Annika Seiler - ADB’s Knowledge and Innovation Based Support to PRC’s Clean Energy Development

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ACEF 2012, SESSION 17:

ADBS KNOWLEDGE AND INNOVATION BASED SUPPORT TO

PRCS CLEAN ENERGY DEVELOPMENT

PILOTING AND DEMONSTRATING CUTTING-EDGE TECHNOLOGIESTO REDUCE GHG EMISSIONS FROM COAL USAGE

Manila, 7 June 2012


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Content

Importance of cutting-edge clean coal technologies forthe PRC

Coal Mine Methane (CMM) an Introduction

ADBs CMM projects and its benefits

Integrated Gasification and Combined Cycle (IGCC)an Introduction

IGCC technology and its benefits Perceived and Real Barriers to IGCC

Way forward for coal in China

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Coal is most widely available fossil fuelresource in PRC and forms backboneof electricity supply; representingalmost 80% in generation mix

PRCs energy security strategy isbased on its vast coals reserves

Coal will continue to play a dominantrole in energy mix up to 2035 andbeyond despite strong incentives forenergy efficiency and to renewableenergy sources.

By deploying of cleaner coaltechnologies, PRC can facilitate .

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Importance of cutting-edge clean coal technologies forthe PRC

PRCs share in

global coal demand


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PRC Coal Production, Mtce


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Methane gas accountsfor 14% of all globalgreenhouse gas (GHG)emissions.

60% of total methaneemissions are fromhuman-related activities.

Methane emissions fromcoal mining account forabout 10% ofanthropogenic methaneemissions.

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Importance of support to Coal Mine Methane (CMM)and Coal Bed Methane (CBM) capture and utilization

Part of Chinese coal varieties containsignificant amounts of methane whichrepresents a safety hazard inunderground mines and contributes to

climate change if released to theatmosphere

Capture and utilization of CMM/CBM provides a clean fuel source replaces coal consumption reduces GHG emissions Improves coal mine safety

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Loan 1715: ShanxiEnvironment Improvement -$102 million, 1999

Loan 2112: LiaoningEnvironmental Improvement -$70 million, 2004

Loan 2146: Shanxi Coal Mine

Methane Development -$117 million, 2004

ADB approved 3 loans for CMM-CBMextraction and utilization in theprovinces of Shanxi and Liaoning

Projects included methane capturingand utilization for power generation collection and transmission by

pipeline production of clean vehicle fuel liquefaction for residential

and industrial use

ADB Coal Mine Methane (CMM) Coal BedMethane (CBM) Projects in PRC

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PART A:

120 MW power plantoneof the biggest CMM PP inthe world

CMM drainage CBM surface development

PART B:

Transmission & Distribution

248Mm3 of methane gas p.a. arerecovered and captured Part A: 182 Mm3 p.a. Part B: 166 Mm3 p.a.

429 ktons of coal p.a. are replaced Part A: 291ktons Part B: 138 ktons

Sale of carbon credits could offset70% portion of capital cost

Gas supply to 90,000 households,commercial and industrial, andtransport customers.

Secondary benefits include

reduced urban air pollutionfrom coal transportation by road

Project Benefits: Coal Mine Methane Development

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PRC accounted forabout 80% of theworlds death toll in

coal mines

Approximately 6,500miners died in coalmine accidentsannually during 1990s.

ADB support

Technical assistance to StateAdministration of Work Safety for

Coal Mine Safety to improve rulesand regulations as well as theirenforcement

Impact: Average annual coal mine

fatalities dropped to about 2,500in recent years

Project Benefits : Coal Mine Safety

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Schematic demonstration ofIGCC technology for powerplants

The IGCC is a state-of-the-art-technology for power generationfrom coal:

Coal is combined with oxygen and

steam in the gasifier to produce thesyngas

Following a purification process,the syngas is used to produceelectricity in the gas turbine.

Waste heat is then recovered tocreate steam which drives thesteam turbine.

IGCC Technology - a brief introduction

Source: Northwest Energy

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WEO 2011:Improvement ofaverage efficiency of all coal-fired power plants by fivepercentage points couldreduce CO2 emissions from

power sector by 8% in 2035.

