China, People's Republic of: Road Map for Carbon Capture and Storage Demonstration and Deployment

Sovereign Project | 46052-001

Summary

The proposed TA will consist of two components. As part of Component A, a comprehensive roadmap for CCS demonstration and deployment shall be elaborated. In addition, key products for paving the way towards the realization of at least two large-scale integrated CCS demonstration projects in the short-term, each capturing and storing 2 million tons of CO2 per year shall be produced, comprising (i) recommendation on a set of appropriate policy, regulatory and incentive framework; (i) identifying a shortlist and ranking of early stage CCS demonstration projects; (iii) identifying suitable business models for implementing early stage projects; and (iv) capacity development in the policy, regulatory, and techno-economic modeling for CCS roadmap. Component B will further develop the capacity of Dongfang Boiler Co., Ltd.

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Project Name Road Map for Carbon Capture and Storage Demonstration and Deployment
Project Number 46052-001
Country China, People's Republic of
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8133-PRC: Road Map for Carbon Capture and Storage Demonstration and Deployment
Carbon Capture and Storage Fund US$ 2.20 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Sector / Subsector Energy - Conventional energy generation - Energy sector development and institutional reform
Gender Equity and Mainstreaming
Description The proposed TA will consist of two components. As part of Component A, a comprehensive roadmap for CCS demonstration and deployment shall be elaborated. In addition, key products for paving the way towards the realization of at least two large-scale integrated CCS demonstration projects in the short-term, each capturing and storing 2 million tons of CO2 per year shall be produced, comprising (i) recommendation on a set of appropriate policy, regulatory and incentive framework; (i) identifying a shortlist and ranking of early stage CCS demonstration projects; (iii) identifying suitable business models for implementing early stage projects; and (iv) capacity development in the policy, regulatory, and techno-economic modeling for CCS roadmap. Component B will further develop the capacity of Dongfang Boiler Co., Ltd. (DBC) in designing, planning, and implementing CCS with oxy-fuel combustion and support the roadmapping component with (i) techno-economic feasibility assessed of a 100 megawatt coal-fired power plant applying the oxy-fuel combustion technology; (ii) technical standards and pathways for future work prepared for applying the oxy-fuel combustion technology; (iii) a prototype model for CO2 storage site assessed; (iv) preliminary site characterization and identification of early demonstration project(s) prepared; and (v) capacity development in analysis, planning, and implementation of oxy-fuel combustion with CO2 capture technology.
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.

Impact Staged demonstration of CCS in the PRC
Project Outcome
Description of Outcome Assessed techno-economic feasibility of selected early-stage demonstration projects.
Progress Toward Outcome Individual consultants for Component A and Component B were engaged and mobilized. Consultants produced and submitted final reports for both components by QI 2015.
Implementation Progress
Description of Project Outputs

Component A

A comprehensive road map for demonstration and deployment of CCS is prepared

A policy and regulatory framework with an accompanying set of incentives is formulated

A shortlist and ranking of early-stage CCS demonstration projects is established

Suitable business models proposed for implementing early-stage projects

Capacity strengthened in policy making, and techno-economic modeling for CCS road map

Component B

Pre-feasibility of a coal-fired power plant applying oxy-fuel combustion CO2 capture technology is assessed

Technical standards for oxy-fuel combustion CO2 capture technology is established

A CO2 storage characterization manual developed

Capacity assessed and strengthened in analysis, planning, and implementation of oxy-fuel combustion CO2 capture technology

Status of Implementation Progress (Outputs, Activities, and Issues)

The TA completion date has been extended to 15 March 2015 in order to accommodate all TA related activities. The completion dates for the all consultant's contracts have been extended also till 30 June 2014.

COMPONENT A

Two interim reports were produced in January and August 2014, respectively.

The interim workshop for Component A was held on 15 January 2014 in Beijing. A follow up discussion with the Component B team leader was also arranged on 16 January 2014. Team leaders for the respective work assignments made a presentation on the status of implementation for Component B. The interim workshp ended with strong support from both international and national experts.

