Page 2 of
2 Powering
up Asia's super-grid By John A
Mathews
The way would then be open to build
the infrastructure that would carry current at
very high amperage levels from renewables hotspots
such as the Gobi desert to industrial centers in
China, Korea and Japan.
But just as
important as the infrastructure would be the
political agreement to allow free trade in
electric power between these grids. This might be
a (relatively) small step for the countries
concerned, but it would be a giant leap for
mankind. For it would bring a resolution to the
logjam that has been holding back renewable
energy, keeping it as a marginal player in
individual countries with their powerful fossil
fuel vested interests.
Free trade in
electric power would break that logjam very
effectively - just as
Son's business models have broken incumbent
oligarchies in IT, PCs and telecoms in Japan. The
Asian super grid would then open the way to
similar grand proposals, linking North Africa and
Europe, and the southwest of the US to the eastern
seaboard.
The reason that this is such an
important initiative is that the empowered grid,
rendered "smart" with IT to moderate intermittent
power supplies with fluctuating demand and
"strong" through the deployment of new HVDC cables
to carry renewable power long distances, is the
backbone of any substantial push towards a
renewable energy future.
Over and above
what can be done with individual renewable energy
technologies and sources, the grid itself has to
be enhanced and rendered competitive, so that a
multitude of small power generators can be enabled
to supply power to the grid, which would be able
to accommodate them. Feed-in tariffs complement
such a strategy perfectly - which is why they have
been so effective in Germany and should now prove
their worth in Japan (since the new feed-in
tariffs were introduced on July 1) and in China
(where provincial-level feed-in tariff experiments
were introduced in 2012).
Indeed the
free-market approach being championed by Son
Masayoshi in Japan complements the approach to
market expansion favored by feed-in tariffs, in
that both envisage market expansion as stemming
from the cumulative and aggregate effect of
thousands and eventually millions of decentralized
decisions over what to connect to the grid and how
to do so.
China's huge investments in the
smart grid are needed to accommodate such
decentralized power generation - while its
promotion of vast quasi-monopolies in power
generation (such as the State Grid Corporation of
China) will eventually work against such a
process. For now, State Grid Corp plays a positive
role in upgrading China's grid and equipping it to
accommodate varying renewable inputs - including
those from new sources such as wind farms in
Mongolia.
Cost advantages will drive
the ASG The key to the Asian super grid
living up to its potential lies in costs and its
capacity to exchange power between countries at
costs below those currently obtaining for thermal
and nuclear power. In Japan, an official
commission into costs of different energy sources
(a post-Fukushima initiative) found that nuclear
power cost at a minimum 8.9 yen per kilowatt hour
(kWh) - against wind power as low as 9.9 yen and
coal-burning thermal power at 9.5 yen, noting that
the costs for thermal and nuclear are in practice
much higher than had previously been used in
planning documents. [5]
Now Son Masayoshi
reckons that costs to generate wind power in the
Gobi desert would be far below these levels, at
around 3 to 4 yen per kWh, assuming that land for
the wind farms could be leased virtually
rent-free. The transmission costs from Mongolia to
Japan he reckons at around 2 yen per kWh, making
the total of 5 to 6 yen per kWh - much less than
current Japanese power costs. It is this
cost differential that will drive the scheme. It
would also ensure massive savings in carbon
emissions, which would be utilized by all the
countries sharing in the ASG to bolster their
positions in international global warming
mitigation negotiations. This is a win-win
solution for all and potentially a major step
towards reducing tensions between the East Asian
countries.
Towards free trade in
clean-tech goods, services The other aspect
of the Asian super grid that has yet to attract
public discussion is the boost that it would give
to an East Asian Free Trade Agreement in
clean-tech goods and services. There is no such
proposal on the table at the moment, but in March
this year Matthew Slaughter argued in The Wall
Street Journal that the best way of avoiding an
all-out trade war involving wind and solar power
devices would be to create a Clean Tech Agreement
(CTA) within the institutional setting of the
World Trade Organization (WTO) - and modelled on
the very successful Information Technology
Agreement (ITA) that was first signed and entered
into effect in 1996.
Since then, the ITA
has ensured that trade in IT products has been
largely free of trade barriers and has boosted the
uptake of IT products and services in developing
countries, accelerating the development of China,
India and other emerging giants. The ITA is so far
the only such agreement of its kind endorsed by
the WTO. [6] The idea has received enthusiastic
endorsement from no less an entrepreneur than Shi
Zhengrong, founder of Suntech, the world's largest
solar panel producer.
The case for a
similar Clean Tech Agreement to counter the
protectionist tendencies evident in the imposition
of tariffs against solar modules by the US (and
threatened action from the EU) is powerful. (See
here
my European Energy Review article on the US and EU
trade sanctions on solar PV panels from China, and
their likely boomerang effects.) But in the
current trade environment, with hostilities in the
air, it is unlikely that a push for a WTO-endorsed
CTA would be successful.
This is where the
Asian super grid and its foundation in free trade
in clean electric power comes in. If Son and JREF
are successful in promoting the idea (and the
initial agreement with Newcom to develop huge wind
farms in the Gobi is a strong pointer to its
viability), then free trade in the fundamental
clean technology - green electric power - would be
established for the East Asian region.
If
free trade in green electric power proves its
worth in promoting the transition to a clean
energy and economic future (as well as boosting
the clean development of countries like Mongolia),
then it is a short step to realizing the benefits
of free trade in clean-tech goods and services
generally - thus giving advanced countries like
Japan and South Korea a vast market for their
clean-tech goods and services, and promoting
China's clean-tech development over its black,
fossil-fueled rival.
Such an agreement
would establish the Inner Asian-East Asian
clean-tech region as world leader in the emerging
clean technologies of the 21st century - so that
the EU, the US and other emerging regions will
also wish to join or emulate it. Thereby lies the
path to a global CTA that could be presented to
and endorsed by the WTO - helping to prevent the
trade spats that already threaten to derail the
clean-tech revolution.
Indeed the
countries of the Asia-Pacific Economic Cooperation
forum have already taken the first steps towards
such a comprehensive CTA, in their historic step
of committing to reduce all tariffs on
"environmental goods" to a maximum of 5% by 2015.
This step, announced at the Leaders' Summit in
Vladivostok in September, creates an expanded
market for goods such as solar cells and wind
turbines, and thereby expands the market for
exports from Japan, the US and Australia, as well
as China and Korea, thereby reducing costs of
importing clean-tech products for the rapidly
developing countries of Southeast Asia. [7]
The final point worth noting is that many
of the sources of tension within and linked to
East Asia - such as disputes over territorial
claims to the sea around remote islands involving
China, Japan, Korea and Southeast Asia - involve
access to fossil fuels. These are international
disputes that stem from the "business as usual"
model of industrialization and its assumption that
access to fossil fuels is the critical factor in
successful transition to modernity.
But
the clean-tech paradigm represents a sharp break
with this thinking - and with it, reduces the
potential for such disputes. There is therefore
much at stake in the success of the free trade
approach to clean technology being championed by
business leaders such as Son Masayoshi from Japan
and Shi Zhengrong of China.
John
A Mathews is Professor of Management,
Macquarie University, Australia, and Eni Chair of
Competitive Dynamics and Global Strategy at LUISS
Guido Carli University in Rome
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