# The Next Hot Smart Grid Market? China

When a giant nation with giant energy needs like China says it’s going to smarten up its electric grid, U.S. technology companies — not surprisingly — take note. Witness General Electric’s (s GE) announcement that it’s partnering with the City of Yangzhou, China, to build a smart grid “demonstration center” in the city of 4 million, with the goal of deploying some of the tested technologies within four years. It says the initial demonstration phase — which will include wireless-enabled smart meters, home energy management systems and smart appliances set up in a 100,000 square-foot lab -– is meant to showcase how GE technologies can “help China improve the reliability, efficiency and carbon footprint of its energy delivery.”

It will be GE’s first smart grid-related project in China, and the technology giant will be focusing its efforts there on offering smart appliances as well as solutions that drive energy and operational efficiency and help with the integration of renewable energy sources into the grid.

China’s energy needs are expected to double in 10 years; with that in mind, the country’s dominant power distribution company, State Grid Corp., said last year that it’s set a goal of building a smart grid by 2020. As with U.S. efforts to add intelligence to the grid, China wants its grid to be more flexible, robust and able to integrate a higher percentage of renewable sources of energy. In the meantime, the Chinese government has been ramping up investment into power distribution; last year it spent more on building out the grid and making it smarter than on power generation, according to the China Electricity Council.

State Grid’s initiative will take enormous resources. An analyst with Essence Securities, according to this Bloomberg report, estimated China will need to spend as much as $10 billion a year through 2020 to build a modern grid. GE isn’t alone in starting to lay the groundwork for winning smart grid business in China. IBM (s IBM) announced late last year an agreement with ENN Group, a Chinese energy provider, to form a joint venture focused on “intelligent energy.” The two companies said they will develop “innovative energy services” and promote intelligent city programs throughout China. Highlighting its interest in the country, IBM also recently moved its Energy & Utilities VP of Sales, Brad Gammons, to Beijing from Texas. Big Blue expects to generate a minimum of$400 million in smart grid revenues in China over the next four years, a spokeswoman tells us.

Hewlett-Packard (s HPQ), Cisco (s CSCO) and Accenture all are said to be vying for smart grid-related business in China, with Accenture having already snagged a piece of at least 10 projects. Smart meter maker Itron (s ITRI) has been selling its products in China at least since the 1990s, and the firm estimated in 2008 that only about 1 percent of China’s utility meters are automated –- meaning there’s plenty of growth in the country for Itron and others.

Roy Wildeman, a senior analyst with Forrester, told me he’s not surprised that leading U.S. companies are excited about smart grid opportunities in China, but he said the savvier ones will be looking to work with Chinese partners so they don’t have to enter the market all on their own. For the U.S. companies, Wildeman said, it’s a way to participate while not taking on all the risk, and for China it means the country benefits from leading global players while still having some role for domestic firms.

Having local partners, however, could eventually become a necessity for U.S. firms. The Chinese government requires that at least 70 percent of wind turbine components be sourced domestically in order to be eligible for use in projects in the country, and China analyst Louis Scwartz of China Strategies has been quoted as saying that a similar rule is likely around the smart grid. “Buy China” mandates or not, in coming years expect more U.S. companies, both big and small, to be looking to sell their smart grid products and services in China.