ps division: business units review template

Electricity market

drivers

March 2008

Daniel Assandri

Head of Power Systems

ABB (China) Ltd

© ABB Power Systems division - slide # 2

Electricity

markets

Global T&D Market

Drivers


Electricity

markets

The Americas

Aged infrastructure needs to be refurbished

Reliability concerns and U.S. Energy Bill will trigger T&D

investments

Europe

Need for interconnections and power grid upgrades

Replacement and refurbishment

Integration of renewable, such as wind farms in the North Sea

Asia

China driven by growing demand for electric power infrastructure

development, prospect of the world‟s most modern power grid

India growth on rural electrification plans and distribution systems

Middle East Africa

Windfall from oil prices main driver for power transmission and

distribution investment in Middle East

ABB’s view on markets and market drivers


Electricity

markets PWC Study 2006, most important for utilities


Electricity

markets

Source: IEA study 2006 , Dr. Fatih Birol

244 BUS$/year


Electricity

markets

Europe


Electricity

markets

Electricity

markets


Electricity

marketsTransformation of energy system, Europe

Source: EPPSA - European Power Plant Suppliers‟ Association

+ 550 GW


Electricity

marketsThe European transmission challenge

Key Drivers

Increase security of supply

Develop competition in market

Allow integration of renewables



Electricity

markets Wind power in Europe

The 48,027 MW installed in the

EU by the end of 2006 will

produce electricity, equal to

around 3% of EU electricity

consumption.

Almost twice amount of energy

could be produced with the

same amount of installed power

if located at best wind sites


Electricity

marketsABB supplies to off shore wind power

Nysted Denmark 2003 54 km 36 kV ACsubmarine cable

Horns Rev Denmark 2001106 km 150 kV ACunderground cable

Burbo BanksGreat Britain 200640 km 36 kV ACsubmarine cable

Q7Netherlands 200646 km 24 kV AC 28,5 km 170 kV ACsubmarine cable

GotlandSweden 19992x70 km +/-150 kV HVDC Lightunderground cable

Yttre StengrundSweden 20008 km 24 kV AC submarine cable4,5 km 24 kV ACunderground cable

UtgrundenSweden 200011 km 24 kV ACsubmarine cable

LillgrundSweden 200620 km 36 kV ACsubmarine cable 7,5 km 145 kV ACsubmarine cable 6 km 145 kV ACunderground cable

EnertragGermany 2002 / 200476 km 110 kV ACunderground cable

Borkum 2 2007120 km 150kV DCsubmarine cable

75 km 150 kV underground cable


Electricity

markets

China’s Electricity

Market


Electricity

marketsChina electricity consumption (2000 – 2006)

8.6%

11.6%

16.5%

14.5%13.6%

14.5%

0

500

1,000

1,500

2,000

2,500

3,000

2000 2001 2002 2003 2004 2005 2006

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

China Electricity Consumption Growth Rate (%)(Billion kWh)

Source: China Electric Council


Electricity

markets Newly added installed capacity (2001 – 2010E)

19 18

35

52

74

105

90

80

65

53

0

20

40

60

80

100

120

2001

2002

2003

2004

2005

2006

2007

E

2008

E

2009

E

2010

E

Source: China Electric Council

(GW)


Electricity

markets Power grid investment (2001 – 2010E)

36

52

80

124

142

196

244

276

308

340

0

50

100

150

200

250

300

350

400

2001

2002

2003

2004

2005

2006

2007

E

2008

E

2009

E

2010

E

Source: China State Grid and China Southern Grid

(Billion RMB)


Electricity

markets Present situation energy industry in China

Energy supply remains a challenge

Power shortage during winter storms before Spring Festival. Thirteen provincial power grids had to impose restrictions on the consumption of electricity, with shortages amounting to the equivalent of 70 GW.

China„s coal-fired power plants, whose coal feedstocks are mainly supplied through railway transportation, reported coal inventories dramatically down from the end of January. The Ministry of Railway had difficulties trying to maximize the transportation of steam coal and coping with the mass exodus for Chinese New Year under extremely severe weather conditions

Energy saving and environmental protection are very high in the political agenda

System reform remains work in progress

Energy legislation undergoing a wide consultation process


Electricity

markets 2006 Energy Flow Chart of China

Data Source：National Bureau of Statistics of China,

"2007 Chinese Statistical Year Book ", published by National Bureau of Statistics of China.

