|Project Rationale and Linkage to Country/Regional Strategy
As a result of an energy-intensive economic growth, a particularly rapid increase in electricity demand and heavy reliance on the country's vast coal reserves to underpin this unprecedented growth, the PRC now accounts for about 20% of global primary energy consumption, 48% of global coal consumption, and 25% of global carbon dioxide (CO2) emissions. More than 80% of PRC's CO2 emissions originate from coal combustion. The Energy Research Institute of the National Development and Reform Commission (NDRC) predicted that without enhanced policies on energy conservation and emissions reduction, the energy demand would increase to 6.73 billion ton of coal equivalent in 2050 and that CO2 emissions would reach 12.2 gigatons. Recognizing the adverse implications of high energy intensity on the economy, energy security and climate change, the Government of PRC introduced policies and significant fiscal and financial support mechanisms to (i) achieve an improvement in energy intensity of 19.1%; (ii) increase the share of renewables in the total final energy consumption to 9%; (iii) and to shutdown 70 gigawatts of small, high-polluting coal-fired generation during the Eleventh Five-Year Plan, 2006 2010. Notwithstanding, during the same period the PRC's coal demand still increased by 50% primarily due to use in power generation and heavy industry. Due to projected sustained high growth in these sectors, coal consumption is expected to increase by an annual average growth rate of 5.2%. Yet, in 2009, the PRC has committed to reduce its carbon intensity by 40% 45% by 2020 compared to 2005.
In the Twelfth Five-Year Plan, 2011-2015, the government seeks to pursue green, low-carbon development concept and committed to (i) increase the proportion of non-fossil fuels in the final energy consumption to 11.4%; (ii) reduce energy consumption per unit of gross domestic product by further 16%; and (iii) reduce CO2 emissions per unit of gross domestic product by 17%. But the PRC will continue to add large additional fossil fuel-based power generation plants to meet the growing energy demand. Even with very strong incentives for energy efficiency, renewable and other low-carbon technologies, including nuclear power, coal is likely to remain a dominant part of PRC's energy mix until at least up to 2035. The deployment of the full range of low-carbon technologies, including CCS, is essential for the PRC to decarbonize its power sector and achieve long-term climate change mitigation goals.
CCS offers the unique opportunity for moving towards near-zero emissions from the fossil fuel-based power plants by cutting CO2 emissions to the atmosphere by 80% 90%. The International Energy Agency Blue Map scenario, a least-cost mix of the most effective portfolio of mitigating technologies for reducing greenhouse gas emissions by 50% by 2050, concluded that CCS will need to contribute one-fifth of the necessary emissions reductions. Under this scenario, PRC would need to build 10 to 12 large-scale projects by 2020 and ramp up to 600 projects by 2050. Given the magnitude of the PRC's CO2 emissions, the pace and scale of demonstration and deployment of CCS in the country will have a significant impact on the overall global potential of CCS to play its role in decarbonizing economic growth.
The government has been promoting CCS research, development and demonstration since 2005 to get a better understanding of the techno-economic characteristics of the various CCS technologies and continuously increase the program's funding. The State Council included CCS as one important action to mitigate climate change. Notwithstanding, the government has not yet defined a policy target, neither for CCS demonstration, nor for its deployment or established any regulatory, fiscal and financial support mechanisms for facilitating the technologies' further development. The government emphasizes that at this early stage, towards paving the way for large-scale demonstration projects and deployment of all available CCS technologies, priority should be given to the implementation of projects which utilize CO2 as a resource, such as (i) enhanced fossil-fuel recovery; (ii) coal-to-chemical industry; (iii) heavy industry, including cement and steel; and (iv) commercial usage.
In recognition of the importance of CCS for decarbonization of economic growth in the PRC as well as the regional climate change implications, Asian Development Bank (ADB) provided loan and TA projects, mainly focusing on the pre-combustion capture technology. The TA projects identified several key barriers for large-scale demonstration: (i) low policy priority on CCS; (ii) incomplete regulatory framework; (iii) low fiscal and financial support to large-scale CCS projects as compared to the overall support for large-scale integration of renewables into the power grid; (iv) insufficient, targeted funding mechanisms to projects in emerging economies from the side of development partners; and (v) technical challenges in scaling-up these projects. The key recommendations from facilitating demonstration projects include (i) definition of a favorable tariff calculated on a least-cost basis from available CCS technology options; (ii) first phase of CCS policy should focus on early opportunity projects; (iii) first large-scale demonstration projects should be made a showcase for learning for all stakeholders, possibly through the establishment of a joint venture; (iv) fostering demonstration through integrated projects; (v) the government and stakeholders should continue cooperating proactively with development partners and learn from other countries' experiences when defining own policies and regulations.
At present, ADB provides TA to develop capacity on post-combustion CO2 capture for natural gas-based power and cogeneration plants using a CCS-ready approach. The proposed TA will develop country specific CCS-ready criteria and test those of a small-scale pilot project applying the proposed criteria. Lessons to be learned from this TA will be important for feeding into possible new standards for fossil-fuel based power plants. The proposed TA will represent the synthesis of previous ADB TAs and will directly add to the establishment of a comprehensive policy framework facilitating large-scale demonstration and paving the way for the deployment of the technology.
While pre- and post-combustion technologies have been analyzed in greater detail, the oxy-fuel combustion with CCS has only been tested at micro-scale pilot projects in the PRC. The techno-economic characteristics of the technology have not been studied sufficiently to support analysis-based policy-making. Notwithstanding, some experts claim that the technology is likely to be the lowest cost option for clean utilization of fossil-fuel based power plants in the PRC. Also, no technology roadmap exists yet for this technology. This constitutes an important obstacle for fast-tracking the CCS technology demonstration and deployment following a comprehensive roadmap. In order to avoid any delays which may lead to a further carbon lock-in of economic growth in the PRC with global climate change implications, it is regarded as essential to conduct the necessary analysis and prepare studies as the second part and in parallel to the part consisting of the roadmap elaboration, including the techno-economic assessment of a coal-fired power generation demonstration project with oxy-fuel combustion as well as an essential technology roadmap.