SGT Insights.

January 30, 2012

2012ChinaSmartGrid ConstructionInvestment Outlook

Lihui Xu Jochen Alleyne ______________________________________ SGT Research | SmartGridTimes&Consulting www.sgtresearch.com

SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

ExecutiveSummary
FollowingChinasthreestagesmartgridplan(Table1.1)gradualdeployment,Chinas smartgridconstructioninvestmententersintoalargescalephasein2012.
Table 1.1 Chinas Three Stage Smart Grid Plan
Target planning & trial phase To establish master plan, carry out key technology research and key equipment development, and proceed with demonstration projects. To formulate standards and requirements for strong and smart grid, to evaluate construction progress based on the needs and technical development of smart grid, continuously amend development plan, and construct smart grid in fullscale. To evaluate the construction of smart grid in fullrange, further enhance the capability of Chinas strong and smart grid in an all-around way, based on application needs and technical development.
(Source: State Grid Corp. of China)

Segment Stage 1 ~ (2009-2012)

Stage 2 ~ (2011-2015)

full-scale construction phase

Stage 3 ~ (2016-2020)

leading & enhancing phase

In2011,theStateGridCorporationofChinas(SGCC)fixedassetsinvestmentroseto RMB330.3billionyuan(US$52.37billion),up13.5percentfromthesameperiodlast year.ThepowergridinvestmentwasRMB301.9billionyuan(US$47.87billion),an increaseof14percentfromthesameperiodlastyear. In2012,SGCCisexpectedtocompletethefixedassetinvestmentofRMB336.2billion yuan(US$53.3billion),withapowergridinvestmentofRMB309.7billionyuan (US$49.11billion),anincreaseof2.58percent.ChinaSouthernPowerGridCo.,Ltd. (CSG)willinvestRMB100billionyuan(US$15.85billion)inthesmartgridconstruction. Mostoftheinvestmentswillgototwomainfields,powertransmissionconstruction (includingUltraHighVoltageprojects)andpowergridupgradinginruralareas.

CurrentSituation
In2012,SGCCisspeedingupsmartgridconstruction,especiallyUltraHighVoltage (UHV)projects.HuainanShanghaiUHVAC(AlternatingCurrent)projectwillbe startingtheinvitationtotenderinQ12012.HamiZhengzhou800UHVDC(Direct Current)projecthasreceivedpermissiontodeployfromtheNationalDevelopmentand ReformCommission(NDRC).NingdongZhejiangUHVDCprojecthasreceived approvalbytheNationalEnergyAdministration(NEA)forpreliminarywork. Thepowergridupgradeprojectsforruralareathisyearisatacrucialstage.Basedon thepreviousdeploymentfromNDRC,theStateGridinvestmentofRMB48.84billion
SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

yuan(US$7.74billion)forruralgridupgradingworkswillbeendedby2012.The problemof96,000householdswithapopulationof400,000withoutelectricitywillbe solvedaftertheupgradeiscompleted.Therefore,theruralpowergridupgradingtask in2012wouldbeexceptionallyheavy. In2011,SGCCdeployed51.62millionsmartmeters.SGCCplanstofinish37million smartmeterinstallationthisyear,meaningtheamountofsmartmeterinstallationswill dropby28.32percentfromthesameperiodlastyear. Atpresent,Chinaisatastageofrapiddevelopmentofindustrializationand urbanization.Chinaselectricitydemandisexpectedtocontinuetogrowrapidlyata rateof8.5percentannuallyoverthenexttwoyears. However,atightpowersupplywilloccuragainthisyearduetoincreasingdemandand stagnantgrowthinnewpowerplants.ThemaximumloadoftheStateGridregionis expectedtoreach635millionkilowattsandthepowershortageduringthesummer peakperiodwillreach49millionkilowatts.ThemaximumshortagesfromNorthChina, EastChinaandCentralChinaPowerGridrespectivelyare10million,25millionand14 millionkilowatts.JiangsuProvinceandZhejiangProvinceaccountfor17%ofthe maximumloadwithshortagesof13.4millionand9.3millionkilowatts. ChinaSouthernPowerGrid(CSG)alsorevealedatthe2012SouthernPowerGrid powersupplyanddemandsituationsymposiumthatthewholepowernetworkinits regionwillcontinueshortagesthroughouttheyearduetofloodseasonandinsufficient generatingcapacity.Themaximumshortageisbetween8millionto14millionkilowatts duringthesummerpeakperiod.ThebiggestshortageisatGuangdongProvince. ChinesepowergridslocationbyregionreferstothefollowingMapofChinaPower Grids(Figure1.1).

SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

Figure 1.1

Map of China Power Grids

(Source: State Grid Corp. of China) Regardingsmartsubstation,theconstructionrequiresmajorinvestmentsasitinvolvesa largeamountofequipmentandapplicationofhighendtechnologies.SGCCgave specialemphasistotheconstructionofsmartsubstationsatitsmidyearcapital constructionconference.The74pilotsmartsubstationswhicharepartofthefirsttwo phasesofStateGridspilotprogrammehavecompletedthebiddingprocess,and20 smartsubstationsarealreadyoperating.Theconstructionofadditionalsmart substationsisexpectedtocontinueatanacceleratedpaceoverthenextseveralyears.

RegionalSmartGridConstructionInvestment
Chinahastwostateownedpowergridcompanies.OneistheStateGridCorporationof China(SGCC),theotheristheChinaSouthernPowerGridCompanyLimited(CSG). HeadquarteredinBeijing,SGCCisthelargeststateownedelectricpowertransmission anddistributioncompanyinChinaaswellasintheworld.SGCCspowernetwork operationcovers26provinces,autonomousregionsandmunicipalitieswith subsidiariesofNorthChina,EastChina,CentralChina,NortheastChinaandNorthwest China.

SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

CSGisthesecondlargestateownedenterpriseinChina.ItsdistributioncoversChinas fivesouthernprovincesincludingGuangdong,Guangxi,Yunnan,GuizhouandHainan. CSGisheadquarteredinGuangzhou,GuangdongProvince. ThefollowingMapofChina(Figure1.2)showsthelocationofChineseprovincesby region.

Figure 1.2 Map of China

(Source: SGT Research)

SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

Thetablebelow(Table1.2)indicateseachprovinceandcitysmartgridconstruction investment.
Table 1.2 List of Chinese Provinces Smart Grid Construction Investment In 2012
Power Grids Provinces & Cities Beijing Tianjin Hebei Shanxi Shangdong Shanghai Jiangsu Anhui Zhejiang Fujian Hubei Hunan Henan Jiangxi Sichuan Chongqing Heilongjiang Liaoning Jilin Shangxi Ganxu Qinghai Ningxia Xinjiang Xizang Guangdong China Southern Power Grid Shenzhen Guangxi Hainan Yunnan Guizhou Investment (billion yuan) TBA 5.79 8.5 8.219 26.908 TBA 6 10.83 19.347 20 12 TBA TBA 8.219 26 9.3 TBA TBA 5.604 TBA 6.577 3.751 2.5 TBA 2.88 25.2 3.758 6.68 2.21 12.78 15

North China

East China

State Grid Crop. of China

Central China

Northeast China

Northwest China

(Source: State Grid Corp. of China)

SGT Insights. | 2012 China Smart Grid Construction Investment Outlook

SGT Insights. January 30, 2012

About SGT Research SGT Research is a global market research and advisory firm serving the smart grid industry value chain including electric power infrastructure, renewable energy, clean technologies and capital investment. SGT Research provides strategic consulting services including analysis of market drivers, business models and technology trends for smart grid development. SGT Research also provides market entry services for smart grid firms seeking opportunities in China. With SGT Researchs local and international experience, clients will have added competitive advantages of bringing high-value products and services to the Chinese market faster. www.sgtresearch.com

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SGT Insights. | 2012 China Smart Grid Construction Investment Outlook