|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.