Smart Grid in China- a R&D Perspective

July 2013

Content

Introduction.....................................................................1

China’s power sector - a fast growing sector................2

The role of the government..............................................4

A duopoly sector................................................................6

SGCC’s initiatives.................................................................8

Wider Industrial layouts...................................................10

Technology R&D outlook.................................................12

Key research institutes....................................................14

References.........................................................................16

Introduction

The smart grid is an important platform for China to achieve the new energy targets and drive the country’s low carbon transition. In recent years, the research and development of grid techno-logies has become one of China’s national priorities. Denmark, on the other hand, has the world-class R&D capacity within the smart grid area. And researchers from both sides, according to our early consultation, have expressed interests towards further exchange and collaboration.

As a background study for the upcoming activities to bridge Sino-Danish research communities in the area of smart grid, this report provides information as follows:

• a preliminary mapping on China’s smart grid sector, including the relevant government agencies, industrial structure, cur-rent R&D initiatives,

• a technology outlook on priorities for smart grid research and development (R&D) in China for the coming years,

• an example list of the potential stakeholders for further Si-no-Danish R&D cooperation on smart grid.

This report is intended to provide a general overview on China’s smart grid status and is not an exhaustive treatment of this sub-ject. The list of research institutes in China provided in this re-port does not cover all the key institutes in China and the order is random and does not represent any rank from our opinion. The data collected is due in August 2012, with minor updates in spring 2013.

Green Innovation

The Green Innovation 2013 seeks to strengthen the coope-ration between Danish and Chinese cleantech research communities. It will serve as a platform for Chinese and Danish researchers and other relevant stakeholders to exchange the cutting-edge research ideas and to identify the specific topics for future cooperation. The project is funded by the Ministry of Science, Innova-tion and Higher Education of Denmark, executed by the Innovation Centre Denmark, Shanghai.

Smart Grid is one of our focus areas. This report is a backg-round study under Green In-novation initiatives.

1

China’s power sector – a fast growing sectorChina has surpassed the USA and become the world’s largest power producer and consumer since 2010. To boost the rapid economy growth, China’s net power generating capacity has ra-ised 13.22% per annum from 2005 to 2010 (China Electricity Council, CEC, 2011). And this rate is projected to be 8.5% annu-ally during the next five years.

Meanwhile, the power sector is one of the most important sec-tors to drive China’s low carbon transition. The energy efficiency of power generation and transmission has been significantly im-proved in the past half decade.

The share of “green” power, including hydro, nuclear, wind and solar mainly, has increased drastically each year, while the share of thermal power dominated by coal, has decreased year by year. In 2009, the mix of non-fossil power has exceeded a quarter. In 2011, this figure has increased to 27.5%. The thermal power ac-counted for 72.5% in 2011, with the installed capacity increased 7.9%, but the mix in total down 2.3 percent point year-on-year. Hydropower capacity was 230GW, or 21.9% of the total, increa-sed 6.7% year on year. Nuclear power installed capacity was 11.91GW, increased 10% by year. Wind power capacity reached 47GW, increased 43.7%.

Data Source: State Grid Energy Research Institute & China Electricity Council

2

Along with the growth of power generation and the increasing share of renewables China has now built the world’s largest ele-ctricity grid. The smart grid is an important platform for China to achieve the new energy targets and optimize their energy re-source allocation. It covers all sectors such as power generation, transmission, distribution, consumption and control. It is viewed as the core of the “Third Industrial Revolution” in China by many Chinese professionals.

In the past few years, China has outlined a smart grid develop-ment plan and poured billions of investment in developing a nationwide smart grid. And the investment will scale-up in the coming five to ten years. It is projected that the total value of China’s Smart Grid market to rise from $22.3 billion USD in 2011 to $61.4 billion USD in 2015, an annual growth rate of 29.1% over five years (Zpryme, 2011).

Data Source: China Electricity Council

China should build intelli-gent, highly efficient and re-liable electricity grid, cove-ring both urban and rural areas.

- Hu Jintao, Former President of

China

3

The role of governmentThe development of smart grid technologies is well incorpora-ted with China’s national energy priorities on improving energy efficiency, increasing renewable mix, and reducing the carbon in-tensity. Therefore, Chinese central government has attached great importance towards smart grid and taking the crucial roles in its development. The key government agencies include:

• National Development and Reform Commission (NDRC) is so far the most influential ministerial agency in China, overseeing all aspects of economy development. In the areas of smart grid, NDRC coordinates that the smart grid development plan is well placed within the context of overall national development plans. It also controls the electricity pricing, issuing bench-marks for feed-in tariff and sales tariff, and holds the authoriza-tion of review and approval of smart grid construction projects.

