China Thermal Power Efficiency Project WB support to the improvement of coal-fired power generation efficiency in China Jie Tang Energy Specialist East Asia and Pacific Region

Energy Supply to Sustain Economic Growth Increased demand on energy supply, less energy intensive, and sustainability 1. The 11 th Five-Year Plan ( )  doubling the GDP ( )  Improving efficiency  reducing energy consumption per unit GDP by 20% (2005 to 2010) Power sector: installation of large-sized, high-efficiency thermal generators and scale up efficiency improvement 2. The medium and Long Term Energy Conservation Plan  reducing energy consumption per unit GDP by 2.2%  power sector highlighted for efficiency improvement

Coal as a Dominant Energy Source Coal accounts for about 65% primary energy supply in China, and will remain dominated until CHALLENGES: 1. Long-term Energy Security  Providing affordable and reliable energy supply - 40% oil imported 2. Local Environmental Impacts  acid rains impact on agriculture and food security  SO 2 emissions will double and NOx emission will triple from 2000 to 2020  particulates impact on population health  cost of exposure to particulates for urban residents expected to rise from $32 billion in 1995 to $98 billion in 2020 (WB: China 2020) 3. Global Environment Impacts – Climate Change  High coal consumption is leading to increased GHG emission

CO 2 emission from fossil fuel consumption (Billion tons) GHG Emission China’s CO 2 emissions are expected to increase from 3.3 billion tons in 2000 to 5.7 billion tons in 2020 (IEA 2004)

World Bank Support Challenges Energy Security Local Env Impacts Climate Change Advices on legislation, policies and sector regulation Support technology transfer & development – clean coal & EE Support renewable energy development Support EE improvement Thermal Power Efficiency Project

The Power Industry - Capacity Total installed capacity reached GW by 2004, 12.6% increase from % 23.8% GW in thermal, produced about 82% of the total electricity output in about 50% of the total coal consumption of 1400 Mtce in 2004, was for power generation.

 The overall efficiency of coal-fired generation is about 20% lower than best international practice Coal-fired Power Generation - efficiency

Mix of thermal power units in 2004 UnitNumber of setsAverage Gross Efficiency (gce/kWh) ± 600 MW53328 ± 300 MW MW MW below 100 MW> 4000> 390 Overall Efficiency ~ 352 Coal-fired Power Generation - Way to improved efficiency Sector-wide approach to Applying stringent efficiency standard on new capacity additionApplying stringent efficiency standard on new capacity addition Phasing out small unitsPhasing out small units RehabilitationRehabilitation

Barriers to Efficiency Improvement - barriers to efficiency improvement of existing units Regulatory barriers Regulatory barriers –Lack of adequate policies, incentives mechanisms & enforceable standards for efficiency management –Lack of detailed regulatory provisions supporting implementation of the Medium and Long Term Energy Conservation Plan in the power sector Institutional barriers Institutional barriers –Weak enforcement of government policies –Weak supporting systems for efficiency management –Lack of obligations or incentives to invest energy efficiency improvements Technical barriers Technical barriers –Lack of advanced technologies for rehabilitation of medium an large- sized units –Lack of advanced technologies for rehabilitation of plant auxiliary equipment to improve overall plant efficiency

China Thermal Power Efficiency Project - proposed for GEF Grant (US$19.7 million) The project is designed to offer a systematic program to increase the overall efficiency of China’s coal-fired power plants The project is designed to offer a systematic program to increase the overall efficiency of China’s coal-fired power plants –Phase-out small-sized –Facilitate investment in rehabilitation / retrofitting of in-efficient thermal units through technical capacity building and demonstration There are three components: There are three components: –Enhancement and Enforcement of Sector Regulation on EE A mandatory and incentive approach A mandatory and incentive approach –Efficiency Improvement Demonstration Project (Rehabilitation) –Technical Capacity Building

China Thermal Power Efficiency Project - Rehabilitation and technical capacity building Efficiency Improvement Demonstration Project -- Rehab. Identify about 10 sets of potential units in different categories of unit size Identify about 10 sets of potential units in different categories of unit size Technical auditing and justification (economic, financial, reliability) Technical auditing and justification (economic, financial, reliability) –Packaged solutions to unit / plant efficiency improvement –Financial justification / cost-effectiveness of individual as well as packaged solutions –Including environment project when possible – regulation requirements on emissions, financial implication to plant owner –Market demand and implementation schedule Development of new business and financing models for rehabilitation Development of new business and financing models for rehabilitation –Competing with other initiatives on plant own working capital (annual budget for Technical Renovation Funds) Rehabilitation of units & plants for demonstration Rehabilitation of units & plants for demonstration –about 57 units of 200MW and 57 units of 300 MW have similar type of technologies/design (double-flow turbines) Technical Capacity building TA to technology development and/or transfer to lower down cost of rehabilitation and to explore further efficiency increase potential TA to technology development and/or transfer to lower down cost of rehabilitation and to explore further efficiency increase potential Creation of awareness and dissemination of knowledge Creation of awareness and dissemination of knowledge

Project ComponentsLocal Financing GEF Grant Estimated Total (US$m) 1.Enhancement of Regulation on Energy Efficiency Efficiency Improvement Demonstration Project 85.5 (79) Technical Capacity Building Total Project Costs China Thermal Power Efficiency Project - project cost and financing Total cost estimation: $113.3 million US$93.6 million in counterpart funds, covering 100% of the capital investment in demonstration (US$79 million) and partial cost of technical assistance activities US$19.7 million GEF Grant, contributing to the cost of technical assistance activities

China Thermal Power Efficiency Project - GEF financing, carbon financing Carbon financing for rehabilitation – in considerations Baseline: unit or plant itself - coal consumption rate and output (kWh) before rehabilitation ERs – reduced coal consumption for same amount of output (kWh) after rehabilitation Methodologies – to be developed GEF financing – contributing partially to the cost of Policy and regulation enhancement Technical auditing (bring international best practices when possible) Technical capacity building – rehabilitation technology, plant service efficiency Knowledge dissemination for replication

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