Beijing Smart Grid Conference: Day 2

Friday, December 4, 2009 10:15

Day two at the Beijing smart grid conference:

After spending much of the first day of the Beijing Smart grid conference discussing the definition and scope of smart grid for China, the second day of the conference was focused on how smartgrid was going to be rolled out, what some of the solutions would be, and who was going to pay for it.

Starting the morning was Lorenzo Colovini from Italy’s Enel Group who provided one of the most interesting, and relevant pitches, of the entire conference by walking the audience through Enel’s own recent roll out. Filled with real charts, slides, and diagrams, the representatives from China’s utilities and regulatory body were able to see how Enel has rolled out their 23 million smart meters (not an insignificant sum even for China), and the benefits of the roll out since the smart grid went live in 2007:

  • Electronic meters and automatic meter management enabled them to execute 12 million operations at no cost to save 360 million EUR in the first year
  • Reduce outages from 130 minutes per year/ customer to under 50, and further reduced their costs by 21 EUR per customer

Following were a series of of vendor pitches by Alcatel, G&W, ABB, and Cisco, the audience was introduced to wide range of products and services that were all geared to assist the development and roll out of smart grid. CISCO and Alcatel looked to leverage their long telecom histories as the foundation for their abilities to work with utilities and regulators to take the first steps in planning, and used European and US examples to show the need for early planning and holistic thinking. ABB and G&W on the other hand, were highlighting their equipment and program based solutions, and walked through their programs with technical and practical views on smart grid operations, and the benefits to utilities once it was up and running.

After lunch, perhaps one of the most China relevant speeches was given by , who spoke about the challenges of integrating wind power onto the grid. A topic that was briefly mentioned in the first day. At the heart of the issue was profitability, and the fact that as many of China’s wind farms were producing only 25-30% of their potential, the 5 year payback period that was possible in other markets (EU/ US) was being stretched to 12-15 years. Which until now has done little to motivate the State Grid to invest in building the appropriate infrastructure that would further capture wind. In his words:

Grid does not like behavior that will cause trouble to the grid. Wind is “clean energy”, but dirty technology = adds trouble to grid management capabilities.

A topic addressed through Ms. Chi of the NDRC Research Unit, the branch responsible for drafting China’s renewable energy law:

Renewable energy does have potential in China over the next 50 years to help alleviate/ replace coal. Too expensive now.

A condition that is true with a system that is only producing power 20% of the time.

to overcome this,and to engage the utilities to continue supporting renewable energies (a policy that will be needed to ensure the 2020 goals are met), the NDRC have been adjusting the feed tariffs for wind, and providing other subsidies, but have made little progress as the cost equation is still not balancing in the favor of utilities. highlighting the fact that more needed to be done.

In her mind, a few things were possible (my thoughts on likeliness in italics):

  1. NDRC was looking at an opportunity cost model that would price in the externalities of the traditional system – unlikely to gain traction as utility relationships with traditional energy suppliers (i.e. coal mines) are stronger than NDRC relationships to renewable energy providers
  2. Make full transition from current project award system – likely as there have already several changes in the last 3 years, and Guangdong has its own system that could be seen as an improvement from the national system

Moving on from regulations, the most important questions were asked were: What would the roll out of a smartgrid in China look like, and Who was going to pay for it

To answer the first question, Satoshi Nagata of VPEC highlighted one of the biggest constraints he saw when it came to rolling out a smart grid in China.

When Beijing was planning for Olympics, fiber cable went missing in Sendai. How can China roll out smart grid? The country is too big, and there is not enough fiber optic cable.

In his mind, China’s planners need to think outside of the box to find different solutions. Microgrids and clouds were two of the examples he gave

The second question was answered by the UMS Group‘s Jack Shearman, who began by stating that: while current consensus for rolling out smart grid is about 250USD/ per customer, a figure largely based on the amount of money it takes to purchase and install a smart meter, the price could be as high as 3000USD/ customer once utilities add in the costs of building the supporting infrastructure. A huge sum of money that only left two potential investors: the government or the utilities.

More importantly though, Shearman mentioned that the mispricing was only one area where planners failed to understand he full picture. That as smart grids were rolled out, the costs stood to go up even more as customer expectations grew and unforeseen investments popped up (migrating legacy systems). A sobering reminder of the need for planning.

Some parting thoughts on Smart grid in China.

After spending two days with policy makers, scientists, engineers, and service providers, I came away with a much deeper understanding of the hurdles that are faced. That, before anyone begins to speak of large scale rollouts, or even pilot projects, the building blocks of defining the goals of smart grid and the standards to support those goals have yet to be established. Still largely theory, the discussions hover around the emotional carbon, and the appealing electronic vehicle support, but when the topics dive deeper into the real issues of what the grid should do and what the benefits are, clarity is lost.

In my mind, several large questions need to be answered:

1) Is the process of modernizing the grid one that is going to be driven by climate change and carbon, or will planners put those issues aside and work out what the real need for this overhaul is going to be.

2) will the various bodies be able to work together to drive forward as one, or will standards and investments occur in a manner that leaves them no better off at the end of the day?

3) Will planers look outside their circle to understand how the smart grid would support the different needs of different customers, or will investments be made that require customers to make unnecessary adjustments

.. and most importantly, will the price of traditional sources of energy be repriced to include the negative externalities associated with those forms of energy, and if so, what will that do to change the economic models that are currently being used to drive the investment decisions on future renewable energies projects.

A lot of questions, big questions, to be answered still.

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