China, People's Republic of: Low-Carbon District Heating Project in Hohhot in Inner Mongolia Autonomous Region

Sovereign Project | 47052-001

Summary

The proposed Low-Carbon District Heating Project in Hohhot in Inner Mongolia Autonomous Region (IMAR) will upgrade and expand the district heating system in the eastern and southern parts of the city, where the district heating coverage is insufficient and residences depend on inefficient coal-fired heating stoves without emission control devices. The project will not only improve living conditions by providing clean and modern heating services, but also contribute to the development of low-carbon district heating systems by introducing wind and coal hybrid district heating system in IMAR, the People's Republic of China (PRC).

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Project Name Low-Carbon District Heating Project in Hohhot in Inner Mongolia Autonomous Region
Project Number 47052-001
Country China, People's Republic of
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8403-PRC: Low-Carbon District Heating Project in Hohhot in Inner Mongolia Autonomous Region
Technical Assistance Special Fund US$ 600,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change
Sector / Subsector

Energy - Energy utility services

Gender Equity and Mainstreaming Some gender elements
Description The proposed Low-Carbon District Heating Project in Hohhot in Inner Mongolia Autonomous Region (IMAR) will upgrade and expand the district heating system in the eastern and southern parts of the city, where the district heating coverage is insufficient and residences depend on inefficient coal-fired heating stoves without emission control devices. The project will not only improve living conditions by providing clean and modern heating services, but also contribute to the development of low-carbon district heating systems by introducing wind and coal hybrid district heating system in IMAR, the People's Republic of China (PRC).
Project Rationale and Linkage to Country/Regional Strategy

The PRC is the second largest district heating market (637 terawatt-thermal of annual district heat sale) in the world, the Russian Federation being the largest. The district heating system coverage area is continuously expanding to keep pace with the rapid economic growth and urbanization. Between 2000 and 2012, centralized heating coverage increased from 1.1 billion square meters (m2) to 4.7 billion m2, an average annual increase of 12%. However, district heating system still covers only 30% of the heating demand compared to a coverage of about 60% in some northern European countries.

IMAR is located in the northern part of the PRC where winter temperature drops to as low as 40 degrees celsius, and subzero temperatures typically last for 6 months in a year. Adequate heating is an essential need in such harsh winter climate. Heating is also a major cause of increased outdoor and indoor air pollution during winter months as residents, uncovered by modern and efficient centralized district heating, depend on coal-based stove or neighborhood's inefficient and small coal-fired boilers without any emission control equipment. The poor indoor air quality increases the risk of acquiring respiratory and heart diseases, with higher impact on the sick, children, elderly and poor people who spend more time indoors. Since 2010, Hohhot, the capital city of IMAR, has introduced district heating to replace many isolated, decrepit, and inefficient heating systems in urban areas. But the eastern and southern parts of Hohhot are still not fully covered by modern district heating. Accelerated expansion of district heating through modern clean and efficient system is one of the major priorities for the Government of IMAR (GIMAR).

IMAR has the largest installed wind power capacity in the PRC with more than 18 gigawatt of wind power project already in operation. But due to intermittent and unpredictable nature of wind energy, it is underutilized with more than 45% of the wind power curtailed in IMAR. During winter time when heating demand rises, the coal-based combined heat and power plants are prioritized in the grid operation. This forces many wind farms out of the grid causing curtailment. The use of wind energy in district heating has been widely practiced in Denmark, United Kingdom, and other Scandinavian countries. In the PRC, a pilot project utilizing 200 megawatt (MW) of off-peak wind power in Taonan county of Jilin province was successfully pilot tested in 2011 to provide heat to 163,000 m2 of residential area, saving 27 gigawatt-hour of wind power from curtailment. Encouraged by preliminary results, in March 2013, the National Energy Administration has issued a notice to urge the development of wind-to-heat projects in northern PRC to address this issue. GIMAR is keen to undertake similar pilot(s) under the proposed project, which can provide pathway to maximize wind power utilization and reduce coal consumption for district heating.

The proposed project will upgrade and expand district heating systems in the three districts located in the eastern and southern parts of Hohhot city in IMAR. The original design of the project was to install (i) one 25 MW of wind-powered electrode boiler and 13 116 MW of energy-efficient coal-fired heating boilers with advance emissions control equipment; (ii) 73.76 kilometers of high insulated heating pipelines; and (iii) 179 heat exchangers. During the due diligence process, the project design has changed to install (i) two 25 MW of wind-power electrode boilers, totaling of 50 MW wind-powered heating boilers; (ii) low emission natural gas boilers with a total capacity of 1560 MW; (iii) 180 energy efficient heat exchange stations, including 11 building-level heat exchange stations; (iv)73.8 km of insulated heating pipelines; and (v) distributed control system and supervisory control and data acquisition to optimize the system operation. The project will avoid 848,500 tons of standard coal; and will emit 60% less carbon dioxide, 82% less nitrogen oxides, negligible particulate matters, and 98% less sulfur dioxide compared to the existing heating supply.

