What China's smart grid means for the U.S.

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With more than 1.3 billion residents and counting, China's demand for electricity ranks among the highest in the world. As this energy appetite grows, so does the need to develop electricity infrastructure and build a smarter grid. China's booming smart grid has impacts for the U.S. market --both positive and negative -- including the possibility for new, lower-cost products and the opportunity to learn from China's successes and failures.

According to various estimates, China will deploy between 300 to 500 million smart meters over the next five years. Compared with the estimated 65 million smart meters expected to be deployed in the U.S. by 2015, the sheer size of the Chinese market becomes clear.

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"In the past for China, a lot of the manufacturers have stayed within China figuring the market space was large enough. They've not been encouraged to go outside of China to look for additional business." - IEEE'S Bill Ash
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A 2010 report from McKinsey & Company noted that, "China has become the world's largest market for power transmission and distribution (T&D) and is poised to become a major consumer in smart grid technology."

Numbers aside, China also has an advantage over the U.S. in that there are only three major utilities nationwide, compared with around 3,000 in America. This means fewer ways of doing things and simpler product implementation. Chinese utilities are also government-driven, which means they can strive to produce smart meters at a cost of around $20 -- a much lower price than the United States' cost of $150 and up.

"You see a lot of technologies being pushed out and developed," said Bill Ash, Strategic Program Manager for Standards at IEEE, in an interview with FierceEnergy. He added that Chinese utilities "have a large ability to pull in manufacturers and to generate products for their needs."

"We are looking to them because of the technology that they are evolving and implementing to see how we can here in the states adopt and use the lessons learned for what they are doing," he said.

Ash estimated that Chinese companies have been looking outside China to sell their smart grid products since about 2008. China already produces 80 to 90 percent of all solar equipment in the states.

"Some of the mindset in China has changed," Ash said. "In the past for China, a lot of the manufacturers have stayed within China figuring the market space was large enough. They've not been encouraged to go outside of China to look for additional business."

This shift was apparent at the recent IEEE PES T&D Conference in Orlando, which featured a number of Asian exhibitors.

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"We are looking to them because of the technology that they are evolving and implementing to see how we can here in the states adopt and use the lessons learned for what they are doing."
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But even as these companies begin entering the North American market, it's debatable whether or not a $20 Chinese smart meter will ever be realized, or if it will threaten U.S. manufacturers. Reliability will likely trump cost as a deciding factor for U.S. utilities.

"Just because a smart meter is $20, there might be some criteria with an outside utility where they will make sure it meets the requirements that they need," Ash said.

This need for a lot of cheap devices has also become an opportunity for U.S. manufacturers to find business abroad. The California-based manufacturer Glen Canyon in January announced a 1.5 million order from China for its $25-a-pop smart meters. GreenTechGrid reports that in order to achieve the lower price, Glen Canyon is omitting remote disconnect and outage detection features that are common in U.S. meters.

Whatever the commercial result of an increased number of foreign vendors, one distinct advantage that China gives U.S. companies is the opportunity to learn from both the accomplishments and setbacks of Chinese smart grid projects.

"What ends up happening for us is we are looking toward their expertise," Ash said.  "They are allowed to push out technology a little faster than we are."