Up to 50% gross efficiency

In combination with integral pollutantsystem can significantly reduce SOx,NOx, and mercury emissions

Reduction of up to 35% of cooling waterdemand

Poly-generation possibility of hydrogen,slurry and syngas

Technology offers flexibility in combusting

varying coal qualities

IGCC offers emission reduction downto level of highly efficient natural gasfired combined cycle power plant

IGCC is logical next step for PRC

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Benefits of IGCC Technology over Pulverized CoalSupercritical or Ultra-Supercritical Power Plants

Source: IEA, 2012

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PRC will be swingstate determining thespeed of commerciali-zation of IGCC techno-logy for power genera-tion.

Support to keyindustry players indemonstration isessential to fast trackthe technologies

commercialization.

For large-scale demonstration anddeployment of IGCC technology PRCneeds capacity strengthening in:

Component manufacturing

Engineering, planning, and construction Plant operation and maintenance

Regulation and tariff setting

Other factors impeding demonstrationand deployment of IGCC Technology :

Low policy priority, including for carboncapture and storage

Regulation and tariff setting

Limited environmental protectionincentives

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Integrated Gasification Combined Cycle TechnologyA logical next step in cleaner coal technologies for PRC

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1st Phase (2006 2012)Build 250MW coalbased IGCCpower plant

2nd Phase (2012 2014)Implement Carbon DioxideCapture, Utilization, andStorage small scaledemonstration project

3rd Phase (2014 2016)Build 400MW coalbased IGCC

power plant with CCS 13

GreenGen: Facing Chinas Coal Future

ADB supports the GreenGen program, a jointventure to demonstrate near-zero emissiontechnology for coal-based power plants

Oct 2008 Jun 2011: Technical assistance (TA)

for Capacity Strengthening on IGCC projects

May 2009: TA for Strategic Analysis and CapacityDevelopment on Carbon Dioxide Capture andStorage Demonstration

Feb. 2010: ADB approved $135 million loan and$5 million grant support to construct the 250 MWIGCC demonstration plant in Tianjin; project isexpected to be in operation by end of 2012

ADB at present is assessing grantfinancing for phase 2 CCUS small scale

demonstration project

GreenGen Program:

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Innovative financing for the Tianjin IGCC

Sovereign guaranteed loan; innovative onlending and counter-guarantee supportfrom EXIM Bank of China

Loan amount up to 70% of loan amount

Tenor 26 years including a grace period of 6 years

Loan pricing for sovereign loan

Interest: cost basis = 6 Month LIBOR; lending spread over cost basis= 20; rebate = 28 bps. Effective rate = LIBOR 8 bps

Commitment charge= 15 bps

As an Illustration interest rate as at29 March 2010

(LIBOR = 0.439% + (0.20 0.28)% = 0.359%

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Clean EnergyFinancing

Partnership Facility(target $250 m)

Carbon MarketInitiative Funds Asia-Pacific Carbon

Fund ($151 m)

Future Carbon Fund(target $100 m)CCS Fund (A$21 m) +?ADBI

NTERNAL

EXTER

NAL

Global Environment

Facility (GEF)Climate Change($250 m/ year)

Clean TechnologyFund of the Climate

Investment Funds(WB as Trustee)

(target $5 b)

Climate Change Fund($40 m)

Green Climate Fund

($30 billion up to 2013,$100 billion from 2014onwards)

ADB established and administers a series of funds dedicated to

foster clean energy development and finance demonstrationprojects

ADBs Funding Resources for Cleaner Energy

Projects

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Cleaner coal projects have substantial environmental, publichealth, social, and climate change benefits

There is huge potential for expansion of cleaner coal projects inPRC

CDM will remain an important financing tool out to 2012. ADBhas established funds to provide upfront financing for purchase ofcarbon credits beyond 2012. Other funds are also available.

ADB has considerable experience in financing cleaner coalprojects and is looking to continue its support for projects whichwill fast track locking in low carbon cleaner coal technologies

Conclusions

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Documents

Annika Seiler - ADB’s Knowledge and Innovation Based Support to PRC’s Clean Energy Development