ACEF 2012, SESSION 17: ADBS KNOWLEDGE AND INNOVATION BASED SUPPORT TO PRCS CLEAN ENERGY DEVELOPMENT

PILOTING AND DEMONSTRATING CUTTING-EDGE TECHNOLOGIES TO REDUCE GHG EMISSIONS FROM COAL USAGE Manila, 7 June 2012
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Content
Importance of cutting-edge clean coal technologies for

the PRC Coal Mine Methane (CMM) an Introduction ADBs CMM projects and its benefits Integrated Gasification and Combined Cycle (IGCC) an Introduction IGCC technology and its benefits Perceived and Real Barriers to IGCC Way forward for coal in China

Importance of cutting-edge clean coal technologies for the PRC

Coal is most widely available fossil fuel

resource in PRC and forms backbone of electricity supply; representing almost 80% in generation mix
PRCs energy security strategy is

based on its vast coals reserves

Coal will continue to play a dominant
PRCs share in global coal demand

role in energy mix up to 2035 and beyond despite strong incentives for energy efficiency and to renewable energy sources.
By deploying of cleaner coal

technologies, PRC can facilitate .

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3000.0
PRC Coal Production, Mtce

2500.0
2000.0 1500.0 1000.0 500.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Importance of support to Coal Mine Methane (CMM) and Coal Bed Methane (CBM) capture and utilization
Methane gas accounts for 14% of all global greenhouse gas (GHG) emissions. Part of Chinese coal varieties contain significant amounts of methane which represents a safety hazard in underground mines and contributes to climate change if released to the atmosphere Capture and utilization of CMM/CBM provides a clean fuel source replaces coal consumption reduces GHG emissions Improves coal mine safety

60% of total methane emissions are from human-related activities. Methane emissions from coal mining account for about 10% of anthropogenic methane emissions.
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ADB Coal Mine Methane (CMM) Coal Bed Methane (CBM) Projects in PRC
ADB approved 3 loans for CMM-CBM

extraction and utilization in the provinces of Shanxi and Liaoning

Projects included methane capturing
Loan 1715: Shanxi Environment Improvement $102 million, 1999 Loan 2112: Liaoning Environmental Improvement $70 million, 2004 Loan 2146: Shanxi Coal Mine Methane Development $117 million, 2004

and utilization for power generation collection and transmission by pipeline production of clean vehicle fuel liquefaction for residential and industrial use

Project Benefits: Coal Mine Methane Development

PART A: 120 MW power plant one of the biggest CMM PP in the world CMM drainage CBM surface development PART B: Transmission & Distribution

248Mm3 of methane gas p.a. are

recovered and captured Part A: 182 Mm3 p.a. Part B: 166 Mm3 p.a. 429 ktons of coal p.a. are replaced Part A: 291ktons Part B: 138 ktons Sale of carbon credits could offset 70% portion of capital cost Gas supply to 90,000 households, commercial and industrial, and transport customers. Secondary benefits include reduced urban air pollution from coal transportation by road

Project Benefits : Coal Mine Safety

PRC accounted for about 80% of the worlds death toll in coal mines
Approximately 6,500 miners died in coal mine accidents annually during 1990s. ADB support Technical assistance to State Administration of Work Safety for Coal Mine Safety to improve rules and regulations as well as their enforcement Impact: Average annual coal mine fatalities dropped to about 2,500 in recent years

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IGCC Technology - a brief introduction

Schematic demonstration of IGCC technology for power plants

The IGCC is a state-of-the-arttechnology for power generation from coal: Coal is combined with oxygen and steam in the gasifier to produce the syngas Following a purification process, the syngas is used to produce electricity in the gas turbine. Waste heat is then recovered to create steam which drives the steam turbine.

Source: Northwest Energy

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Benefits of IGCC Technology over Pulverized Coal Supercritical or Ultra-Supercritical Power Plants
WEO 2011:Improvement of average efficiency of all coalfired power plants by five percentage points could reduce CO2 emissions from power sector by 8% in 2035.

