new mechanism feasibility study 2011 final report new...

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New Mechanism Feasibility Study 2011 – Final Report

New Mechanism Feasibility Study for Electric Generation based on Low-Level Coal Mine Methane and Integrated Energy Efficiency

Improvement in Yunnan Province, China

By Tepia Corporation Japan Co., Ltd.

1. FS Cooperators

Tepia Corporation Japan Co., Ltd. (main implementing entity): ・ Overall coordinator of FS ・ Develop new methodology and MRV method, etc.

Yunnan Sun Valley Energy Conservation Industry Development Co., Ltd.: ・ Research and provide with the local information ・ Make appointments with local government and other local related bodies, etc.

Japan Consulting Institute: ・ Review the new methodology and MRV method as third party

2. Description of Project/Activity

(1) Project/Activity Outline

The project is implemented in Bailongshan coal mine affiliated to Huaneng Yunnan Diandong Energy Co., Ltd (hereafter referred to as Diandong company) in Yunnan province, China. The project aims to improve the comprehensive energy efficiency and reduce GHG emission originates in mining activity as well as secure the safety of mining activity and protect local environment from the following aspects; recover and destroy the low concentrated Coal Mine Methane (CMM, methane concentration ≦ 30%) and Ventilation Air Methane (VAM, methane concentration ≦ 1%) originally released into atmosphere for power generation and reduce power consumption for installing “Mine Enesave Pack” including inverter and SVC to the electric equipment and transformer substation.

As implementing the project, 74.16 million m3 of CMM (average CH4 concentration is set to 27%) and 7.16 million m3 of VAM (average CH4 concentration is set to 0.25%) are recovered to generate 87,899MWh of electricity through 11.5MW (5.75MW*2) of power generator every year (Phase 1). The annual coal production is designed as 1.8 million during Phase 1 period and after that the production scale reaches 3 million by 2025. Accordingly, 2 more power generators is expected to be installed (Phase 2) however, the project aims only Phase 1 project, not include Phase 2. The amount of generated power is totally lower than the whole

New Mechanism FS 2011 – Report

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demand in the mine; the all amount of electricity is consumed within the project site.

For transformer substation and electric equipment, 2 SVCs (6000kvar*1, 800kvar*1) are installed to reduce the power loss at 35kV and 110kV lines as well as secure the power quality of 10kV line. Furthermore, the 20 inverters are installed at drainage pumps, exhaust pumps and ventilation fans for power saving.

As a result, total GHG emission reduction is estimated at 3,751,986tCO2e during the 19-year crediting period of the project; accordingly, the average annual GHG emission reduction is expected to be 197,472 tCO2e.

(2)Situation in Host Party

After 2003, China, the host party of the project, falls into serious power shortage in more than two thirds of all provinces; that becomes an object of public concern in China. In addition, the major source of electric power depends on coal, so that the Chinese government promotes to develop and utilize the coal mine methane as well as the renewable energy resource. On the other hand, the coal mine methane which methane concentration exceeds 30% was prohibited to release into atmosphere directly while the low concentration methane (30% or below) was to be released into atmosphere in consideration of mining safety. However in March 2010, the power generation activities which utilize the low concentration coal mine methane are possible to be permitted based on the revised “Coal Mine Safety Regulations”.

For promoting the methane utilization, the Chinese government promulgated Notification on Directions about the Power Generation Using CBM/CMM ruling to subsidize 0.25RMB/kWh to sell the generated power by methane. Moreover, the State Council announced Several Opinions on Promotion of CBM/CMM Extraction and Utilization in June 2006 and Notification on Tax Policies for Encouraging Coal Bed Gas Extraction in January 2007, in addition Ministry of Finance P. R. China issued Announcement on the Coal Bed Gas Exploitation Subsidy in 2006 for promoting the methane utilization. As to the energy saving at coal mines, the government promulgated Administrative Measures for Financial Initiative Funds for Energy Conservation Technology Retrofits in 2011 to subsidize energy saving projects by 240RMB/tC in eastern area and 300RMB/tC in western area respectively.

