The Chinese province of Guangdong is a major industrial area and a heavy – and rapidly growing – energy user. It already has a significant installed CHP base and, writes Chen Jian, if current pro-energy conservation policies can be successfully implemented, much of the future growth in power generation could also be CHP.

Guangdong province (GD) has led the economic reform of China, and now it is one of the most developed provinces in that country. In 2006, Guangdong’s per capita GDP was over $3500, while GDP was RMB 2597 billion ($346 billion), accounting for about an eighth of the country’s total. The annual average economic growth rate was 14.5% from 1990 to 2006, which was 4.8 percentage points higher than the average for China.

According to The Guangdong Provincial Planning for Economic and Social Development in the 11th Five-Year Plan, the province’s GDP will amount to RMB 3350 billion in 2010, and per capita GDP will reach $4250 dollars, double the per capita GDP of 2000. Since the economy has maintained double-digit growth in recent years, the actual growth is likely to exceed the planned average annual growth of over 9%.

Energy development of Guandong

In 2005, the total energy consumption rose to 178 million tonnes of Standard Coal Equivalent (SCE), which is 8% of the country’s total. Yet, only 45 million tonnes of SCE primary energy was produced by the province. The rest came from other provinces and abroad. With rapid economic growth and heavy industrialization, energy consumption has increased rapidly in Guangdong. The average elasticity coefficient of energy and electricity consumption was 1.02 and 1.13 between 2000 and 2005 respectively, while it was only 0.58 and 0.94 in last decade of the 20th century. The elasticity coefficient is an indicator of the relationship between the growth rate of energy/electricity consumption and growth rate of the national economy.

By the end of 2006, the total installed electricity generating capacity available for the province was 67 GW, including 54 GW of installed capacity in the province and 13 GW of electricity imported from west to east. Guangdong ranks first in China for capacity.


A gas-fired CHP plant in Guangdong
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Despite that, Guangdong has still experienced severe electricity shortages since 2003. The annual average growth rate of total electricity consumption was 14.4% from 2001 to 2006, about 2% higher than that of the available total installed electricity capacity.

In 2006, total electricity consumption in Guangdong was 299 TWh, or 11% of the nation’s total, 2.24 times the figure for 2000. Although it has been forecast that the electricity supply would be balanced at the beginning of 2007, the real situation is that demand is still beyond the expected amount in the first half of the year, and supply shortage is likely to continue in the third and fourth quarters of 2007.

Challenges to energy supply

It is estimated that the total energy consumption in Guangdong will amount to 238 million tonnes of SCE by 2010. It will be very hard to meet this demand as the competition for resources is becoming fiercer in both international and national markets and there is no prospect of or potential for any large scale increases in primary energy production in the province.

Since Guangdong shut its coal mines in 2006, all coal consumed in the province has to be imported from other provinces and overseas. Imported coal exceeded 10 million tonnes in 2006, accounting for only 10% of the total consumed. The total coal consumption is expected to be over 1.3 billion tonnes in 2010 and to rely on domestic resource from north China that arrives by rail or by ship via the ports. Therefore, the transportation facility should be greatly strengthened. Long-distance transportation results in a vulnerability to a supply shortage because of the domestic and international markets, weather and the long distances that coal has to travel by rail or ship.

A second challenge is the ambitious target of a 16% decrease in energy intensity, particularly in the current climate of industrialization and urbanization. Some local governments will give priority to growth of the economy rather than energy conservation, so meeting the energy conservation target will be difficult.

Thirdly, the coal and oil dominated structure is unlikely to change in the short term despite the fact that the energy consumption structure will be continuously optimized in Guangdong in the long run. As the amount of coal and petrol consumption continues to grow, it is difficult to achieve the goal of The Guangdong Provincial Planning of Environmental Protection and Ecological Construction 11th Five-Year Plan, which aims to keep sulphur dioxide emissions down to 1.1 million tonnes per year. Along with the strengthening of pollution control in the province, energy costs will continue to increase. For example, during the 11th Five-Year Plan period, all new-build power plants in Guangdong had to install desulphurization equipment, so electricity costs were inclined to rise.

