China, People's Republic of : Shanxi Energy Efficiency and Environment Improvement Project

Energy / Energy utility services

The proposed Shanxi Energy Efficiency and Environment Improvement Project will improve energy efficiency and reduce emission of green house gases (GHG) and other pollutants in Shanxi province by introducing district heating in the four urban cities and expanding the gas distribution network in another city. The components of the project include (i) upgrading the district heating source, and installation of pipelines, heat exchangers and computer monitoring and control systems, (ii) construction and installation of coal mine methane (CMM) gas supply system and gas distribution network, and (iii) institutional strengthening. The project follows and complements a previous Asian Development Bank (ADB) project in the province, which has been completed and implemented successfully. This project preparatory technical assistance (TA) is being undertaken for the due diligence of the proposed project.

Shanxi is an underdeveloped inland province in the north-central region with a nominal GDP per capita of $3,173 in 2009, equivalent to 86% of the national average ($3,678), ranking 21st among 31 provinces. It is a major coal producing province in the PRC and its coal mines are a rich source of CMM, which when vented to the atmosphere, becomes a potent GHG, or when released in underground coal seams has been the cause of explosions that have taken lives of miners. Shanxi has many typical examples of the major pollution and environmental problems that are closely related to the use and transport of coal. District heating in Shanxi depends primarily on coal. Many of the existing heating system in urban areas are old and inefficient and without any emission control equipment. Environmental impacts from current heating methods have a disproportionately high effect on the poor. Inadequate coverage of district heating in low-income urban areas drives residents to use indoor coal stoves for heating, a major cause of respiratory diseases. Urban pollution from small boilers also worsens outdoor air pollution and causes significant cumulative harm to public health.

Serious efforts are being undertaken by the Shanxi Provincial Government (SPG) to improve Shanxi's environmental quality. SPG recognizes the importance of improving energy efficiency in district heating as a priority toward achieving the target for improving energy intensity. Large energy efficiency gains can be attained from the district heating subsector through (i) eliminating inefficient inner city small boilers and replacement with cleaner centralized district heating network; (ii) improving insulation in pipelines; and (iii) installation of demand control district heating systems; and (iv) implementing tariff and energy conservation reforms in buildings. Households connected to the modern district heating network will enjoy a cleaner and greener living environment in addition to a comfortable heating service. Similarly, capture and utilization of CMM will avoid GHG emissions and improve the safety of miners, while the expansion of CMM gas distribution network will reduce direct coal burning, improve energy efficiency, and create a lucrative market for CMM. This will result in reduced energy consumption, air pollution and related health impacts, and provide the poor with clean, convenient and affordable energy.

The project has a strong rationale as part of ongoing energy intensity improvement in the PRC under the Eleventh Five-Year Plan, 20062010, which aims for 20% improvement in energy intensity compared to 2005. The ongoing emphasis on energy intensity improvement is likely to get reinforced in the emerging Twelfth Five-Year Plan, 20112015 and beyond to meet PRC's objective to achieve 40%45% carbon intensity improvement by 2020 compared to 2005. The Project is also in line with the PRC's country partnership strategy, 20082010 and ADB's Energy Policy 2009.

Improved energy efficiency and environment in Shanxi province

Improved air quality and reduced GHG emission in project targeted urban cities in Shanxi province

Expanded CMM gas distribution network

Institutional strengthening

Improved district heating system in project cities

Various aspects of due dilligence was conducted including (i) technical/technology selection, (ii) economic and financial analyses of all subprojects, (iii)estimated environment benefits, (iv) governance/procurement capacity assessment, (v) assessment of policies and reform programs. Workshops and trainings were also conducted as part of the project activities