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Why CHP and district heating are important for China: learning from Denmark could be the key

It can easily seem that the enormous growth in both energy productionà‚ andà‚ consumption in China will swamp any efforts being made in Europe to increase energy efficiency. But, asks Jes B. Christensen, what if China adopted the best practice in CHP and district heating currently in use in Denmark?

Challenges in China are paramount. A country with a population of 1.3à‚ billion and an average annual economic growth of 10% for the past 25 years is bound to encounter exorbitant energy, as well as environmental, challenges. The following example illustrates the point.

Today in China only 0.8% of the population has a car. In the United States and Europe the number is, respectively, 76 and 47 cars per 100 inhabitants. In China the Communist Party has a target of making China the biggest producer of cars by 2020. Last year approximately 7 million cars were produced in China, up from 1à‚ million in 2000. A recent survey by McKinsey and Company (2006) concluded that the largest materialistic wish for a Chinese citizen is to own a car à‚— 43% of 1.3 billion Chinese wish to own a car. The magnitude of this challenge clearly indicates the daunting task for China in coping with the lack of sufficient energy resources and the simultaneous increase in CO2 emissions, acid rain and blackouts.

When it comes to the demand for cooling and heating in China, the situation is remarkably similar.

China in numbers

In China today the relationship between economic growth and energy consumption is unbalanced. The energy-elasticity for China, the percentage change in energy consumption to achieve one per cent change in national GDP, is 1.5. In other words when China increases its GDP by 1% it requires an increase in the energy consumption of 1.5%. In order to create a more sustainable situation, China must be able to break the link between energy consumption and economic growth. In the current situation, 27 out of China’s 31 provinces experience black-outs every year, which of course leads to great economic losses.

China’s leaders have reacted to the current non-sustainable and unbalanced situation by demanding a more energy efficient way forward. The 11th Five Year Plan that sets out the guidelines for China’s overall goals from 2006à‚—2010 includes the demand for economic progress, combined with a simultaneous reduction in energy intensity per unit of GDP by 20%. This is an ambitious target equivalent to a reduction in energy consumption of around 830 billion kWh per year.

Two thoughts immediately come to mind when scrutinizing what is, in principle, an admirable new goal:

  • China is running dry of natural resources to keep up this leaping tiger economy deemed necessary to keep the population just happy enough
  • the natural disasters in China caused by this ineffective and reckless use of energy must come to an end, in order for China to cope with the environmental costs in time.

Please let me elaborate a little on the facts and figures for China, so we can get an indication of the task ahead of all of us. China has been a net importer of oil since 1993, and today more than 40% of its oil consumption is imported, which alone makes it the most expensive post on the trade balance. In 2005 the cost of importing oil equalled approximately USà‚ $35 billion. Not to mention that the oil comes from geopolitically uncertain areas such as Angola, Sudan, Iran, Venezuela and the Middle East. China’s primary energy consumption comes from 65%à‚—70% coal. In size this equals around one third of global consumption. This level of consumption will make China a net importer of coal by 2010. Not surprisingly, these disturbing facts have increased the search for natural gas (LNG). Today only 3% of the energy demand is satisfied by LNG; however the goal for 2020 is a 10% supply.

Not only is China diversifying the import of energy resources and countries of origin to reduce the risk of supply shocks, the country has also launched the new renewable energy law following high ambitions for increasing the energy supply from renewables. Today wind, biomass, solar and hydro power total less than 2%, but by 2020 this number shall increase to 15%.

The Chinese ‘guard dog’ monitoring the environmental situation in China, State Environmental and Protection Administration, is said to be protected by the Premier Wen Jiabao, which might explain the daunting announcement by the vice-minister for environment, Mr Pan Yue, that China’s 25 years of sky-scraping economic growth will actually be negative when the costs for all the environmental damage sustained during the era of Chairman Mao have been settled. This conclusion is not considered a wild shot, given that 16 out of the 20 most polluting cities in the world are situated in China. According to the WWF, 30% of China is impacted by acid rain; Greenpeace estimates this figure to be 70%.

One visible and undeniable fact is the repainting of bus stops and buses in South East China each year as a result of acid rain damage. China is already the largest emitter of SO2 in the world by nearly 30 million tons in 2005, and according to the IEA World Energy Outlook, China will surpass USA as the biggest emitter of CO2 by 2007.

