A Virtual Power Plant that Creates Real Energy

In Guangdong province, traditional bulbs in many streetlights were replaced with energy-efficient lights. Photo: ADB.

In the People's Republic of China, a project is saving enough energy to match the equivalent of building a 107-megawatt power plant.

Overview

Since 2000, electricity use in the People’s Republic of China has been rapidly increasing at an annual rate of over 13%. By 2004, serious power shortages had become persistent, and more than half of the provinces in the country had to curtail power supplies during the peak periods in summer.

Furthermore, approximately 80% of the electricity is produced by coal-fired power plants, generating substantial amounts of air pollutants and greenhouse gases. More than half of the cities in the country have failed to meet the national ambient air quality standards.

Increased energy consumption has also led to more fuel imports. In 2013, the People’s Republic of China imported 327.1 million tons of coal. Projections suggest that oil imports will increase to about 13.1 million barrels per day in 2030, up from 3.5 million barrels per day in 2006.

In 2008, the People’s Republic of China and the Asian Development Bank embarked on an energy efficiency program to improve the country’s energy security and environment. The Guangdong Energy Efficiency and Environment Improvement Investment Program focused on creating additional system capacity through an efficiency power plant in Guangdong province.

An efficiency power plant is a strategic option that would help increase a country’s power generation capacity without building additional power plants. Because an efficiency power plant is a virtual power plant, building it does not mean constructing power generation infrastructure. Rather, it entails investments in conservation and efficiency measures that reduce energy demand and yield energy savings equivalent to the capacity generated by an actual power plant. Conservation measures include retrofitting electrical equipment for power savings and using more energy-efficient equipment and technologies.

Project information

39653-023 : China, People’s Republic of: MFF: Guangdong Energy Efficiency and Environment Improvement Investment Program – Tranche 1

Project snapshot

      • Approval date: Jun 2008
      • Closing date: Dec 2011
      • Amount of loan: US$ 35 million
      • Executing agency: Guangdong Provincial Government Geographical
      • Financing: Asian Development Bank

Challenges

Guangdong is in southern People’s Republic of China. Its population of 92 million has grown an average 2.2% per year since 1995. Its economy is the largest and fastest-growing among the country’s provinces.

In 2007, before the project started, Guangdong’s installed generation capacity totaled 59.3 gigawatts, one of the biggest in the country. However, power demand has grown 13% per year since 1995, and Guangdong imports its coal, oil, and electricity (100%, 80%, and 20%, respectively) from other provinces. Power demand has outpaced capacity, causing severe power shortages during peak hours in summer.

Solution

Choosing Guangdong

Guangdong was chosen as the best site because the project would help expand power generation capacity in the country’s largest provincial economy and secure energy supply without further harming the environment. It was envisaged that the success of this project would potentially spur more cities in the country to explore using efficiency power plants.

Implementing energy efficiency subprojects

To create the efficiency power plant, Guangdong implemented eight energy efficiency subprojects for Tranche 1 of the program, which retrofitted, upgraded, and replaced appliances and equipment owned by end users, industries, and commercial establishments. It also implemented subprojects on waste-to-energy measures.

The municipal government established the Efficiency Power Plant Project Management Office to handle overall implementation of the energy efficiency subprojects.

For Tranche 1, eight agencies ran subprojects as subborrowers. Upon completion, the subprojects created an efficiency power plant capacity of 130 megawatts, saving 651 gigawatt hours per year.

Strategic lending mechanism

Many companies do not seek loans for energy efficiency projects because it takes funding away from their core business operations. They would rather seek funding for business expansion or the establishment of a new business. To address this, the program used a financial intermediary loan scheme with strengthened implementation supervision and a simplified process for subproject appraisal. This scheme not only made funding for retrofits available to companies, but also gave Guangdong needed flexibility to quickly complete energy efficiency projects. It functioned as a revolving fund; new subprojects could be financed as subloans for each repaid subproject, multiplying energy savings.

Using Asian Development Bank loan proceeds, the project established a special single-purpose trust fund managed by a financial intermediary, the Guangdong Finance Trust Company. Together with the Efficiency Power Plant Project Management Office, they appraised subproject applications and the Guangdong Finance Trust Company on-lent to financially viable efficiency power plant subprojects. Repayments of subloans, net of transfers to the Guangdong provincial government for servicing the loan, were used for further on-lending. The trust was available only for efficiency power plant projects and could not be mixed with other trust funds.

Numbers and facts

107 megawatts power generated
175,813 tons/year coal use projected reduction
415,560 tons/year carbon dioxide emissions projected reduction
1,785 tons/year suspended particulates emissions projected reduction

Results

Upon completion in 2011, Tranche 1 generated efficiency power plant capacity totaling 130 megawatts and energy savings totaling 651 gigawatt hours per year, exceeding the initial target of the entire investment program (i.e., 532 gigawatt hours of energy savings per year and an equivalent 107 megawatts in capacity).

In addition, the project demonstrated how efficiency power plants can be created in a systematic way. It tasked two entities for two aspects of program implementation. The Efficiency Power Plant Project Management Office appraised the technical feasibility of the subprojects and subproject implementation, whereas the Guangdong Finance Trust Company appraised the financial viability of subborrowers and on-lending. Thus, each entity complemented and supplemented the other. The project management office ensured smooth implementation and timely loan repayment by subborrowers, freeing loan availability for the next subproject borrower. This partnership facilitated more energy saving projects.