The proposed project is closely aligned with Asian Development Bank''s (ADB''s) Strategy 2020, where moving developing member countries onto low-carbon growth paths by improving energy efficiency and introducing renewable energy has been identified as one of the key means of achieving environmentally sustainable growth. ADB''s Energy Policy (2009) prioritizes energy efficiency and access to energy for all, including district heating. The country partnership strategy, 2011-2015 for the PRC identified environmental sustainability as one of the three pillars of ADB assistance to the PRC. ADB has implemented six similar projects in the PRC and the proposed project builds on two ongoing district heating projects in IMAR by incorporating lessons learned from these ongoing projects.

Impact
Project Outcome
Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design N/A
During Project Implementation

The project concept paper and PPTA for Low Carbon District Heating Project in Hohhot in IMAR was approved in 15 July, 2013. A total of $600,000 was allocated for the PPTA on a grant basis from ADBs Technical Assistance Special Fund-other sources (TASF-other sources).

The project has initially proposed a coal based district heating system with pilot testing of 25 megawatt (MW) electrode boiler powered by wind energy. Asian Development Bank and the Government of Peoples Republic of China raised a concern on the environmental impacts of dominance of coal as heating source but marginalized wind energy use. They requested the project a possibility of improving the project design. The project agreed to assess potentials to expand wind, and/or other cleaner energy in district heating.

Part 1 of the PPTA commenced on August 2014 with two major tasks: safeguard due diligence work and the technical assessment study to explore options to improve the project design. The PPTA technical consultant, with close coordination with the project conducted this assessment study. The project held a series of dialogue with the PPTA consultant, ADB, Government of IMAR, and other project supporters. As result, the project decided to switch coal to natural gas based district heating and informed National Development Reform Commission (NDRC), Ministry of Finance, and ADB during the 2014 Loan Review Meeting that was held on 6 December 2013 in Beijing. Soon after the announcement of project design change, Part 2 of the PPTA started with full due diligence of the project.

Both Phase 1 and 2 of PPTA, a range of stakeholders were engaged and invited for meetings with ADB and PPTA consultants. A wide range of government authorities, grid company, gas company, wind farm developers, wind to heat advocate consulting firm, and others provided valuable inputs to conduct knowledge products as well as due diligence work. In addition, social and environmental due diligence works involved field survey, public consultation and communication to assess social and environmental benefits to users, while gathering users groups opinions and suggestions.

The PPTA period was extended until January 2016 to complete the remaining activities under the TA, which are: (i) capacity building of the executing and implementing agencies, and other stakeholders like heating companies, and (ii) preparation of a knowledge product on the assessment of potential clean and renewable energy utilization in IMAR heating sector.

Business Opportunities
Consulting Services Part 1 of the PPTA will use individual consultants (3 international for 4.5 person-months, and 2 national for 16.0 person-months). This approach is cost and time efficient to allow quick mobilization of the consultants to (i) conduct the technical and economic study on wind and other renewable energy-based district heating, (ii) improve the project design, and (iii) conduct environmental and social safeguards due diligence. The tasks under part 2 will be undertaken by a consulting firm (1 international for 2.0 person-months and 4 national for 9.0 person-months) using quality- and cost-based selection method (with a quality-cost ratio of 90:10) due to important technical aspects associated with hybrid wind district heating system.
Responsible ADB Officer Na Won Kim
Responsible ADB Department East Asia Department
Responsible ADB Division Energy Division, EARD
Executing Agencies
Gov't of Inner Mongolia Autonomous Reg-Fin BureauMr. Quan Bao, Deputy Director, Office of Foreign Capital Utilization IMAR FBNo. 19, Chilechuan Street, Hohhot City, Inner Mongolia, PRC, 010098
Gov of Inner Mongolia Autonomous Reg-Devt&Ref CommMs. Si Ha, Director, Office of Foreign Investment Ut ilization and Economic CooperationNo.3 Chilechuan Street, Hohhot, Inn er Mongolia Autonomous Region, The People s Republic of China, 010098
Timetable
Concept Clearance -
Fact Finding -
MRM -
Approval 15 Jul 2013
Last Review Mission -
Last PDS Update 25 Mar 2015

TA 8403-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
15 Jul 2013 08 Aug 2013 08 Aug 2013 31 Jan 2015 31 Jan 2016 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
600,000.00 0.00 0.00 0.00 0.00 0.00 600,000.00 15 Jul 2013 276,418.01

Safeguard Documents

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