"This unprecedented cause will revolutionize the current power system that has lasted over 100 years. What lies beneath this revolution is an efficiency-driven reorganization of the world's energy system and a transformation of people's basic production modes," said Wu.

He also believes that this power system transformation would pump energy into the world's major economies. In a report published in May he wrote that China needs 30 to 50 million smart meters and that the deployment of that the smart grid will drive China's annual GDP growth up by 1 percentage point. He believed that the smart grid industry will grow into one larger than the third-generation Internet system.

A report by Wall Street investment bank Morgan Stanley predicted that the market scale of the smart grid industry will surge from $20 billion in 2010 to $100 billion in 2030.

Chinese model

The two components of China's smart grid are IT technologies and ultra-high voltage power transmission technologies. "The key to our system is ultra-high-voltage power transmission that allows long-distance transmission in large capacity and low loss," said Ge Zhengxiang, the research department head of the SGCC. He estimated that the SGCC would invest 83 billion yuan ($12.2 billion) into deploying ultra-high-voltage power grids.

China's enthusiasm in building ultra-high voltage power grids does not have many followers worldwide. Some EU countries have started to develop decentralized power systems but the United States and Russia have given up on ultra-high-voltage grids.

Experts from the China Electric Power Research Institute said the United States is developing a smart grid mainly out of its need to raise power supply reliability by avoiding major outages and lowering the risk caused by potential terrorist attacks on its power system. They believed that EU countries' devotion to developing a smart grid is based on raising power supply safety by increasing the use of renewable energies, improving supply and protecting the environment. Professor Lu Qiang at Tsinghua University said EU countries have decided to build decentralized power grids in the context of slow growth or even stagnancy in their total power demand.

China's energy-rich western areas are less industrialized compared with the country's energy-thirsty east. SGCC spokesman Lu Jian said 76 percent of China's coal reserves are in the country's northern and western areas while its eastern and central areas consume over 75 percent of the country's total energy.

China's first self-developed 1,000-kilovolt-capacity ultra-high-voltage power transmission project has been running stably since it was put into operation at the beginning of the year. The 640-km transmission line delivers electricity from coal-rich Shanxi Province to the west. The project means that China is the first country to master ultra-high-voltage power transmission at 1,000 kv.

Shanxi Province has obtained enormous economic benefits from using high-voltage power transmission by saving on transportation costs associated with moving coal. After the project is put into operation, the province will be able to transmit electricity totalling 3 million kw through the grid annually, which means that another 7 million tons of standard coal will be burned locally rather than being transported to other parts of the country.

Shu Yinbiao, Executive Vice President of the SGCC, said at a press conference in May that transportation costs account for half of the price of coal for power plants. He said replacing long-distance coal transportation with power transmission through the grid could reduce energy consumption and environmental pollution caused by moving the fuel as well as lower power generation costs and electricity prices.

China has patented 139 inventions in ultra-high-voltage power transmission technologies.

Incentive for new energies

China is rapidly developing new energies including wind and solar power. But the country faces a daunting barrier to its large-scale use of wind power—wind farmers' inability to connect to the electric power transmission network. In some cases, power generated by wind turbines is just wasted. Under China's current power grid, wind power's instability might pose dangers to the safety of the whole system.

The problem will be solved using a smart grid that can accommodate decentralized power generation. Distributed generation allows individual consumers to generate power onsite, using whatever generation method they find appropriate. This allows individuals to tailor their generation directly to their load, making them independent from grid power failures. Classic grids were designed for a one-way flow of electricity, and a local sub-network that generates more power than it is consuming can generate reverse flow that can raise safety and reliability issues. A smart grid can manage this situation.

"With the new smart grid, consumers can at the same time be generators, who can integrate their wind, solar and biomass power into the grid," Wu said. "This change might revolutionize people's energy consumption."

It has been estimated that the installed generation capacity from renewable energies in China will reach 570 million kw by 2020, accounting for 35 percent of the total installed generation capacity. China's annual coal consumption would be reduced by 470 million tons while carbon dixocide emissions would drop by 1.38 billion tons.