As mentioned above, China takes many kinds of domestic measure to achieve GHG emission reduction, alongside discusses at international conventions about climate change actively. China has proclaimed to reduce 40 to 60% of energy consumption and 50% of GHG emission per unit GDP by 2020 compared to the level in 2005. Moreover according to Zhenhua XIE, the vice chair person of National Development and Reform Commision, China prepares to reduce 16% of energy consumption and 17% of CO2 emission per unit GDP during the 12th Five-year Plan (2011-2015) for achieving 670 million coal equivalent energy saving during the period. At the same time, China aims to raise the share of non-fossil energy in the total energy consumption by 11.4% during the period.


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Accordingly it can be concluded that the implementation of the project contributes to the realization of Chinese policy of GHG emission reduction and energy saving.

(3)Applicability under BOCM

Yunnan province is rich in coal resource in the southern part in China; the annual coal production exceeded 97 million tons and the extracted methane gas reaches 138 million m3 in 2010. On the other hand, only 11 million m3 of the extracted gas is recovered and utilized. All amount of extracted gas is utilized for power generation at small or medium scale coal mines with domestic technology; one of the above projects is succeeded to upload the generated electricity to the local grid but not as CDM project. According to the local government, many of the equipment installed by those projects don’t work constantly mainly because of its instable gas extraction condition however, there is little manufacture to solve the problem in China.

(4)Dissemination method of the Project/Activity

For disseminating the project scheme, it is better to work together with a local counterpart which has good relationships with local government and coal mine owner at the same time, is able to propose the project scheme to the mine owner considering the profitability and energy efficiency of a project. For the project, Yunnan Sun Valley Energy Conservation Industry Development Co., Ltd. (hereafter referred to as Taiyanggu company) takes this role as the local counterpart.

In implementing the project, the benefits brought by the project like operational safety at coal mine and the project profitability are emphasized for requesting the governmental support and positive participation of the mine owner. Taiyanggu company has already agreed the comprehensive contract with the mine owner on developing the project; thus the project scheme will be disseminated around the site through this process.

3. Study Contents

(1) Study Issues

The main issues of this study are as follows;

1) Feasibility of the project implementation The general information of Bailongshan coal mine (e.g. current situation of gas extraction/utilization, total gas amount, gas quality, available gas amount and possibility of electric equipment installation) is researched. Besides, the domestic subsidiary system related to the project is also researched.


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2) Applicability of BOCM In implementing the project under BOCM, new methodology is designed as well as specifying the reference scenario and project boundary and evaluating the emission reduction. The monitoring items and method are also specified and developed throughout this study.

3) Attitude of China against Post Kyoto and BOCM The attitude of China, the host party of the project, against the Phase II of Kyoto Protocol, Post Kyoto and BOCM between Japan and China are researched.

4) Installation of Japanese Technology The Japanese technology available at the project site and its priority to the Chinese domestic technology, barriers to disseminate, and its promotion plan are studied.

5) Stakeholders’ Comments The stakeholders’ comments from the related bodies or people are collected. Companies, governmental organizations, designate institute and the local residents are chosen as the stakeholders of the project in this study.

6) Environmental and Other Impacts Those impacts on environment, society, culture, economy and sustainable development around the project site are evaluated.

7) Common Practices at Other Coal Mine around the Project Site The precedent practices at other coal mines around the site are surveyed. Some practices with domestic technology are identified in Yunnan province.

(2) Survey Process

1) Feasibility of the project implementation For developing the project, the local designate institute gave advice about the general information of Bailongshan coal mine. Besides the local government in Yunnan province implied the possibility that the project is possible to receive the subsidy for energy saving projects in China. Diandong company has already decided to utilize the methane which is currently released into atmosphere following to the energy saving policy of the 12th Five-year Plan.

