Daniel Assandri Head of Power Systems ABB (China) Ltd Electricity market drivers March 2008
Global T&D Market Drivers ABB Power Systems division - slide # 2
ABB s view on and market drivers 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 Power Systems division - slide # 3
PWC Study 2006, most important for utilities ABB Power Systems division - slide # 4
244 BUS$/year ABB Power Systems division - slide # 5 Source: IEA study 2006, Dr. Fatih Birol
Europe ABB Power Systems division - slide # 6
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Transformation of energy system, Europe + 550 GW Source: EPPSA - European Power Plant Suppliers Association ABB Power Systems division - slide # 8
The European transmission challenge Key Drivers Increase security of supply Develop competition in market Allow integration of renewables ABB Power Systems division - slide # 9
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 ABB Power Systems division - slide # 10
ABB supplies to off shore wind power Nysted Denmark 2003 54 km 36 kv AC submarine cable Borkum 2 2007 120 km 150kV DC submarine cable 75 km 150 kv underground cable Gotland Sweden 1999 2x70 km +/-150 kv HVDC Light underground cable Horns Rev Denmark 2001 106 km 150 kv AC underground cable Yttre Stengrund Sweden 2000 8 km 24 kv AC submarine cable 4,5 km 24 kv AC underground cable Burbo Banks Great Britain 2006 40 km 36 kv AC submarine cable Q7 Netherlands 2006 46 km 24 kv AC 28,5 km 170 kv AC submarine cable Enertrag Germany 2002 / 2004 76 km 110 kv AC underground cable Utgrunden Sweden 2000 11 km 24 kv AC submarine cable Lillgrund Sweden 2006 20 km 36 kv AC submarine cable 7,5 km 145 kv AC submarine cable 6 km 145 kv AC underground cable ABB Power Systems division - slide # 11
China s Electricity Market ABB Power Systems division - slide # 12
China electricity consumption (2000 2006) (Billion kwh) 3,000 China Electricity Consumption Growth Rate (%) 16.5% 18% 2,500 14.5% 13.6% 14.5% 16% 14% 2,000 11.6% 12% 1,500 8.6% 10% 8% 1,000 6% 500 4% 2% 0 2000 2001 2002 2003 2004 2005 2006 0% Source: China Electric Council ABB Power Systems division - slide # 13
Newly added installed capacity (2001 2010E) (GW) 120 105 100 90 80 74 80 65 60 52 53 40 35 20 19 18 0 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E Source: China Electric Council ABB Power Systems division - slide # 14
Power grid investment (2001 2010E) (Billion RMB) 400 350 340 300 276 308 250 244 200 196 150 124 142 100 80 50 36 52 0 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E Source: China State Grid and China Southern Grid ABB Power Systems division - slide # 15
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 ABB Power Systems division - slide # 16
2006 Energy Flow Chart of China Energy efficiency is about 37.5% Data Source:National Bureau of Statistics of China, "2007 Chinese Statistical Year Book ", published by National Bureau of Statistics of China. ABB Power Systems division - slide # 17
Available energy Electricity Reducing losses along the energy chain Primary energy Transport Generation T&D Industrial processes Industrial production Improved well efficiency Higher pipeline flows More efficient fuel combustion Lower line losses, higher substation efficiency ABB technology can reduce losses by 20-30% Improved productivity More efficient motors & drives Process Automation Marine & pipelines Power plant automation Grid operation Process automation Drives & motors ABB Power Systems division - slide # 18
Outlook energy industry in China Forecast for China s Power Supply and Demand China forecast a power demand increase of 13.5 percent yearon-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. ABB Power Systems division - slide # 19
Outlook energy industry in China 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 ABB Power Systems division - slide # 20
Outlook energy industry in China 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. ABB Power Systems division - slide # 21
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 ABB Power Systems division - slide # 22
Recommendations 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 ABB Power Systems division - slide # 23
Recommendations 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 ABB Power Systems division - slide # 24
This city can t wait for electricity ABB Power Systems division - slide # 25
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