Proposed methods to change the current mode of development include the optimization of industrial and energy structure. As part of this, an important possible solution would be to vigorously develop CHP. Acceleration of CHP use is prominent in government documents such as state and provincial Medium and long-term energy conservation planning, and the state’s Comprehensive program for energy conservation and emission reduction.

Status of CHP in Guangdong

Distribution by size

There are about 230 CHP installations in Guangdong of size 1500 kW or more, giving a total capacity of about 6000 MW. Over 53% of CHP installations are of a size up to 10 MW and these account for about 9% of the capacity. The situation is reversed for large installations. Those of above 50 MW comprise only 12% of the number installed but account for 59% of the capacity (see Figures 1 and 2).


Figure 1. Number of CHP installations in Guandong by size
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Figure 2. Amounts of CHP installed capacity in Guandong by size
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Development of CHP was considered as one of the important ways to save energy and appeared in government documents in the 1980s. To regulate the CHP projects, the state government set a series of technical standards for CHP projects and their certification. A basic rule is that the thermal load decides the size and type of any new CHP installation; this then determines the amount of power which can be sold to the power grid. This rule greatly restricts installation size and has resulted in the existence of a large number of small CHP installations.

In recent years, China has been accelerating the closure of small thermal power plants. Small CHP plants with certification have been allowed to operate to separate them from purely condensing power plants. Up until now, 81 cogeneration installations have been certified by the Guangdong Economic and Trade commission, totaling 1357 MW.

Distribution by sector

Under government regulations, the economic performance of a CHP plant depends on whether the thermal load is long and steady. Most cogeneration plants active in Guangdong were originally built for continuous processes in industry in which steam demand and electric load is nearly constant. However, with urban development, the sites of some cogeneration plants have gradually become urban centres. This has meant that the heat supply of these CHP plants has become available to some commercial users.

CHP plants in Guangdong can be divided into two types. Those built by independent companies account for 62% of the total capacity and 23% of the installation number. They sell all the electricity and heat they generate. The other type is those built by enterprises in various industries and which focus on meeting their own steam and electricity demands. Table 1 shows the distribution of this second type of CHP plant within industry.

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These installations usually connect to the power-grid so as to balance their electricity load. Most of the enterprises supply heat for themselves, selling only a small portion to other peripheral users.

Distribution by fuel and prime mover

Currently most of the cogeneration plants in the province use coal as raw material. There are also 54 cogeneration sets totaling 233 MW that use waste materials from the sugar-making and paper-making industries. Although some CHP plants were built to use natural gas as fuel and although LNG has been available in Guangdong since 2006, LNG can only supply a few CHP sets. The other CHP plants have so far still had to use oil.

The common prime movers of existing CHP plants in Guangdong are boilers driving steam turbines, as determined by the main raw materials. These plants use coal and waste material, except several combined cycle configuration gas turbines that use LNG and oil.

Distribution by city

Generally speaking, cities with good industrial foundations have more CHP sets and larger single-set capacity. Examples are Guanzhou, Dongguan, Foshan, Jiangmen and Shenzhen city. With a lot of sugar-making and paper-making enterprises, cogenerations sets in Zhanjian city are relatively large in number but small in single-set capacity.

Contributions to energy conservation and economic development

The benefits of CHP compared with separate heat and power are many, including energy saving, reduced air pollution, reduced transmission and distribution line losses, and increased fuel efficiency. These benefits are not static, of course, and they depend on the CHP emission rate, central station emission rates and many other factors.

Most of the certified enterprises in Guangdong have a thermal efficiency of over 50%. Per MW, the average that a cogeneration unit can save is up to 2500 tonnes of SCE per year. In 2006, the 1590 MW of certified units in Guangdong saved more than 3.9 million tonnes of SCE.

Currently, all the certified CHP units have achieved the emissions standards and are used to replace small boilers that have means of controlling their pollution. CHP plants have, in effect, reduced pollution emissions. Replacing electricity-driven air conditioning with air-conditioning using steam has reduced grid electricity consumption in peak times.