• National Energy Agency (NEA) sits under the NDRC as a vice-mi-nisterial department. It takes the leading role of formulating and implementing national energy policy and development plans, which incorporates smart grid development plans. The NEA also takes part in smart grid project approval process.

• State Electricity Regulatory Commission (SERC) supervises the daily operation of power generation companies and power utility companies. In a recent national institutional reform in March 2013, SERC is suggested to be merged as a part of the National Energy Agency, to enhance the energy supervision and management role of NEA.

• China Electricity Council (CEC) is a consolidated non-profit or-ganization composed of all China’s power enterprises and ope-rates under the supervision of the SERC. It is also the think tank of power policies and has strong lobby power when de-veloping the national smart gird plans.

• Ministry of Science and Technology (MOST) takes charge of research and development of cutting-edge technologies and international cooperation. Smart grid technologies have been viewed as one of the priorities in its 12th Five-Year Plan on National Scientific and Technological Development.

The various ministries in China have built the consensus to place

Applying Smart Grid to optimi-ze the resources is a key to sustainable development in China.

- Wu Guihui, Chief Engineer, Natio-nal Energy Administration of China

4

smart grid technologies as one of the national priorities, which has spawned the supportive policies for smart grid. The de-velopment of smart grid has been integrated into China’s 12th Five-Year Plan (2011-2015), which is the highest level national economy plan. In addition, on May 4, 2012, the Chinese Ministry of Science and Technology (MOST) released the Special Planning of 12th Five-Year Plan on Smart Grid Major Science and Techno-logy Industrialization Projects. This plan clarifies the overall objectives for smart grid construction during the 12th Five-Year Plan period as well as the related industries that China will sup-port.

The political will helps to leverage resources and finance. In the recent “12th-Five Year Plan for National Energy Techno-logy”, China will heavily invest in 4 areas, including power trans-mission and distribution technologies. In 2012, the country will invest 951 million RMB (around 150 million USD) in 22 research projects. These projects include major smart grid technologies, such as “integration of large-scale wind energy in the power system”, “charging and discharging system for electric vehicles”.

5

A duopoly sector

The massive grid market in China is shared by two giant sta-te-owned companies: State Grid Corporation of China (SGCC) which takes over 80% of the market share and China Southern Power Grid Company (CSG).

As the world’s largest power utility company, SGCC has the domi-nant influence on all aspects of China’s smart grid development, from formulating national plans, technology R&D, infrastructure investment and piloting and testing new technologies to formu-lating industrial standards. Currently, SGCC owns 26 provincial power utilities companies, 5 research institutes and 20 other in-stitutes. The total asset by 2012 is 2077.5 billion RMB or around $330 billion USD. The total revenue of 2011 was over $260 bil-lion USD (SGCC, 2012). SGCC has also aggressively expanded their business oversea, investing heavily in Philippines, Brazil, Portugal and other emerging economies, such as India and Rus-sia.

Map of China Power Grids (Source: State Grid Corporation of China)

6

SGCC is currently taking the leading role in the smart grid invest-ment and pilot project constructions in China. Most of the invest-ments will go to two main fields, power transmission construction (including Ultra High Voltage projects) and power grid upgrading in rural areas.

China Southern Power Grid Company (CSG) covers the rest 5 pro-vinces in South China, with a distance of 2000km from west to east. CSG connects the three west provinces with the richest hydro resource in China (Yunnan, Guizhou and Guangxi) to the highly populated and industrialized province on south coast (Guangdong) and China’s largest island (Hainan). CSG is therefore connecting a higher mix of hydropower (37%) and lower mix of thermal power (56%) than the country’s average to the end users. It plays a key role in the nationwide project to transmit power from resource rich west China to the high consumption region in Eastern China. CSG is also actively developing smart grid technologies and participating in formulating standards, following SGCC. CSG is expected to invest RMB 100 billion (US$15.85 billion) on smart grid development in the coming years.

7

SGCC’s initiatives

In 2009, SGCC outlined a three-stage master plan to become a world leader in smart grid technologies, named “SGCC Umbrella Plan on Smart Grid (2009-2020)” to develop a “Strong and Smart grid”. The plan embraces different aspects of the grid system, some are unique to China’s situation, including the upgrading of existing grid infrastructure, expanding grid capacity to rural areas, enhancing the west China to eastern coast connection, large-sca-le renewable energy integration, demand management to avoid outrages and overloads, and a national wide smart meter deploy-ment (Zpryme, 2011& GTM research, 2011).

