By 2025, China plans to reduce its national energy consumption to 13.5% per unit of GDP, according to its 14th Five-Year Plan. To achieve this goal, smart grids have attracted significant attention. In line with its national carbon neutrality commitments, China has significantly grown its capacity to generate and transmit renewable energy across the country.
China''s investments in its transmission and distribution network are supporting the transfer of higher amounts of renewable energy across provinces and regions while significantly reducing transmission loss. This steady growth is projected to continue as renewable energy continues to attract more investment. In tandem, China''s growing green finance market is improving access to green bonds and other financial tools, better enabling it to achieve its sustainability targets.
KPMG''s report Smarter Grids: Powering decarbonisation through technology investment, analyses how smart grid technology enhances the operational efficiency of the grid and better integrates renewable energy. It assesses the smart grid outlook of three key markets for global investment in electricity grids – China, the UK, and the US – providing a deep dive into the policies that support smart grid implementation and the investments incentivised by these enabling policies.
Wei LinPartner, Head of Environmental, Social and Governance(ESG)KPMG China
Angus ChoiPartner, ESG AdvisoryKPMG China
Ebele Angela OnyeaboAssociate Director, Climate and SustainabilityKPMG China
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
For more detail about the structure of the KPMG global organisation please visit https://kpmg /governance.
ICP12028186-1 11010102003233
China Southern Power Grid has pledged to continue investing in digital power grid construction, including a digital grid across Guangdong, Yunnan, Guizhou and Hainan provinces and the Guangxi Zhuang autonomous region.
The company, one of the country''s two major power grids, said it will invest more than 26 billion yuan ($4.1 billion) in the construction of a digital power transmission network, the core of a new power system, during the 14th Five-Year Plan period (2021-25). It would ensure that the power system operates safely and stably, and optimizes the allocation of resources on a large scale.
By applying artificial intelligence, big data, simulation modeling and the internet of things, the network is expected to be more responsive in operation and dispatch, while digitalization can also provide support to the grid network''s systems for early detection of problems and intelligent intervention, it said.
This is also in accordance with the government''s blueprint for the development of the digital economy, which aims to increase the contribution of core digital economy industries to 10 percent of the GDP by 2025.
According to the 2022 Government Work Report, China aims to boost its global competitiveness in advanced technologies such as semiconductors and AI. To promote digital transformation, large companies are encouraged to focus on the integration of new technologies such as 5G and artificial intelligence with China''s real economy. Analysts forecast that the use of data will help transform the country''s electric power grid into an innovation engine.
The company''s work on grid digitalization is aligned with the recent strategy laid out for a modern energy system during the 14th Five-Year Plan by the National Development and Reform Commission and National Energy Administration. The strategy specified digitalization as a key part of business model innovation in the energy sector, said Wei Hanyang, a power market analyst at research firm BloombergNEF.
According to the modern energy system plan, China''s share of nonfossil energy consumption will increase to around 20 percent by 2025, and the proportion of non-fossil power generation will be around 39 percent by then. The country is also expected to develop high-quality solar and wind power on a large scale. Priority would be given to local development and utilization while speeding up the construction of decentralized wind and distributed photovoltaic power in load centers and surrounding areas.
"As renewable power gains a higher penetration in the grid, it is compelling to integrate it smartly with other power sources and deal with intermittency automatically," said Wei.
Intermittency means that many forms of renewable energy, like solar and wind, do not consistently produce energy at all hours.
A digital power grid will better facilitate the consumption of power increasingly produced by clean energy while further facilitating China''s ambition to achieve a carbon peak by 2030 and carbon neutrality by 2060, he said.
"China Southern Power Grid also has two major pilot projects on power trading in Guangdong and Yunnan provinces, which provide both challenges and opportunities for the country''s in-depth digitalization of its power networks," he added.
The company will substantially increase the degree of intelligent operation in its digital power grid, its digital operational efficiency and its network security protection and operation and maintenance level by 2025. That will lead to it becoming a world-leading utility company and benchmark for digital transformation, the company said.
The digital network will better support a new power system that gradually increases the proportion of new energy utilization, which is expected to further boost the industry''s prospects amid the nation''s progress toward carbon neutrality, said Meng Zhenping, president of the company.
China Southern began the planning and construction of a digital power network during the 13th Five-Year Plan period (2016-20), laying a solid foundation for the company''s digital transition.
As a pilot digital project, the power network in Guangdong allows the digital power network to support macroeconomic analysis, environmental management and poverty alleviation enhancement in Guangdong province.
One of the most pressing challenges for China to meet its pledge to cap carbon emissions this decade and pivot toward renewables is overhauling its electricity grid, the world''s largest, officials and analysts say.
Beijing''s surprise announcement last year that it would hit peak emissions by 2030 and become carbon neutral by 2060 could presage the biggest reduction in projected global warming of any climate commitment to date, researchers say.
But building new solar plants and wind farms is the easy part, analysts say. Upgrading the system that transmits that green power to faraway consumers could be five times more costly, and depends on rapid technological progress.
"When we talk about the challenges, most people focus on the (electricity) grid," said Chunping Xie, an expert on China''s policies on climate change and energy at the London School of Economics and Political Science. "It''s the first step in this long journey."
Investments in China''s grid and other associated costs are expected to exceed 6 trillion yuan ($896bn) over the next five years, Mao Weiming, former chairman of State Grid, said in a speech in October.
China, the world''s biggest electricity generator, power consumer and carbon emitter, has said it is aiming for renewable power to account for more than 50 percent of its total electricity generation capacity by 2025, up from 42 percent now.
Such a drastic swing from coal, which generates a stable base-load power supply, to renewables, which can fluctuate with weather conditions, could play havoc with China''s electricity network, officials say.
A senior manager in charge of dispatch at China''s State Grid – the world''s largest utility, which manages 75 percent of the country''s network – told Reuters the system had already "reached its ceiling" of how many renewable sources it could handle and still maintain stable operations. The official asked to remain anonymous as he is not authorised to talk to the media.
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