Manager, Energy Division (East), Asian Development Bank
The Asian Developing Bank, a development finance institution consisting of 56 member countries (40 from the Asian and Pacific region and 16 from outside the region) is engaged in promoting the economic and social progress of its 37 developing member countries (DMCs). The Bank started its operations in December 1966 and is based in Manila in the Philippines. As of 31 December 1996, energy sector lending of the Asian Development Bank accounted for $15.9 billion or about a quarter of the Bank's cumulative lending of $62.2 billion. The major part of this energy sector lending to the bank's DMCs, all of which are in the Asia and Pacific region, went for power development (79 percent) followed by natural gas development 915 percent) and the development of other energy sources including coal (6 percent). On the power generation side, the emphasis has been on the utilization of indigenous non-oil energy resources such as hydropower, geothermal, natural gas, and coal. In addition to new power plants with a combined capacity of about 30 GW, funds have been provided also for rehabilitation and modernization of existing power facilities. Reinforcement and expansion of transmission and distribution systems have also been assisted with view to reducing electricity losses and connecting new customers. The Bank also placed major emphasis on energy efficiency and pricing and on the environmental impact of energy conversion processes. More recently energy conservation and demand side management measures have been financed by the Bank in various DMCs. The financial sustainability of energy utilities and their institutional development to achieve fully commercial behavior have also been important bank concerns.
The Bank's Country Operational Strategy Study for the PRC emphasizes three broad objectives:
1) Improving economic efficiency,
2) Promoting growth in the poor inland provinces, and
3) Enhancing environmental protection and natural resource management.
Improving environmental protection and natural resource management is a key them e in Bank operations to ensure that PRC's rapid economic growth is sustainable. In total the Bank provided about US$1.5 billion to support environmental improvement in PRC. Of this, about US$1.2 billion is helping to address the brown side of the pollution problem and US$0.3 billion will help address green issues. Total lending for environment-related projects represents slightly less than one quarter of total Bank lending to the PRC.
The Banks lending has been complemented by the provision of 68 technical assistance grants totaling over US$37 million which can be grouped under five broad headings:
1) Environmental policy, monitoring management and capacity building,
2) Environmental project preparation,
3) Energy efficiency and conservation,
4) Water resource management, supply and sanitation, and
5) Natural resource management/agriculture.
The Bank's support for environmental activities in the PRC is closely aligned with Agenda 21 and the Ninth Five-Year Plan, and focuses on five objectives:
1) Improving the policy, legal and regulatory framework to strengthen environmental management,
2) Building capacity in key agencies, including the NEPA and local environmental protection bureaus,
3) Addressing environmental problems in selected urban centres,
4) Promoting the efficient use and conservation of soil, water, and marine resources, and
5) Promoting the use of cleaner processes and clean coal technologies for industrial production and power generation.
The two major sectors contributing to pollution particularly in urban areas on the East Coast are:
1) energy generation, because of heavy dependence on coal and limited investment in appropriate environmental technology, and
2) industry, because of the obsolete production processes, the use of outdated technologies, and the reliance on coal.
Heavy industries, and particularly state-owned enterprises, continue to operate with outdated inefficient technologies, and are the major sources of industrial pollution.
The bank efforts to introduce cleaner technologies in the industrial sector have been complemented by its lending for energy projects. The Bank has financed:
1) Cleaner forms of energy (e.g. hydropower, natural gas),
2) Modern technology to reduce emissions from the thermal stations to internationally acceptable standards,
3) Cogeneration projects that have allowed inefficient, polluting boiler and coal stoves to be replaced,
4) The planting of trees to absorb the emissions of thermal station, and
5) The preparation of a long-term strategy and investment plan to improve efficiency and reduce emissions of existing thermal stations.
Some details in this regard are given below.
The PRC's annual electricity consumption grew at 4 percent a year from1985 to 19 95. The installed power generating capacity and annual electricity generation in 1996 were 237 GW and 1400 TWH, respectively, by the year 2000. Coal-fired power generation provided over 80 percent of total electricity generation and accounted for about 25 percent of national coal consumption in 1996. This percentage is expected to increase to about 33 percent by the year 2000, While thermal power plant, dominated by coal-fired power plant, account for about 75 percent of installed power generation capacity in the PRC at present, the share of large power generation units with capacities of 300 MW and above is only about 25 percent.
The installed coal-fired power plant capacity in 1994 consisted of 334 units of 125 MW and above as follows:
1) 86 units of 125 MW.
2) 149 units of 200 MW.
3) 63 units of 300 MW to 330 MW.
4) 18 units of 350 MW to 362 MW.
5) 8 units of 400 MW to 600 MW (including two 600 MW supercritical units).