SGCC’s plan covers an initial planning and piloting phase from 2009 to 2010, the scale-up construction phase from 2011 to 2015, with the target to become world’s leader on smart grid by 2020 (SGCC, 2009). At the first phase, SGCC planned to invest $77.8 billion USD including a $9.2 billion USD investment into Smart Grid technology. The investment went to establish master plan, research and key equipment development and the demonstration projects.

The second phase will invest $282.9 billion USD with $45.8 billion USD of these funds dedicated to the development of smart grid standard and technologies, including operational smart grid ma-nagement systems, wide spread deployment of smart meters, and enough EV charging stations.

China will build a strong and smart national grid by 2020, to provide multi-functional, wide-ly connected energy network services.

- Liu Zhenya, CEO of State Grid

Cooperation of China

SGCC Strong and Smart Grid Plan2010 – 2020 in U.S. billions

Phase Time Period

Total Investment Amount

Ultra-high Voltage (UHV) Investment

Smart Grid Investment

1 2009-2010

77.8 12.1 9.2

2 2011-2015

282.9 43.8 45.8

3 2016-2020

240.5 36.5 45.8

Total (2009-2020)

601.1 92.4 100.8

Source: Zpryme, 2011

8

The last phase will invest $240.5 billion USD into building a reliable, intelligently managed transmission network, with $45.8 billion USD of these funds dedicated to further enhan-ce the capacity of strong and smart grid in all aspects, based on application needs and technology breakthroughs (Zpryme, 2011 & SGCC, 2012).

By the end of 2011, SGCC has built 238 smart grid pilot proje-cts, completed the technical and economic evaluation for 102 pilot projects. These projects covered the full sectors of smart grid implementation, ranging from generation, transmission, distribution, consumption and dispatching. So far, SGCC has built 65 smart substations of 110 KV to 750 KV, 243 EV char-ging stations and fixed over 51 million smart meters for hou-seholds. The demonstration projects are implemented across the country, including the most publicized smart grid demo at the Shanghai World Expo and the smart grid demo at Si-no-Singapore Tianjin Eco-city as part of integrated smart city solutions. 28 smart communities have been constructed in Bei-jing and Shanghai, serving 251 thousand households.

At the piloting and construction stage, new transmission lines are a major focus for SGCC, as to achieve a stronger grid ca-pacity. Although under various debates since the beginning, SGCC has developed the world’s first class UHV AC (Alternating Current) equipments and DC (Direct Current) key equipments. According to the plan, at least one 1,000kV UHV AC or DC line installed annually until 2015. In 2009, a 1000kV UHV AC pilot demonstration project started operation. And a ±800kV UHV DC transmission demonstration project started operation in 2010. The ambitious development plan and billions of invest-ment on UHV transmission lines have raised the concerns on both safety liability and the over-centralization of power utility sector.

More recently, the SGCC has attached attention and invested resources in developing its UHV infrastructure together with full-scale technology options, including integration of renewab-les, distribution automation, micro-grids, smart metering and demand side management.

High voltage, extra-high volta-ge and ultra-high voltage lines are being installed by SGCC currently, since most coal, hy-dro, wind, and solar load sour-ces are over 1,000 kilometers away from the populous east and south.

- GTM research, 2011

9

Wider industrial layoutTo build a national wide smart grid, the challenges ahead is tre-mendous. Beyond the leading roles from China’s government and the two grid companies, hundreds of international and domestic compa-nies will work together to meet this challenge. Smart grid is going to play an important role in supporting the development of related emerging industries. The Ministry of Science and Technology in its recent plan has outlined a smart grid industrial layout, covering the following six industries:

• Clean energy generation and equipment manufacturing, as smart grid construction will aim to improve the power grid to accept in-termittent clean energy generating capacity, such as wind power generation, solar power generation, hydro-power etc.;

• New materials industry such as photoelectric conversion materi-als, energy storage materials, insulation materials, superconduc-ting materials and nano-materials

• Grid infrastructure and equipment manufacturing industry, such as the new power electronic devices, transformers, etc.

• Information and communication, instrumentation, sensors, software, etc.

• Alternative energy automotive industry

• Home appliances and the consumer electronics industry

As China is stepping up efforts to develop and build smart city to handle the tremendous wave of urbanization, smart grid technologi-es are considered as important support in this process. For the ma-jority of companies in smart grid industry chain, the construction of smart cities and Intelligent Communities contains attractive business opportunities.