Moreover, the project facilitated the development of energy service companies. At the outset, two energy service company subborrowers implemented waste heat recovery and industry energy-efficiency retrofitting projects. By 2011, two other subborrowers had established their own energy service companies.

Guangdong’s efficiency power plant model has attracted attention from other municipalities in the country, and many made study visits to learn about it. Shandong and Hebei provinces have already replicated Guangdong’s model.

Lessons

Creating a replicable model

The structure of Guangdong’s efficiency power plant model was straightforward. The project created a trust company and a project management office with distinct but complementary tasks in facilitating energy efficiency projects. Together, they were able to exceed project expectations, demonstrating that a simple structure with clear-cut delineations can ease implementation, especially in areas where the efficiency power plant is relatively unknown. Project implementation was easier for subproject borrowers because it simplified the whole efficiency power plant process, from loan request to completion. Other municipalities can easily replicate the model.

Savings and on-lending

Subborrowers who successfully implement efficiency power plant subprojects can anticipate both energy and financial savings. Their loans yield monetary benefits, and full repayment is rolled over to the next borrower, expanding loan availability for other agencies seeking funds to implement their own efficiency power plant projects.

Author
Xinjian Liu

Xinjian Liu

Senior Project Officer (Energy), East Asia Department, ADB

This blog is reproduced from Development Asia.

Closing the Industrial Energy Efficiency Financing Gap

Reduced greenhouse gas emissions in Lufang’s copper smelting plant in Dongying City, Shandong. Photo source: Lufang subproject.

Accessible funds for the industry sector accelerated investments in energy efficiency and enhanced institutional capacities.

Overview

A project supported by the Asian Development Bank (ADB) highlighted the impact of supporting the industry sector to invest in technology innovations that lead to reduced energy costs and enhanced market competitiveness.

This project showcased how a financial intermediation loan modality can accelerate private sector investments required for improving energy efficiency through enhanced provincial capacity in financing and managing energy conservation projects.

Project information

40524-013 : People’s Republic of China: Shandong Energy Efficiency and Emission Reduction Project

Project snapshot

      • Approval date:18 Aug 2011
      • Closing date: 19 Sep 2017
      • Total project cost: $100 million
      • Executing agency: Shandong Provincial Government
      • Financing: Asian Development Bank

Context

The industry sector is the main energy consumer in Shandong, a province in the People’s Republic of China (PRC). In 2009, it consumed more than three-quarters of the province’s total energy supply. Moreover, the energy supply in Shandong is heavily dependent on high carbon fossil fuels – coal (77%) and oil (21.2%) – causing high level of emissions. The province’s total energy consumption in 2009 was 324 million tons of standard coal equivalent or 10% of the national total. Its economy has grown consistently at a rapid rate, expanding at an average of 12.49% per annum from 1995 to 2009.

Shandong province is committed to reduce energy emissions in the long term. Despite some achievements, the underinvestment in energy efficiency and the existence of many energy-intensive industries in the province provide significant opportunities for further energy intensity reductions through targeted investments.

Development Challenge

Existing industrial energy efficiency financing mechanisms in Shandong were designed mostly for large projects. A large financing gap existed for small and medium-sized energy efficiency efforts that involve all or part of an industrial manufacturing process because of the following:

  • lack of familiarity with the latest energy efficient technologies, combined with the enterprises’ perception of production interruptions and/or loss of revenues;
  • difficulties for commercial banks to assess cash flow benefits and forgo collateral for such investment projects which do not generate additional revenues; and
  • lack of capacity for evaluation and risk assignments for energy conservation investments by commercial banks.

Solutions

Through the Shandong Energy Efficiency and Emission Reduction Project, ADB approved in 2011 a financial intermediation loan of US$ 100 million to finance the reduction of energy intensity and emissions from energy-intensive industries in Shandong. The project aimed to:

  • expand investment in energy efficiency and emission reduction measures in the province’s industry sector,
  • develop energy service companies, and
  • enhance institutional capacity to identify and manage energy efficiency and emission reduction projects.

The China Everbright Bank, particularly the Jinan branch in Shandong, was selected as the financial intermediary in rolling over the fund because of its sound track record. It is a major onlender of loans from foreign governments and international financial institutions. It is also familiar with the policies and procedures of Shandong Provincial Finance Department.

Financial intermediation loan was chosen as the modality to:

  • build the knowledge and capacity of the provincial government to evaluate and assess risks for energy efficiency project investments;
  • reduce investment transaction complexities;
  • enable rollover of the ADB loan to support multiple batches of subprojects and leverage additional domestic investments; and
  • enhance governance and safeguard compliance for energy efficiency projects.

Subprojects

The Lufang subproject developed oxygen bottom-blown smelting (OBBS) technology with flue gas recovery and residual-heat utilization. The flue gas recovery component utilizes the most advanced vanadium catalyst and rhodium catalyst so that its sulfur dioxide conversion rate can reach 99.85%. At the same time, the sulfur dioxide emission concentration can be less than 20mg/m3. The residual-heat utilization component utilized waste heat for power generation. Because of the successful implementation of the new OBBS technology, other metal and iron smelting enterprises in Shandong have also started to apply these technologies through Lufang.

The Hider subproject replaced coal-fired boilers with advanced heat exchangers and customized pumps. Their technology can use wastewater heat from a combined heat and power plant to warm up aquaculture ponds to up to 12 centigrade. Hider covered 45 clients for energy efficiency renovations.

During the project implementation, Hider also developed other energy conservation and emission reduction technologies like frequency motor application technology in oil fields, enhanced natural gas energy conservation technology, and waste heat power generation technology.