Prospects for CHP in Guandong

CHP is best applied in facilities that have significant and concurrent electric and thermal demands. In the industrial sector, CHP thermal output has traditionally been in the form of steam used for process and space heating. The logging and papermaking, textile and garments, food and beverages, pharmaceuticals, and petroleum and chemicals industries are excellent areas in which to develop CHP as they have constant demands for steam and electricity. CHP with thermally activated cooling (CCHP) for commercial and residential buildings can also substitute for central air conditioning, which accounts for about 20% of the power-grid load for as many as 180–200 days per year. All of these provide good foundations for CHP development, yet due to policy barriers and other reasons, the heat and power provided to most users, for whom CHP would be appropriate, are generated separately. Studies show that there are plans to add 10,000 MW of CHP capacity by the stakeholders, yet only part of this amount will be realized.


Gas-fired CHP plant in Guangdong
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In the energy planning of the 11th Five-Year Plan of Guangdong, 654 MW LNG and 1200 MW coal-fired CHP will be built to operate by 2010. There is also 4000 MW of small power plants planned to be shut down that can be replaced with CHP in the Pearl River Delta (PRD).

Suggestions on policy-making

Although CHP has historically provided environmental benefits, those benefits are not currently captured or accounted for in some of the related policy-making processes. As energy conservation has become more and more important, support for CHP has become a standard element in national energy policy, yet CHP still faces severe market and regulatory barriers. Here are some recommendations to shift towards policies for the development of CHP.

Integrated planning from the government.

Currently, China is developing its power plant installations on a large scale, as is the case for CHP. CHP for single enterprises is forbidden except for the petrol-chemical, chemical, steel and paper-making industries. This means that most new build CHP has had to build heating pipe networks, which greatly adds to investment costs and the payback period. Furthermore, without the integrated planning and construction of industrial enterprises that depend on heat loads, it is hard for large CHP installations to be economical without enough steady thermal loads.

So, it is strongly recommended that industrial enterprises with heat load requirements should be sited in industrial parks. As a heating network is part of urban infrastructure, we suggest that the government provides funds to support regional planning of the thermoelectric pipe network construction.

Encourage the development of CHP by taxation, pricing and finance

Currently enterprises do not pay value-added tax for their own boilers. However, heat-supplying enterprises must pay this tax for heat supply. To promote concentrated heat supply by cogeneration, heating income must be exempted from the VAT. We suggest that, in the next tax reformation, we adopt the practice of developed countries and give tax credits to enterprises that supply heat from cogeneration projects.

The central station generators may have dispatchability and cost advantages over CHP. With the reform of the sale of electricity by competition, CHP loses it competitive advantage in the electricity market without special favourable polices. So it is proposed that priority should be given to electricity sold by CHP, and that the price should be treated differently from that from a central station.

Like other energy conservation projects, the government should provide funds to innovative CHP projects.

Strengthen CHP legislation and enforcement

A revised ‘power law’ should include items to encourage CHP and clear its legal status, standardize cogeneration project preparatory work and operational management, and thus protect the stability of power supply and thermal prices by way of regulation.

The revised ‘Energy Conservation Law’ should further clarify that cogeneration projects, like other energy projects, are subject to state financial support and are included in items that receive tax relief.

Boilers within the heat supply area of an existing CHP plant must be shut down or should be prohibited from being built.

Reform of CHP project permitting process

The provincial governments are authorized to formulate regional CHP planning. The planned thermoelectric projects can be authorized by a provincial government after reporting to the State Development and Reform Commission for permission. Construction of coal-fired CHP should be approved by the National Development and Reform Commission; others CHP plants should be approved by the investment administration departments at provincial levels.

The application to set up a CHP project is more time-consuming and complex than for a nominal coal-fired project.

So it is strongly recommend that the permitting process be simplified and the authorization for permitting be transferred to the related provincial departments.

Push forward the application of new technology and equipment in CHP

The use of fuels such as LNG, methane gas, biomass and hydrogen must be encouraged. The development, demonstration and adoption of new technologies such as solid oxide fuel cell systems, micro-turbines and internal-combustion engines must be accelerated.

Conclusion

The market potential for CHP is substantial and could contribute significantly to the province’s overall energy conservation target. However, without innovation in policies and regulations, only projects listed in the provincial planning are going to be realized by 2010. If the current legislation and energy conservation policies can be implemented well and the permitting process is simplified, the 10,000 GW potential is likely be realized by 2015.

Chen Jian is with the Guangdong Energy Conservation and Monitoring Center, Guangzhou, China.
e-mail: jianchen@163.net