EE Project Group3:  Waste Heat and Gas Utilization EnergyEfficiency Projects

1.     Objective

      Heatresources in the most relevant seven industrial subsections in China which canbe captured and used are estimated to amount to about 340 million tons of coalequivalent (tce) in 2015, or about 30% of the total energy consumption of theseindustries.^[1]  Underused byproduct gasresources, especially in the steel and petrochemical industries, further add tothe industrial wasted energy stream utilization potential.  When wasted energy streams are captured andused for on-site power generation, factory needs for less purchase ofelectricity yields less need for power generation, currently dominated bycoal-fired generation, and thus pollution reduction benefits in the electricpower industry.  When wasted energystreams are recycled internally for on-site use in industrial processed, thisresults in reduced needs for fuel combustion and pollution reduction benefitsaccrue accordingly at site.

2.     Measure Description

      a.  Relevant laws and regulations.  Waste heat and gas utilization projects arespecifically encouraged in China’s Energy Conservation Law and Circular EconomyPromotion Law.  Calls to implement moreof these projects figure prominently in China’s main energy conservation plans,including, for example, the Medium and Long-term Energy Conservation Plan, andthe energy conservation parts of the 12th FYP. The projects are also supported with various public financial incentivesavailable for key energy conservation projects.

      b.   Scope for adoption of the measure.  At the end of 2013 only about 38% ofavailable industrial waste heat resources were being captured and used, savingabout 130 million tce.  Researchers hopethat an additional 50 million tce of heat resources can be captured and used by2020, so that the utilization rate can approach 50%.  As many of the easiest, high-temperature heatutilization projects have already been undertaken, however, it will be achallenge to move further into medium and low temperature heat recoveryprojects, and to develop solutions for the many dispersed types of waste heatand heat-carrying mediums.^[2]

      c.  Description of the measure.  Projects to capture and use waste heatinclude projects to use high temperature heat (above 500 degrees C), mediumtemperature heat (200-500 degrees C), and low temperature waste heat ( below200 degrees C for flue gas and below 100 degrees C for liquids).  Heat to be captured is carried in any of avariety of mediums, such as smoke stack flue gas, coolants, waste steam or hotwater, chemical reaction heat, waste heat from hot product, or waste heat fromslag or other by-products or waste products. Projects to capture off-gas for combustion for internal use or for powergeneration are especially common in the steel, petrochemical and chemicalindustries.

      d.  Implementation framework.  Projects are implemented by enterprisesthemselves with technical expertise and equipment available in the market.  A primary incentive is to reduce energycosts.  Additional incentives includeneeds to comply with energy conservation agreements with local government,needs to conform with energy-use standards, and improved security of energysupply.

      e.  Benefits and costs:

•   Investment costs for projectswhere waste heat or gas is used for internal factory  processes are typically far lower than forprojects involving power generation.  Inthe sample of 7 internal process use projects reviewed, investment costsaveraged about RMB 1900/tce annual energy savings capacity.  In the sample of 9 electric power generationprojects, investment costs averaged about RMB 4300/tce annual energy savingscapacity.

•   Internal process use projectshave large local air pollution control benefits from on-site emissionsreductions.  However power generationprojects typically yield only regional air pollution control benefits from reducedpower plant emissions.  Local SO2 and NOxemission reductions in the sample of internal process use projects averagedabout 450 tons and 180 tons per year, respectively.  Power generation projects yielded reductionsof some 160 tons of SO2 per year and 150 tons of NOx per year at power plants,usually away from urban areas.

