The mainland is emerging as a potential leader in the development of the so-called "smart grid" - a technology that radically changes the way electricity is distributed and used.
Picture a world in which you can review your home electricity use through the internet or an in-home electronic display. You browse the latest prices offered by electricity firms and switch to the cheapest.
Armed with information on usage and price, you can program your home appliances, such as the washing machine, to start while you are at work or out shopping. You recharge your electric car late at night to take advantage of lower power prices.
You can also sign up to automatically turn down your air conditioner in the hottest hours of the day for 15 minutes every half hour to save energy. You are rewarded for your sacrifice through rebates in your electricity bills.
Your electric vehicle, normally charged at night, can be turned into an "electricity generating unit" by "reverse" supplying the power grid when you are at home.
You also save money by storing electricity at home through high-performance batteries, which are charged during non-peak hours.
These are just some of the options many consumers will have at their disposal in 10 years.
This is the world of "smart grid", the buzzword in the electricity industry for decades to come.
"Smart grids will fundamentally change the way we think about, use and manage energy," said George Arnold, a national co-ordinator of smart grid interoperability at the United States National Institute of Standards & Technology, at a conference in Shanghai.
In this world, consumers will take centre stage. Consumers empowered by information and technology will drive energy conservation and a greater use of renewable energy, fundamentally altering the face of the power industry.
Gone will be the days of the one-way transmission of electricity and bills - from power generators and distributors to end-users.
By taking advantage of different electricity prices at different times of the day, consumers can adjust their consumption behaviour and save money.
Arnold said idle power-generating capacity in the US at night could be enough to charge 70 per cent of the nation's cars and light trucks if they were electric vehicles.
Consumers are not the only beneficiaries in the smart grid future. By shifting peak demand to non-peak hours, power generators will not need to build as many power stations and can keep less reserve capacity, thus reducing their expenses.
By investing in information technology, power companies can also improve their service quality and reliability. They can also cut maintenance and operating costs and increase their capacity to provide clean but intermittent renewable energy, such as solar and wind power.
In a smart grid system, power lines and sub-stations are monitored by digital technology, which enables the network to be "self-healing". The system detects operating faults automatically, cuts off the problem areas and redirects electricity delivery around them.
With the installation of "smart" electricity meters, utilities no longer have to send meter readers to customers' homes, and meter problems can be detected and corrected earlier. Customers can be connected or disconnected without workers physically doing the job.
But the big stumbling block is that building out the smart grid comes with huge costs and will take many years. Moreover, the costs-benefit trade-offs have yet to be demonstrated, for their electricity companies or consumers.
"The business case for smart grid is a bit tough to build," said M.L. Chan, a vice-president of Asia business development for Quanta Technology, a US-based utility infrastructure consultancy.
This leaves government shouldering the responsibility to spearhead and jump-start demand for smart grid equipment.
In the US, the Department of Energy last year announced US$3.4 billion in grants to fund smart grid technology development in what was billed as "the largest single energy grid modernisation investment in US history".
The grants will fund up to half the costs of eligible projects.
On the mainland, State Grid Corp of China may spend 20 billion yuan (HK$22.91 billion) on the first-stage pilot of smart grid development, Beijing-based Essence Securities analyst Zhang Long estimated in a research report.
This is part of hundreds of billions of yuan in annual expenditure on grid network upgrades and expansions by the state-owned giant, which holds power-distribution monopolies in all but five southern provinces.
The first-stage pilot includes demonstration projects that fuse information and electricity transmission in some small residential communities in Beijing, Wuxi and Shanghai. It also includes the installation of pilot "smart" sub-stations, power transmission line monitoring systems and demonstration electric vehicle recharging stations.
To enhance the national power grid's capability to absorb irregular renewable energy output, the smart grid pilot also includes a project in Hebei province that mixes solar and wind-power generation at one site.
Coupled with electricity storage devices, the project aims to cure the output instability problem inherent in standalone solar and wind-power generation.
Solar output is best captured during the day, while wind power is at its strongest at night. While both tend to be intermittent and vary according to weather conditions, their fluctuation can be smoothed out by energy storage devices such as batteries.
Although a great deal of equipment and technology is needed to realise the smart grid pilot, industry observers said the mainland is likely to be highly self-reliant.
The mainland is focusing its initial smart grid development on upgrading the infrastructure of the power utilities such as automated meter reading systems and sub-stations that can monitor the external environment and protect the distribution system from potential damage.
By contrast, in developed nations where power price deregulation has already been implemented, power utilities tend to start their smart grid development at the customer end of the system, Chan said.
Currently, the monopolies' power prices are strictly regulated by the government. They cannot deal directly with their customers to offer them price incentives to encourage energy conservation and facilitate clean-energy generation and usage.
It would be difficult for foreign suppliers, whose competitive edge is in customer service management software, to break into the mainland market, which is not yet ready for customers to participate in the power market, Chan said.
"The market is highly guarded by State Grid," he said. "They are using products developed by their own research institute."
Nevertheless, US information-technology giants IBM, Microsoft Corp and Cisco Systems are known to be pursuing opportunities to tap the huge smart grid market on the mainland.
Jack Perkonski, the founder of JFP Holdings China, is advising US-based smart grid software developer BPL Global on its China expansion.
He said it was "particularly challenging" for Western companies to break into the mainland smart grid market because "for most products in smart grid, China is already larger than the United States".
Perkonski said mainland companies were also fortunate that they were increasingly able to get access to funding, a situation that "most foreign firms can only dream of".
He added that foreign companies would fare better on the mainland by co-operating with local firms.
Smart thinking
What is it?
A smart grid is an intelligent electricity network that integrates the behaviour and actions of all connected users - generators, consumers and those who do both - to deliver sustainable, economic and secure power supplies
Benefits:
CONSUMERS
Smart meters and other devices let people instantly see how much electricity is used, when it used and how much it cost (by the hour)
Real-time pricing allows people to save money by using less power when electricity is most expensive (at peak periods)
ENVIRONMENTAL
Homeowners and businesses can use advanced metering to calculate and reduce their greenhouse gas emissions
WORKFORCE
Smart grid investments are expected to foster a "green" economy, with programmes providing training in new technologies and jobs
POWER SYSTEM
More efficient transmission
Quick restoration of power after blackouts or outages
Reduced operations and management costs
Reduced peak demand
Increased integration of distributed generation and renewable energy
NATIONAL
Smart grid technologies will detect and isolate power outages to contain them before they become rolling blackouts
SOURCE: US DEPARTMENT OF ENERGY, SMARTGRIDS EUROPEAN TECHNOLOGY PLATFORM FORUM
