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1 Scenario Analysis for China s Energy and Major Industry Sectors Tsinghua University, China Center for Clean Air Policy Dialogue on Future International Actions to Address Global Climate Change Lima, 12th October, 25 Presentation Outline Overview Sector Analysis and results Implications of Intensity Targets Conclusions and Discussions Appendix 2

2 China s national energy profile Mtce China's Energy Demand/Energy Intensity Mtce/Billion U S. $ energy demand energy intensity Year Energy demand keeps growing. Decline of energy demand after middle of 199s mainly results from shift of economic structure and enhancement of energy efficiency. Energy intensity declined all along since 198s. The amount of energy consumption has only doubled while China s gross domestic product (GDP) has quadrupled from Data resource:china Statistical Yearbook 22 3 CO2 Emission (MtCO2) USA China Russia India Japn Germany UK Canada Korea Italy Mex ico France Iran Austrilia South Africa 1,2. 1, China s national emissions profile Historial CO2 Emission of China Data resource: CDIAC,23 Solid Liquid Gas Cement Total Total Fossil Fuel CO2 Emissions World's Countries Ranked by 22 MtCO China s CO 2 emissions increase year by year, so does China s share of the world fossil fuel CO 2 emissions. China ranks the second emitter all over the world. However, per capita emission level is low. In 22, China s per capita emission of CO 2 is only 2.71tCO 2, much lower than the world average level of 3.96tCO 2. China s CO 2 emissions mainly come from combustion of coal. Emissions from natural gas and petroleum account for a relatively small proportion. Structure of CO 2 emissions is approximately consistent with the structure of primary energy consumption. 4

3 Background information on sectors Target Sectors Share of China s total energy consumption (2) Electricity 8.56%* Iron &Steel 9.95% Synthetic Ammonia 4.25% Cement 7.86% Pulp &Paper 1.67% CO 2 Emission (MtCO 2 )(2) */ Structure of China's CO2 Emission in 2 13% % 1% China's Sectoral CO2 Emissions 7% 8% 43% 6% Paper,Pulp:1.54% Synthetic Ammonia:4.25% 28% Electricity & Heat Cement:12..44% Iron&Steel:9.88 9% Industrial Processes Manufacturing & Construction Transportation 4% 2% % Electricity Iron&Steel Systhetic Ammonia Other Fuel Combustion International Bunkers share of world share of top 1 developing countries emitters 5 *Taking no account of the electric supply to other sectors Data resource: China Statistical Yearbook 22 ; CCAP,SectorBased Greenhouse Gas Reduction P Cement Pulp and Paper Electricity Sector Characters Installed Capacity(GW) Development of China's Electric Power System Installed Capacity(GW) Power Generation (TWh) Year Power Generation(TWh) China's Electric Power Generation Structure (2) 18% 3% 2% 1% % 76% coal gas oil hydropower nuclear renewables Coalfired power plants still accounts for the majority of electric power supply. China has the most abundant hydropower resources in the world, with an estimated potential of 38 gigawatts. Hydropower theoretically could supply much of China s needs, but suitable rivers are located far from load centers and are heavily laden with silt.. Data Resource: China Statistical Yearbook 22; ERI, China s Sustainable Energy Scenarios 22 6

4 Distribution of plants by Fuel in 2 Fuel number of plants (or generator units Capacity (MW) Share of Total Capacity CO Generati 2 emissi on(twh) on(mt) share of total CO2 emissions Average age year Average CO Average 2 intensity Mtefficiency CO 2 /TWh) Coal % 3545% 1.16 Gas % % 3 458%.47 Oil % 56%.76 Hydro % % Nuclear % % Wind 53* (1998) % % Renewables % Total % % 7 Distribution of coalfired power plants by capacity ( greater than 6MW ) Year Unit Size MW No. of Plants Total Capacity (MW) of Total No. of Plants Total Capacity (MW) of Total > % % % % % % % % % % < % % total % % Distribution of coalfired plants>6mw by CO 2 intensity in 2* CO 2 Intensity (Mt CO 2 /TWh) > <1.5 Total Total number of plants/units Total capacity (MW) Total annual generation(twh) Annual CO 2 (MtCO 2 ) *There is no such accurate data for this part. We can only provide rough results estimated from existing data. CO 2 (% share of sector) % 8