Energy efficiency is about 37.5％


Electricity

markets

Primary energy Transport Generation T&DIndustrial processes

Industrial production

Ava

ilab

le e

ne

rgy

ABB technology can reduce

losses by 20-30%

More efficient fuel combustion

Higher pipeline

flows

Improved well

efficiency Lower line losses, higher substation

efficiencyImproved

productivity

More efficient motors & drives

Drives &motors

Process

Automation

Marine & pipelines

Power plantautomation

Gridoperation

Processautomation

Reducing losses along the energy chain


Electricity

markets

Forecast for China’s Power Supply and Demand

China forecast a power demand increase of 13.5 percent year-on-year, with total installed power capacity hitting 800GW by year end. Most regions will achieve a balance in power demand and supply this year, while southern region will still show a deficit. In 2009, China's power consumption will grow another 10 to 12.5 percent year-on-year, while a further 8 to 10 percent increase is forecast for 2010.

The closure of inefficient small coal mines, which took place on a wide scale last year, as well as the levy of different forms of environmental taxes, have significantly pushed up the costs of coal. At the same time, high consumer price index (CPI) figures have prevented the central government from raising power tariffs. Such a situation is not sustainable and can potentially lead to the country's worst fuel crisis.

Outlook energy industry in China


Electricity

markets

Large hydropower plants

The China Three Gorges Project Corp. (CTPGC) will put the last five generators in the Three Gorges hydropower project into operation this year, meaning all 26 generators included in its initial construction plan will start operation by the end of 2008.

In addition, other large hydropower projects are being built by the CTGPC on Jinsha River upstream of the Yangtze River. The CTGPC plans to start dam construction on the 12„600MW Xiluodu hydropower project on the Jinsha River this November, and dam the Jinsha River for the 6„000MW Xiangjiaba hydropower project in December.

Total potential on hydropower in China is the largest in the world and amounts to around 500GW, requiring UHVDC transmission schemes extending up to 3000 kilometers



Electricity

markets

Wind power projects

China first large-scale offshore wind farm project will be constructed near Shanghai. The Donghai Bridge wind farm project is scheduled to be completed in 2009. It is estimated that the 102MW project will produce 267GWh of electricity annually. The electricity will be transmitted to Shanghai Municipality's power grid through submarine cables.

In Shanghai's neighboring Jiangsu Province, NDRC recently approved a plan by China Guangdong Nuclear Power Holding and China Longyuan Electric Power Group to build a 300MW demonstration offshore wind farm in Jiangsu's Rudong county.

China has a total of 1„000 GW of wind power resources, 70% of which is located in offshore areas. Wind power industry will see a significant boost out of these projects.



Electricity

markets Power system reform

Energy legislation is being strengthened

Systemic reform in Electric industry; integration of upstream and downstream, domestic trade and international trade in oil industry; market-oriented coal production and sale

“Electric power law”, ”Law of coal industry “,”Energy-saving law”, ”Law of renewable energy”

“Electricity supervision and administration ordinance”, “Safety supervision ordinance of coal mines”, “Oil and natural gas pipelines protection ordinance”

“Energy Law”, ”Petroleum Law” and “Law of Recycling Economy” undergoing consultation process

To strengthen the government management on the energy sector, a high-level national energy commission is in the process of being established


Electricity

markets

Energy saving and environment

Optimize energy consumption structure applying market mechanism and government‟s promotion for energy saving and environment protection.

Promote the energy price reform actively. Realize the price forming mechanism to reflect the resources scarcity, market supply-demand relation and the cost of pollution reduction. Build up the price system, which can help to realize energy structure adjustments and sustainable development.

Tax the export of high energy-consuming, high pollutant and high resource-consuming products, promoting quality improvement and cleanliness of manufacturing processes

Improve the market environment for renewable energy development combining the principles of government guidance, policy supporting and market mechanisms

Recommendations


Electricity

markets

Enhance market access latest and most advanced power technologies

Create an even playing field for domestic and foreign owned companies alike in public procurement of high end power technology products and systems

Enhance convergence of domestic technical standards with global standards in power technologies

Promote foreign investment in advanced power technologies and innovation as valuable contribution to the successful development of Chinese industry

Expose domestic companies to competition with the world‟s best as a mean to foster the strategic development of the national economy

Recommendations


Electricity

markets

This city can‘t wait for electricity


Electricity

markets

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