China’s Tianjin Eco-City : Future of Low-Carbon Cities?

Continuing on the discussion of China’s pilot eco-cities from my last post, I found impressive pictures of Tianjin’s Eco-City in the Huffington Post today.  The eco-city will be finished in 2020 by Surbana Urban Planning Group, and will showcase various advanced energy saving technologies, including solar power, wind power, rainwater recycling, and desalination of sea water. The city will be built ten minutes away from the Tianjin Economic Development Area, making the commute a mere ten minutes with the development of an advanced light rail transit system.  China has pledged that 90% of transportation will be through public transit. The 30 kilometer development project will provide a community for 350,000 residents.

This exciting eco-city pilot project is line with the rapid rise of urbanization in China.  According to a People’s Daily report, China will have an urban development rate of around 50% and a total urban population of 600 million by 2015.   The number of cities will rise more than 1,000 by 2015.  The challenge is to build cities that are mixed-used and designed for people, rather than private cars. This peek into Tianjin’s eco-city is a good start to think about the future of urban planning.



China Plans for National Climate Emissions Trading in the Next Five Years

As part of China’s strategy to reduce carbon intensity and improve its energy efficiency, China is moving toward a national carbon emissions trading scheme as part of its 12th Five Year Plan (2011-2015).  China aims to meet its goal of reducing carbon intensity by 40-45% by 2020, and needs to implement aggressive measures to reduce carbon emissions while economic growth and demand for resources continue to grow.  The International Energy Agency states that China’s energy consumption for 2009 totaled to approximately 2.132 billion tons, which account for 17% of the world demand for energy. In the next 25 years, China will account for 22% of world energy demand.

One of the key initiatives in place to reduce carbon intensity is through the Top 1,000 Enterprises Program, which requires the top 1,000 energy consumers to sign a contract with the government to improve their energy efficiency. The Lawrence Berkley Lab reports that the Top 1,000 Enterprises Program “could contribute to somewhere between approximately 10% and 25% of the savings required to support China’s efforts to meet a 20% reduction in energy use per unit of GDP by 2010.”  Additionally, in August of 2010, China ordered 2,000 highly polluting, unsafe, or inefficient energy plants to close down within two months.  This measure is in line with China’s 11th Five Year Plan (2006-2010), to reduce energy intensity by 20% from the 2005 level. By the end of Oct. 2010, China had achieved its energy efficiency goal by phasing out inefficient production capacity of 87.12 million tons of steel, 60.38 million tons of iron, and 214 million tons of cement in 2006-2010. Yet, at the same time, Chinese industries use 20% to 100% more energy per unit of output than their US, Japanese, and other counterparts.

While the reduction in energy use is a substantial improvement, China recognizes the need to establish a national market-based carbon trading system to further reduce its carbon emissions and stimulate low-carbon growth.   This national domestic carbon trading system would be self-imposed and separate from the Kyoto Protocol.  The challenge is: how should a carbon emissions program be implemented in China?  Which industries should be selected to participate first? Should absolute caps on emissions for certain industries be imposed? Unlike the United States and Europe, China lacks experience in financial and environmental trading markets, and will need to draw on the experience from other countries to ensure quality and reliability of emissions data that would be included in a carbon trading system.

In August of 2008, the first voluntary carbon trade was sealed when a Shanghai based automobile insurance company purchased more than 8,000 tons of carbon credits through a green commuting campaign during the Beijing Olympics.  The trade was carried through the China Beijing Environment Exchange, “a professional market platform to trade environmental equities.”

With regard to implementing a domestic carbon trading program, China will most likely launch pilot projects in certain cities or industries, such as steel, cement, and aluminum, before implementing the program nationwide.  In August of 2010, China launched a low carbon pilot in select cities and provinces to test how to implement low carbon growth in cities.  China’s National Development and Reform Commission chose to implement the low-carbon province and low-carbon experiment in five provinces- Guangdong, Liaoning, Hubei, Shaanxi, and Yunnan, and eight cities: Tianjin, Chongqing, Shenzhen, Xiamen, Hangzhou, Nanchang, Guiyang, and Baoding.

