ChinAI #82: State Grid - A Hidden Giant in AI?

Plus, a new section "JeffJots" -- notes on academic articles by the real experts

Welcome to the ChinAI Newsletter!

Greetings from a dream world where The Farewell won the Oscar for Best Picture tonight...

…as always, the archive of all past issues is here and please please subscribe here to support ChinAI under a Guardian/Wikipedia-style tipping model (everyone gets the same content but those who can pay support access for all AND compensation for awesome ChinAI contributors).

Feature Translation: State Grid Corporation of China: A Hidden Giant in AI

Pop Quiz: Which Chinese company was ranked second on the 2018 Fortune Global 500 List and was the only Chinese company ranked in the top 20 in AI patent applicants, per the World Intellectual Property Organization report? The answer my friend is sitting in the headline, the answer is sitting in the headline. This week’s feature translation, from Shang Li’s article for AIbizweek in August 2019, sheds light on the grid company’s AI strategy

Key Takeaways:

  • The number and quality of patents cannot fully reflect the technological strength of a company, and the author acknowledge’s State Grid's patented core technology capabilities are probably not as good as the BAT and “Four Little Dragons of AI” (Sensetime, Megvii, Cloudwalk, Yitu)

  • BUT State Grid has massive amounts of data (power grid operations data across entire country as well as life cycle of assets) and application scenarios — power grid demand forecasting, identifying type and severity of grid breakdowns, State Grid’s Zhuzhou subsidiary has used computer vision to identify defects in transmission lines, predictive maintenance of electricity equipment, etc. Recall that DeepMind was in talks to work with the UK’s National Grid though those have ended.

  • State Grid also seems to have bought into the AI hype, releasing a white paper on the modestly named “Ubiquitously Powered Internet of Things” (泛在电力物联网) and building an electric power AI brain which claims to integrate image recognition and natural language processing

  • Challenges to the diffusion of AI in power grid sector are tied up with the overall low degree of digitization in China’s electricity management system: for instance, there are 4.8 million charging points in China that are unconnected and unmanageable. Any issues with non-digitized equipment and technology results in high costs for upgrading.

  • This is a huge domain that has infrastructure-strategic implications: The article states, “State Grid has 540 million smart meters across the country, which is several times the number of camera terminals in the security field.” How much ink is devoted to China’s smart surveillance compared to smart grids? Of course, surveillance brings a bunch of other nasty baggage, but if we’re talking economic and even military effectiveness, there should be a significant shift in how we think about the big levers in diffusion of AI. More precisely surveilling your population with facial recognition will not bring productivity spillovers across the entire economy; optimizing grid management will.

  • The article ends with this comparison: “In the past few years, we may have focused more on AI + Internet companies, such as BAT, Xiaomi, etc., Hikvision, Dahua, AI + Finance, AI + Education ...In the future, traditional enterprise giants like the State Grid will increasingly attract attention and enter our horizons. Because the storm of AI-driven upgrading of traditional industries is coming, the arrival of the industrial Internet in the next 20 years may be as violent as that of the Internet/mobile Internet in the past 20 years!”

  • Here’s what I wrote in ChinAI #70 about the Industrial Internet: “I like to choose topics where the information arbitrage ratio (relative importance divided by number of people paying attention) is very high. China’s efforts to build an industrial Internet has a very very high information arbitrage ratio.” That point stands and State Grid is a piece of the puzzle.

***The standard we try to live up to every week is to serve you a slice of China’s AI landscape that tastes different than anything you’ll consume anywhere else. I think this week lives up to that standard. If you think so too, and you think that standard is met relatively consistently, but you just haven’t gotten around to subscribing, here’s your chance to subscribe here.***

DISCUSSED IN THE FULL TRANSLATION (in the style of Believer magazine): THE UBIQUITOUSLY POWERED INTERNET OF THINGS (yes this is a thing)

FULL TRANSLATION: State Grid Corporation of China: A Hidden Giant in AI

JeffJots - Dig Deeper into State Grid

If this week’s feature translation piqued your interest, keep reading for the debut “JeffJots” section, which essentially consists of some notes jotted down after digesting a really cool chapter “The Search for High Power in China: State Grid Corporation of China” by Professor Yi-chong Xu (link to edited volume in ChinAI links section):

