China's $250-B power grid plan: too costly and faulty?

A $250 billion upgrade. 

China's State Grid Corp. is lobbying hard for the approval of this plan that it says would make the nation's grid an international trailblazer.

Liu Zhenya, chief of China's State Grid Corp, has pushed for the approval of the plan. 

As many as 20 ultra-high voltage power lines would connect China's disparate regional grids and help resolve China's geographical energy imbalance by 2020.

But critics say it is too costly and could expose the system to blackouts.

China's regional grids are too weak to receive the large amounts of power transmitted via UHV lines, analysts say.

If all the lines proposed by State Grid are built, China's existing regional grids would be strongly interconnected. That would allow power to be sent from one part of the country to another but could also increase the system's vulnerability to black outs caused by glitches to the UHV lines, they warn.

"You have to strengthen the receiving part first," said Michael Thomas, partner at Hong Kong-based energy consultancy, The Lantau Group.

Analysts also question whether the huge costs will deliver commensurate benefits.

Lantau Group and Macquarie Equity Research said in a joint report in July that there is little cost advantage to using the UHV lines. The cost of generating power from coal for delivery via UHV lines is 256.82 yuan or $41.21 per megawatt hour, compared to the 262.86 yuan cost for transporting coal over rail for power generation, the Lantau Group estimates.

"The UHV projects are massively expensive and, together with many observers, I am not convinced of the projects economics and not convinced the projects make sense from an energy supply security perspective," said Joseph Jacobelli, a Hong-Kong based independent energy analyst, who was formerly head of global cleantech research at HSBC Holdings PLC.

The UHV lines, which are designed to minimize energy loss during transmission, would allow China to build power plants near coal mines or gas fields before sending electricity rather than send coal through rail roads across country. 

The project would be China's most expensive energy infrastructure project to date.

The National Development and Reform Commission is assessing Liu's proposal and may make a decision around the end of the year, the regulatory source said.

For more.