Overview: China’s transmission and distribution sector

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Oct. 2 2014, Updated 12:00 p.m. ET

State monopoly

Just like neighboring India—where most of the transmission is carried out by the state-owned Power Grid Corporation—the majority of China’s power transmission is carried out by the government enterprise State Grid Corporation of China (or SGCC). SGCC covers 88% of China’s territory—spread across six separate grids. SGCC owns and operates over 700,000 kilometers of high voltage—long range—lines. It owns over 3.5 million kilometers of low voltage lines.

With 2013 revenues of $333 billion, the company ranks seventh in Fortune Global 500 list. It’s just below ExxonMobil (XOM) and BP (BP). It’s ahead of Chevron (CVX). Two other Chinese state-owned companies—Sinopec Group and China National Petroleum (or CNP)—are featured in the top ten.

UntitledFortune 500 global

Overcoming regional imbalances

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Just like in India (EPI), China’s investment in transmission and distribution infrastructure hasn’t kept pace with investments in generation capacities. China’s transmission network is divided into six regional grids. This led to inefficiencies. One regional grid can’t transfer excess electricity to the other unless the grids are connected.

The majority of hydropower resources are in the west. Most coal resources are in the northwest. However, most electricity demand comes from the heavily industrialized and populated east—Shanghai, Nanjing—and south—Guangzhou, Shenzhen.

To overcome the inefficiencies, China has been investing heavily in ultra-high voltage (or UHV) transmission lines. It plans to have 12 lines covering the entire country.

While companies like Siemens and ABB (ABB) specialize in the technology, SGCC has mastered it. Most of the UHV line work is carried out domestically. The UHV project alone costs $34 billion.

As we saw in the last part in the series, China is focusing on wind, solar, and nuclear power. What does it mean for China’s transmission and distribution sector? We’ll discuss this in the next part of the series.

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