The Jintai subproject replaced the traditional resistance heating method with advanced ultra-frequency magnetic fluid-heating equipment to heat oil in the Shengli Oil Field pipeline. Their technology improved energy efficiency by 30% to 70%.

Because of its successful implementation, other oil fields across the country have replicated Jintai’s technology. Jintai scaled up its technology application to Daqing Oil Field, Changqing Oil Field, and several oil fields in Xinjiang Uygur Autonomous Region. Successful promotion of this technology led to multiplier effects in energy conservation and emission reduction in the oil sector in the People’s Republic of China.

The Lvxi subproject developed advanced energy conservation and renewable energy utilization technologies like solar central air condition systems, air-source heat pumps, distributed PV stations, and absorption and compression cooling systems to enable the complementarity of diversified renewable energy utilization and improve the energy efficiency of public buildings.

From 21,344 tons of coal equivalent per year, the actual energy consumption of Lvxi clients was reduced to 19,511 tons per year – effectively improving client energy efficiency by 91% – after implementing the new technologies. The Lvxi technologies were also tested on a university campus. This became the first micro-emission campus in Shandong and a flagship of micro-emission or near-zero-emission campuses.

Results

The four subprojects achieved total annual energy savings of 263, 417 tons of coal equivalent per year and reduced emission by 647,129 tons of carbon dioxide and 2,943 tons of sulfur dioxide per year as of 2018. The accumulated energy savings were almost 1.6 times the original target.

Improved energy efficiency reduced the negative impacts of coal consumption on public health. The improvement in environmental quality has benefited the poor who are more exposed to health risks such as air pollution and coal burning.

The subprojects successfully adopted new technologies. This encouraged new projects in Shandong and other parts of the PRC to replicate these technologies. The wider application and selling of energy-efficient technologies created jobs in the energy sector thereby promoting overall economic development.

The private sector invested in upgrading their existing equipment and facilities to conserve energy and reduce emissions. All companies involved in implementing the subprojects were key players in different renewable energy and energy efficiency subfields in Shandong. As sub-borrowers, they benefited financially through reduced energy costs and increased sales of their auxiliary services and products, which enhanced their market competitiveness.

As a financial intermediation loan, the project improved the capacity of the government and the China Everbright Bank in planning, investment, and management of energy conservation in Shandong province. The Shandong Provincial Government further strengthened its policies to promote energy conservation in industries. It encourages public-private partnership including diversification of financing and investment channels to promote green financing.

China Everbright Bank has built its capacity in evaluating and assessing renewable energy and energy efficiency improvement projects. It is now more experienced in coordinating subproject selection, approval, implementation, disbursement, and audit of subloans. The institutional mechanism required for effective subproject processing and implementation in succeeding batch of projects has been established and operational.

Lessons

Financial intermediation works

Financial intermediation has made the implementation of energy conservation and efficiency improvement projects possible. To provide for more market-oriented financial intermediation loans, it is recommended that (i) local governments consider relaxing the requirements for financial guarantee, and (ii) for the intermediary to take full responsibility in assessing the types of guarantee or collateral needed as the precondition for approving subprojects.

Incentives for enhancing emission reductions

To provide incentives for sub-borrowers, the intermediary could consider green bonds financing to give interest rebates with clearly defined milestones, so that sub-borrowers who achieved emissions targets can benefit from their action in a timely manner. Likewise, a carbon dioxide reduction registry system for the sub-borrowers could be established to link with nationwide carbon trading in the near future.

References
Author
Lanlan Lu

Lanlan Lu

Senior Project Officer, East Asia Department, ADB

This blog is reproduced from Development Asia.

8th Asia-Pacific Energy Sustainable Development Forum

With the theme of “Green and Stable Energy Transition toward Carbon Neutrality”, the 8th Asia-Pacific Energy Sustainable Development Forum will be held in Tianjin on 21 to 23 September in a hybrid format. This sub-forum below on “Enable Energy Transition and Facilitate Carbon Neutrality” will be held on 23 September. 

Zoom link:

