Power Demand Means $65 Billion a Year Task for China State Grid

China State Grid Corp. will spend about 400 billion yuan ($65 billion) this year on its electricity networks as the nation, which last month reached a deal with the U.S. to curtail fossil fuels, copes with an unprecedented influx of clean energy and higher demand.

Spending will need to be maintained at current levels for the next five years to accommodate higher electricity consumption and contributions from new energy sources, Zhang Zhengling, a spokesman for China’s biggest power distributor, said in an interview in Beijing this week.

The spending throws a spotlight on China’s challenge to get electricity from where it’s generated to where it’s needed. Already, about one in every 10 of the nation’s wind turbines are sitting idle because of inadequate transmission capacity.

The International Energy Agency estimates China will need to spend more than $4 trillion from now until 2040 to overhaul the way it transmits and distributes electricity.

“Grid investment is mainly driven by government policies,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. China is trying to “upgrade and update the networks with ultra-high voltage and smarter technology.”

China’s annual energy consumption surged 51 percent from 2008 to 2013 and is expected to peak between 2035 and 2040, according to a report earlier this year from Climatescope, a research project whose partners include Bloomberg New Energy Finance and the U.K. Department for International Development.

Clean Energy

Under last month’s agreement reached between U.S. President Barack Obama and Chinese President Xi Jinping, China would be required by 2030 to install as much as 1,000 gigawatts of new zero-emissions energy, exceeding the amount of coal-fired power generation the nation has today. Absorbing and transmitting that “will be a huge challenge for us,” China State Grid’s Zhang said.

China will “see a larger scale of clean energy development between 2020 and 2030” as the proportion of coal power in its electricity mix falls and energy demand grows, Zhang said. China State Grid must hasten its use of the most advanced ultra-high voltage transmission technology, Zhang said.

China State Grid currently connects more than 100 gigawatts of wind and solar capacity using its networks, an amount exceeding the total renewable capacity Germany had at the end of 2013, according to Bloomberg New Energy Finance data.

Zhang forecasts China will need at least 400 gigawatts of hydroelectric power, 500 gigawatts of wind power and 300 gigawatts of solar power by 2030.

Pollution Curbs

The problem is distance. Much of China’s newly added hydroelectric capacity is in the southwest and coal is generated in the north. Consumption is heaviest in the east, south and areas around Beijing.

“China is a developing country and our energy consumption demand will continue to grow” at a pace faster than developed countries, Zhang said. “We have large-scale, long-distance energy needs,” he said.

The push to connect renewables and curb air pollution means spending about 180 billion yuan on eight ultra-high voltage lines by 2017, Zhang said, adding that the company has proposed to the government that another 13 such networks be built.

The technology, which the state-owned grid operator began to promote a decade ago, can “deliver larger power capacity over a long distance with higher voltage but less transmission loss,” Zhang said.

UHV Investment

China State Grid operates a grid line capable of handling 8 gigawatts of wind power and 1.25 gigawatts of solar power from Hami in the northwestern province of Xinjiang to Zhengzhou in central China, Zhang said, describing the line as the first of its kind in the world. The company is doing preliminary work on another 3,500-kilometer (2,175-mile) line stretching from Zhundong to Anhui.

A group of companies that included China State Grid won a bid to build a UHV line for Brazil. The company also plans to participate in potential UHV plans in India and Russia.

China had 11 percent of its wind power capacity sitting unused last year, with the rate rising to more than 20 percent in the northern provinces of Jilin and Gansu, according to China Renewable Energy Engineering Institute.

The idled capacity is a result of the rush to build turbines in the windiest areas of China, surpassing the transmission grid’s ability to handle and transmit the power. Leaving wind farms turned off cost operators at least 8.16 billion yuan in lost revenue last year, according to the institute.

“The grid itself just solves the problem of the effective utilization of clean energy but other problems need a systematic solution,” Zhang said. State Grid is working to make all networks “strong and smart” to meet electricity demand and absorb clean energy on a large scale.

“UHV is an essential part of China’s smart grids,” he said.

— With assistance by Feifei Shen

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