While the design and structure of China’s national carbon trading system is being developed, China’s entry into the carbon trading market would significantly impact businesses and the environment.  If China installs a system to cap emissions of its industries, carbon credits would stimulate growth in the clean energy industry, amidst the restructuring of domestic energy companies.

The Chinese government can pass new policies quickly, but the major challenge will be implementing an emission system that is measurable, reliable, and verifiable.  There is a great need for institutional capacity building and knowledge sharing between the East and the West if China is to develop a sound national carbon trading scheme.

Scaling Green Finance in China and the United States

The World Bank’s World Development Report 2010: Development and Climate Change notes the projected annual needs for mitigation and adaptation finance in developing countries in 2030.  Adaptation investment would range from $28 billion to $100 billion and mitigation costs of $139 billion to $175 billion a year, consistent with limiting warming to 2 degrees Celsius. Low carbon technologies play an important role in adaptation and mitigation of climate change, but where will the financing come from? Since China and the US account for more than 40% of the world’s greenhouse gas emissions, it was timely and relevant for Asia Society Northern California to host a one day conference entitled “Scaling Green Finance in China and the US: A Call to Action.”  Investment bankers, venture capitalists, policy makers and policy analysts from the US and China discussed trends, barriers, and opportunities in green finance.

Peter Darbee, CEO of Pacific Gas & Electric lamented the “US has gone backwards in our understanding of climate change”, despite the fact that the manifestations of climate change are clearer than ever.  “In Russia, there have been fires that go on and on.  In Pakistan, we have seen severe floods.”

Jon, Anda, Vice Chairman and Head of Environmental Markets at UBS Securities and former Vice Chairman at Morgan Stanley, emphasized the importance of predictable government policies and regulations to encourage investment in cleantech.  The result of US’s policy uncertainty has affected the market, leading to a drop of 47% of U.S. clean tech companies in the S&P since 2007.  China, on the other hand, with a National Renewable Energy Law in place, has invested $36 billion a year in cleantech, twice as much as the US. Jon Anda’s key take away point was to price carbon so that clean tech VCs would have the necessary information to make decisions about investment.

In Panel 1: Policy and Politics in the US and China, the panelists discussed the policy drivers and constraints in the US and China for financing clean tech.  Ken DeWoskin, senior adviser with Deloitte China, noted China realizes climate change is a national security issue and the leaders are willing to invest in alternative energy without contemplating the return.  While the US has been paralyzed in developing a national renewable energy plan, and China has been leapfrogging forward, DeWoskin comments that US has the technological innovation over China.

Shi Dinguan, senior adviser with China’s State Council, was the special guest at the Conference, representing China in the green finance conversation.  Mr. Shi emphasized the need to adapt to a low carbon path of development for China to continue its economic growth.  Mr. Shi gave an overview of hydropower, wind, solar, and biomass developments in China.  By 2020, the Chinese government will invest 300 trillion RMB (approximately $45 trillion) in clean tech, with a special focus on hydropower and nuclear energy.  By 2020, hydropower will reach 3,000 GW, wind power will reach 150-200 GW, and solar will reach 20-50 GW.  Mr. Shi encouraged technological cooperation and investment, since financing of clean tech projects will come mostly from private companies and banks.

In Panel II: Bringing Innovation to Utilities, Uday Mathur, Principal Energy Procurement at Pacific Gas & Electric, stated the difficulty of project financing of renewables, especially during the financial crisis.  Building a demonstration project is costly and risky; a project may cost $200 billion, with no certainty it will work.  Mark Wallenrod, Director of Program and Operations at Southern California Edison noted that energy efficiency is the cheapest and best option to reducing emission of greenhouse gases.  Mona Yew from National Resources Defense Council shared that China has recently ordered the “Energy Efficiency Resource Standard” to go into effect nationwide in January, which would require China’s electricity sector, factories, businesses, and home to be more energy efficient.  Since the US has a long history of demand side management, the US can share its best practices with the Chinese, while China can share its technology with the US.

