Chinese Smart Grid

Will China Control Smart Grid Too?

Written by Brian Hicks
Posted June 10, 2010

First the Chinese took over the solar market, providing low-cost manufacturing, quick turnaround, and aggressive expansion

Then China starting closing in on the wind market, boasting the largest onshore market in the world with plans to add another 30 gigawatts of offshore capacity by 2020. Companies like Goldwind, A-Power Systems (NASDAQ:APWR) and Sinovel have gone from nearly unknowns to major players in a matter of just a few years.

Now it looks like China's attempting to lock in a piece of the smart grid market too. Although this time, they may not be able to do it without some outside help.

$100 Billion For The Taking

Earlier this year, Chinese Premier Wen Jiabao made smart grid construction a national priority, declaring that China would try to complete renovations by 2020.

And China's State Grid Corp., which controls electricity distribution in nearly all of China, has stated that it will begin major nationwide grid upgrades next year.

It has now been estimated that China could spend more than $100 billion upgrading its power distribution over the next 10 years.

This is huge.

And most expect foreign companies to get a sizable chunk of early contracts from this market, since it's foreign companies that have taken the lead on smart grid technology.

Last month, Siemens (NYSE:SI) struck a deal with holding company Wasion Group (3393:HKG) to conduct feasibility studies in an effort to launch new smart grid pilot projects in the Middle Kingdom.

IBM (NYSE;IBM) is investing heavily in China's smart grid future, having just recently unveiled its Energy and Utilities Solutions Lab in Beijing. According to management, IBM expects the China revenues of its energy and utilities division to grow by $400 million from now until 2014 – thanks primarily to China's smart grid development.

And GE (NYSE:GE) recently announced that it will be partnering with the City of Yangzhou to build a smart grid demonstration center. The goal will be to deploy some of the tested technologies within four years.

Of course there's no doubt that China will seek to incorporate as much domestic technology and manufacturing as possible. So certainly companies like Jiangsu Linyang Electronics, Zhuzhou CSR Times Electric (3898:HKG) (ZHUZF:PK) and Wasion Group will benefit as smart gird integration moves forward.

But early stage growth will definitely include non-Chinese players.