Her main point: explaining why and how the State Grid Corporation of China (SGCC) -- despite being under state ownership -- successfully engaged in technology innovation in ultra-high-voltage technologies, contradicting long held arguments that government intervention can at best produce lower-end imitation

History

The transmission and distribution business = natural monopoly and the electricity industry around the world was vertically and horizontally integrated until the 1990s

  • massive fixed investment requirements + scale economies + non-storable nature of electricity requires precise coordination across networks in real time

In 1990s electricity restructuring was pushed on developing countries by int’l financial institutions; in China the State Power Corporation of China was created out of the Ministry of Electric Power in 1999

  • In December 2002, SPCC was unbundled into two grid companies: SGCC (responsible for transmission networks in 26/30 provinces and regions) and China Southern Grid Corp (gets the rest)

SGCC Basics

  • Among the top-tier SOEs under direct Party-state control and supervision but complex and diverse in terms of management, employees, and activities

  • Among 1.7-1.8m employees, less than half worked at its headquarters and direct subsidiaries; it owns only about 75% of transmission and distribution lines in its service areas, as local governments and privately owned companies own the rest

SGCC success

  • One of very few large SOEs to receive an “A” performance ranking from the State-owned Assets Supervision and Administration Commission

  • In 2005, SGCC first entered Fortune Global 500 ranking 40th; ten years later, SGCC is world’s largest utility and 2nd largest company in the Fortune Global 500 in annual revenue, just behind Walmart

  • “A truly global company,” with investments in hundreds of transmission and distribution projects across Asia and Africa

  • Has deployed high-voltage transmission lines to connect China’s entire population, including those living in the most remote villages in the Tibetan plateau

  • Most importantly, for Xu’s focus, it has also mastered UHV (ultra-high voltage) technologies to become a global power in this field, even proposing a plan to combine interregional and intercontinental UHV transmission grids with smart grid technologies to address serious energy and environmental challenge -- one that has the endorsement of the International Energy Agency

How did SGCC successfully engage in innovation in UHVs?

  • Government policies that incentivized SOE reform and innovation + SGCC’s adoption of an “open innovation” strategy, working with a range of universities, research institutions, and multinational corporations

  • SGG’s chief executive was an active policy entrepreneur, proposing to deploy UHV technologies to create a national interconnected T&D (transmission and distribution) network -- had to compete with demands from not just electricity generation and other segments of power industry 

  • SGCC’s pitch: mastering UHV technologies was necessary to “take the commanding heights in global competition for the transition to low-carbon electricity” (p. 235).

  • 2006 Medium-to Long-Term Plan for the Development of Science and Technology (2006-2020) included SGCC’s proposals for UHV technology in its national priority list

  • In combination with 2006 MLP, SASAC adopted measures to assess central SOEs by their ability to build global brand names, global networks, and international standards

  • SGCC reorganized talent across five major research institutes, including two focused on UHV technologies (AC and DC), and one focused on automation (Nanjing Automation Research Institute)

  • Ramped up investment in R&D - a typical government-funded research institute normally has funding in the tens of millions (RMB), but for a SGCC research institute, it is hundreds of millions (RMB)

  • Collaborations with MNCs were essential but not smooth -- multinational giants (Siemens, ABB, Toshiba) dominated the design, core technologies, and manufacturing capacities and they wanted to continue selling SGCC “one-stop” turnkey transmission substations

  • Compromises made -- joint research by State Grid and ABB was conducted in China, Sweden, and Switzerland on key components such as thyristor valves

  • SGCC initially had no capacity to produce equipment for its UHV projects but to keep its promise to NDRC that at least 80 percent of the equipment would come from domestic sources, SGCC helped electric equipment manufacturers and even acquired two of these manufacturers (Xuji and Pinggao)

The State of Play Now

  • Chinese firms now make nearly all equipment for both UHV AC and UHV DC systems -- “even for the few core technologies that multinationals still control, they have to work with Chinese makers because no other countries produce these devices on a commercial scale. China is the only country investing in multiple varieties of UHV projects (AC, DC< and AC-DC synchronized transmission lines).” (p. 244)

  • Expanded leadership in standard-setting: In 2019-12, SGCC submitted 14 standards to IEC; 11 have been adopted as int’l standards; in 2013, it provided the secretariat for 7 committees and chaired one

