|Project Rationale and Linkage to Country/Regional Strategy
Over the Twelfth Five-Year Plan (2011-2015) period, the Government of the PRC intends to further add significant renewable energy capacity to achieve a more diversified energy mix. By 2015, the annual renewable energy consumption is expected to reach more than 9.5% in the overall energy mix replacing 100 million ton of coal equivalent of fossil energy to satisfy heating and fuel demand. Given (i) the important share of centralized, coal-fired power generation in urban areas and associated emissions and local air quality issues of these power plants; (ii) increasing difficulties of integrating large-scale, intermittent renewable power into the power grid; (iii) a relatively slow development of distributed renewable energy applications; and (iv) the potential of distributed renewable energy applications for local green growth and the expansion of local job opportunities, the government targets experimenting the roll-out of distributed energy applications in 100 demonstration cities.
The concept of rolling out distributed renewable energy in cities has been successfully implemented in Europe. In the European Union, local authorities play a key role in the achievement of the European Union's energy and climate objectives. The Covenant of Mayors is a European initiative by which towns, cities, and regions voluntarily commit to reducing their CO2 emissions beyond mandatory 20% target. This is achieved through the implementation of Sustainable Energy Action Plans which are elaborated by participating cities and which summarize the cities' planned local actions and policy measures to increase energy efficiency and increase the share of renewable energy sources. By the end of 2011, 759 cities ranging from small towns to large metropolitan agglomerations, submitted their Sustainable Energy Action Plans. One key lesson learnt from this rich experience is that each city will need to adapt its planned actions and policy measures to the specific local socioeconomic environment and particularly energy demand and supply characteristics.
Encouraged by the success of the European Union program, NEA announced the NECP on 25 May 2012 to stimulate distributed renewable energy development across 100 second-tier cities within the 12th plan. The announcement includes relevant guidelines defining (i) ambitious targets for distributed energy, (ii) criteria for selecting the demonstration cities, and (iii) implementation procedures for the program. The NECP targets a representative set of second-tier cities with varying economic structures, load characteristics and renewable energy resource endowment. By 2015, each of the selected demonstration cities shall make full use of its locally available renewable energy sources and would have doubled its existing share of renewable energy in its overall energy mix to a minimum threshold level of 6% in 2010. Furthermore, by 2015, each city shall install (i) solar thermal plants covering an area of at least 1.0 square kilometer, (ii) solar photovoltaic panels of 20.0 megawatt, (iii) distributed wind power of at least 100 megawatt, and (iv) shallow-geothermal installations and heat pumps covering an area of 3.0 square kilometers and biomass utilization shall reach 0.1 million ton of coal equivalent per year.
Gansu Province is located in the central-west region of the PRC. Measured by a per capita gross domestic product standard, Gansu Province is ranked 27 among the 31 provinces in the PRC. It relies on tourism and industries for its economic growth. Dunhuang city, as a world cultural heritage site, and Wuwei city, with its long-standing history, are at the heart of the tourism development strategy of the province. While tourism infrastructure has been built up over the past decades, the greening of the cities' energy sector is important to improve the local air quality to ensure its attractiveness to tourists. Wuwei city's central location makes it an important business and transportation hub; many major railroads and national highways pass through Wuwei. Both Dunhuang and Wuwei cities are endowed with significant renewable energy resources, in particular rich solar resources characterized by (i) high solar irradiation with more than 3,000 sunshine hours per year, (ii) a cool continental climate with an annual average temperature of about 9 degrees Celsius, and (iii) broad and flat deserted areas adjacent to urban agglomerations of the cities. These characteristics make the cities ideal for both distributed as well as large-scale development of solar power generation.
Dunhuang city has been at the forefront to demonstrate solar photovoltaic (PV) applications in urban areas. Dunhuang's new energy city masterplan to double its existing share of renewable in its energy mix to more than 27% by 2015 was approved by NEA and it was selected as the demonstration city under the NECP. Dunhuang's masterplan involves investment of CNY26.8 billion by 2015 mainly in the areas of solar photovoltaic and solar thermal installations, micro-grid establishment to connect distributed renewable energy sources within the city, and supporting infrastructure to facilitate the use of electric vehicles. Wuwei is a major transport hub and tourist city in Gansu Province. Unlike Dunhuang, its existing share of renewable in the energy mix is only 3.25% by 2011, which it aims to increase to 8.38% by 2015. Wuwei city's masterplan was submitted to NEA in August 2012 and it was evaluated in October 2012 for formal inclusion in the new energy city program in December 2012. The Wuwei masterplan aims for investments of CNY837 million by 2015 for more than 200,000 solar heating applications, more than 30 MW solar PV capacity addition, more than 30 MW biomass power and 72 MW small hydropower projects.
Both Dunhuang and Wuwei municipal governments face multiple technological, institutional, administrative, and financial challenges in scaled-up investments in developing and integrating distributed renewable energy in the local energy supply mix. The NECP implementation will pose significant challenges for cities to (i) translate the concepts for identified priority projects into financially and technologically viable projects; (ii) institute effective planning and implementation mechanisms to swiftly adjust the city's action and investment plan in view of NECP commitments; (iii) establish appropriate fiscal and financial support mechanisms to facilitate public, private, and public-private investments; (iv) begin data collection, monitoring and verification to effectively supervise the implementation of the plan; (v) establish and ascertain a close cooperation both between different departments within the municipal government as well as between the administration, private sector, and civil society throughout the plan's implementation; and (vi) supplement the plan with smart policy actions and measures to enhance energy conservation and energy efficiency effectively reducing the new renewable energy capacity required to achieve the target share in final energy consumption.
The capacity of relevant staff of the city governments needs to be strengthened to effectively overcome these challenges and to ensure the timely implementation of the NECP in each city. To field test the readiness of each city and applicability of the recommended implementation measures, a pilot project will also be implemented in both Dunhuang and Wuwei. The pilot projects will test at small-scale a key priority project of each of the cities. Pilot projects will help to demonstrate the best practices in (i) project selection, (ii) technical design, (iii) economic and financial viability appraisal, (iv) permitting and agreement of fiscal support by the government, (v) procurement and installation of distributed energy applications, and (vi) project licensing to both municipal governments as well as potential investors.