The share of large power generation units with capacities of 300 MW and above ha s, however, increased from about 10percent in 1987 to 22 percent in 1994. The net coal consumption of these units has been limited to 340 g/kWh (efficiency of 37 percent) while that of the two supercritical 600 MW generating units (in Shidongku) has been limited to 317 g/kWh (efficiency of 40 percent). However, due to the poor efficiency of the remaining coal-fired power plant, the overall coal consumption is still of the order of 400 g/kWh, and the Government has the goal of reducing this figure to 380 g/kWh by the year 2000. The Government, therefore wants t o retire units smaller than 50 MW and replace them with larger efficient units an d rehabilitate existing 125 MW, 200 MW, and 300 MW units to achieve better thermal efficiency coupled with environmental benefits.
Most of the existing equipment in coal-fired power generating units with capacities less than 300 MW are of local manufacture. The generic problems associated with such equipment can be traced to design inadequacy, material deficiencies, fabrication quality control, installation problems, operation and maintenance problems. The main objectives to be achieved through the rehabilitation are improvement, life extension, and reduced operations and maintenance cost. Maximizing combustion efficiency in the boilers, optimizing steam flow path in the turbines, and minimizing power consumption in boiler and turbine generator auxiliaries are the keys to improved plant efficiency and increased power and energy output in a given boiler-turbine-generator arrangement. Modern instrumentation and control systems are essential to achieve optimal integral operation of individual power generating units with the power system. They would also help in ensuring environmental control with the assistance of efficient particulate control systems, preferably in the form of high efficiency electrostatic precipitators.
The last two loans provided by the Bank for coal-fired power generation plant construction in the PRC have interesting efficiency and environmental features.
In October 1994, the Bank approved a loan of $ 165 million(supported by Bank-arranged commercial cofinancing) for the Qitaihe Power Project in Heilongjiang Province to construct a 2×350 MW mine-mouth power station together with district heating facilities at Qitaihe which has current levels of air pollution exceeding nation standards. The 350 MW units chosen would have higher efficiency than the standard 300 MW units locally produced. It would also incorporate low nitrogen oxide burners and 99.5 percent or higher efficiency electrostatic precipitators.
In November 1995, the Bank approved a loan of $200 million for the Henan Power Project in Henan Province to primarily finance a 2×300-350 MW power plant with energy efficiency emphasized by providing commercial incentives in the bid documents for its maximization, and air pollution addressed through low nitrogen oxide burners and high efficiency electrostatic precipitators. Additional project components of environmental value included conversion of existing 2×6 MW thermal power units into cogeneration plant and subsequent closure of 10 industrial boilers, closure of 16 old and inefficient thermal power units totaling 182 MW, and an extensive afforestation program.
To finance part of the foreign exchange cost, the PRC Government has requested the Bank to assist in arranging up to about $100 million in commercial cofinancing for the Project with 15 years maturity including a grace period of 5 years. The Government has also informed the Bank that it may seek a partial credit guarantee from the Bank on the principal payments falling due in the last two to three years, if such guarantee were warranted by the market conditions.
The Bank's efforts at encouraging the construction of high efficiency coal-fired power plant in the PRC were further advanced in September 1996 when the Bank app roved an engineering loan of $2 million for the 2×600 MW Anhui Fuyang supercritical coal-fired power plant. A 1998 Bank loan of $300 million is programmed to finance the construction of this plant together with about $200 million of Bank arranged commercial co-financing. It will be only the second supercritical power plant in the PRC, the first being the 2×600 MW Shidongku No.2 Power Plant. Further development of clean coal technology in the PRC is also being pursued by the Bank. In this context, the Bank is supporting the ongoing collaboration efforts between the PRC and the US Department of Energy through technical assistance to carry out the feasibility of a 200-400 MW integrated gasification combined cycle power project to be located near Beijing or Yantai. The gasification component o f this project could be implemented by the private sector while the power gene ration component could be handled by the public sector.
With regard to rehabilitation of existing coal-fired power plant, the Bank provided technical assistance in 1995, at the request of the PRC Government, and recruited a team of domestic and international consultants to determine the feasibility of rehabilitating selected inefficient and polluting coal-fired electricity generating units in the 100-300 MW range throughout the PRC. With the assistance of the PRC authorities, the consultants identified about 300 coal-fired electricity generating units as potential candidates for rehabilitation.
The scope of rehabilitation work required has been divided into thirteen batches with each batch consisting of work at about 25 power units involving boiler, turbine and auxiliaries renovation, together with instrumentation and control systems and the introduction of electrostatic precipitators, where feasible. The next step in Bank assistance for such rehabilitation work would involve the preparation of suitable rehabilitation projects for Bank financing. Some of these projects could also be implemented with private sector financing.
