Massive upgrade of power grid planned

The mainland is gearing up to spend hundreds of billions of yuan in the next few years to upgrade its extensive power distribution network.

The investment is intended to improve energy efficiency and cut greenhouse gas emissions.

Zhao Yuejin , a senior engineer at the National Institute of Standardisation, said in Beijing yesterday the power grid's efficiency would increase by 20 per cent when the upgrade was finished.

'We can save 70 billion kilowatt-hours in two decades, and that's equivalent to saving 32 million tonnes of coal, or scrapping 69 million tonnes of carbon dioxide and 3.9 million tonnes of sulphur dioxide from the air,' he said. 'The government will subsidise it.'

Zhao is a key author of a new standard for the mainland's transformers, to be launched in July.

A transformer is a device that transfers electric energy from one circuit to another with a change in voltage, current, or other electrical characteristic. Zhao said more than 3 per cent of the electricity generated on the mainland was 'burned' in transformers, accounting for 30 per cent to 40 per cent of the power grid's total energy losses.

The new standard requires efficiency increases of up to 66 per cent from present levels.

Zhou Sheng , China and Southeast Asia director of the International Copper Association, estimated that implementation of the standard would create a 450 billion yuan (HK$512 billion) market for efficient transformers on the mainland.

'It is difficult to estimate how much the final investment will be, because of the fluctuating prices of raw materials, such as copper, in recent years,' he said. 'But the Chinese government's determination to upgrade its power grid is certain.'

Zhou said the State Grid would spend more than 500 billion yuan in a couple of years to improve network efficiency and the central government was subsidising the purchase of better transformers and generators by more than 160 energy-intensive factories. The China Southern Power Grid has announced plans to complete the upgrade of transformers in urban areas this year.

'State-owned companies such as the State Grid are eager to upgrade,' Zhou said. 'They have the money and technology. I am optimistic about the implementation of the new standard.'

Tian Qiang , first deputy general manager of Tebian Electric Apparatus Hengyang Transformer, the largest domestic maker of transformers on the mainland, said the new standard offered domestic suppliers an opportunity to beat overseas competitors.

The mainland is the world's largest market for power transition and transformation equipment, and global players such as ABB, Siemens and Areva T&D have set up huge plants there. With superior technology and product quality, they dominate the mainland market.

But Tian said domestic companies were catching up and would exploit the opportunity to enlarge their market share.

'After years of intensive research and development and continuous support from the government, domestic transformer manufacturers have acquired the technology and expertise to produce electric power equipment that is globally competitive,' he said.

'But our biggest advantage over those global giants is that we move faster and are more flexible [in response] to the rapidly changing market conditions in China.

'To us, the new standard is more of an opportunity than a challenge.'

While large state-owned companies welcome the change, some small and medium-sized companies may not be ready.

'Not all companies are willing to adopt new transformers,' Zhou said. 'They need not only money but also hardware and software for the change.'

The European Union and the International Copper Association launched a six million yuan project yesterday to help small and medium-sized companies on the mainland make the transition.

Powering up

The grid upgrade

Estimated cost: 450b yuan

Estimated power save per year: 3.86b kWh

Estimated carbon dioxide reduction over 20 years: 69m tonnes

Sources: SGCC, Credit Suisse