https://zoom.us/j/94712612395pwd=L29HUmN3NUZ5V2VCcHZsWDRrUitWdz09

Online Meeting ID: 947 1261 2395

Password: 669900

Agenda:
TimeProgram
09:00 – 09:10Opening Remarks
Munlika Sompranon, Vice Chair of Expert Group on New and Renewable Energy Technologies (EGNRET), APEC Energy Working Group (EWG), APEC
Session I. Enable Energy Transition and Support Renewable Energy Development
09:10 – 09:20Supporting energy transition in APEC economies
MA Jinlong, Vice President, APSEC
09:20 – 09:40Energy transition in East Asia from ADB’s perspectives
Atsumasa Sakai, Senior Energy Specialist, Asia Development Bank
09:40 – 10:00Assessment of energy system and energy transition
Shabbir Gheewala, Director, Life Cycle Sustainability Assessment The Joint Graduate School of Energy and Environment, King Mongkut’s University of Technology, Thailand
10:00 – 10:20Rural smart energy technology for carbon neutrality
ZHANG Xiaofeng, President, Global Green Development Alliance, the US
10:20 – 10:40High density city energy transition toward the carbon neutrality
WANG Shengwei, Director, Research Institute for Smart Energy, Hong Kong Polytechnic University, Hong Kong, China
10:40 – 11:00Energy transition and electrification in PNG
Chris Lohberger, President, Solar Energy Association of Papua New Guinea, Papua New Guinea
11:20 – 12:10Panel Discussion
Chair: MA Jinlong, Vice President, APSEC
Session II. Achieving Emission Peaking and Carbon Neutrality
Chair: SUN Yong, Researcher, APSEC
GE Beiqing, Associate Researcher, APSEC
14:00 – 14:20Global trend of energy transition and sustainable development
LIU Xiaowei, Director, Asia Project, World Energy Council
14:20 – 14:40Toward low carbon goals in Australia
SHI Xunpeng, University of Technology, Sydney, Australia
14:40 – 15:00Deployment of energy storage technologies
Matthew Rowe, Director, Power Grids, Asia Pacific DNV, Singapore
15:00 – 15:20Energy transition and renewable energy development in Malaysia
Adarsh Kumar Pandey, Director, Research Centre for Nano Materials and Energy Technology , Sunway University, Malaysia
15:20 – 15:40Renewable energy development and grid integration in Viet Nam
Loc Nguyen, CEO, BBCO Energy, Viet Nam
15:40 – 16:00Clean district energy system and applications
Mikael Jakobsson, Executive Director, Asia Pacific Urban Energy Association, Sweden
16:00 – 16:20Innovative approach to scaling up renewable energy development in APEC region
SUN Yong, Researcher, APSEC
16:20 – 17:10Panel Discussion
Chair: MA Jinlong, Vice President, APSEC

Modernizing District Heating Systems in Heilongjiang

Tongjiang city district heating source plant. Photo credit: Xinjian Liu.

A district heating project taps the help of private sector companies to promote higher energy efficiency and lower emissions.

Overview

A project supported by the ADB has provided safer, cleaner, and more reliable heating services to 1.21 million urban residents in six cities of Heilongjiang province in the PRC. As the primary users of heating services, the health of women and children in the project areas improved through better quality of indoor and outdoor air. It expanded and upgraded district heating systems to make them more energy-efficient, thereby reducing emissions of greenhouse gases and air pollutants in the project areas.

Project information

44011-013: Heilongjiang Energy Efficient District Heating Project

Project snapshot

      • Approval date: 25 Sep 2012
      • Closing date: 29 Nov 2019
      • Amount of loan: US$ 353 million
      • Executing agency: Heilongjiang Provincial Government, the PRC
      • Financing: Asian Development Bank

Context

Heilongjiang is an underdeveloped northeastern province regularly battered by frigid Siberian winds. The province experiences long winter seasons that last 6 to 7 months and temperatures that could fall as low as -40°C. Space heating is one of the basic needs and provides essential support to socio-economic activities. District heating systems are most suitable for areas where heating seasons are relatively long.

Challenge

Inadequate coverage of district heating in low-income urban areas forced poor households to use indoor coal-based stoves for space heating. These heating systems were old, inefficient, lacked proper emission control equipment, and a major source of respiratory diseases. Small heat-only boilers in many cities of Heilongjiang had a combustion efficiency of 55%, far below the 87% that modern combined heat and power plants or large heat-only boilers can achieve. The burning of coal through boilers and stoves worsened indoor and outdoor air quality. Women and children were particularly vulnerable to high indoor pollution as they tend to spend more time at home.

Solution

The Heilongjiang Energy Efficient District Heating Project was designed to expand and upgrade the district heating systems in Heilongjiang Province. Funded by a $150 million loan from ADB, the project installed energy efficient heating sources and heat exchangers; insulated pipelines; computerized monitoring and control systems; and removed and dismantled small, inefficient, and polluting neighborhood coal-fired boilers and coal-fired household stoves.

The project adopted environment-friendly boiler technology with high energy efficiency and lower emissions. The installment and use of computerized monitoring and control systems to manage the demand and supply of heat prevented the overheating of buildings and supported two private enterprises to promote private sector participation.

The project was implemented in six cities (Harbin, Jiamusi, Qitaihe, Tongjiang, Yichun Tangwanghe, and Hailin), installing 406 megawatt thermal-equivalent of three energy-efficient heat generators, 226 heating exchange stations, 161 km of insulated heating pipelines, and 5 computerized monitoring and control systems. It also removed 361 small, inefficient, and polluting neighborhood coal-fired boilers and 116,160 coal-fired household stoves.

The project supported two private heating companies―Tongjiang Changheng Cogeneration Company and Hailin Hailang Thermal Power Company―which operate in remote small cities through financing and capacity development. It also improved energy efficient heat generation capacity in the cities of Tongjiang and Hailin.

The capacity of the executing agency, the project management office, and the six subproject implementing agencies to supervise and manage project implementation was strengthened through training and logistics provision. Knowledge-sharing sessions were organized between private sector companies and state-owned enterprises to promote good business practices.

The project also raised the awareness of the public, particularly women, through energy conservation awareness programs. Women are the primary users of heating services and their participation in these sessions was critical for a gender-sensitive delivery and quality of district heating services.

Results

Low-carbon heating for residents

The expanded coverage of upgraded district heating systems reached 30 million m2 without a net increase in emissions benefiting about 1.21 million urban residents or 226,499 urban households, including 21,137 poor households and 1,829 households headed by women. The disposal of low-efficiency, high-pollution coal-fired household stoves has lessened the domestic chores working hour allowing women more time to spend for income-generating activities, learning, or recreation. Through heating tariff subsidies, waived connection fee, and discounts, the project benefited poor female-headed households with access to a cleaner, safer, and reliable heating system.

