Options for Clean Coal Technology in China

Position Paper by the Japan Study Group of the Energy, Security, and Environment in

Northeast Asia (ESENA) Project

Masayoshi SADAKATA, Jun WADA, Aki MARUYAMA, Yasuhide YAMANOUCHI

1. Introduction

Considering the importance of the use of coal in Chinese energy consumption, ESENA Japan Study Group studied options for clean coal technology (CCT) from the viewpoint of innovative financial assistance.

Making a national energy plan and environmental policies for China and implementing them should be under the jurisdiction of the Chinese government. It is true, however, that there are a lot of elemental technologies relating to the CCT in the international community. Those technologies are now at their different stages of development and commercialization. On the other hand, it is also true that frameworks for multilateral environmental assistance or bilateral diplomatic cooperation such as GEF have recently become available. Therefore, it is advisable to study and evaluate comprehensively various combinations of technological and financial options, if a coal-consuming country like China intends to adopt CCTs widely in its domestic commercial facilities. To our understanding, China intends to continue various forms of coal utilization on a large scale in the future, and surveys options for the introduction of CCTs. Therefore, studies of CCTs in China from various perspectives should be beneficial for all those interested in energy and environmental issues in Northeast Asia. ESENA is a one-year project, so it should be noted that the conclusions mentioned below are tentative.

The Views of ESENA Japan Study Group

Opinions are summarized below as (a), (b), and (c). We assume that the criteria from a-1 to a-3 written below are appropriate for evaluation of CCT introduction. We concluded that the combination of a supercritical unit and a new type desulfurization unit is most promising as a CCT in China. This CCT should be an object of new type financial assistance by GEF. These conclusions are described in more detail in section two.

(a) Evaluation Criteria

a-1 Sustainable dissemination
Many foreign environmental technologies are born in experiemental or demonstration plants at local sites. Therefore, we conclude that CCTs to be introduced to China must "disseminate successively." Big gaps in the basic technology on which the transferred technology is based is not desirable if the receiving country to develop further the transferred technology stepwise.

a-2 Flexibility in the combination of element technologies
Assuming that there is geographical diversity in a coal-using country and considering that CCTs are used in a plant always in a combination of plural technologies, a combination of flexibility and operational certainty have to be ensured in the CCT selected by a coal-using country, Here, flexibility means selections among cost-effective combinations of element technologies according to the fuel, the site surroundings, the local circumstances, and the cost due to damaging the environment in the coal-using country.

a-3 Sufficiency for both global-level and national-level environmental requirements
The developments of international financial assistance systems have formed two kinds of frameworks: one for environmental goals at the global level (reduction of global warming gases, etc.) and another for those at the national or regional level (reduction of SO2, etc.). The achievement of national and regional goals is often more urgent than solving global environmental problems. In order for the technology transfer of a CCT to be effective, it has to cover both global and national goals.

(b) Technologies on which the Japanese Study Group Focused

The combination of a supercritical unit and a new type desulfurization unit (hereafter referred to as SC + FGD, i.e., supercritical + flue gas desulfurization).

(c) Pertinent New Financial Assistance
c-1 GEF/OP#5, OP#7
c-2 the combination of CMD and bilateral assistance should be considered in the future

2. Brief Summary of SC + FGD Technology

2-1 Supercritical Units

Coal-fired generation is based on technology for burning coal in a boiler to produce steam and operating a generator directly connected to a turbine. The heat efficiency of coal-fired generation was about 20% in the 1950s. Heat efficiency of coal-fired generators in Japan was raised by various technological improvements, and has been approximately 40% since 1970. One of the important technological factors contributing to this improvement is the spread of the SC technology. When water is heated under the atmospheric pressure, it boils at 100°C. Above the critical point, 221 atmospheric pressure and 374°C, however, water changes directly into steam without boiling. A power plant designed to operate with steam having pressure above the critical point is called "Supercritical," distinguished from a traditional subcritical unit. Whether the phenomenon of boiling exists or not makes differences not only in the boiler structure but also in the operation control, in which supercritical units are more delicate.

In Japan the first supercritical plant was introduced in 1967, and since then, the pressure of 240 atmospheric pressure and the temperature of 538°C /566°C were the standards for newly constructed plants for about 25 years. After that, the design temperature has been raised gradually as part of CO2 reduction policy measures. A plant completed last year adopted 600° C and its net heat efficiency reached 41-42%.

2-2 Supercritical Units in China

In China, two 600 MW and two 500 MW supercritical units have already been in operation, and 500 MW, 600 MW, 800 MW, and 900 MW units are to be constructed adopting the supercritical technology. A problem in China is that all of these units were constructed by foreign makers and that Chinese makers have no construction technology and cannot participate in this market. In the present coal-fired power generation in China, small-scale plants having a capacity of 210 MW or less (including a lot of extremely small plants of 6 MW, 25 MW, etc.) account for almost 70% of the total plant capacity. The Chinese government, on the other hand, has taken the policy of decommissioning small-scale plants of 100 MW or less as early as possible and constructing large scale plants of 300 MW or 600 MW.

The Chinese government has taken the policy of giving priority to domestic products for the purpose of improvement in domestic industry. This policy may have an effect on the decision of power plant specifications. For example, a subcritical unit that can be manufactured domestically may be judged more desirable from this policy than a supercritical unit which has to be imported, even though obviously a supercritical unit is advantageous economically and environmentally. It is expected that considerable numbers of 600 MW coal-fired power plants will be constructed in China in the next 10 to 20 years, and whether supercritical or subcritical units will be constructed will make a great difference in CO2 emission. On the other hand, it is very difficult for other technologies, such as IGCC and PFBC to spread widely in commercial terms within this time span.

