Innovation & Technology
A Power Play for China's Electrical Grid
Gammons is part of an influx of energy specialists aiming to remake China's electric system. Companies from around the world are eyeing contracts with State Grid and China Southern Power Grid, the government enterprises in charge of power distribution. China's spending eclipses the $8 billion Washington and U.S. companies have earmarked for similar projects—smart meters, software, and consulting to digitize the grid and conserve energy. "The opportunities in China are breathtaking," says Peter Larsson, a vice-president at Echelon (ELON), a California company that makes software measuring electricity delivery.
SKYROCKETING DEMANDAs the mainland's economy surges, so do its power needs. China is the No. 2 consumer of electricity after the U.S., using 3.4 trillion kilowatt-hours in 2008—double its usage six years earlier. But China consumes about four times as much electricity as the U.S. per dollar of gross domestic product and eight times what Japan does, the International Energy Agency estimates.
IBM expects at least $400 million in smart-grid revenues in China over the next four years, but competition for those dollars will be stiff. General Electric (GE), Hewlett-Packard (HPQ), Cisco (CSCO), Westinghouse, ABB (ABB), and Siemens are all vying for a piece of the market. ABB, for instance, is pushing systems to manage power plants and transmission lines. And HP, which has long supplied computers to the research arm of State Grid, hopes to parlay those contacts into deals for managing smart meters, which let consumers see how much power they use at different times of day and adjust their consumption accordingly. With its centralized system and just two companies operating the grid, "China has an opportunity to move faster than many other countries," says Douglas Hanson, HP's director of global energy and resource industries.
Big consulting companies are trying to get in on the action, too. Accenture is working on 10 smart-grid projects on the mainland, including one to help power plants better recognize rapid changes in consumer demand in real time. Smart-grid consulting will be "a very big wave for us," says Michael Ding, a managing partner for Accenture in China.
A handful of Chinese outfits have ambitions in smart grids, but it's one area where Westerners have relatively few worries about losing out to domestic rivals. While Beijing wants to give preference to Chinese-made tech gear, in smart grids there's not enough local expertise to meet the country's massive needs. "China is still at an early stage," says Sam Zhou of Boston Consulting Group, which hopes to win contracts advising the Chinese on smart-grid projects. "Chinese companies are starting to study, but they are still behind the foreign companies."