CDM Potential of Electric Power Sector and Energy-intensive industries in China

Outcome of 5-Year Joint Study of Keio University/Tsinghua University Sponsored by NEDO (New Energy and Industrial Technology Development Organization) Japan
Keio University/Tsingua University 1

Members of Joint Research Team

Keio University
Mitsutsune YAMAGUCHI, Professor, Faculty of Economics Osamu KAWAGUCHI, Professor, Faculty of Science and Technology Minoru FUJII, Senior Technical Advisor, Hitachi Engineering Co., Ltd. Yasuhiro KONNO, Senior Technical Advisor, Hitachi Engineering Co., Ltd. Kuniyuki NISHIMURA, Research Director, Mitsubishi Research Institute, Inc. Shuta MANO, Staff Researcher, Mitsubishi Research Institute, Inc.

Tsinghua University
Lu Yingyun,
Liu Deshun, Ma Yuqing, Zhao Yong, Zhou Sheng, Tong Qing, Professor, 3E Research Institute Professor, Institute of Nuclear Energy Technology Professor, 3E Research Institute Associate Professor, 3E Research Institute Lecturer, 3E Research Institute Assistant Professor, 3E Research Institute

Members of the 3E CDM Committee in Japan Various staffs in Electric Power Companies in China
Keio University/Tsingua University 2

Purpose of the study

Contribute sustainable development of China through promoting CDM activities Establish a methodology of estimating CO2 emission reduction potential Provide reliable figures of emission reduction potentials and costs of CDM in China to prospective investors worldwide
Keio University/Tsingua University 3

Characteristics of our study

Thorough bottom-up approach Technology-based Based on the actual data (especially in electric power plant cases) Intense cooperation of Keio-Tsinghua Universities as well as Academia, Industry and Governments Best mix of climate and technology experts, mechanical engineers, research institute, business society of both countries
Keio University/Tsingua University 4

Targeted sectors and reason

Targeted sectors
Power Generation Iron & Steel Paper & Pulp Cement Oil Refinery and Chemicals

Reason
Major CO2 emitters

Keio University/Tsingua University

Process of analysis
Study and select CDM model plant and technology Calculate Baseline emissions (existing emissions) Estimate CO2 2 reduction of model plant Estimate CO2 2 reduction potential in China Calculate CO2 2 reduction costs Estimate CO2 2 reduction potential in China corresponding to various cost
Keio University/Tsingua University 6

CDM potential in electric power plantsKeio & Tsinghua U.

Collection of basic data of all power plants in North China (Tsinghua University and power plants in North China) Classification of power plants
Group 1 50 MW units Group 2 100200 MW units Group 3 300 MW units Scrap & Build Option Modification Fuel switching

The above 3 groups account for 75% of total capacity in North China

Selection of model units/technologies, collection of detailed data, thereafter implementation of site survey Price of fuel (gas price is about 8 times higher than coal
Keio University/Tsingua University 7

Estimation of CO2 reductions

Calculate baseline emissions
Existing actual emissions are used as baseline

Estimate CO2 emission reductions of model units by applying state-of-the-art Japanese technologies (with some exception) Apply model units reduction to all others units
Keio University/Tsingua University 8

Summary of CO2 emission reduction potential (Power Plants)

50 MW
Scrap & Build(50MW to 200MW)

100MW
Retrofit

200MW
Retrofit

300MW
Fuel switching from coal to natural gas

Total

11,695

7,180

9,004

45,550

73,429

Unit 1000 t/y

Keio University/Tsingua University 9

Other energy intensive industries (Iron & steel)

Technologies
Japanese state-of-the-art technology

Targeted plants Plant capacity bigger than 1 Mt of Pig Iron, but excludes plants already installed them

Coke Dry quenching (CDQ)

Top Pressure Blast furnaces exceeding 1000 Recovery Turbine M3, but excludes plants already installed them (TRT)
Keio University/Tsingua University 10

Other energy intensive industries (Cement, Chemicals and Paper)

Cement Japanese state-of-the-art technology
- Replacement of small vertical kiln with fluidized bed kiln -Replacement of wet-process kiln with suspension preheater -Waste heat power generation -Utilization of combustible waste as fuel -Utilization of steel slag for cement material

Oil refinery and chemical industry Japanese state-of-the-art technology

-Oil refinery (Gasification of oil residue and power generation) -Ethylene (Gas turbine installation and utilization of exhaust gas for cracking furnace) -Chemical fertilizer (Coal gasification combined power generation) -Clor-alkali (Replacement of diaphragm process with ion-exchange membrane process

Paper Japanese state-of-the-art technology

-Replacement of main motors/main auxiliary motors with variable speed motors -Installation of closed type dryer hood and waste heat recovery equipment for dryer and other remodeling
Keio University/Tsingua University 11

Comparison of CDM reduction potential by industry

Reduction Potential (thousand ton-CO 2/year) 0 10000 27879 20000 30000 45550
300MW

40000

50000

60000

70000

80000
total 73429

Power Plant Steel Industry Paper Industry Cement Industry Oil Refinery and Chemical Industry

5744

783

13275

8625

Paper industry Reduction potential is 3941172 thousand ton-CO2. 783 thousand ton-CO2 showed above is average. Keio University/Tsingua University 12

Comparison of CDM reduction potential by technology

Reduction Potential (thousand ton-CO2/year)
0 50MW Scrap & Build 100MW Modification 200MW Modification 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 11695 7180 9004 45550 4764 980 783 4807 357 1892 4260 1959 6707 938 729 251
Power Plant

