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The global power grid crisis opens the door to China, which is poised to dominate the market with its technological supplies...
The infrastructure responsible for distributing electricity to homes and businesses of all types is showing worrying signs of insufficiency. This has become more apparent over the last few summer months. The alarm, which is almost worldwide, was raised by the International Energy Agency (IEA), which in a report published in February highlighted the urgent need to double global investment in electricity transmission within the next decade. While we wait to see what governments in each country will do, China is ready to seize the opportunity to better exploit the global energy market.
China and the electricity market
The IEA is clear: annual global investment in electricity transmission will need to increase from around $140 billion in 2023 to $300 billion by the mid-2030s if the world is to meet growing energy demand and emissions reduction targets. “Over the past decade, nearly 1.5 million kilometers of new transmission lines have been built around the world, but insufficient transmission continues to be a major obstacle to power system development, electrification and energy security,” the agency’s analysts noted.
However, according to experts, China, which boasts a large and growing industry of electrical equipment and equipment suppliers, is well positioned to take advantage of the deplorable state of the global electricity transmission system.
Governments need to act quickly, as the ever-increasing demand for energy will be needed to meet the growing demand for artificial intelligence, electric vehicles, and data centers (and more).
According to the Financial Times, the urgent need to modernize global power grids, from poles to cables, including power distribution software, will push Western governments to work closely with Chinese manufacturers. In other words, Western manufacturers are struggling to keep up with demand, and China is poised to turn electrical equipment into a highly profitable export market.
Beijing's role
According to Ken Liu, head of renewable energy, energy services and research at China Energy, the supply of gas turbines and large power transformers is facing “serious” bottlenecks globally. The turbines, which have become essential for powering data centers powered by artificial intelligence, have a lifespan of more than three years, compared to the roughly 18 months typically required. However, projected production levels for transformers will only meet half of the new demand from Europe and the United States. Not to mention the delivery lead times for DC cables, used for long-distance transmission lines, exceed five years (and the price has almost doubled since 2019).
China, by contrast, is racing against time to avoid its own power outages. The country is in the midst of a major initiative to decarbonize its economy, in part by electrifying its transportation and manufacturing sectors. Beijing is sharply increasing spending across the sector. The State Grid, responsible for about three-quarters of the country’s electricity transmission, for example, plans to spend a record 650 billion yuan ($89 billion) this year alone.
UBS analysts believe a group of Chinese manufacturers could benefit from strong export growth, such as Yingliu, Sieyuan and Sanxing, major producers of transformers and other equipment for the power sector.
Some point out that the prospect of an ever-increasing number of Chinese-made devices being installed in electricity grids around the world poses national security risks related to economic dependence, as well as military and espionage threats. But time is running out and finding an alternative is increasingly complex. /Adapted from Il Giornale/
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