2) Applicability of BOCM In this study, new methodology of BOCM was developed. Based on the new methodology, reference scenario is reconsidered every year since its rapid growth of economy and technique level in China; the dynamic reference scenario can reflect more reasonable and realistic reference situation in China. The factors which could influence the reference scenario are investigated throughout this study. As to the monitoring plan, it is investigated whether the required data can be measured with meter and then designed the plan. The MRV method is developed researching that in


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China and seeking technical advice from Japanese engineer and specialist.

3) Attitude of China against Post Kyoto and BOCM The attitude of China against the Phase II of Kyoto Protocol and Post Kyoto are very important factors under BOCM.

4) Installation of Japanese Technology One of the big themes of this study is how to promote the installation and dissemination of the Japanese technology to China. In discussing this theme, major factors like the current situations of market, policy and consumer, competing companies and alternative technologies are researched.

5) Stakeholders’ Comments For collecting the stakeholders’ comments, the hearing survey has been conducted to the local government (e.g. provincial and lower level), organizations (e.g. coal mine specialized designate institute, energy saving center), local grid company and local residents.

6) Environmental and Other Impacts The project activity brings the environmental benefits on local environment for reducing SOx, NOx and dust emissions; the implementation of the project contributes to the Chinese policy of low carbon society and emission reduction. At the same time, the project will also contribute to the sustainable development through stimulating the local economy, creating job opportunity and narrowing economic gap.

7) Common Practices at Other Coal Mine around the Project Site As a sample case of the common practice around the project site, Z coal mine which applies the domestic technology is investigated. Consequently, the priority of Chinese domestic technology is found: low price, packaged sales method and maintenance support. On the other hand, the actual power generating efficiency of the Chinese technology is low however.

4. Outcome of the Feasibility Study

(1) Estimation of GHG Emission Reduction

GHG emission reduction is estimated based on the new methodology; the emission reduction is claimed by methane recovery section (e.g. methane destruction and power replaced by the methane utilization) and power loss reduce and power save section (e.g. electric power loss reduction by SVC and power saving by inverter). The estimated emission reduction is as follows;

1) Methane recovery section The project recovers 74.16 million m3 of CMM (average CH4 concentration is set to 27%) and 7.16 million m3 of VAM (average CH4 concentration is set to 0.25%) to


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generate 87,899MWh of electricity through 11.5MW (5.75MW*2) of power generator and replace 79,491MWh of electricity from the local grid every year; the recovered methane gas under the project would be released into atmosphere, if the project were not implemented. The global warming potential of methane is 21, which means methane is 21 times more heat-absorptive than CO2 and 79,491MWh of electricity is replaced originally supplied form local grid; therefore the annual emission reduction of the methane destruction and power replaced is 292,703tCO2e in the first year.

2) Power loss reduce and power save section The project installs 2 SVCs (6,000kvar*1, 800kvar*1) at 10kV side of transformer substation as well as inverters to ventilation system, which consumes the great part of electricity consumed within a coal mine. As a result, 33,462tCO2e of GHG emission is reduced in the first year.

(2) Determination of Reference Scenario and Project Boundary

The reference scenario of the project is reconsidered and chosen among the scenario options provided in the new methodology.

1) Methane recovery section Without implementation of the project, methane gas is considered to be treated following to one of the 3 scenarios: released into atmosphere (Scenario 1), open flared (Scenario 2-1), enclosed flared (Scenario 2-2) or recovered and utilized (Scenario 3). At present, no regulation exists prohibiting the direct release into atmosphere, moreover the greater part of CMM in Yunnan province is released into atmosphere; thus the Scenario 1, “CMM is released into atmosphere” is chosen as the reference scenario.

2) Power loss reduce and power save section Without implementation of the project, the situations of the transformer substation and electric equipment are either SVC and/or inverter is not installed (Scenario 1) or SVC and/or inverter is installed (Scenario 2). At present, no regulation exists to compel coal mine to install these equipment, moreover less than 50% of coal mines in Yunnan province install the same kind of equipment; thus the Scenario 1, “SVC and/or inverter is not installed” is chosen as the reference scenario.