  • Organizational Shift to Focus on “Strong and Smart Grids” in 2011 -- SGCC created a Smart Grid Research Institute (has 600 employees), regrouping projects from subsidiaries such as the Nanjing Automation Research Institute. Soon after its establishment, the Smart Grid Research Institute opened a North American branch at Santa Clara, CA, and an European branch in Berlin

  • It’s not all hunky-dory: government policies may not always offer a stable environment and there have been persistent calls for the break-up of SGCC; recent reforms in 2014 have empowered government auditors to set the grid’s transmission charges, expands the scope for direct electricity sales from generation companies to large end users, and allows new firms to enter the electricity market 

***The standard we try to live up to every week is to serve you a slice of China’s AI landscape that tastes different than anything you’ll consume anywhere else. I think this week lives up to that standard. If you think so too, and you think that standard is met relatively consistently, but you just haven’t gotten around to subscribing, here’s your chance to subscribe here.***

ChinAI Links (Four to Forward)

Must-read: The Windfall Clause: Distributing the Benefits of AI

New GovAI report! Led by Cullen O’Keefe and coauthors Peter Cihon, Ben Garfinkel, Carrick Flynn, Jade Leung, and Allan Dafoe, “The Windfall Clause is an ex ante commitment by AI firms to donate a significant amount of any eventual extremely large profits. By “extremely large profits,” or “windfall,” we mean profits that a firm could not earn without achieving fundamental, economically transformative breakthroughs in AI capabilities. It is unlikely, but not implausible, that such a windfall could occur; as such, the Windfall Clause is designed to address a set of low-probability future scenarios which, if they come to pass, would be unprecedentedly disruptive.”

I particularly enjoyed the historical precedents section, which compared the Windfall Clause to corporate social responsibility efforts (they estimate that a windfall clause commitment would be only 60% greater than leading corporate philanthropy efforts today), public windfall governance (e.g. redistribution of sovereign wealth funds), and personal philanthropy.

Should-read: The FBI’s China Obsession - Mara Hvistendahl for The Intercept

A sad history of the FBI’s bias against Chinese Americans, told through the lens of Harry Sheng who contributed the best years of his life to US defense work but never held a permanent position in his field after a 1973 visit back to China to visit his sick mother. You cannot read about the decades-long trend of discrimination Mara outlines in this piece and not reflect on current US policy toward ethnic Chinese scientists — both in how these policies are drafted and perhaps more importantly in how they are implemented.

This passage struck me in particular:

A former FBI supervisor whom I’ll call Don Lieu told me that in a routine security check, his unit’s embedded security officer asked him whether he hung Chinese lanterns in his home and whether he was friendly with people who were “in touch with Chinese culture.” (Lieu asked me to identify him by his grandfather’s first name and a family surname, citing concerns about retaliation.) Another time, he said, a security officer brought up the fact that Lieu dated Asian Americans. Lieu, who grew up in the New York City area, said he responded, “I can guarantee that none of these women are foreign nationals. In some cases, they are multigeneration Americans like myself.” He told me that the security officer then questioned how he could be sure that a girlfriend was a U.S. citizen, suggesting that any “close and continuing contact” with a Chinese American woman put the United States at risk.

Check out Mara’s new book The Scientist and the Spy: A True Story of China, the FBI, and Industrial Espionage for more!

Should-read: Policy, Regulation, and Innovation in China’s Electricity and Telecom Industries (2019, ed. Brandt and Rawski)

The edited volume that today’s JeffJots section draws from. Douglas B. Fuller’s chapter on “Growth, Upgrading and Limited Catch-Up in China’s Semiconductor Industry” is fire as well.

Should-listen: WSJ’s The Future of Everything Podcast

I’m very late to this but the WSJ’s Future of Everything podcast is pretty dope — and a fair amount of the recent episodes feature AI and China. Original host and creator of this podcast was Jennifer Strong.

Thank you for reading and engaging.

These are Jeff Ding's (sometimes) weekly translations of Chinese-language musings on AI and related topics. Jeff is a PhD candidate in International Relations at the University of Oxford, Researcher at GovAI/Future of Humanity Institute, and non-resident Research Fellow at the Center for Security and Emerging Technology.

Check out the archive of all past issues here & please subscribe here to support ChinAI under a Guardian/Wikipedia-style tipping model (everyone gets the same content but those who can pay for a subscription will support access for all).

Any suggestions or feedback? Let me know at chinainewsletter@gmail.com or on Twitter at @jjding99