Better air quality and energy savings

By 2020, the project improved energy efficiency of the district heating systems in six urban areas in Heilongjiang. It saved 882,460 tons of estimated annual raw coal consumption. This has contributed to emission reductions of 5,787 tons of sulfur dioxide, 98,552 tons of total suspended particulates, 11,566 tons of nitrogen oxide, and 1,299,831 tons of carbon dioxide. The air quality in the project areas improved to meet Class II air quality standards. With reduced annual coal use and improved energy efficiency, the incidence of respiratory diseases and other air pollution-related health risks in the project areas are expected to decrease significantly in the long term.

Lessons

Commitment of project stakeholders is critical to the success of a project. Project implementation should be carried out under effective supervision, monitoring, and cost control. Emission of heat source pollutants during the operation period should be continuously monitored to ensure that standards are met.

With rapid urbanization comes the need for investment and rehabilitation of old heating systems. Private sector participation helps fill the huge gap in investment demand. Good practices and knowledge from the private sector could also be shared with state-owned heating companies to enhance the viability of the heating business. Generally, private heating companies attain higher tariff collection rates because of market-oriented business practices with better customer orientation.

Author
Xinjian Liu

Xinjian Liu

Senior Project Officer (Energy), East Asia Department, ADB

This blog is reproduced from Development Asia.

Clean Heating Technologies: A Pilot Project Case Study from Northern PRC

Mitigating Energy Shortages in the PRC

In Heilongjiang, PRC, Modernizing of Heat Sources Spreads Warmth and Cuts Pollution

Boiler control room in Tongjiang's heating plant.

For many decades, heating in Heilongjiang Province, PRC, depended heavily on out-of-date, inefficient boilers. Coal stoves for space heating were a major cause of indoor air pollution and respiratory diseases in poor households.

In 2012, ADB approved a loan of $150 million for the Heilongjiang Energy Efficient District Heating Project to expand and upgrade district heating systems. The goal was to make heating systems energy efficient and reduce greenhouse gas emissions.

Overall living conditions improved through adequate and reliable heating services, while heating expenditures were reduced by switching from individual household stoves and decentralized heating systems to centralized energy efficient heating systems.

Winter falls hard in Heilongjiang Province, an underdeveloped inland area in the northeast of the People’s Republic of China (PRC). Temperatures drop as low as -40 degrees Celsius, and the province is often enveloped in sub-zero temperatures for more than six months.

“For many decades, heating in the province depended heavily on out of date and inefficient boilers,” says Xinjian Liu, Senior Project Officer for the Asian Development Bank. “Coal stoves for space heating were a major cause of indoor air pollution and respiratory diseases in poor households of Heilongjiang. Emissions from small neighborhood boilers also affect outdoor air quality and cause significant long-term harm to public health.”

The Heilongjiang provincial government has long recognized the importance of improving energy efficiency in district heating, and earmarked it as a priority as it works to improve energy efficiency and quality of life.

Walking outside the Harbin Taiping heating plant.

Upgrading Heating

In 2012, ADB in 2012 approved a $150 million loan for the Heilongjiang Energy Efficient District Heating Project. The aim was to expand and upgrade district heating systems in cities of Heilongjiang Province, to make heating systems more energy efficient, and reduce emission of greenhouse gases and air pollutants.

The project was carried out in six cities (Harbin, Jiamusi, Qitaihe, Tongjiang, Yichun Tangwanghe, and Hailin). Energy-efficient heating sources and heat exchangers were installed, pipelines were insulated and compuThe project was carried out in six cities (Harbin, Jiamusi, Qitaihe, Tongjiang, Yichun Tangwanghe, and Hailin). Energy-efficient heating sources and heat exchangers were installed, pipelines were insulated and computerized monitoring and control systems were introduced. The project also removed 361 small, inefficient, and pollution-generating neighborhood coal-fired boilers and 116,160 coal-fired household stoves.

By 2020, the project had extended the coverage of the district heating system in the six project cities and towns by 30 million meters2 without a net increase in emissions. It also promoted private sector participation in district heating sector in two project cities, and held three knowledge sharing sessions.

Some 226,499 urban households—including 21,137 poor households and 1,829 households headed by women—now have access to district heating systems. Conservation awareness campaigns covered 683,600 women within the project areas.

The project improved air quality and reduced greenhouse gas emissions across the six urban areas. By 2020, it reduced annual raw coal consumption by 882,460 tons, avoiding annual emissions of 1,299,831 tons of carbon dioxide, 5,787 tons of sulfur dioxide, 98,552 tons of total suspended particulates, and 11,566 tons of nitrogen oxides, compared with 2012 levels. By 2020, air quality in project-targeted areas improved to Class II of the PRC’s ambient air quality standards.

By 2020, the Heilongjiang Energy Efficient District Heating Project reduced annual emissions* of

0 tons
Carbon dioxide
0 tons
Nitrogen oxides
0 tons
Sulfur dioxide
0 tons
Annual raw coal consumption
0 tons
Suspended particulates
0 Improved to Class II
Air quality

*Compared to 2012 figures

Cleaner Environment

“The project achieved its intended impact of improving energy efficiency and a cleaner environment in Heilongjiang Province,” says Yolanda Fernandez Lommen, ADB Country Director in the PRC. “It created significant social and environmental benefits and helped reduce poverty by creating job opportunities, improving health and welfare, and driving economic growth while reducing pollution.”

A total of 1.21 million urban residents of the project areas—including 683,600 women, 55,246 people from poor families, 109,794 children and 14,020 teachers in 94 schools, along with 43,947 patients and 9,994 medical staff in 50 hospitals—benefited directly from improved energy efficiency and a cleaner environment.