5 Bullets for Electricity Sector Thermal power plants (fired with coal, petroleum, or natural gas) accounted for almost threequarters of China s installed capacity in 2. Hydropower provided about 25 percent and nuclear power less than 1 percent of capacity. Oil and natural gas combined accounted for less than 6 percent of total power generation in 2. Nearly all of the sector s CO2 emissions come from coalfired generators. Unlike some other countries, a significant share of China s coalfired generator capacity is at relatively small units. For example, nearly three out of every four such generators is less than 5 MW, and these generators account for about 2% of total electric capacity. Over 4 % of China s CO2 emissions of electricity sector come from relatively inefficient coalfired plants with CO2 intensities above 1.2 Mt/TWh. 9 Iron&Steel Sector 35 Development of China's Iron Production Development of China's Crude Steel Production 25 % Mt % Mt % share of global iron production China's iron production % share of global crude steel production China's crude steel production Total production and proportion of both iron and steel in the world keep growing all along. Pig iron from blast furnace accounts for the majority of total iron. Proportion of direct reduced iron is comparatively small. Majority of crude steel is from oxygen blown converters(83%,22) Data resource:carbon Dioxide Information Analysis Center, 23 1

6 Iron&Steel Sector Iron/Steel Ratio of China and USA China large average Japan Korea EU15 USA Russia China Source: Japan Iron and Steel Federation 12 USA International comparison of energy intensity of iron/steel industry(index for Japan set at 1*) Higher energy intensity of per ton steel( about 1.5 times as Japan) Main reasons of higher energy intensity includes: characteristic of production process,small proportion of advanced equipment, inefficient management. Iron/Steel ratio of China is high, although with a decline trend *include the energy consumption of iron used as an input as well as that used to make the steel 11 Evolution of Plants in Iron&Steel Sector Typical Plants in iron&steel industry Number sets Ironmaking blast furnace Production Capacity Average Production Capacity per plant m 3 m Coal injection per ton iron kg/t Steelmaking Oxygen blown converter Number Production Capacity Average Production Capacity per plant sets tons tons Steelmaking electric furnace Number Production Capacity Average Production Capacity per plant sets tons tons Continuous casting equipment Continuous casting machine Continuous casting ratio sets % < Openhearth furnace sets Data resource: China iron&steel statistic. Data of 2 is only for key iron&steel enterprises

7 Distribution of Plants in key Iron&Steel Enterprise in 23 3 Total production Total annual Annual Class of Total Share of total CO capacity per production * 2 CO 2 * 2 2 intensity(tco 2 /t) equipment number year* 1 (mt) (%) (mt) (mt) Total* >3m m Blast furnace 3 1 For ironmaking m m m <1m Total* oxygen blown >3t * 5 converter for 1299t steelmaking 599t t <1t Total* >1t Electric furnace 599t for steelmaking 1149t <1t * 1 Incomplete statistic data for large and medium key enterprises; * 2 Uncertain data estimated from product capacity by the 13 same proportion * 3 By volume * 4 By weight * 5 negative energy consumption means energy recovery realized by advanced steelmaking converter Bullets for Iron&Steel Sector Iron production is the highest energyintensity process during iron and steel production, and accounts for nearly 4% of China s total CO 2 emissions from iron and steel production. Blast furnaces between 3999 m 3 accounted for 5.62% of China s total CO 2 emissions from blast furnace in 23. But average capacity per plant of China s new blast furnace will above 1m 3 The CO 2 intensity of China s largest blast furnaces (>3 m 3 ) is 13.6% lower than average level for all furnaces, but the largest blast furnaces account for only 8.6% of total iron production. In the past decade, the average production of China s iron plants has greatly increased, rising by % from 1995 to 2. A similar trend has occurred in steelmaking, 47.9% of oxygen blown converter, 287.3% of electric furnace 14