In Panel III: Bringing Financing to Scale in China, Mr. Shi, senior advisor to the State Council, stated that China’s primary focus is energy efficiency, while renewable energy is secondary, since “energy saving is a low-hanging fruit. It pays off economically and reduces emissions.” In the Top 1,000 Enterprises Program, the Chinese government has set a mandate for the top 1,000 energy intensive companies to reduce 3,500 million tons of CO2, the largest reduction program in the world.

In addition to energy efficiency, nuclear energy will play an important role in reaching China’s 2020 emission reduction target.  Unlike wind and hydro, which are built in remote places far from demand sites, nuclear plants can be built close to centers of demand. As of June 2010, official installed nuclear capacity projections were 70-80 GWe by 2020, 200 GWe by 2030 and 400-500 GWe by 2050. In September 2010, the China Daily reported that China National Nuclear Corporation (CNNC) alone plans to invest CNY 800 billion ($120 billion) into nuclear energy projects by 2020.

According to the International Energy Agency 2010 World Energy Outlook, China’s energy demand will rise by 75% between 2008 and 2035.  Currently, coal represents 75% of China’s total power capacity, and will likely remain the dominant power source, though China has set the dual goal of increasing the us e of non-fossil energy to 15% of primary energy consumption by 2020 and to reduce carbon intensity by 40 to 45% in 2020 from the 2005 levels.


Documentary on Biogas Engineering

It’s been a long time since I last blogged. The last month I’ve been working on a documentary to engage a larger audience on China’s green movement.  I previously blogged about Dongran Company (a company that turns urban manure into biogas, an energy source that fuels the company’s facility, and also produces organic fertilizer).  You can view the video at the link below.

The title of the video is: “Talking Trash: Turning Waste into Energy”

Challenges to Rural Biogas- Maintenance, Lack of Technicians, and Fragmented Authority

Last week, I met with Mr. Zhang Mu, the Yunnan Provincial Director of Agriculture, Department of the Energy Office, to chat about Yunnan’s biogas development.

According to 2008 government statistics, 2.17 million households in Yunnan have installed biogas. Yunnan Province’s plan is to construct a total of 2.7 million biogas digesters, which is equivalent to 70% of farmers having biogas digesters.  Each year, the Department of Agriculture plans to build 200,000 digesters.   The government has invested a significant amount of money in the household biogas program to protect the environment and provide an alternative energy source for farmers.  In the 12th Five Year Plan (2010-2015), the government provides a subsidy of 1,500 RMB, or half of the total cost, for construction of biogas.

While the government has invested heavily in construction, there is still insufficient funding and attention for the maintenance of household biogas digesters.  Each village has a service station that typically is in charge of 300-500 households, but since many of the farmers may live far away from the service station, few are willing to go to the service station to purchase a new biogas stove or broken appliance.  However, Ms. Li, a government official in the energy department of Yunnan’s An Ning City, recognizes this problem and told me their department is working on increasing the number of biogas service stations.

Each station is staffed with biogas technicians to teach farmers how to properly manage the biogas digester to prevent injuries, but according to Ms. Li, an energy government official of Yunnan’s An Ning City, most of the biogas technicians are not paid a very high salary, and so turnover is high.  She is working to introduce policy to increase the salary of biogas technicians to attract and retain skilled staff to ensure the proper operation of biogas digesters.   One major potential safety hazard is the yearly cleaning of the digester, which includes digging up the accumulated fermented material and adding a new batch of feedstock.  Since the biogas digester is fairly deep, proper techniques must be used to ensure safety.

Mr. Zhang Mu frankly stated that fragmented authority is a big problem in the Chinese political system.  There are five bureaus in charge of biogas: the agricultural bureau, forestry bureau, the poverty alleviation bureau, and the women’s federation.  While all the bureaus are involved in some aspect of biogas, there is no information sharing/communication between the different bureaus.  The fragmented authority and lack of oversight prevents biogas from being well managed.