In the meantime, SGCC is building a strong supply chain internally, making their own specifications and standards and integrating them into their own grid. China Southern Grid Corporation (CSG) follows the initiatives from the SGCC and work together on the standar-dization of the industry. For both domestic and international ma-nufacturers of smart grid equipment, these standards and favored technologies have enormous impact on the products offered by their businesses (Zpryme, 2011). 10

International companies seeking to profit from China’s smart grid market have sensed the favoritism for domestic suppliers as a key barrier. In the State Grid project bidding process, companies report that price accounts for roughly 60% of the decision, followed by technology and other criteria. Besides bidding for cheaper and more reliable products, grid compani-es source 80% of their equipment from domestic suppliers to strengthen local capabilities (Copenhagen Cleantech Cluster, 2012). However, the perceived preference for local content does not exclude all foreign players from the grid market in China. Due to the nature of the Chinese market, private companies seeking to promote their smart grid products and services must prepare themselves to engage deeply with with SGCC and CSG at both central and local levels.

Foreign companies have sought to establish alli-ances and partnerships with Chinese companies, leveraging their superior knowledge and experience to gain access to contracts and pilot projects in hopes of expanding business once large-scale investment and construction begins.

- Zpryme, 2011

11

Technology R&D outlookAt the national level, the Chinese Ministry of Science and Technology (MOST) is in charge of new technology development, including international cooperation. MOST has included smart grid in its “12th Five Year Plan on National Scientific and Technological Development” as one of the priority areas for R&D. In the recent Special Plan on Smart Grid, the MOST defined nine key technologies within smart grid scope for R&D breakthrough in the period of 2011 to 2015, which include:

• Grid-integration for large-scale intermittent renewable energies;

• Grid technology to support electric vehicles;

• Large-scale energy storage systems;

• Intelligent and automatic distribution systems;

• Intelligent and automatic grid operation and control technologies;

• Intelligent transmission technology and equipments;

• Grid information and communication technologies (ICTs);

• Flexible power transmission technology and equipment;

• Smart grid integrated demonstrations.

According to this plan, the priorities have been given to grid-integration for large-scale renewables, grid technology for supporting electric vehicles and large-scale storage systems, followed by other intelligent distribution and transmission technologies. This is well integrated with the national strategy on developing renewable energies. Unlike the SGCC’s plan, UHV has not been mentioned through the text. Besides, the technologies to introduce the early warning system and to enhance the safety are also highlighted. New material research is stressed to support the storage system, flexible transmission sy-stem and the application of ICTs.

The R&D focus at this stage has switched from building “strong” infrastructure to integrated solutions for “strong, smart and sustainable grid”.

The MOST has also highlighted the public-private partnership as a key element in the plan. It encourages the cooperation between industries, research insti-tutes and universities. It aims at the key technology demonstration by 2015 and wider deployment by 2020. According to the plan, China will build 20 to 30 specific smart grid technology demonstration projects and 3 to 5 integrated demos, 5 to 10 smart grid demonstration cities, and 50 smart grid demonstra- 12

tion industrial parks during 2011 to 2015, many of which have been built by the SGCC. By 2020, China aims to be among the world’s leading countries for smart grid technologies and equipments, and build a well-structured national smart grid with highly efficient transmission and optimized distri-bution system.

At the industrial level, the Grid Corporation of China (SGCC) is making the breakthrough in key areas, including the UHV transmission technology, large-scale renewable integration, substations, electric vehicle charging in-frastructure and smart metering. It is also establishing both domestic and international standard systems. SGCC is involved in the formulation and revision of more than 470 national and industry standards; and 12 inter-national standard proposals approved by the International Electrotechnical Commission (IEC) and the Institute of Electrical and Electronics Engineers (IEEE). This industrial giant together with its five in-house research insti-tutes will continue to make technology breakthrough in all aspects of smart grid. Besides the technology development, SGCC would like to make further progress on piloting policy studies, tariff framework and developing busi-ness models.

The second largest utility company, CSG has also actively participated in the national R&D projects. Given the higher mix of hydropower from the west provinces and the potential for off-shore wind power, one of the major challenges for CSG is to optimize the resources at large scale while ensuring the safety and stabilization of the network. In order to facilitate the integra-tion of distributed renewable and to shift the peak loads, CSG has piloted a large-scale energy storage project in Shenzhen, with a 4 MW capacity in phase I. CSG’s R&D strategy will continue to focus on system optimization. Meanwhile CSG is also investing in the R&D for the early warning techno-logy to minimize the impacts of hazardous weather.

13

Key research institutesA large number of research institutes and universities in China have car-ried out smart grid research and studies in recent years, some of which have established key institutions specialized in smart grid. The research institutes named in this report are examples of potential stakeholders for Danish researchers and shall not be treated as a full list. The order in the lists does not reflect any importance ranking from our perspective.