Urbanization in China is growing at an unprecedented rate as a result of people wanting a better life. The fact that inequality in China keeps getting bigger between rural and urban areas, in favour of people living in the cities, surely nourish this effect. According to the World Bank, China’s income inequality has risen from 28% in 1981 to 41% today (Gini-index measurement). A calculation based on Chinese data gives us a direct 2007 comparison between Xinjiang Province and the two cities Beijing and Shanghai. The average Xinjiang income is estimated at 13,775 Yuan/year ($1912/year) against the estimated average Beijing/Shanghai income of 55,752 Yuan/year ($7740/year).

In China, 750 million inhabitants still live in rural areas. But with an estimated 18 million each year moving to the cities à‚— making them mega-cities à‚— this creates a seemingly insurmountable challenge. By 2050 it is estimated that 75% of the Chinese population will live in the cities.

In aggregated numbers China is a very small consumer of energy. Globally China only consumes around 10% of the global energy production, and the average citizen in China only consumes around one eighth of the average for OECD (Organisation for Economic Co-operation and Development) countries. However, when China uses three times the energy per GNI as the average of the world and the average Chinese citizen has doubled the energy consumption, the expectations for the future energy consumption in China are alarming. It is of no surprise that the energy consumption in cities is larger than for those living in the countryside.

On a more positive note, the 4th Generation Government now demands a more balanced society between people and nature. To create a much more energy efficient society is one of the many tools in making China sustainable. Combining the production of heat and power has proven very valuable in Denmark. This lesson learned and the 100+ year’s development of the district heating technology has become a highly demanded asset.

Cogeneration acknowledged as part of the solution

Over the past 25 years Denmark has experienced some 70% economic growth and simultaneously a near zero increase in energy consumption. One significant explanation is the Danish expansion of cogenerated heat and power in the 1980s and 1990s. Possessing the world record in most energy efficient power plants along with second-to-none district heating technology, Denmark, despite is small size, has a lot to offer China. This is, in part, due to a combination of visionary and bold government policies in symbiosis with the innovative industry and district heating companies.

For China to quadruple its economic growth and ‘only’ double the energy consumption, it will have to reduce energy used for space heating. China is estimated to consume at least 50%à‚—100% more energy for space heating than Western Europe. One political approach has been for China to demand centralized heating in all bigger cities north of the Yellow River. With the rate of urbanization China cannot accept anything else than finding the most efficient production of energy enabling the economy to continue its growth. Not only easing the pressure on the electricity grid preventing excessive blackouts, China can also save around E20 billion yearly by increasing the energy efficiency to (only) equal the world average. Another calculation by the powerful National Development and Reform Commission in China, shows that winter heating makes up 15% of the total primary energy consumption. By reaching EU levels of energy efficiency in its heating supply, China can save up to 10% of the primary energy consumption annually or around 150 million tons of coal equivalent (approximately E3à‚ billion).

Energy efficiency will be vital to sustainable economic growth in China
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This achievement is of course not only reached by more efficient production and distribution of the energy it is also about changing consumers’ attitudes, as well as improved insulation of buildings. Hence, China not only requires centralized heating systems (preferably CHPs) but is also dictating that new design codes for construction shall, as a minimum, save 50% energy benchmarked to previous construction. In cities like Beijing and Shanghai the requirement set by the local governments are 65%. The heating reform progress has been long and cumbersome. The challenge to entirely change the idea of heat as a public good to become a private (quasi market-based) good in a Communist regime is not easy.

Things are looking brighter for 2008. Metering is installed in growing numbers and the tariff for heating changing from paying per m2 to actual consumption. One suggestion from Denmark in cities and provinces facing massive opposition to this development, is to introduce not only a fixed connection rate and a variable consumption rate, but to motivate the consumer even more by saying that all households pay the usual average rate à‚— but if they can use less heat than the usual average, the heating company should then be instructed to pay back the difference to the consumer.

In general the savings from introducing combined heat and power production (CHP) in China will induce obvious positive results. Not only increasing the power plants in China using Danish technology, hence reaching nearly 50% net efficiency, but by including heat production as a by-product the total efficiency reaches 90%à‚—98%. This is a tangible result achieved in Denmark.

