EE Project Group4:  Electric Motor Upgrade Projects

1.     Objective

      In2011, electric motors accounted for 64% of China’s total electric power enduse, and 75% of total electricity use in industry.^[1]  Over the medium term,  the efficiency of motors and motor-drivensystems, such as fan and pump systems, can be improved by at least some 5-8percentage points, resulting in savings of 130-230 billion kWh.  Such large-scale electricity savings canyield  a substantial reduction in thermalpower generation requirements, and thereby reduce air pollution in thermalpower producing areas and the travel of this pollution to China’s big urbancenters.

2.     Measure Description

      a.  Relevant laws and regulations.  Electric motor efficiencies are regulatedwith national energy efficiency standards, which are becoming increasinglystringent.   Electric motor and motordriven system energy efficiency projects are encouraged under the country’sMedium and Long-term Energy Conservation Plan, and the energy conservationparts of the 12th FYP.  The projects arealso supported with various public financial incentives available for keyenergy conservation projects.

      b.   Scope for adoption of the measure.  As of 2011 the installed electric motorcapacity of China totaled 1700 GW, consuming about 3 trillion kWh ofelectricity (roughly equivalent to the total electricity consumption of theEuropean Union).  However, the efficiencyof electric motor driven systems in China is reported by MIIT to be some 10-20%lower than advanced levels abroad.  Themain measures needed to improve efficiency include:  (1) promotion and dissemination of new,high-efficiency motors, (2) elimination of backward electric motors still beingused, and (3)  renovation andreconfiguration of electric motor driven systems.

      c.  Description of the measure.  The simplest electric motor electricitysaving projects involve variable speed drive (VSD) retrofit projects that addfrequency control to allow motors designed as fixed-speed motors to vary theirspeed to match actual drive loads. Industry electric motor projects also involve additional efforts,including replacement of inefficient motors themselves and redesign andrealignment of multiple-unit motor driven pump or fan systems to optimizeperformance with as little electricity use as possible.

      d.  Implementation framework.  Projects are implemented by enterprisesthemselves with technical expertise and equipment available in the market.  A primary incentive is to reduce factoryelectricity costs.  Additional incentivesinclude needs to comply with energy conservation agreements with localgovernment, needs to conform with energy-use standards, and improved securityof energy supply.

      e.  Benefits and costs:

•   Investment costs and energysavings levels for electric motor energy savings projects varydramatically.  Investment costs in thesample of 12 projects ranged from less than RMB 2 million for relatively simpleVSD projects to RMB 180 million for complex projects involving renovation ofmany motor-driven systems in a large industrial facility.    Investment costs per tce saved also varieddramatically among the projects reviewed, ranging from RMB 500/tce to RMB5000/tce.

•   Electric motor projects savepurchased electricity, reducing needs for generation and hence air pollutionemissions at thermal power plants, but not at factory sites.   Because electricity savings in theseindustry projects are often substantial, however, corresponding estimatedemissions reductions at power plants also are significant, averaging 70 tons ofSO2 and 70 tons of NOx per project in the sample.

•   Because electric motorrenovation projects save relatively expensive electricity, they typically yieldvery strong financial returns to enterprises. In fact, the electric motor upgrade project group of sample projectsyielded the highest net financial gains to enterprises per ton of air pollutantreduced of any of the energy efficiency project groups reviewed in thestudy:  and average of RMB 115 in netlife-cycle financial returns per ton of SO2 and NOx 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.

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.  Reductionsin local air-shed ambient PM 2.5 levels that can be achieved by portfolios ofenergy efficiency projects can be calculated by adding coal savings-PMemissions reduction coefficients (as well as SO2 and NOx coefficients), andcalculating synergistic effects using local air quality models.

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 three motor system upgrade projects are provided in the tablebelow.  All projects have been completed,with verified energy savings levels.

* Lifecycle energy cost savings minus total investmentcosts.

      Allprojects show exceptionally good financial benefits to enterprises per ton ofpollutant reduced, with net benefits per ton of life-cycle SO2 and NOxreduction ranging from RMB 97,000 to RMB 124,000.

      Acomparison of Project 1 and Project 2, however, shows how the benefits andcosts of variable speed drive projects can vary substantially.  Project 1 is a small project retrofitting 17fans and pumps with variable speed frequency inverters and addition ofautomatic  controls  The total investment cost is under RMB 2million, but the net lifecycle financial benefits over 12 years are about RMB71 million—some 35 times higher than the investment cost.  Project 2 also involves variable speedfrequency inverter retrofits, on ventilators at a cement plant, plus additionof a smart energy control system.  Inthis case, the investment is RMB 11 million, but the net financial benefits areless than in the first project, at about RMB 35 million or only 3 times higherthan the investment cost.  The likelyexplanation is a sharp difference in the load profiles of the motor-drivenequipment, yielding far lower electricity savings from the ability to adjustspeed as load changes in Project 2 compared to Project 1.  As VSD retrofit projects have become verywell known in China, projects as attractive as Project 1 are becoming more rare(although they still can be found).

      Project3 involves a more comprehensive motor system upgrade project through theproduction process at a chemical plant producing polyurethane.  The project involves new motors, new fans,variable speed drive retrofits, a distributed control system and even thereplacement of the old power transformer. Although the investment cost is RMB 53 million, the project yields netfinancial benefits of RMB 480 million, or 9 times the investment cost.  The electricity savings of this projectresult in an estimated reduction of 180 tons of SO2 per year and 169 tons ofNOx per year due to reductions in the need for thermal power generation.