The physical extent of project boundary is specified as 1.area from the methane extracted to destroyed, 2.all facilities which generate electric power and originally supply the power to the project site and 3.electric equipment which inverters installed to and output range of transformer substation.

The following gases originated in the physical extent of project boundary are evaluated;

1) GHG under reference scenario ・ CH4 released into atmosphere


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・ CO2 emitted after methane destruction under reference scenario ・ CO2 emitted for generating electricity replaced by the project at power plants

connected to electricity system ・ CO2 emitted for generating electricity consumed within electric equipment under the

reference scenario, to which inverter installed by the project ・ CO2 emitted for generating electricity supplied to transformer substation under

reference scenario, to which SVC installed by the project

2) GHG under project scenario ・ CH4 released into atmosphere from the unburned CMM and/or VAM ・ CO2 emitted after methane destruction under project scenario ・ CO2 emitted for generating electricity consumed within electric equipment inverter

installed ・ CO2 emitted for generating electricity supplied to transformer substation SVC

installed

(3) Monitoring Method and Monitoring Plan

The monitoring activity satisfies the following conditions; 1. All the monitoring items shall be measured directly/indirectly, 2. All the monitoring record shall be kept at least 3 years after project activity, 3. The monitoring activity of both reference and project scenarios shall be based on the monitoring method, and 4. The data related to specify the latest reference scenario is monitored as well as the data related to the project emission every year.

1) Monitoring method of reference scenario

The data related to specify the reference scenario is to be monitored every year. The common practice in the province should be researched at this stage so that, this should be conducted in cooperation with the local government. Throughout this study, the local government should be obligated to static the current status of the coal mines in the province for implementing the project under BOCM. The governmental policy and regulations related to the project are confirmed through the open information published by the government. Meanwhile the government should compel the coal mines in the province to provide or report the related information every year, for example the extracted and utilized amount of methane gas, its way of usage (ex. power generation, gas supply or flaring, etc) and installation status of inverter and/or SVC; the project participants and verification institute shall be notified of the result under BOCM. In the case the methane gas should be treated in some way or inverter and/or SVC should be installed based on the governmental policy, the government shall confirm the policy compliance status at each mine.


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2) Monitoring method of project scenario The project emission is calculated after monitoring the all related monitoring items every year. The related data of gas which is used for power generation is automatically recorded, compiled and saved through the operational management system with the Japanese methane power generation technology. Besides, the flow, density and extracted amount of CMM and VAM are also measured with electric meters where the gas extracted similarly for safety reason. In measuring the amount of electricity consumed, it is possible to measure the power consumption of each electric equipment since all pieces of equipment are installed electric meters.

(4) GHG Emission Reduction

The reference scenario is fluctuated during the 20 years project period from 2015 to 2034. The reference scenario agrees with the project scenario in the 20th year, so that the crediting period of the project is set as 19 years from 2015 to 2033.

Emission Reduction during the period

(tCO2e)