Other legislation in China promoting better use of energy is both the ‘The managing Terms of Energy Efficiency Labels’ and ‘Energy Conservation Law’. NDRC also launched the first ‘China Middle and Long Term Energy Conservation Plan’ with targets for 2010 and 2020 and ‘Ten main energy efficiency projects’ stretching from more efficient production of energy to utilizing the heat waste from production of electricity and industry ending with green buildings and monitoring the energy consumption. All these initiatives are part of a bigger scheme towards changing the attitudes of Chinese consumers who are always demanding more.

Lastly, the relatively new Law on Renewable Energy in China that commenced 1 January 2006 stipulates as previously mentioned ambitious targets for more sustainable energy by 2020. Biomass is one very interesting fuel source for combined heat and power production and resources are estimated to be plenty in China. Today biomass is mainly used in rural areas for individual cooking and not thought of as a fuel source for centralized heating or power purposes. Biomass is here estimated to account for 25% of the energy consumption. However, the new renewable legislation stipulates an increase from around 3 GW today to a minimum of 30à‚ GW in 2020 or around 2%à‚—3% of the electricity generation. One way of supporting this initiative is to mandate the Transmission Companies (China Grid and Southern Grid) to off take the power from biomass production. Moreover, power produced from biomass will receive a subsidy of 0.25 yuan per kWh. If this ambitious target is to succeed then approx. 1.5 biomass-fired power plants of 25à‚—30 MW should be build each week.

The benefits are many. A typical 30à‚ MW biomass power plant combining Danish technology and Chinese craftsmanship utilizes annual 200,000 tons of agricultural wastes and forest residue. Then the outcome is 160,000 kWh electricity generated per year. The conversion from coal to biomass saves 70,000 tons annually and reduces the CO2 emissions by 150,000 tons. One of these projects, Shan Xian Project, Shandong Province, by Dragonpower has recently also been approved as a CDM Project. This means that relatively poor farmers in rural areas receive extra payment for otherwise agricultural wastes, the power plant produces clean and sustainable energy and the plant owner receives financial support for implementing a non-polluting and visionary energy project. There are several projects already approved and others in the pipeline.

On a more critical note, in spite of a 30% net efficiency, would be the lack of potential higher energy efficiency by not mandatory establishing/connecting district heating or district cooling (district energy) to the system. Today when generating 2000 MW per hour of electricity from biomass, 4000 MW is wasted. If another 100 ‘small’ power plants in rural areas are to be built over the next three years the opportunities for European CHP technology are great.

Approach and results

For more than 10 years and more intensively during the past five years Danish district heating solution companies have toured China advocating for more energy efficient and sustainable solutions. The group, consisting of ABB, APV, Broen, Brunata, COWI, Danfoss, Grundfos, Hydro-X, Kamstrup and Logstor, not only complement one another with technical solutions, but they also share market development information four times a year .

The results are many, but together the projects count some 10+ from the most landlocked Province of China, Xinjiang, to the Eastern Provinces Heilongjiang and Jilin. As an example, the group of companies has partially implemented to date the biggest heating project in China à‚— maybe globally. The project has demolished more than 1000 small inefficient and very polluting heat-only boilers with the following results:

  • CO2 emissions are reduced by approximately 550,000 ton per year
  • coal consumption is reduced by 300,000 ton annually
  • SO2 emissions reduced by 2200 ton annually
  • dust is reduced by 11,000 ton annually
  • soot reduced by 75,000 ton annually.

The nearly 160 heat exchanger units, 100 km pipes and 110 network valves all contribute to a cleaner and more energy efficient Harbin making the air ‘consumable’ for the inhabitants.

Denmark has also tenaciously worked for an approval of a methodology for approving combined heat and power projects based on coal under the Kyoto Protocol’s Flexible Mechanism à‚— Clean Development Mechanism (CDM). This was succeeded in October 2007; hence CHP based on coal is now indirectly sanctioned by the IPCC under UN Umbrella to be one solution in the fight against global warming. This will surely fuel the development of even more CHP in China and the other receiving states that ratified the Kyoto Protocol.

Tangible results for China are available now. Introducing more CHP, western technology, utilizing CDM, metering and better insulation will make China slowly but steadily shift course from an unbalanced and non-sustainable society towards sustainability, by decoupling economic growth and energy consumption and simultaneously improving the environment.

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Jes B. Christensen is the Managing Director of the Danish Board for District Heating (DBDH), Taastrup, Denmark
e-mail: jbc@dbdh.dk