2-3 Desulfurization Units

The critical necessity of a desulfurization unit in a coal-fired power plant depends on the situation. For example, according to the case studies in Shanghai and Henan, the environmental damage caused by soot and dust was more dominant than that caused by SO2. Particularly considering that a lot of coal is used in areas other than power generation and that much emission comes from home-use fuels, measures for reduction of soot and dust should be given priority. In measures for SO2 reduction, the use of briquettes and coal washing will be more effective in this case. Besides, the use of "the bubble concept (joint achievement)," as seen in the Waigaoqiao 900 MW project in Shanghai, will bring higher cost-effectiveness in investment. Under this bubble concept, regulations are adopted by the total emissions (i.e., combination of a new power plant to be constructed to use low sulfur coal and then another existing power plant using higher sulfur coal with an FGD installed.) On the other hand, in many predictable cases FGDs will have to be considered a necessary component in power generation just like pumps and fans. FGDs that operate in developed countries use a wet desulfurization process and are expensive in plant and operation costs. China has not widely accepted the wet process yet. Today a lower-cost dry desulfurization process has been developed, and studies on utilization of the byproduct gypsum as a soil improving agent (for agriculture and forestry) have been in progress.

3. GEF Fundability of Supercritical Units

GEF

GEF has four target areas, which include climate change. GEF finances the incremental cost between an ordinary project cost and the cost when the project will be carried out taking the global environment into consideration. UNFCCC has specified GEF as a funding mechanism for the time being.

Financing SC + FGD

GEF's STAP (Science and Technology Advisory Panel) has IGCC and PFBC included in the list of the technologies to which GEF's fund can be applied because those technologies have risks for commercialization and are more expensive than the existing technologies, although they are potentially highly efficient technologies for CO2 reduction in the long term view. On the other hand, SC technology has already been commercialized and has no technological risk, and usually is more economical than the traditional subcritical technology. Therefore, STAP does not have SC included in their list. The ESENA Japan Study Group, however, has the view that the promotion and spread of the SC + FGD technology should be included in the GEF/OP#5 list (climate change: removal of barriers against energy efficiency and saving) and OP#7(climate change: long term reduction of costs for reduction of greenhouse effect gases emission).

Actually, one example of OP#5 is a project for the improvement of industrial boiler efficiency. In this project, GEF has borne the expense required for a Chinese manufacturer of industrial boilers to acquire the license for a high efficiency boiler technology from a foreign manufacturer. To recover the initial investment in an FGD, not only the reduction of the running cost but also the increase in the O&M cost has to be taken care of. Thus the innovative combination of FGD with a supercritical unit having the effect of reducing CO2 will become particularly useful, considering that supercritical units are in arms reach of domestic production by Chinese manufacturers if technological transfer is promoted by appropriate international financing.

The SC unit is much more cost-effective for the reduction of CO2, taking into account the competitive price of facility construction. In fact, SC + FGD is the only option from the perspective of the Japan Study Group that fulfills the three criteria. Specifically, ease of domestic production in China enables continuous dissemination (criteria a-1); the combination of SC + FGD is both flexible and well proved (a-2); and SC + FGD covers both global and national levels of environmental goals in a most cost-effective manner with respect to dollar amount per reduction of CO2 unit (a-3).

Combinations with Other Innovative Financial Assistance: CDM

CDM (Clean Development Mechanism) is a flexibility measure (Kyoto mechanism) introduced for the achievement of the greenhouse effect gases reduction goals of the developed countries (the Annex I countries) based on the Kyoto protocol of COP3. According to CDM rules, some portion of emission reductions in a developing country achieved by a developed country's assistance can be added to the emission reduction in the developed country that assisted it. Details of the CDM rules, procedures, and principles are to be decided in COP6 in 2000. Because the CDM is to impose financial additionality requirements on ODA and GEF, this mechanism is expected to be operated primarily with money from the private sector. CDM may be an effective means for introducing SC + FGD into China depending upon the result of the negotiation on credit sharing.

4. Tentative Conclusions

In order for supercritical units to spread in China, technological innovation is required both on the part of manufacturers and on the part of users. The technological innovation requirement on the manufacturer part will range widely including manufacture of steel materials, processing and welding of steel boilers, design of supercritical boilers entirely different from that of traditional boilers, and design and manufacture of larger auxillary equipment as required by boiler scale-up. If China would like to avoid relying on overseas import, it has to establish those production capabilities.

On the user's part, the following have to be learned and mastered: operation technique, quality control of boiler water, which is highly pure and has to be controlled more severely than in subcritical units, quality control of boilers and turbines, which are more vulnerable because of exposure to high temperatures and high pressure. Lack of well-trained personnel and product bases will lead to frequent occurrence of failure, too much time for repairs, no supply of parts, and thus result in the abandonment of high performance technology. Personnel education and technology transfer are indispensable to sustainable development and environmental protection. This has recently begun to be recognized widely.

One of China's most important policies is the growth and development of domestic technologies, so a mechanism helping promote this policy will be easier for China to accept whether it is GEF or CDM. In the past, the loan by the World Bank or ADB was based on international competitive bidding (ICB) as a prerequisite, and so was against the priority-to-domestic technologies policy. Recently, however, the World Bank has accepted an exception of not forcing ICB on technologies for renewable energy and energy efficiency improvement, and discussions about a new mechanism have just been started. A competitive principle among different technologies should be assured when a country chooses from among various CCTs in any circumstances.