Also, overall living conditions were improved through adequate and reliable heating services, while heating expenditures were reduced by switching from individual household stoves and decentralized heating systems to centralized energy efficient heating systems. The new systems also provided a better schooling environment during the winter by providing cleaner and reliable heating services.

“This upgraded district heating system created a more comfortable and conducive environment for residents in the project areas,” says M. Teresa Kho, ADB’s Director General for East Asia. “The reliable indoor heating ensured residents a warm and cozy living environment, particularly during the COVID-19 pandemic, when most residents had to spend a major portion of their daily lives indoors. With reduced annual coal use and improved energy efficiency, the incidence of respiratory diseases and other air pollution related health risks are expected to reduce significantly in the long term.”

Author
 Graham Dwyer

Graham Dwyer

Principal Communications Specialist, Department of Communications, ADB

This article is reproduced from Asian Development Bank.

Building Sustainability and Resilience in the Energy Sector

There is a need for a holistic approach that not only reduces carbon emissions in the energy sector but also addresses its climate-vulnerability. Photo credit: ADB.

Strengthen power systems against climate and other risks to minimize damage to infrastructure, disruption of service, and economic loss.

Overview

Continued economic growth and urbanization are projected to almost double energy demand in the Asia and Pacific region by 2030. Securing energy supply for the region involves not only increasing capacity and improving access to affordable and reliable electricity for millions of people but also protecting energy infrastructure from climate-related and other risks.

A webinar organized by ADB in April 2021 discussed approaches and solutions for strengthening infrastructure resilience by incorporating climate and disaster risk considerations into power system planning and design.

Aligning Energy and Climate Strategies

The term “carbon neutral” refers to net-zero carbon dioxide emissions. It means not adding new emissions to the atmosphere, and this can be done by balancing out carbon dioxide (CO2) emissions with their removal (often through carbon offsetting). Carbon peaking, on the other hand, means that CO2 emissions from all sectors in an economy reaches the highest level and then gradually goes down.

Priyantha Wijayatunga, Chief of the Energy Sector Group at ADB, started the session by discussing briefly how the new energy policy of ADB aligns with its strategy for tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability. ADB supports universal access to reliable and affordable energy services, while promoting the low-carbon transition in Asia and the Pacific. The deployment of new and advanced technologies will play a vital role in achieving these objectives.

Strategies and approaches, such as conducting vulnerability assessments, use of multiple scenarios for extreme climate and geophysical events, preparation of emergency and recovery plans, use of smart grids, climate-proofing of infrastructure, diversification of and distribution of energy system, are all important for improving power system resilience. Costs associated with these approaches should also be considered to prioritize resilience investments. For example, burying distribution and transmission lines is a “no regrets” investment, but it is more expensive than overhead lines. The value of climate-proofing needs to be weighed against other options to establish priorities.

Electricity grids of countries in the region are at different stages of development. While most of the developing economies are on track to achieve 100% electrification (or are already there), many of the grids remain underdeveloped and vulnerable to impacts of climate change. With population changes and increasing demand for clean energy, radical transformation of electricity systems is happening or will happen, with more variable-output generation sources, grid-connected energy storage, and behind-the-meter storage as key components of system resilience.

Case Studies

Belize

Migara Jayawardena, Founder and Managing Director of AMALA Clean Energy Advisors, presented the results of a study on power systems in the Caribbean country of Belize, which identifies climate vulnerabilities and solutions to enhance systems resilience to adverse weather and climate change impacts.

Extreme weather events have taken its toll on the country’s economy. For example, Hurricane Dean struck Belize in 2007 and caused a near blackout with more than 88% of customers losing power completely. This resulted not only in foregone revenue from unserved demand for the power sector but also lost valued added of $4.8 million for the national economy.

Jayawardena explained that improving energy resilience requires adopting such measures as long-term energy planning, segmentation of transmission networks, collection and use of meteorological and hydrological data, operational and dispatch capabilities, and systems strengthening of transmission and distribution substations. Measures for rapid response and recovery are equally important to minimize damage and losses. These include emergency response plans, emergency repair access, awareness and communication plan, and recovery and reconstruction plan.

Lao People’s Democratic Republic (Lao PDR)

Maythiwan Kiatgrajai, a renewable energy senior planning and policy specialist at Abt Associates/USAID Clean Power Asia, highlighted the importance of stakeholder engagement in undertaking vulnerability assessment and resilience strategies based on a case study from the Lao PDR.

The vulnerability assessment covered the four main power systems components: generation, transmission, distribution, and consumers. The assessment included identifying threats, defining impacts, assessing vulnerabilities, calculating risks, and developing solutions.

Engaging stakeholders in the process ensures context-specific inputs and buy-in from relevant organizations for implementation. Key success factors include involving relevant stakeholders, the role of experts in facilitating and encouraging discussions among stakeholders, and clearly communicating the objectives and expected outcomes of the study.

People’s Republic of China (PRC)

Xiaoming Jin shared measures taken by China Southern Power Grid to adapt to natural hazards, specifically to minimize impacts from typhoon and ice hazards that commonly affect the system.

The state-owned company covers five southern provinces of the PRC—Guangdong, Guangxi, Yunnan, Guizhou, and Hainan.

Jin, a former chief technical expert of the grid operator’s Electrical Power Research Institute, explained procedures, and technical measures to protect the power grid, including substations and power lines. Measures include pre-risk assessment and pre-control measures, emergency management systems and command platforms, establishment of design standards and guidelines, use of high-level technology for collecting and transmitting real-time information, and refinement of minimum power grid, such as tower reinforcement, upgrade of distribution lines, and use of underground cable.