Up to 50% gross efficiency

In combination with integral pollutant

Source: IEA, 2012

system can significantly reduce SOx, NOx, and mercury emissions Reduction of up to 35% of cooling water demand Poly-generation possibility of hydrogen, slurry and syngas Technology offers flexibility in combusting varying coal qualities IGCC offers emission reduction down to level of highly efficient natural gas fired combined cycle power plant IGCC is logical next step for PRC
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Integrated Gasification Combined Cycle Technology A logical next step in cleaner coal technologies for PRC
PRC will be swing state determining the speed of commercialization of IGCC technology for power generation.
Support to key industry players in demonstration is essential to fast track the technologies commercialization.
For large-scale demonstration and deployment of IGCC technology PRC needs capacity strengthening in: Component manufacturing Engineering, planning, and construction Plant operation and maintenance Regulation and tariff setting
Other factors impeding demonstration and deployment of IGCC Technology : Low policy priority, including for carbon capture and storage Regulation and tariff setting Limited environmental protection incentives
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GreenGen: Facing Chinas Coal Future

GreenGen Program:
1st Phase (2006 2012)
Build 250MW coalbased IGCC power plant
ADB supports the GreenGen program, a joint venture to demonstrate near-zero emission technology for coal-based power plants Oct 2008 Jun 2011: Technical assistance (TA) for Capacity Strengthening on IGCC projects May 2009: TA for Strategic Analysis and Capacity Development on Carbon Dioxide Capture and Storage Demonstration Feb. 2010: ADB approved $135 million loan and $5 million grant support to construct the 250 MW IGCC demonstration plant in Tianjin; project is expected to be in operation by end of 2012 ADB at present is assessing grant financing for phase 2 CCUS small scale demonstration project
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2nd Phase (2012 2014)

Implement Carbon Dioxide Capture, Utilization, and Storage small scale demonstration project

3rd Phase (2014 2016)

Build 400MW coalbased IGCC power plant with CCS

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Innovative financing for the Tianjin IGCC

Sovereign guaranteed loan; innovative onlending and counter-guarantee support

from EXIM Bank of China

Loan amount up to 70% of loan amount Tenor 26 years including a grace period of 6 years Loan pricing for sovereign loan
Interest : cost basis = 6 Month LIBOR; lending spread over cost basis

= 20; rebate = 28 bps. Effective rate = LIBOR 8 bps

Commitment charge = 15 bps As an Illustration interest rate as at 29 March 2010

(LIBOR = 0.439% + (0.20 0.28)% = 0.359%

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ADBs Funding Resources for Cleaner Energy Projects

ADB INTERNAL

Clean Energy Financing Partnership Facility (target $250 m)

Climate Change Fund ($40 m) CCS Fund (A$21 m) + ?

Carbon Market Initiative Funds Asia-Pacific Carbon Fund ($151 m) Future Carbon Fund (target $100 m)

Global Environment Facility (GEF) Climate Change ($250 m/ year)

Green Climate Fund ($30 billion up to 2013, $100 billion from 2014 onwards)

Clean Technology Fund of the Climate Investment Funds (WB as Trustee) (target $5 b)

ADB established and administers a series of funds dedicated to foster clean energy development and finance demonstration projects

EXTERNAL

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Conclusions


Cleaner coal projects have substantial environmental, public health, social, and climate change benefits
There is huge potential for expansion of cleaner coal projects in PRC CDM will remain an important financing tool out to 2012. ADB has established funds to provide upfront financing for purchase of carbon credits beyond 2012. Other funds are also available. ADB has considerable experience in financing cleaner coal projects and is looking to continue its support for projects which will fast track locking in low carbon cleaner coal technologies

For further information and comments please contact:

Ashok Bhargava, Director East Asia Energy Division (EAEN) abhargava@adb.org

Merlita Pajarillo, Senior Finance Specialist (Energy) EAEN mpajarillo@adb.org Annika Seiler, Finance Specialist (Energy) EAEN aseiler@adb.org
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