A 2 day focus group discussion with key stakeholders on the key results of the TA was held from 11-12 September 2014. Three half day consultation sessions were held separately with the different sectors: power, coal and petroleum. The main purpose of this workshop is to consult with the sector representatives on the key recommendations of early stage CCS demonstration during the 13th Five Year Plan period and in the medium term up to 2030. In addition, recommendations of two ADB policy notes for the PRC government on CCS-ready and carbon dioxide enhanced oil recovery were discussed with stakeholders. Subsequently, the reports was be revised accordingly. Comments of stakeholders were be recorded and transmitted to the government together with final reports.

A draft final report was prepared in November 2014 and peer reviewed and discussed by key Chinese stakeholders. Subsequently, the reports was be revised accordingly. Comments of stakeholders were be recorded and transmitted to the government together with final reports.

A final roadmap was submitted to the government in March 2015.

COMPONENT B

The interim workshop for Component B was held in Wuhan on 13 January 2014 with participants from national and international consultants. The interim workshop consisted of two sessions: the morning session focused on the progress of TA 8133-PRC and the afternoon session focused on feedbank and comments from Dongfang Boilers.

A draft final report and a final report was prepared by July 2014 and January 2015, respectively. A final workshop was held in Beijing on 10 February 2015 to discuss the key findings of oxy-fuel combustion CO2 capture strategic technology assessment. A presentation on the prefeasibility assessment support for the 200MW oxy-fuel coal-fired demonstration power plant; and feasibility study of geological CO2 storage in the Ordos Basin for the proposed Shenhua oxy-fuel combustion plant demonstration project was also highlighted during the workshop.

TA completion is on 15 March 2015. No extension will be done and TA is being prepared for closing.

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design The proposed policy and advisory TA is included as a firm 2012 TA in the aide memoire between ADB and the Government of PRC for the country programming held in November 2011. A reconnaissance mission has been fielded in February 2012 to define the broad scope of the policy and advisory TA. The mission consulted with the NDRC and DBC. A fact finding mission was subsequently organized in April 2013 during which the project team leader consulted with the executing and implementing agencies.
During Project Implementation The proposed TA will closely coordinate with stakeholders from the government as well as representatives from relevant national and international civil soceity and research institutions.
Business Opportunities
Consulting Services

The TA will consist of two components: component A for formulating a road map for CCS demonstration and deployment, and component B for an oxy-fuel combustion CO2 capture technology assessment.

Component A will use individual consultants (5 international, 13 person-months; and 10 national, 88 person-months). They will have in-depth knowledge of the PRC's energy sector, including the oil, gas, coal-mining, power, and CCS subsectors, as well as the PRC's energy policy. They will all have previous experience in elaborating road maps and designing energy policy proposals preferably in the PRC. The consulting inputs estimated for component B are 4 international consultants for 12 person-months, and 8 national consultants for 62 person-months. The tasks under component B will be carried out by a consulting firm that will be engaged using the quality- and cost-based selection method (with a quality cost ratio of 80:20). The firm will be required to submit a simplified technical proposal covering all aspects of the terms of reference. The consultants will be engaged by ADB in accordance with its Guidelines on the Use of Consultants (2010, as amended from time to time).

Procurement Procurement of TA-relevant equipment will be carried out in accordance with ADB's Procurement Guidelines (2010, as amended from time to time). Ownership of this equipment will be transferred to the relevant executing agency and/or implementing agency after TA completion.
Responsible ADB Officer Annika Seiler
Responsible ADB Department East Asia Department
Responsible ADB Division Energy Division, EARD
Executing Agencies
National Development and Reform CommissionLi Gao, Director, Department of Climate Changeligao@ndrc.gov.cnNo. 8 South Yuetan St. Beijing 100824 China
Timetable
Concept Clearance 22 May 2012
Fact Finding 23 Apr 2012 to 28 Apr 2012
MRM -
Approval 10 Aug 2012
Last Review Mission -
Last PDS Update 31 Mar 2015

TA 8133-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
10 Aug 2012 05 Sep 2012 05 Sep 2012 15 Mar 2014 15 Mar 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
0.00 2,200,000.00 0.00 0.00 0.00 0.00 2,200,000.00 10 Aug 2012 1,537,690.70

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