Key Takeaways

1. The energy sector facilitates economic growth and supports key service sectors that drive the development of a country. Understanding and addressing the sector’s climate vulnerability is critical to inform efforts to improve power sector resilience, minimize damage and disruption, and sustain development.

2. The broader economic impact from unserved energy puts greater emphasis on the need to strengthen the sector’s resilience and to keep the system operating. The longer there is unserved energy, the more financial and economic losses for the economy. These costs should be taken as part of economic evaluation of resilience measures.

3. Enhancing resilience of power systems requires a comprehensive approach that includes strengthening infrastructure, planning and operational capabilities, preventive measures, and emergency response and reconstruction plans. Resilience improvements, such as burying distribution lines, should be viewed as insurance policies that can avoid economic losses caused by grid failure in extreme weather events.

4. Engaging a wide range of stakeholders from policymakers, planners, and system operators ensures in-depth and comprehensive analyses to identify and assess sector vulnerabilities from climate and non-climate hazards. Stakeholder engagement also creates greater buy-in to support implementation of action plans.

References

Asian Development Bank. 2021. Building Resilience of the Power System in the Low-Carbon Transition. Virtual Dialogues on Resilient Infrastructure series (Season 2: Dialogue 3). 28 April.

Author
 Priyantha Wijayatunga

Priyantha Wijayatunga

Chief of Energy Sector Group, Sustainable Development and Climate Change Department, ADB

Migara Jayawardena

Migara Jayawardena

Founder and Managing Director, AMALA Clean Energy Advisors

 Maythiwan Kiatgrajai

Maythiwan Kiatgrajai

Senior Renewable Energy Planning and Policy Specialist, Abt Associates/USAID Clean Power Asia

Xiaoming Jin

Xiaoming Jin

Former Chief Technical Expert, Electrical Power Research Institute, China Southern Power Grid

This blog is reproduced from Development Asia.

Hydrogen Energy Could Be Key to Carbon Neutrality in the PRC

The People’s Republic of China is working toward carbon neutrality. Photo: Wong Zihoo

Renewable hydrogen is an essential direction for the development of green and low-carbon energy in the future as the People’s Republic of China seeks to lower greenhouse gas emissions.

Hydrogen energy is clean and storable with no tailpipe emission except water vapor after combustion. It produces neither carbon dioxide.

Unfortunately, most hydrogen energy still produces the carbon dioxide that contributes to climate change. Across the world, more than 95% of hydrogen energy is produced using fossil fuels containing carbon. As a result, the emissions avoided at the tailpipe are shifted to the production process upstream.

Why low carbon hydrogen now? In order to make low carbon hydrogen, there are two options. Carbon dioxide emissions from the production of hydrogen can be abated with carbon capture and storage technologies or it can be produced using renewable electricity— often called renewable hydrogen or green hydrogen.

Low carbon hydrogen is an important initiative right now for countries around the world and particularly in the People’s Republic of China, one of the world’s largest producers of hydrogen energy. In 2020, the world’s production of hydrogen was approximately 72 million tons. The People’s Republic of China produced about 20 million tons in 2019. One percent or less was renewable energy hydrogen with the remainder being hydrogen produced from fossil energy (70-80%) and from industrial by-products (more than 20%).

According to the country’s hydrogen industry development report 2020, the proportion of hydrogen produced using renewable energy will increase from about 1% to 5% by 2025 and to 10% by 2030.

So, while the most desirable form of renewable energy-based hydrogen—“green” hydrogen—will be available in substantial quantities only after 2030, between now and then useful experience can be gained. Now is a good time to start building the engineering code, infrastructure and uses of hydrogen.

Hydrogen produces neither carbon dioxide nor pollutants such as

sulfur oxide and nitrogen oxide.

Policymakers in the People’s Republic of China shall consider these steps when moving forward with hydrogen energy:

What is the role of carbon capture utilization and storage for low carbon hydrogen?

In the initial stages, hydrogen can be sourced in the most cost-effective way available and later be switched to the most environmentally cost-effective method. Green hydrogen can unlock approximately 8% of global energy demand with a hydrogen production cost of $2.50 per kg. If the hydrogen price drops to $1.80 per kg it would unlock as much as 15% of global energy demand by 2030.

Low carbon hydrogen can be a transition fuel which will avoid stranded assets and prepare the world to shift to a new way to deliver energy, which is environmentally friendly as well as economical. This approach is also in line with climate science which shows that early actions today are much better than more massive responses later.

Carbon capture utilization and storage in the hydrogen production process has also attracted much attention and is more economical at present than electrolysis-based green hydrogen. It could also provide an early opportunity to transit to a low carbon hydrogen economy. The early availability of low carbon hydrogen using carbon capture will ensure that the downstream hydrogen infrastructure is ready by the time electrolysis-based green hydrogen is cost effective.

The People’s Republic of China has well-established coal mining infrastructure but lacks availability of cheap domestic natural gas. Carbon capture technology can decarbonize fossil fuel-based hydrogen, which will enable hydrogen economy and reduce carbon dioxide emissions in the short and medium term.

While the production and consumption of green hydrogen is a long-term goal, carbon capture is becoming more viable and could be a great accelerator for the expansion of the hydrogen economy.

What is the trend for low carbon hydrogen?