•   However, the power generationprojects are usually far more financially attractive to enterprises, as theyreduce expensive electricity purchases or provide valuable sales to thegrid.  As a result there are especiallyhigh benefits to enterprises from reducing pollution through these projects,even if that pollution may be more distant. The net financial benefit achieved by enterprises pursuing waste heat orgas projects for power generation averaged RMB 100 for every ton of SO2 or NOxpollution reduced.  The net financialbenefit for waste heat or gas projects for internal process use was farsmaller—averaging RMB 15-20 for every ton of SO2 or NOx pollution reduced.

      f.  Key issues for implementation. Whilethe main types of energy efficiency projects save enterprises money,encouragement and support for implementation by local energy conservationsupervision agencies and environmental protection authorities can help raiseproject priority and overcome operational inertia.  Assistance from energy conservation units orthird-party service entities may be needed in identifying the best specifictechnical options and solutions.  Forprojects involving electric power generation, use of the electricity onsite tooffset purchase from the grid is the simplest solution, while sale ofelectricity to the grid requires completion of power purchase agreements withthe electricity distribution company.

3.     Method for Calculating Project EnergySavings and Emissions Reduction

      Airpollution reductions from industrial energy efficiency projects can becalculated from available data on the reduced energy use resulting the projectswhich then leads to reduced fuel combustion emissions.  For most projects, and especially waste heatand gas recovery projects, it is best to divide project energy savings into twocategories: (1) on-site coal combustion savings, which directly benefits thelocal air-shed; and (2) on-site electricity savings, from which a reduction inneeds to combust coal in thermal power plants and associated emissionsreductions at thermal power plants can be calculated, wherever they arelocated.

      Projectinvestment and energy savings data used for this note are from the Institutefor Industrial Productivity’s (IIP) database of 84 Chinese industrial energyefficiency projects completed during 2008-2014. Both on-site and power plant emissions reductions were then derived fromaverage national coefficients for SO2 and NOx emissions reduction per ton ofindustrial on-site coal saved and for SO2 and NOx emissions reduction per tonof coal saved in thermal power production.

      Localenvironmental protection authorities can prepare improved, location-specificair pollution benefit calculations.  Theycan obtain recent local energy efficiency project investment and energy savingsdata and information on future project potential from local energy conservationsupervision agencies (节能监察队或中心).  Coal savings-emission reduction coefficientscan be fine-tuned to account for local coal characteristics, electric powergenerating plant location and type, and prevalent emissions controlinstallations at various sites. Reductions in local air-shed ambient PM 2.5 levels that can be achievedby portfolios of energy efficiency projects can be calculated by adding coalsavings-PM emissions reduction coefficients (as well as SO2 and NOxcoefficients), and calculating synergistic effects using local air qualitymodels.

4.     Project Examples

      The investment costs, net lifecycle financial benefits arisingfrom energy cost savings, pollution reduction per year and net costs of SO2 andNOx reduction of four typical waste heat or gas recovery  projects are provided in the table below.  All projects have been completed, withverified energy savings levels.

* Lifecycle energy cost savings minus totalinvestment costs.

      Project1 involved use of waste heat from a cement kiln for electricity production in a15 MW generator.  The power generated wasused by the plant, reducing its power purchases from the electricity grid.  The project is expected to yield almost netfinancial gains of RMB 500 million through electricity cost savings.   Project 2 combusts previously wastedblast-furnace and steel convertor off-gas to produce steam and then power aturbine-generator set.  Electricitygenerated is also used by the plant itself, offsetting its purchaserequirements.  Net financial benefits areeven higher than in the cement waste heat recovery project even thoughinvestment cost is lower.  Both projectsindirectly yield substantial air pollution reduction from reduced powerproduction needs.

      InProject 3  waste heat from a dryingfacility is used to produce steam for process use.  Needs to produce steam from coal are therebyreduced, yielding local SO2 emission reductions of 332 tons per year and local NOx emission reductions of 133 per year.(Total emissions reductions are a little smaller, as the project results in asmall increase in electricity use from the power grid).  Project 4 primarily uses off-gas as a fuelfor various steam and heat production purposes at the plant.  It also includes a waster heat recoverycomponent.  This project yields very highlocal SO2 and NOx emissions reduction benefits as the off-gas use substantiallyreduces needs for coal combustion to produce steam and heat.