State Grid Essay ⋆ Business Essay Examples ⋆ EssayEmpire

With headquarters in Beijing, the State Grid Corporation of China (SGCC) is the provider of electric power throughout China, reaching 88 percent of the country’s area. It operates both the electric grid in the country as well as all power plants. In existence since 2002, it is a state-owned enterprise and has 49 subsidiaries as well as the responsibility for managing and operating the Tibet Electrical Power Company. Its 1.5 million employees serve a customer base of 128 million people. Its stated income for 2005 equaled $105.5 billion with profits equal to $21.7 billion. In the same year, it ranked 40th in the Fortune Global 500; the following year it ranked 32nd.

Among the responsibilities of SGCC has been that of bringing electricity for the first time to remote areas of China, a project analogous to that of the New Deal’s Tennessee Valley electrification of the 1930s in the United States, only on a much larger scale. In 2006 SGCC brought free electricity to over 545,000 households. In addition to the newly created demand for consumer goods this electrification created, public works such as electrified irrigation pumps were now possible. SGCC has stated its intention to continue this effort to other areas of the country. SGCC has also been involved in international projects. In 2007, it was a partner with the Calaca High Power Corporation in a team that won a 25-year contract to run the Philippines power grid.

Challenges

An important part of SGCC’s mission has been to ensure that China’s industrial growth, which requires enormous amounts of power, can continue. SGCC’s task has not been easy for a number of reasons. Shortages of fuel, inadequacies of infrastructure, and increased demand have combined to create an array of problems that must be solved.

In recent years, China has seen coal shortages that have affected the ability of the coal-fired plants that supply over 80 percent of China’s power. Coal supplies (one-third of which came from illegal mines shut down by the government) fell seriously short in 2008. The result was some rationing of power. In addition, the inability of certain companies to produce up to capacity affected the nation’s gross domestic product (GDP) as well as causing certain stock prices to fall. The coal fired power plants connected to the nation’s grid are supposed to maintain a 15-day supply of coal. In reality, 541 of these had less than a 12-day supply, while others had a seven-day supply, and others enough coal for only two or three days. The coal shortage combined with increasing demand and infrastructure problems prevent areas with a surplus from transmitting their electricity to areas that need it.

Solving the problem of transporting electricity from remote regions, and some of these have a great deal of available coal or are located where hydroelectric dams have been built, has been an important project for SGCC. In 2007 it proposed constructing and using an ultravoltage power grid that would make the transfer of energy possible from remote regions. The technology to enable these massive transfers exists (having been developed by the Soviet Union years before). It would completely bypass smaller grids between the interior and the coast, where the power is needed. In 2008 SGCC stated that it had awarded a $70 million contract for power equipment that would allow the construction of such a line to run from northeast China to urban areas. The line, which will run in parallel with already-existing lines, will allow the massive transfer of electricity. When completed and online in December 2009, the project will have cost $400 million.

Whatever specific course SGCC pursues, it must further develop and improve its existing infrastructure. The International Energy Agency has stated that China, probably through SGCC, must spend more than $1.5 trillion between 2008 and 2030 to ensure that its electric infrastructure can support growth. The demand for power is so great and will increase so dramatically that even a massive project such as the Three Gorges Dam, which will sell electric power to SGCC, will not be able to supply as high a percentage of the national requirement as had originally been planned.

In addition to developing new ways to increase power supplies domestically, SGCC has brokered agreements with other countries to supply power to China. In 2008 it was announced that SGCC would sign an agreement with Russia’s Far East Power Grid to supply 10 million kilowatts to northeastern China. Three years earlier, another similar agreement had been signed with a Russian power grid to supply electricity. A 2008 agreement with Mongolia will result in that nation supplying 12 million kilowatts to northern China. Another agreement has been signed to bring electricity from Kazakhstan to China.

Bibliography:

Douglas F. Barnes, ed., The Challenge of Rural Electrification: Strategies for Developing Countries (Resources for the Future: Energy Sector Management Assistance Program, 2007);
State Grid of China, www.sgcc.com.cn (cited March 2009);
Yi-Chong Xu, Electricity Reform in China, India and Russia: The World Bank Template and the Politics of Power (Edward Elgar, 2004).

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