In near term, the existing hydrogen supply, marketing and utilization systems are relatively mature and stable. On the other hand, carbon capture technology will not be commercialized and popularized in five years because of its high cost. As a result of this, the current structure of hydrogen production will not change greatly in the near future.

The annual increment in low carbon hydrogen supply of about 2 million tons cannot be filled by the development of renewable energy hydrogen. Renewable hydrogen can only supplement about 40% of the increment. Therefore, in the near term, hydrogen production from fossil energy (especially from coal) will still be dominant in the People’s Republic of China. Carbon capture technology shall be promoted to help in the decarbonization of hydrogen production from fossil energy.

In the medium term, say until around 2030, the annual demand for hydrogen in People’s Republic of China will reach about 35 million tons, an increase of 75% in absolute terms. By this time, the proportion of hydrogen production from renewable energy will reach 10%, which is 10 times that of the present 1%.

From now to 2030, carbon capture technology, electrolyzer cost and renewable energy cost will continue to decline, and various hydrogen production demonstration projects will continue to appear. By 2030, carbon capture technology will be more mature and the cost of hydrogen will be reduced.

Many carbon capture technologies will be demonstrated in the early stage of commercialization, and many industries will enter the time window of this transformation. Combined with carbon capture technology, coal hydrogenation and renewable energy electrolytic water hydrogen production will become the main effective hydrogen suppliers.

In long term, by 2050, the People’s Republic of China’s annual demand for hydrogen will reach 60 million tons. Its energy structure will change from traditional fossil energy to a diversified energy structure with renewable energy as the main body, and the electricity price of renewable energy will be further reduced.

At that time, hydrogen energy supply will be based on renewable energy electrolytic water hydrogen as the main body of effective hydrogen supply. Carbon capture technology used for fossil energy hydrogen production, biomass hydrogen production, and nuclear hydrogen production will be effective supplements.

Carbon 2030 and 2060 targets need low carbon hydrogen.

Hydrogen is an important medium during energy transition, and renewable hydrogen is an essential direction for the development of green and low-carbon energy in the future. Under the background of carbon neutral and zero carbon goals, carbon capture is becoming more and more important. If the People’s Republic of China wants to achieve the goal of carbon neutrality by 2060, the development of renewable energy hydrogen and carbon capture technology are indispensable.

Author
Jinmiao Xu

Jinmiao Xu

Energy Specialist, Energy Sector Group, Sustainable Development and Climate Change Department, ADB

Darshak Mehta

Darshak Mehta

Consultant, Energy Sector Group, Sustainable Development and Climate Change Department, ADB

This blog is reproduced from Asian Development Blog.

Accelerating Clean Energy Transition in the PRC

The use of solar, wind and other renewable energy sources continues to grow in the People’s Republic of China. Photo: Vista Wei

The move to clean energy and carbon neutrality in the People’s Republic of China will require conservation, conversion to new energy sources beyond coal and changing people’s energy consumption habits. 

The People’s Republic of China is working to peak its carbon dioxide emissions before 2030 and achieve carbon neutrality by 2060. The only way to achieve its climate change targets is by adopting an aggressive low carbon pathway. Reducing reliance on coal will be a major challenge for this clean energy transition.

Coal is deeply embedded in the energy system and economy of the People’s Republic of China – the world’s largest coal consumer and producer. It is widely used in electricity generation, steel and cement production, building materials, chemicals, and heating and cooling of buildings.

Due to progress made between 2011 and 2020, the country’s total coal consumption declined after 2013. It has increased again in recent years, approaching its 2013 peak, driven up by the fast-rising demand for electricity. The country’s coal consumption grew by 0.6% from 2019 to 3.86 billion tons in 2020.

The country needs to adopt a new approach to coal. A shift from controlling coal growth to accelerating a phaseout of coal in all sectors is the way forward, coupled with sufficient financial resources for long-term low-carbon investments in renewable energy, green transportation, green buildings, and low-carbon manufacturing.

During the last 10 years, renewable energy such as solar, wind, and battery storage have grown, with an average annual growth rate of non-fossil energy consumption in the total energy consumption at 0.7% since 2013. In 2020, the combined newly added capacity for wind and solar energy reached a record high of 120 GW. However, with total clean energy accounting for about a quarter of the total energy consumption more is needed in light of government commitments.

The only way to achieve its climate change targets is by adopting an aggressive low carbon pathway.

By 2020, the installed capacity for renewable energy reached 930 GW, accounting for 42.4% of the total installed capacity. The country has further committed to bringing its combined installed wind and solar capacities to more than 1.2 terawatts by 2030. As fossil fuel wanes, renewable energy needs to become the main pillar of the “new power system’’ proposed by the government in March 2021.

The People’s Republic of China must not only use less energy but use energy more efficiently, while reducing pollutant emissions (including greenhouse gases), consumption of natural resources, and improving energy security by reducing reliance on energy imports.

Energy conservation is dependent to a great extent on changing human behavior. But some energy efficiency measures can now be automated, e.g., through the use of automated demand response systems such as smart thermostats and other smart building energy management systems.

Electrification of transport and other infrastructure that historically rely on fossil fuels will also help improve energy efficiency on a scale that helps meet global climate change and national energy security objectives.

Moving to clean energy and carbon neutrality in the People’s Republic of China is not just a matter of phasing out coal. It will require a broad effort encompassing conservation, conversion to new energy sources and changing people’s energy consumption habits.

Author
Xinjian Liu

Xinjian Liu

Senior Project Officer (Energy), East Asia Department, ADB

This blog is reproduced from Asian Development Blog.

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