|Project Rationale and Linkage to Country/Regional Strategy
The PRC is the world's second largest energy consumer after the United States and has the fastest growing energy sector in the world. The electricity generation in 2007 was 3,256 TWhr, of which almost 83% was from coal-burning, 15% from hydropower, 2% from nuclear, wind and other alternative sources. In 2007, the total coal production was more than 2.53 billion tons, an increase of about 8% over 2006. Electricity generation consumed about 55% of the total coal produced in 2007. Diversification of energy mix with more renewable, nuclear and other alternative sources is a priority for the Government of the PRC. However, coal will remain the dominant source of electricity production in the foreseeable future. New and advanced coal-based electricity generation has already led to a large number of super critical and ultra-super critical plants in the country's new generation stock. The detailed feasibility of IGCC power plants is under active consideration and these plants are likely to be operational by 2010. The CCS) technologies are widely recognized as the most promising technology to almost eliminate CO2 emissions from coal-based power plants. Thus, allowing utilization of coal-based power generation in a sustainable manner and enhancing the energy security in the PRC.
At the moment, there is no coal-based industrial-scale power plant with CCS. However, CCS has been in operation in oil and gas industry for a long time. The international efforts are aggressively targeting CCS demonstration in coal-based power plants. The recently concluded G8 Summit has further provided the momentum for CCS demonstration by endorsing 20 CCS demonstration projects to be committed by 2010 with a view to make CCS widely available by 2020. The International Energy Agency projects that by 2020 at least 35 coal-based power plants with 500 megawatts capacity each will be with CCS. The European Union (EU) is committed to launch about 10 to 12 large-scale CCS projects under its zero-emission platform; it is actively considering an EU directive which will lay the legal and regulatory framework for CCS demonstration in EU. Australia and Japan are working together on a coal-based CCS power plant under the Asia Pacific Partnership. The United States is restructuring its FutureGen program to do multiple IGCC-CCS demonstration; it is also supporting extensive research on all available capture technologies. It is increasingly recognized that concessional funding and transfer of technology to developing countries should be embedded in the CCS demonstration phase itself. The G8 summit in July 2008 and EU and others are actively seeking demonstration projects in key developing countries. There is a growing international consensus that CCS is the key CO2 mitigation technology that can reconcile coal usage with CO2 emissions.
Recognizing the central role of coal in its energy security and to address the CO2 emissions, the Government of the PRC launched the Greengen Program in September 2005. The Greengen program is with the support of the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology (MOST). The Greengen Company Ltd. (Greengen) was established in December 2005 with a mandate to lead the research, development and demonstration (RD&D) of clean coal technology and develop a near-zero emission coal-based power plant in the PRC by 2015. China Huaneng Group is the managing partner of Greengen. It is a collaborative company with participation from seven major energy enterprises in PRC (i) China Datang Group, (ii) China Huadian Corporation, (iii) China Guodian Corporation, (iv) China Power Investment Company, (v) Shenhua Group, (vi) State Development and Investment Co., and (vii) China Coal Group. In 2007, Peabody Energy, USA, the largest private sector coal producer in the world also became an equity partner in the Greengen. Xian Thermal Power Research Institute is providing the core technical expertise. The Greengen intends to draw experts from all over the country in this major RD&D venture. The Greengen has identified a three step technological development process to achieve this strategic objective. The first phase (2006-2010) is currently being implemented under which a 250 megawatts IGCC plant is being designed and constructed at Tianjin utilizing local resources. This IGCC plant is included as one of the major projects with the MOST support. In parallel with the first IGCC plant, the Greengen intends to launch more intensified effort to undertake analysis of various issues surrounding the CCS demonstration. The likely implementation of IGCC plant and widely used ultra-supercritical plants are the enabling power plant technologies to allow cost competitive pre-combustion and post-combustion CCS options, respectively.
Technologically, the Greengen program is in sync with the CCS development in other developed countries. However, the CCS demonstration in the PRC faces the challenge of higher costs and associated risks, which can be mitigated by transfer of funds and technologies from developed countries. Some key steps in this direction have already taken place with the development of multi-donor Clean Technology Fund and Strategic Climate Fund but the relevance of these funds and their likely impact on CCS demonstration require closer scrutiny. Moreover, being a very complex implementation structure, CCS demonstration will face pre-implementation work of unprecedented scale and serious legal and regulatory issues and challenges. There is an urgent need to comprehensively analyze these issues with a demonstration outlook, identify gaps, provide capacity building and in all aspects of CCS and develop a clear road map. With the assistance from the Department for Environment, Food and Rural Affairs (DEFRA, UK) and the European Commission, some enabling groundwork is being prepared. However, moving from RD&D and knowledge sharing to demonstration will pose many unique challenges. Greengen with its mandate and strong interest to demonstrate a near-zero emission coal-based power plant by 2015 would like to analyze these issues in greater details.
The Department of Climate Change in the NDRC recognize the potential of long-term strategic importance of CCS in the nation's climate change agenda and supports the Greengen request for a grant-financed CDTA from ADB. This CDTA will complement the ongoing and planned efforts of other donors and will assist in analyzing key issues-institutional, legal, regulatory, policy, concessional finances that will assist the decision and policy makers to consider a strategic approach to CCS. The TA)is expected to (i) take stock of all relevant international efforts and their relevance to the PRC; (ii) identify strategic choices and their cost/benefit comparisons-capture technologies (pre-combustion/post-combustion) CO2 chain utilization and storage; (iii) analyze and recommend a potential road map for CCS demonstration and identify key barriers; (iv) evaluate existing international legal and regulatory frameworks (EU directives and others) and their relevance to the PRC; (v) identify capacity gaps and recommend a capacity strengthening plan with a focus on targeting policy and decision making institutions and government agencies; (vi) identify potential priority technologies and sites for demonstration projects and, undertake further research and preliminary pre-feasibility assessment; (vii) identify cost gaps and examine availability of concessional funding and their relevance; (viii) critically examine the socio-economic impacts including impacts on electricity pricing from CCS technologies; (ix) identify policy measures and innovative financing that may enhance the economic impacts of CCS at an affordable cost, and (x) widely disseminate technical expertise on CCS technologies in conjunction with relevant research institutions in PRC and key stakeholders.