8 Cement Sector Development of China's Cement Production Total output of cement sector increased from 65Mt in 1978 to Mt in 1985, and China s cement sector ranked No.1 of the world in output statistics Great demand of cement is caused.. by the building and rebuilding of the infrastructures and city constructions to satisfy the tremendous growth of % Share of Global Production China's Cement Production China s economic. So cement production keeps growing without CO2 Emissions in China's Cement Sector any letup. 4 Accounted for more than 4% of whole world output in Main sources of CO 2 emission from 2 cement sector is fossil fuel combustion, self industrial process 1 and a relative small portion of indirect electrical consumption Year Average clinker/cement ratio is.75 Fuel Combustion ElectricityRelated Process 15 Data resource: Carbon Dioxide Information Analysis Center, 23; ERI, China s Sustainable Energy Scenarios 22 % C O2 Em issions(m tc O2) Mt Distribution of China s Cement Plants in Clinker Production Process Average Age (Year) No. of plants* 1 Share* 1 average plant Capacity (MT) Annual Producti on (MT) Share of Producti on Unit Investme nt ( USD/T) Mechanical Shaft Kiln % % 72.5 shaft kiln ordinary shaft Kiln Other % % 9.% 36.2 Subtotal % % dry process plain kiln % % 72.5 rotary kiln with waste heat for power generation % rotary kiln rotary kiln with cyclone preheater standtube preheating kiln % % 72.5 kiln operated with offkiln decomposition % % 12.8 Lepol kiln % % 84.6 Wetprocess Rotary kiln % % 78.5 Subtotal % % Total % 718 1% 16 * 1 Data in 1995

9 Parameters of China s Cement Plants in Clinker Production Process in 2 Energy consumptio n (Mcal/T) Coal consumptio n (kgce/t))* 2 Gasoline consump tion (kg/t)* 2 Electricit y consump tion (kwh/t)* 2 CO 2 Intensity (TCO 2 /T)* 3 total CO 2 emission s (MTCO 2 ) Share of CO2 emission s shaft kiln Mechanical Shaft Kiln ordinary shaft Kiln % 19.89% Subtotal % dry process plain kiln % rotary kiln with waste heat for power generation rotar y kiln rotary kiln with cyclone preheater standtube preheating kiln % kiln operated with offkiln decomposition % Lepol kiln % Wetprocess Rotary kiln % Subtotal Total * 2 data in 199; * 3 including the emission from self industrial process % 1% 17 Bullets for Cement Sector The cement industry in China is dominated by shaft kilns. In 2, about 85 shaft kilns account for almost 85% of total cement production. These plants account for over 8% of total cement CO2 emissions. Mechanical Shaft Kiln is the largest single source of cement CO 2 emissions, accounts for 61.84% of China s total CO 2 emissions from cement. Rotary kilns operated with offkiln decomposition have a very low CO 2 intensity, but a high unit investment, accounts for.6% of production and.5% of emissions China s cement sector structure is need to be improved. 18

10 % Synthetic Ammonia Sector Development of China's Systhetic Ammonia Production % Share of Global Production China's Systhetic Ammonia Production Classification of enterprises Large scale Medium scale Small scale Distribution of Synthetic Ammonia Sector in 1998 No Data resource: China Statistical Yearbook 22 ERI, China s Sustainable Energy Scenarios 22; Xiulian Hu, Kejun Jiang. Evaluation of Technology and Countermeasure for GHG Mitigation in China Mt Share of no. 3.2% 6.% 9.8% To be classified into great, medium and small ammonia enterprises. Separately, output per year of each kind of enterprise is 3 thousand tons, >4 thousand tons and <4 thousand tons Although the proportion of small scale enterprises declined gradually, they account for more than 5% of the total production. Global average proportion of product made from gas and oil is > 85%, while China s raw materials for synthetic ammonia are mainly coal and coke. Production (Mt) Share of production % % % Total 912 1% % 19 Pulp and Paper Sector % Development of China's Pulp and Paper Production % Share of Global Production China's Pulp and Paper Production Mt.According to production structure, pulp for paper enterprises can be classified into three categories: modern large scale plant, integrated pulp plant and other small scale plant. The proportion is separately 1%,45%,45% in 1998 Pulp from wood accounts for small proportion in paper making process. Alkali recovery rate is relatively low. Integrated energy consumption per ton paper is about 1.5 times to advanced level of the world. Sector structure still needs to be improved. 2 Data resource: Carbon Dioxide Information Analysis Center, 23 ; ERI, China s Sustainable Energy Scenarios 22

11 Presentation Outline Overview Sector Analysis and results Implications of Intensity Targets Conclusions and Discussions Appendix 21 Descriptions of RefPRPN Scenarios Scenarios Descriptions Reference Will evaluate projected emissions using the policies in place before 2 Recent Policy Will evaluate projected emissions using combination of measures in place before the end of 25.Taking regards of Report of 16th Party Congress, Tenth FiveYear Plan as well as relative industrial long term development policies and plans. New Policy Will evaluate projected emissions using combination of measures in place before the end of 23 based on PR scenario, mostly from a sustainable way 22

