The speed of China's economic growth has been breathtaking. A generation ago, millions of Chinese lacked reliable access to power. The shortage hindered basic economic growth, stifled industrial investment, slowed healthcare progress, and constrained consumer spending. In just a couple of decades, China has largely bridged this gap by constructing more new power plants, at a faster clip, than any nation in history. And now, it plans to go further still, by building out the world's largest smart grid at a pace and scale that will eclipse efforts elsewhere.

Why a smart grid, rather than the sort of conventional electricity network that's common in other countries? After all, a typical, traditional grid could deliver all the electricity China needs. The answer: Because a smart grid, which optimizes the flow of power by combining a layer of digital networking, intelligent sensors, computerized controllers and system analytics, will do much more than help China wire up its population. It will also make it easier to deploy an array of green technologies, from renewable energy to electric vehicles.

These goals are in line with a national agenda to build up an energy efficient and environmentally friendly economy. In the 12th five-year (2011-15) national development plan, China has targets for energy mix, energy efficiency, and carbon emissions, including:

  • Increase the ratio of non-fossil energy to total primary energy consumption by 11.4 percent
  • Decrease energy consumption per unit of gross domestic product by 16 percent
  • Cut CO2 emissions per unit of gross domestic product by 17 percent.

Perhaps as important, China is also looking to the smart grid to help create the 15 million new jobs that, year after year, employ rising numbers of newly graduated workers. By supplying the gear to build its own smart grid -- from computerized meters, to advanced sensors, to substation equipment and the like -- Beijing rightly sees the potential to seed a new generation of high-tech manufacturers. Further out, those new domestic suppliers will become exporters, Beijing hopes, which will supply the advanced devices for the rest of the world's smart grid build out.  And, following a familiar model, it's likely to do so at competitive prices.  

There is no better example of the scale of China's smart grid ambitions than the State Grid Corporation of China, or SGCC. Little known abroad, SGCC operates most of China's electric power transmission network and is the world's largest utility, one of the 10 largest listed companies world-wide, with a service territory that includes 1 billion people covering nine-tenths of the country. Guangzhou-based Southern Power Grid Co. manages the remainder of China's grid.

Picked by Beijing to lead the national smart grid push, SGCC has committed a total of $400 billion to transmission upgrades, including $100 billion targeting the smart grid, according to ZPryme Research & Consulting.  The funding has unleashed a building blitz. With 36 million smart meters installed in just the past three years -- on par with the total installed to date in the U.S. -- SGCC next aims to outfit 300 million customers with smart meters nationwide by 2020.  By comparison, the U.S. has a total of 143 million utility customers.

Pressure is also rising to upgrade the grid from other quarters. China's planners recognize that to deploy large scales of renewable energy, the grid must be smarter and more flexible. If not, China will face difficulties managing a new era of grid dynamics. Intermittent by nature, wind and solar can cause power flows to spike then fall. Likewise, recharging a coming wave of electric vehicles complicates the timing and scale of demand. Already, major new additions of wind energy are testing the grid. China installed 64 gigawatts of wind power in the past two years, yet because existing transmission lines were running near capacity, not all of those new turbines could be hooked up immediately.

This is only the start. Much more green energy is due. Beijing plans to invest $473 billion by mid- decade on renewables, including wind and solar power. Come 2015, SGCC aims for its grid to be able to handle 100 GW of wind capacity and 5 GW of solar, while, nationwide, China is aiming to build 10 GW of solar in that period. SGCC is also planning ahead for a smart grid able to support hundreds of thousands of electric vehicles, or EVs, this decade. By 2016, for instance, more than 400,000 charging points will be built as part of a large-scale push to commercialize EVs in some 20 cities.

To date, SGCC has built and operates 156 charge stations and 6,252 charge poles. Its plans call for wide-area EV charge networks as well as battery-swap stations in selected cities. It is also operating several smarter community pilots as a way to explore smart energy services for commercial and industrial customers. Meanwhile, SGCC is trying to develop smart grid industry standards, and would like to build several industry groups on electricity engineering R&D, equipment manufacturing, and system engineering.

The rapid growth of China's smart grid is already sending ripple effects beyond its borders. As has been the case with other manufactured goods, China's entry into the smart grid is likely to drive down unit prices for smart meters worldwide. China's planners hope to roll out smart meters for under $50. In the U.S. and EU, the rise of lower-cost Chinese smart meters will drive down costs. China is also hungry for expertise to help get right its massive smart grid agenda. To help China's utilities make the transformation, for example, IBM's Energy and Utilities Solutions Lab in Beijing, is developing a range of solutions across the entire value chain of electric power generation, from renewable integration to consumer interaction. 

China recognizes that a smarter grid is a building block for a better, greener economy. Driven by the imperatives to improve the delivery of basic energy services to a growing population, coupled with rising demands of renewables, and the long term need for jobs growth, China is pushing to take a lead in the global smart grid market.

Henry Yu is the Solution Executive for Business Development and Solutions, Energy & Utilities at IBM. Brad Gammons is Vice President of IBM's Global Energy and Utility Industry. In this role, he is responsible for global sales and solution development. He is also responsible for the sales and execution of IBM's Intelligent Utility Network growth initiative.