300MW Fuel switching CDQ Steel Industry TRT Paper Industry Replace of small vertical kiln
Cement Industry

Replace of wet-process kiln with SP Waste heat power generation Utilize of combustible waste as fuel Utilize of steel slag for cement material Residue gasification at oil refineries

Oil Refinery and Chemical Industr

Utilize of exhaust gas at ethylene plants IGCC at chemical fertilizer plants Ion-exchange membrane process at soda plants

Keio University/Tsingua University

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Cost estimation methodology

i =1 n

( SBi EBi MBi )

(1 + r )

i =1

( SCi ECi MCi )

(1 + r )

I0

(Baseline emission)

(Emission after CDM project) --- (Numerator means saved fuel)

( ECi EBi ) + I0 i (1 + r ) i =1
n

i =1

( EC i EB i ) + I0 i (1 + r )

Y
i =1

(Denominator means CO2 reduction in year i)

i

(Carbon reduction cost per ton) SBi: revenue, EBi: fuel cost, MBi: maintenance cost of Baseline case SCi: revenue, ECi: fuel cost , MCi: maintenance cost of CDM case I0: initial investment cost of the project
Keio University/Tsingua University 14

Reduction potential and cost (1)

Power Plant
50 MW
Scrap & Build

Reduction Potential
1,000t- CO2/y

Cost,$/t - CO2 Cost, $/t - CO2

7 year crediting period 14 year crediting period

11,695 7,180 9,004 45,550 73,429

Keio University/Tsingua University

8.3 19.4 28.3 61.4

2.5 8.0 12.7 41.4

100 MW
Retrofit

200 MW
Modification

300 MW
Fuel switching

Total

15

Reduction potential and cost (2)

Iron & Steel Reduction Potential
1,000t- CO2/y

Cost,$/t - CO2 Cost, $/t - CO2

7 year crediting period 14 year crediting period

CDQ TRT Total

4,764 980 5,744

Keio University/Tsingua University

1.6 0.5

-15.3 -15.6

16

Reduction potential and cost (3)

Paper & Pulp

Replacement of main motors etc.

Reduction Potential
1,000t- CO2/y

Cost,$/t - CO2 Cost, $/t - CO2

7 year crediting period 14 year crediting period

394 - 1,172

21.1

0.91

Keio University/Tsingua University

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Reduction potential and cost (4)

Cement
Replace of small vertical kiln with fluidized bed kiln Replace of wetprocess kiln with Suspension Preheater Waste heat power generation Utilize of combustible waste as fuel Utilize of steel slag for cement material

Reduction Potential
1,000t- CO2/y

Cost,$/t - CO2
7 year crediting period

Cost,

$/t - CO2

14 year crediting period

4,807 357 1,892 4,260 1,959

45.0 55.9 8.9 25.0 -2.9

21.4 26.2 -5.2 10.2 -3.1

18

Keio University/Tsingua University

Reduction potential and cost (5)

Oil refinery, Chemicals
Oil refinery (Gasification of oil residue and power generation) Ethylene (Gas turbine installation and utilization of exhaust gas for cracking furnace) Chemical fertilizer (Coal gasification combined power generation)
Clor-alkali Replacement of diaphragm process with ion-exchange membrane process

Reduction Potential 1,000 CO2 t/y

Cost, $/t 7 year crediting period

Cost, $/t 14 year crediting period

6,707 938

-20.4 -19.8

-23.3 -33.5

729 251

-4.7 24.7

-5.8 7.5
19

Keio University/Tsingua University

Marginal Cost Curve of CDM in China

Reduction Cost (US $/ton-CO2) 70 60 50 40 30 20 10 0 -10 0 -20 -30 -40 20 40 60 80 100 120

CO2 Emission Reduction Potential (million ton-CO2 /year crediting period: 7years crediting period: 14years

Keio University/Tsingua University

20

Reduction Potential corresponding to credit prices

CO2 Reduction Potential (thousand ton-CO2/year)
0

5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

50MW Scrap & Build 100MW Modification Power 200MW Modification Plant 300MW Fuel switching CDQ Steel Industry TRT Paper Industry Replace of small vertical kiln Replace of wet-process kiln with SP Cement Waste heat power generation Industry Utilize of combustible waste as fuel Utilize of steel slag for cement material Residue gasification at oil refineries Oil Refinery Utilize of exhaust gas at ethylene plants and IGCC at chemical fertilizer plants Chemical Ion-exchange membrane process at soda plants Industr

11695 8.3 7180 19.4 9004 28.3 45550 4764 1.6 980 0.5 783 21.1 4807 45.0 357 55.9 1892 8.9 4260 25.0 1959 -2.9 6707 -20.4 938 -19.8 729 -4.7 251 24.7 $0 $4.5 $9 $18 All Potential
61.4

Keio University/Tsingua University

21

Tentative Conclusion
Potential CO2 emission reduction in five major sectors is around 100 Mt (Physical potential) Among them, power generation sector is the largest (especially at 300 MW units) When considering cost, picture changes drastically Very few commercially viable projects exist (at zero cost, total reduction will be only 10 Mt, at $4.5, still 16 Mt even under our baseline emission figures) Fuel switching projects in power sector will not be feasible due to high cost of natural gas Public funding is essential for promotion of CDM projects in China
Keio University/Tsingua University 22

Further works
Elaborate baseline emissions in view of discussions at the Executive Board Revisiting selection of model plants Improve data quality (other than power plants) Compare with other top down models Take into consideration of transaction costs Explore applicability of our methodology to other developing countries
Keio University/Tsingua University 23