12 Energy Demand of Scenarios 23 CO2 Emission of Scenarios 24

13 Presentation Outline Overview Sector Analysis and results Implications of Intensity Targets Conclusions and Discussions Appendix 25 Measures of Electricity Sector No Measures Demand side management CFBC (Circulating Fluidized bed combustion) Reconstruction of conventional thermal power Supercritical plant Nuclear power Hydropower Natural gas IGCC (integrated gasification combinedcycle ) PFBC (pressurized fluidized bed combustion) Wind power Solar thermal Marginal mitigation ost(u.s.dollar/tco2)

14 MAC Curve of Electricity Sector Average Unit Cost(US.$/tCO2) Cumulative CO2 Emission Avoided in 22(MMT) 27 Intensity analysis of Electricity(22) Incremental Cost (billion US.dollars) Initial production cost Initial CO 2 intensity Total cost No cost measures total saving total cost from positive cost measures Billion US.dollars 1.1 (MtCO 2 /TWh) Production cost increase (%) % 1% 2% 2.25% 2.5% 5% Production cost (billion US.dollars ) Cost increase ($/MWh) CO 2 reduction (MtCO 2 ) CO 2 intensity(mtco 2 /TWh) Decline of initial CO 2 intensity.21% 1.18% 1.69% 1.81% 1.92% 2.88% Average cost per ton CO 2 reduced ($/t CO 2 ) Total CO 2 reduction achieved MtCO 2 Average cost per ton CO 2 reduced overall US.dollars /per ton CO 2 Blue and green parts are analyzed based on MAC curve, have no relationship with the production cost increase rate

15 Measures of Iron&Steel Sector No Measures Increase coal power injection level More advanced continuous casting machine Establish energy management center and increase management capacity More advanced coke oven More advanced blast furnace with TRT Marginal mitigation cost(u.s.dollar/tco2) Adjust ratio of iron/steel Apply dry coke quenching More advanced sinter machine More advanced direct steel rolling machine Apply direct reduced ironmaking process More advanced oxygen blown converter for steelmaking More advanced electric furnace for steelmaking MAC Curve of Iron&Steel Sector 4 Average Unit Cost(U.S.Dollar/tCO2) CO2 Emission Avoided,22(MMT) 3

16 Intensity analysis of Iron&Steel(22) Incremental Cost (billion US.dollars) Initial production cost Initial CO 2 intensity Total cost No cost measures total saving total cost from positive cost measures Billion US.dollars 1.68 (tco 2 / t steel) Production cost increase proportion (%) % 1% 2% 2.25% 2.5%* 5%* Production cost (billion US.dollars ) Cost increase per production($/t steel) CO 2 reduction (MtCO 2 ) * 97.61* CO 2 intensity(tco 2 /t steel) Decline of initial CO 2 intensity.84% 8.21% 9.79% 1.37% 1.88%* 16.81%* Average cost per ton CO 2 reduced ($/t CO 2 ) Total CO 2 reduction achieved Average cost per ton CO 2 reduced overall MtCO US.dollars /per ton CO *in scenario analysis, total incremental cost only accounts for 2.25% of total production cost,so the data is estimated Blue and green parts are analyzed based on MAC curve, have no relationship with the production cost increase rate Presentation Outline Overview Sector Analysis and results Implications of Intensity Targets Conclusions and Discussions Appendix 32

17 Conclusions Tremendous society transformation in current China vs. Challenge to analyzer Relative lowerlevel technologies vs. continuous technology advancement and energy efficiency improvement Recent policy scenario vs. New policy scenario Carbon emission potential vs. Incremental cost 33 Constraints and Prospects Potential constraints and difficulties Financing Technology availability Plant characteristics and disparities Geographic/regional problems or differences Ownership pattern Capacity building New international financial institutions Technology transfer mechanism Identification of prior technologies R&D Pilot projects Capacity building: envision of technology strategy, innovation of technology management system, training for operators 34