Year

Reference Scenario Reference

Emission

Project

Emission

Annual

ER CMM

VAM Inverter SVC

2015 M1 S1 S1 474,746 148,581 326,165

2016 M1 S1 S1 474,746 148,581 326,165

2017 M1 S1 S1 474,746 148,581 326,165

2018 M1 S1 S2 455,932 148,581 307,351

2019 M1 S1 S2 455,932 148,581 307,351

2020 M1 S2 S2 441,284 148,581 292,703

2021 M1 S2 S2 441,284 148,581 292,703

2022 M1 S2 S2 441,284 148,581 292,703

2023 M1 S2 S2 441,284 148,581 292,703

2024 M1 S2 S2 441,284 148,581 292,703

2025 M2-1 S2 S2 310,176 148,581 161,595

2026 M2-1 S2 S2 310,176 148,581 161,595

2027 M2-1 S2 S2 310,176 148,581 161,595

2028 M2-2 S2 S2 205,289 148,581 56,709

2029 M2-2 S2 S2 205,289 148,581 56,709

2030 M2-2 S2 S2 205,289 148,581 56,709


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Year

Reference Scenario Reference

Emission

Project

Emission

Annual

ER CMM

VAM Inverter SVC

2031 M-3 S2 S2 172,010 148,581 23,429

2032 M-3 S2 S2 160,149 148,581 11,565

2033 M-3 S2 S2 153,942 148,581 5,362

2034 M-3 S2 S2 148,581 148,581 0

Total in project period 6,723,598 2,971,612 3,751,986

Total in crediting period 6,575,018 2,823,031 3,751,986

Average in crediting period 346,053 148,581 197,472

*Rounded off after the decimal point Yunnan government recently proposed to the central government to install 60MW of coal mine methane power generation systems newly by 2015. Besides, the emission reduction by the methane recovery section of the project in 2015 is 292,703tCO2e, e.g. 25,452tCO2e/MW; therefore if the project scheme is applied to all of the 60MW methane power generation systems, the potential of emission reduction by methane recovery section hereafter in Yunnan province is approximately 1,527,120tCO2e in a year.

As to the power loss reduce and power save section of the project in 2015, 0.01859tCO2e per 1 ton coal production are to be reduced. The prospective coal production of Yunnan province in 2015 is estimated as 145 million ton; thus the potentiality of emission reduction in this section is expected to be 2,695,550tCO2e in 2015.

(5) Measuring, Reporting and Verifying (MRV) method

The MRV method is developed based on those methods in Japan and China, and the method used under CDM scheme.

1) Measuring For ensuring the reliability of the credit under BOCM, the monitoring items which are physically possible to be measured are to be measured with electric meters basically. The parameters (e.g. amount and density of methane gas, electricity consumed and so on) to estimate the emission reduction are measured through the electric meters. As to the other values like emission factor of local grid are applied for the default values used under Kyoto mechanism or designed by IPCC. The monitoring activity of reference scenario should be undertaken in cooperation with provincial level government to compel the coal mines to provide the required data under BOCM.


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2) Reporting The measurement result is reported to a verification institute and the related bodies both in Japan and China. The result is better to be submitted through a platform at fixed period every year.

3) Verifying The result reported shall be verified by a verification institute entrusted by both Japanese and Chinese governments; in addition both the measurement result and its verification result should be opened to public.

(6) Securing the Environmental Integrity

The negative impact on the surrounding environment by the project is limited because of the following reasons;

1. There is no activity which could give some negative impact on the environment at the stage of preliminary survey before implementing the project. 2. The project does not require to open up the additional space since there is enough space to construct the project. 3. There is no eviction of local residents since the project is constructed within the project site owned by Diandong company. 4. The additional pollution emission will not bring about by the installation of the technology in the project.

On the other hand, the negative impact during the construction period is very limited and satisfies the Chinese national standard; therefore it can be concluded that the project has no serious negative impact on the environment.

(7) Other Indirect Impacts

Throughout this study, no negative impact on nature or society is identified. (8) Stakeholders’ Comments According to the hearing survey to the stakeholders, they agree with the implementation of the project since it contributes to utilize the waste energy source, improve the environmental condition, stimulate the local economy and so on. There are little project succeeded in utilizing the methane resource to power generation to date, their expectation against the project is very high.

(9) Framework of the project

The project site is Bailogshan coal mine owned by Diandong company. Diangdog company and Taiyanggu company established SPC (51% from Taiyanggu company, 49 from Diangdong company) to invest in the project and operate and manage the project; the SPC


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purchases the main equipment from Japanese manufactures. The detailed project framework and scheme is shown in the following figure.

