China will invest some 200 billion yuan ($29.53 billion) in the next two and a half years to expand and upgrade its rural power grid network, China's energy officials said on Monday.
The plan comes as electricity is still beyond reach for some rural residents despite China's effort to expand rural networks since 1998. There are also new supply bottlenecks with the fast sales of electric home appliances in the countryside partly fuelled by government incentives.
It would provide more business opportunities for numerous power equipment makers.
"There are still 5.3 million people nationwide that have no access to power, and most of them are in Inner Mongolia, Sichuan, Yunnan, Tibet, Qinghai and Xinjiang," Zhang Guobao, head of the National Energy Administration, told a national meeting.
"Some rural power grids were also overloaded despite earlier expansion, restricting power consumption."
The central government will allocate at least 36 billion yuan for rural grid construction before the end of 2012. Combined with bank loans and other input, total investment would amount to some 200 billion yuan, Zhang and Shi Lishan, deputy head of the energy administration's renewable and new energy department, said.
China's grid investment has fallen behind power generation investment in past years and investment in rural grids lagged further. Average annual expenditure on rural grid facilities was around 38.5 billion yuan since 1998, compared with more than 300 billion yuan of investment by the State Grid Corporation of China alone in 2009.
The insufficient rural investment was in part because grid firms diverted some designated funds to other more profitable projects in urban areas.
China levies a surcharge of 0.02 yuan per kilowatt hour on power sales to finance rural grid construction, which by current power sales could amount to more than 50 billion yuan per year.
"The 0.02 yuan was mixed into grid firms" revenue pot" and cannot be guaranteed to be used for rural grid construction and transformation," Zhang said.
"The surcharge policy will continue and research on how to establish a separate account to earmark the fund for rural grids is needed."
Zhang said the government would also aim to cut rural power prices to the same level as their urban counterparts in each province in about three years. Nineteen provinces have reached the goal.