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In China, local smart grid equipment suppliers trump foreign names

* State Grid Corp says Chinese firms offer advanced technology

* EU Chamber of Commerce complains about lack of access

* Nari, China XD Electric, TBEA among companies dominating local market

METERINGChina.com - The politically powerful chief of China's State Grid Corp, the world's biggest utility, welcomes bids from foreign firms looking to supply equipment for its smart grid but says they face formidable competition from Chinese companies.

Liu Zhenya, State Grid's president, dismissed accusations of protectionism, saying China's smart grid market was open and transparent. Local suppliers held the upper hand because they offered sophisticated home-grown technology at a lower cost, he said.

European firms including Siemens AG, ABB Ltd and Alstom SA have long complained about the lack of access to the world's biggest smart grid market, which is dominated by state-owned firms including affiliates of State Grid and its smaller domestic peer, China Southern Grid.

"China is at the very forefront of world smart grid technology," Liu said on the sidelines of the 18th Communist Party Congress in Beijing at which the country's new leadership will be revealed this week.

China, like the United States and some European countries such as Britain, is spending heavily to upgrade its power network to a so-called smart grid that can absorb variable and intermittent renewable energy and help improve the efficiency and economics of transmission.

"All equipment and materials are procured through open tenders. Whoever has the best price, technology and reputation wins," Liu said on Friday.

The EU Chamber of Commerce has been lobbying for improved market access, hoping China's new leadership will consider opening the lucrative sector after the party congress.

Foreign firms are not involved in the drafting of standards for China's smart grid. This is mainly handled by State Grid which transmits and distributes power to 1.1 billion people across nearly 90 percent of China.

In a paper published in September, the European business lobby says the practice raised concerns that the standards are used to erect market barriers. It also warns that discrepancies between Chinese and international standards have hindered Chinese companies from entering foreign markets.

The lobby declined to comment for this story.

Chinese reformers and Western governments have also taken aim at the state sector in recent years, saying it gets the lion's share of preferential loans and policies and poses unfair competition to private companies and overseas firms.

Outgoing President Hu Jintao, in his address to a Communist Party Congress on Thursday, called for further opening up of China's economy to foreign investors, as well as market-oriented reform of the state sector and increased state investment in industries crucial to national and economic security. He did not elaborate on these plans.

State Grid has also come in for domestic criticism with reformers calling for the break-up of its monopoly. But Liu and others have argued that preserving the monopoly helps ensure security of energy supply.

HUGE BUT CLOSED MARKET

State Grid aims to invest 280 billion yuan ($45 billion) in China's smart grid between 2011 and 2015. And Liu has been lobbying Beijing for approval of nearly 20 cross-country ultra high-voltage (UHV) lines as the backbone of the country's smart grid network. Industry experts say this would cost up to $250 billion.

Beijing has approved five of the UHV lines, and Chinese state-owned enterprises have won nearly all of the multi-billion dollar contracts to supply UHV equipment such as transformers.

China is the only country to launch a commercial roll-out of large-scale UHV projects. Foreign companies are virtually shut out of the market as its grid companies source over 90 percent of UHV equipment from domestic firms.

Chinese firms own the UHV technology, based on high-voltage technology transferred from foreign companies through joint ventures set up for projects such as the Three Gorges Dam, domestic and foreign power industry officials told Reuters.

In the 1990s, China relied almost entirely on foreign companies such as Siemens, Toshiba Corp and Mitsubishi Corp for high-voltage power transmission equipment.

Now local players such as China XD Electric, TBEA Co and Baoding Tianwei Baobian Electric dominate the domestic market.

"Basically we have got all that high-end UHV technology. Most major domestic companies are almost fully capable of making these products by themselves," an official at the securities office of TBEA said by phone from northern China.

TECHNOLOGY FOR MARKET

Foreign companies are now struggling to compete.

"It is quite difficult for us to get projects from China at the moment," said Pakorn Thepparat, a power transmission engineer at Siemens. "They have learned all the technology."

Siemens has been involved in many of China's high-voltage power projects, including its first multi-billion dollar UHV project to transmit hydropower from southwestern China to the industrial powerhouse of Guangdong. As part of the deals, Siemens transferred high-voltage technology to Chinese firms and provided training to Chinese engineers.

Key Chinese smart grid equipment suppliers include Nari Group, a wholly owned unit of State Grid, and Guodian Nanjing Automation Co Ltd which have seen sales and profits grow by leaps and bounds and started to export their products.

Still, as international companies pile pressure on China to open its smart grid market, some Chinese firms are sensing they could come under threat from foreign competition.

"Our country's current policy of encouraging the use of home-made equipment in the domestic UHV market is being challenged," China XD Electric said in its interim report. "If the policy changes, competition will intensify."


 

Contacts:Liko Lee
Telephone:0516-80335990 Phone:86-15252193629 Mailbox:xysjydq@163.com URL:www.jingyidq.com
Address:No 111,Beijing West Road, Economic Development Zone,Xinyi City,Jiangsu Province,China