Climate change is not only an environmental problem but also a critical development issue. Its adverse impacts will disproportionally affect the poor, as they are more reliant on their direct natural environment. In its long-term strategic framework 2008-2020 (Strategy 2020) , ADB has identified energy as a core operational sector and achieving environmental sustainability as a strategic priority to pursue its mission to help its developing member countries reduce poverty and improve living conditions and quality of life. ADB has introduced new initiatives to augment its assistance to developing member countries for acquiring low-carbon technologies and implementing energy efficiency projects. ADB's country partnership strategy for energy operation in the People's Republic of China (PRC) has also emphasized clean and efficient technologies to promote the utilization of renewable energy and help reduce greenhouse gases (GHGs) emissions.
Like many other countries, the PRC has recognized that it is facing imminent and severe challenges on energy security and climate change. The PRC government has made great efforts to improve energy efficiency and reduce carbon dioxide (CO2) emissions. For example, its Eleventh Five-Year Plan (2006-2010) mandates a 20% reduction in energy intensity by 2010. In 2006, the PRC government announced plans to develop a low-carbon economy in the National Evaluation Report on Climate Change. In 2007, the PRC government declared that it would promote a low-carbon economy by improving energy efficiency, developing low-carbon energy technology, expanding carbon sinks, and developing renewable energy. More recently in November 2009, the PRC government announced to reduce carbon intensity of its GDP in 2020 by 40%-45% compared with 2005 level. There is a strong and clear consistency between the strategic priorities of ADB and the PRC in the energy sector.
The proposed TA is designed to help SGCC develop Smart Grid technology for efficient utilization of renewable energy. The successful implementation of the TA is expected to (i) draft a Smart Grid roadmap for harmonizing renewable energy development with the grid expansion in a regional grid; (ii) codify/update technical standards for the connectivity of renewable energy to the grid; (iii) upgrade short-term day-ahead wind power forecasting systems and pilot it in a selected power dispatch center; and (iv) summarize and disseminate the lessons learned to other places and stakeholders.
|Project Rationale and Linkage to Country/Regional Strategy
PRC's is currently heavily dependent on coal for electricity production which accounts for more than 80% of the total electricity produced in 2009 and accounted for about 50% of total CO2 emissions in the country. This presents an enormous challenge for the electricity sector in addressing climate change and achieving desired carbon intensity cut. A low-carbon development path requires the future grid to integrate a far more diverse energy mix with a significant portion of renewable energy resources. However, being intermitted and less predictable, the higher penetration of renewable in the electricity mix would pose serious challenges in ensuring security of electricity supply. Thus, electricity grid using a significant portion of renewable energy must have effective means of balancing electricity supply and demand according to the intermittency of the renewable sources. A Smart Grid is an electricity grid which can intelligently manage demand and supply across the whole electricity value chain, i.e. generation, transmission, distribution and consumption, through robust two-way communications. Therefore, Smart Grid deployment is widely believed to be a key for employing renewable energy at large scale to reduce carbon intensity and address climate change.
It is estimated that the PRC holds about 1000GW exploitable wind resources, among which about 253GW is onshore and 750GW offshore. The rapid development of wind power has increased its capacity from 76.4 MW in 2004 to about 17,600 MW in 2009. This growth is expected to be further intensified and the expected installed capacity will increase to 100 GW by 2020. However, this momentum for wind energy may be impeded unless some challenges pertaining to grid integration of the dispersed renewable energy sources are addressed urgently. Such challenges include: First, increased demand for adequate spinning reserve capacity to maintain the grid stability. Large scale wind farms have to be connected to the electricity grid. However, due to the intermittency and unpredictability of wind power, large spinning reserve capacity has to be maintained to ensure the grid stability and meeting the demand without interruption in service or quality of supply. At present, there is no generally accepted ceiling of wind power penetration. The limit for a particular grid will depend on many factors, e.g. existing dispatchable generating plants, capacity for storage, and demand management arrangement, etc. Some estimates showed that in 2009 about one-third of wind capacity newly installed in the PRC could not be timely connected to the grid due to various reasons including perceived impacts on grid stability. Without a firm understanding on the effects of large scale (e.g. above 15%) wind penetration on grid stability, the grid companies will continue to be a hesitant partner in integrating wind power in the grid. Second, strategic harmonization between renewable energy development and grid expansion is essential. While wind farm developers are greatly encouraged by strong incentives of higher tariff, the grid companies have been squeezed by the rising uploading tariff (both coal-fired and renewables) and the relatively stable selling price, are facing difficulties mobilizing sufficient funds to upgrade its transmission and distribution networks (e.g. rural sub-grids) and accommodate more renewables (e.g. wind and solar). While this has been addressed to some extent through regulatory need imposing fine on grid companies for not connecting wind farms or idling them, there is a urgent need to establish standard procedures and codes to simplify the interconnection between distributed renewable power plants and the grid and establish tariffs and incentives for smart grid development.
Third, economics of long distance transmission lines have to be worked out. Wind power is not evenly distributed geographically and seasonally, and availability of peak wind may not coincide with peak demand for electricity. Areas with rich wind resources are mainly located in north and northwest China, several thousand kilometers away from load centers in eastern part of China. Vast amount of wind power has to be transmitted long distance through high voltage transmission lines. Also, northern China usually sees strong wind and peak demand for heat in winter. Prioritizing heat supply in winter means that wind power has to give way to coal-fired combined heat and power units (CHPs). This in some cases leads to the idling of wind turbines.
There is an urgent need to comprehensively analyze these issues and help PRC create a more enabling environment for renewable energy development. The existing grid infrastructure in the PRC, along with regulatory and policy framework, was developed for the fossil fuel based economy, and future grid is required to accommodate a far more diverse energy mix with a much higher proportion of renewable energy. The State Grid Corporation of China (SGCC) is responsible for meeting the 80% coverage of the transmission system in the PRC. It has announced its smart grid development plan in mid-2009, aiming to establish by 2020 a "strong and smart grid" to improve the grid security, intelligent level of distribution, and integration of more renewable energy. Given the above mentioned difficulties, several meetings were held with the department of Smart Grid in the SGCC to discuss ADB support in this area. Given the above mentioned difficulties, a TA from ADB aiming at improving the connectivity of renewable energy will not only help SGCC strengthen its capacity in Smart Grid technology but also greatly promote the efficient utilization of renewable energy in the PRC.