• China Electric Power Research Institute (CEPRI) is a multi-disciplinary and comprehensive research institution in China’s electric power se-ctor, and a subsidia research institute of the SGCC. CEPRI owns 14 research departments and 9 supporting centers, including a national engineering research center, a ministerial quality inspection and test center, a graduate school etc. SGCC’s key labs including power electro-nics laboratory for power system, power system simulation laborato-ry, transmission line pole and tower laboratory, conductor mechanical performance laboratory, and rock and soil engineering laboratory, and relay protection and safety automation devices laboratory.

• State Grid Energy Research Institute (SGERI), an exclusively-invested subsidiary of State Grid Corporation of China (SGCC), specialized in soft sciences and consulting services for critical decision-makings. SGERI is dedicated to the study on such fields as power sector planning, energy & environmental protection policy, power supply and demand analysis, corporate strategy and management, institutional reform and power market, smart grid, new energy, accounting and auditing, power pricing, and energy statistics & analysis, etc. SGERI has carried out a lot of research relevant to development of China’s energy and power industry, such as the 12th Five-Year planning of SGCC and state-owned central power corporations, strong and smart grid, the reform of power industry.

• NARI Group, also known as the former State Grid Electric Power Re-search Institute SGEPRI, with headquarters located in Nanjing, it has set up a high-tech industrial cluster-enterprise with industrial bases, sales and service networks in several provinces across the country. NARI is currently specializing in all areas of smart grid technologies, and has developed a successful business model to commercialise its R&D outputs.

14

• Electric Power Research Institute of CSG, is the think tank of China Southern Grid. It provides technical support to CSG’s development plan and to ensure the safe operation. It also carries out the basic research and cutting-edge grid technology development tasks, funded by the MOST and CSG. Its key expertise covers grid safety analysis and controlling, grid simulation, DC transmission, HV equipments and safety, smart grid and ICT.

• Institute of Electrical Engineering, Chinese Academy of Science (IEE, CAS)

is a national scientific research base in electrical engineering field focu-sing on the high-tech research & development. IEECAS plays a unique role in China’s deployment of electrical engineering science. It has car-ried out extensive studies in the areas of power system stability, large electric machines, high voltage techniques, power system automation, and electrical measurement. It also takes the lead in initiating research and development of the electric spark machining technology and MHD power generation.

• State Energy Smart Grid R&D Center (Shanghai) at Shanghai Jiaotong University is the first national smart grid research center approved by the National Energy Agency in 2010. The center relies on the talents of Shanghai Jiaotong University and actively carries out basic research and industry incubation, provide the scientific base for the national energy strategy and high-end technology and products. The center has capacity to implement the dynamic simulation of Smart Grid Systems.

• Zhejiang University Smart Grid Research Institute is a multi-disciplinary research group initiated by three leading professors from the College of Electric Engineering in Zhejiang University. It has strong focus on the micro-grid studies.

15

References

Zpryme, 2011. China: Rise of the Smart Grid.

Kamil Bojanczyk, David J. Leeds, GTM Research, 2011.

The Smart Grid in Asia, 2012 - 2016: Markets, Technologies and Strate-gies.

Lihui Xu, Jochen Alleyne, Smart Grid Times& Consulting (SGT Research), 2012. 2012 China Smart Grid Outlook: Special Planning of 12th Five-Year Plan on Smart Grid Major Science & Technology Industrialization Proje-cts.

Copenhagen Cleantech Cluster, 2012. The Global Cleantech Report 2012.

State Grid Corporation of China ( SGCC), 2012. Strategy and Practice of Smart Grid in SGCC (ppt).

The Ministry of Science and Technolgoy of China(MOST), 2012. Special Planning of 12th Five-Year Plan on Smart Grid Major Science and Techno-logy Industrialization Projects (full text, in Chinese).

16

Innovation Centre Denmark, Shanghai

Shanghai Technology Innovation Centre100 Qin Zhou Road, Bld. 2, Room 711Shanghai 200235, China

Tel (+86 21) 6085 2000Fax (+86 21) 6085 2005

E-mail shainn@um.dkWeb icdk.um.dk

The Trade Council is a part of the Ministry of foreign Affairs and is the official export and investment promotion agency of Denmark. The trade councel benefits from around ninety Danish Embassies, Consulats General and Trade Commissions abroad. The Trade Coun-cil advises and assists Danish companies in their export activities and internationalization process according to the vision: Creating Vlue All the Way

The work in the Trade Council follows specific procedures and qu-ality guidelines. In this way, our customers are secured the best possible quality under the varying working and market conditions at any given point of time.