18 Discussions What is the actual GHG emission reduction potential? What is the actual cost for GHG emission reduction? Emission reduction potential maybe is higher in analysis, because in scenario analysis, we only change the technology structure to reflect the technology substitution, but in real world, there are many constraints not including in model. Incremental cost of emission reduction cost maybe is lower because while analyzing technology substitution,the most determinant is the compare of marginal cost of different technology and sinking cost has not been considered. Model results uncertainties Sources: Scenario definition Methodology Data resource Impact on output Emission reduction potential Cost Feasibility 35 Future work More sectors in our framework Integration of Topdown and Bottomup methodologies: macroeconomic models for the analysis of the macroeconomic impacts by sectorbased options 36

19 Any question, please contact Environmental Systems Analysis Institute. Department of Environmental Science and Engineering. Tsinghua University. Beijing 184,P.R.China Dr. WANG Can Phone: (861) Mr. WANG Ke Phone:(861) Ms. ZHANG Ying Phone:(861) Our Works on Climate Change Sectorbased mitigation options analysis Topdown economic impact analysis: such as CGE model Combination of adaptation measures and regional sustainable development strategy: such as water resources CDM: Market potential analysis, preparation of PDD and methodologies training for related stakeholders Initial research on integrated assessment model 38

20 Thank you 39 Presentation Outline Overview Sector Analysis and results Implications of Intensity Targets Conclusions and Discussions Appendix 4

21 GDPBillion Dollar China's Energy Scenarios 22(ERI,23) SRES B1 National Response Strategy (ADB/Tsinghua,1994) Environmental Considerations (UNEP/NEPA/ERI/Qinghua,1996) Country Study (USDOE/SSTC/Tsinghua,1999) CCAP project Year SRES A1 SRES B2 Issues and Options (WB/Jt Study Group,1994) ALGAS(GEF/UNDP/ADB/ SSTC,1998) actual year Annual growth ratio GDPbillion dollar % % % PopulationBillion year China's Energy Scenarios 22(ERI 23) SRES A1 SRES B1 SRES B2 National Response Strategy(ADB/Tsinghua,1994) Issues and Options(WB/Jt Study Group,1994) Environmental Considerations (UNEP/NEPA/ERI/Tsinghua,1996) ALGAS(GEF/UNDP/ADB/ SSTC,1998) China Country Study(USDOE/SSTC/Qinghua,1999) Actual CCAP project year Annual growth ratio PopulationBillion Urbanization ratio

22 Analytical methodology Technology data: energy intensity, emission intensity, cost etc. Marginal emission reduction cost of different measures Other Scenario forcedriving: Social, economic, political etc. Energy demand and emission under different scenarios Emission reduction potential of each measure and intensity analysis Integration of macroeconomic model:cge Macroeconomic cost and impact of sectorbased option Ongoing Work Conclusion and policy suggestions 43 Analytical methodology continued Accounting approach LEAP model (Long Range Energy Alternatives Planning System ) Baseline scenario Sector Total demand Technology structure Production via technology Coefficient of Energy Consumption Energy demand Abatement scenario Technology Unit cost Unit CO 2 emission Cost curve Emission curve Abatement curve 44

23 45 Production Process during iron&steel Sector Coke Making Quenching Sintering Direct reduced ironmaking Blast furnace Coal Power Injection Oxygen Blown Converter Electric Casting Hot Rolling Cool Rolling 46

24 Instructions for Iron&Steel Process Oxygen blown converters vs. electric furnace: although oxygen blown converters are much less CO 2 intensive,but they need pig iron as raw.ironmaking is high energy intensity process. The raw material of electric furnace is waste steel, it can make crude steel from waste steel and only needs few iron. So the total energy intensity is lower than oxygen blown converter. In scenario analysis, the share of crude steel made from electric furnace is important.. We often use the ratio of iron/steel to indirectly describe the proportion of electric furnace steel. But in China, waste steel is scarce because China is still facing tremendous development, the total stock of steel in current China is smaller. Electricity availability is another constraint. In future years, when the steel stock in China is large, there is more waste steel availability, the share of electric furnace in steel making will increase. In ironmaking process, direct reduced ironmaking is another important kind of technology. It can make iron directly from iron ore and coal and skip the process of cokemaking. It is also high energyintensity process. So when using the technology of direct reduced ironmaking,the total energy intensity is lower than traditional blast furnace ironmaking, that also means the decrease of total energy consumption of steel making. But this kind of technology is expensive and the total production can't satisfy the raw material demand of China's steel making. In medium and long term analysis, direct reduced ironmaking will play an 47 important role in energy conservation and emission reduction in China's iron&steel industry.