Executives call for China, US alliance on electricity
Companies in the United States and China have complementary advantages and should co-operate to bring down the high costs of making the world's electricity grids 'intelligent' via information technology upgrades, according to industry executives.
But they are not doing so due to competitive and regulatory reasons.
'Both sides want to be industry leaders, so they don't want to share their intellectual property,' said ML Chan, Smart Grid executive director at the non-profit organisation Joint US-China Collaboration on Clean Energy (JUCCCE).
'But the market is so big and no single company can meet all the customers' needs in the entire supply chain cost efficiently,' Chan said on the sidelines of the International Smart Grid Congress in Beijing.
While American firms excelled in the provision of technology at the customer-servicing side of the industry chain, mainland firms were good at making products at the transmission and distribution side cost-efficiently and with quality, said Chan.
Electricity providers around the world are eyeing investments worth trillions of US dollars in the next decade to install so-called smart power meters and power grid monitoring devices so that they can collect and use data on demand and supply to cut down operating costs.
Smart-grid technology brings power grids into the digital telecommunications age, connecting together smart meters in households and businesses to central monitoring systems that allows utilities to detect and repair outages and overloads in an instant.
Such automation provides utilities with significant savings when not having to physically send staff to read meters and repair networks. It also provides real-time data that can be used to determine electricity pricing, so that some peak-hour demand can be shifted to non-peak periods.
As a result, fewer power plants are required to meet the same total demand.
Smart grids also allow more clean energy like wind and solar, whose production varies a lot during the day, to be handled by the distribution system.
Lorenzo Colovini, manager of Asia Pacific network technologies development for Italy's dominant utility Enel, said the firm cut its transmission and distribution cost per unit of power sold in 2009 by 46 per cent compared to 1996. A pioneer in the mass deployment of smart grid technology, it invested Euro2.1 billion (HK$23.19 billion) to install 30 million smart meters in Italy between 2001 and 2005.
If US and Chinese firms work together, they have the potential to cut the costs of smart meters for the global market from more than US$100 each to less than US$30, which would make investing in them much more attractive and economically justifiable, Chan said.
He saw opportunities for US firms to form joint ventures with mainland industry leader Nanjing-based Nari Technology Development, a unit under regional power distribution monopoly State Grid Corporation, that would speed up global deployment of smart grid technology.
Besides intellectual property concerns, factors deterring co-operation include different product and technical standards that need harmonising among different nations, as well as differences in regulatory and market environment. For example, US utilities are regulated locally and many are allowed free market electricity pricing, while their mainland counterparts are subject to central government regulations on pricing and new plant development.
Little reform has been achieved in power price deregulation on the mainland, which means consumers would not benefit as much from smart grid technology.
Tu Rongjiang, vice president at Beijing Guozhiheng Power Management Technology, which has co-operated with California-based OSIsoft since 2005 to tackle the mainland market, said that although the mainland has peak and non-peak electricity pricing, the differentials are too small and inflexible to change consumer behaviour effectively.
'The biggest challenge is that we can't link our products to the electricity market. If grid operators and customers can't see the benefits, how can they invest in smart meters and related systems?' he said.
OSIsoft provides the software technology, while Guozhiheng sources the hardware globally and integrates them. So far they have completed more than 20 projects for State Grid, but they are primarily infrastructure upgrades on power distribution networks that do not reach the end-customers.
Colovini of Italy's Enel, which is trying to sell its smart grid technology and solutions to other nations, said it has done a feasibility study for Shanghai Power Grid to install a full suite of smart grid system.
'But since they are a subsidiary of State Grid, which has come up with their own product and technical standards, we had to drop the business,' he said.