Diandongcompany

BailongshanCoal mine

Inverter

SVC

Power generationsystem

EPC & maintenancecontract

TepiaBOCM consultant

(credit buyer)

TaiyangguCompany

Com

preh

ensiv

e con

trac

t

49％

finan

ce

Gassupply

ElectricitySupply

51％

finan

ce

Invest

SPC(Implement the project)

Install

Japanese manufacture

Project framework and scheme

(10) Financial plan

The initial investment is 140 million RMB (including the equipment and construction costs); 80% of the initial investment from loan and 20% from capital investment. The annual O&M cost (including methane gas cost) is estimated as 1.43 million RMB and the bank interest of the loan is set at 7%. The revenue from the project consists of 3 parts: the power sales to Bilongshan coal mine, the saved cost for replacing the grid power and the credit income.

Based on these parameters, the project IRRs and the payback periods with and without are 13.14% and 26.98%, 3 years and 7 years respectively.

(11) Introduction of Japanese Technology

For introducing the Japanese technology to China, the main factors to notice are 1.cheapen and shorten the equipment and the date of delivery, 2.apeal the high level of quality and performance, 3.create the local network, 4.capacity building and maintain the after support and 5.prepare the variation of line-up.

Throughout this survey, although the Japanese technology is more expensive than the common technology in China, it is concluded that the Japanese technology is superior to those


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in China because of its quality and performance; thus the introduction of the Japanese technology is very realistic with credit income under BOCM.

(12) Outlook towards Implementation

One of the main themes of the project is the gas extraction activity from the coal seams; many of the coal mines in Yunnan province have this kind of problem. For stable operation of the project, the mutual communication between related organizations is necessary. In the case the gas extraction activity is not favorable, it can be considered the installation of Japanese extraction technology.

Furthermore, there is MA label that expresses the equipment has been authorized by the Chinese government. The label is added to those equipment used at a coal mine for secure the mine safety. At the stage the Japanese manufactures supply those equipment to China, it is better to acquire the MA label in advance.

5. Co-benefits

1) Items to be evaluated The items to be evaluated here is set a.SOx, b.NOx and c.dust based on the co-benefit quantification manual published by Ministry of Environment in Japan.

2) Emission reduction and its development Without implementing the project, the amount of supplied electricity from the methane power generation, saved by inverters and SVC would have been sourced from CCPG, a coal dominant local grid. The implementation of the project contributes to reduce the part of electricity supplied form CCPG, so that the considerable amount of the items mentioned above is reduced every year.

3) Calculation process The emission factors of SOx, NOx and dust of CCPG is not opened to public, so that the default values published by Ministry of Environmental Protection of P.R. China (MEP) and International Center for Environmental Technology Transfer (ICETT) are applied to this evaluation.

Emission factors (EF) of environmental pollutants in China

Pollutants EF SOx 2.26 g/kWh*1 NOx 3.98 g/kWh*2 Dust 2.16 g/kWh*2

*1: MEP, “2010 and 11th 5-year plan Electric Power Industry Energy Saving and Emission Reduction Report” *2: ICETT, “ICETT 2004 vol.13 No.43”


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SOx Emission Reduction ＝Replaced electricity (126,396MWh)×EF (2.26g/kWh)

＝285,654kg/year

NOx Emission Reduction ＝Replaced electricity (126,396MWh)×EF (3.98g/kWh)

＝503,056kg/year

Dust Emission Reduction ＝Replaced electricity (126,396MWh)×EF (2.16g/kWh)

＝273,015kg/year

6. Contribution to Sustainable Development

The project aims to utilize the methane gas originally released to atmosphere for power generation and improve total power efficiency at coal mine; thus the project contributes to the serious power shortage in China.

In addition, the stable extraction activity of methane from coal mine would improve the mining activity at coal mine, which is the current big problem in Chinese coal mine industry.

Furthermore, the implementation of the project creates the job opportunities around the project site where the income level is relatively low in China.

To sum up, the implementation of the project contributes to the sustainable development in China from the following aspects; contributing to the power shortage, securing the safety of coal mine and creating the job opportunities.

new mechanism feasibility study 2011 final report new...

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