While there are challenges to rural household biogas in China, the outlook for large-scale biogas digesters is more promising.  In Yunnan, there are 13 large scale biogas digesters (300 cubic meters and above). As China demands more and more meat, the shift to factory farming will be likely.  Factory farms are required to have a proper waste management system in place, and building a biogas digester is part of the prerequisite for a factory farm to operate.  Since building a large scale biogas digester diverts waste from the water and surrounding environment, the government heavily subsidizes the cost of constructing a biogas digester.   The central government pays 45% of the total cost, the local government pays 5% of the total cost, and the company pays the remaining balance.

The large-scale biogas digesters can provide sufficient energy to power their facilities, but for these biogas digesters to reach its full potential, it needs to be mandated to connect to the grid. Currently, the Chinese government does not provide any support for electricity generated from biogas to be connected to the grid.  According to Mr. Zhang Mu, the government is concerned that biogas digesters do not produce enough electricity and insufficient energy is produced at a high cost.  However, as more and more large-scale biogas digesters are built and with supportive policies, large-scale biogas digesters can be fully utilized.

Turning Urban Manure Into Organic Fertilizer

During the three week biogas training workshop, we visited Kunming Dongran Technology Company, a business that specializes in treating human manure through anaerobic digestion and turning the bio-slurry into an organic fertilizer.  Dongran Technology was founded in 2003 with a capital investment of 10 million RMB.  With the advancement of its scientific capabilities, the Yunnan National Reform and Development Commission approved Dongran as a suitable BOT (Build-Operate-Transfer) project for Kunming City’s Wu Hua District.  BOT is a form of project financing, where the private enterprise receives funding from the government to finance, design, construct, and operate a facility.  The financing from the government allows proponents to recover its investment, operation, and maintenance expense in the project.   Usually, the project is transferred to the government at the end of the concession term, and in the case of Dongran, the company will be transferred to the government in twenty years.  Fortunately for Dongran, the return in investment is only 2-3 years, so the company can make a quick return.  BOTs are quite common in China.  When I went to Beijing to visit Beijing Sound Environmental Group, a municipal solid waste company, I learned the company was also a BOT.

Dongran is the first company in China to design an urban manure treatment facility and use the manure to generate power.  Every day, Dongran treats 300 tons of human manure from the Western districts of Kunming, and in the coming years, it will treat all of the human manure of Kunming, a city with approximately 5-6 million residents.

In most urban areas, human manure is often treated with wastewater, but Dongran specifically treats manure as a separate entity from wastewater, and reduces the likelihood of disease transmission by proper manure management.   Additionally, through Dongran’s separation of manure from the wastewater treatment process, the Environmental Protection and Sanitation Bureau’s waste management burden is reduced.  While Dongran receives money from Kunming’s Wu Hua District to treat the waste, Dongran’s main source of income is from producing organic fertilizer through the fermentation of manure.  The solid organic fertilizer is used on tobacco farms, a major industry and source of income for Yunnan Province, and also on vegetables, flowers, fruits, and tea.  The liquid organic fertilizer is often used as a nutrient for seeds. Not only does organic fertilizer improve food quality, but also improves soil quality as well.

The biogas technology designed by Dongran not only treats urban manure, but can also treat municipal organic waste and the water algae that cause water pollution in the nearby Dianchi Lake.  The multiple layers of fermentation guarantee the organic fertilizer produced is poison free and odorless.   Through the whole process of manure treatment and fertilizer production, no pollution is emitted since the biogas produced from anaerobic digestion supplies sufficient energy to power the facility.

The manure and organic material undergoes anaerobic fermentation in the biogas digester where the bacteria are removed, and the bio-slurry produced is similar to an odorless sludge.  Since the bio-slurry is only 10% solid and 90% liquid, it must undergo solid liquid separation before it can be produced as a solid fertilizer.  Through a centrifugal wall, the liquid is sieved and the solid is sent to a machine to undergo compression and dehydration. Dongran has the capacity to produce 45 tons of solid organic fertilizer a day.

For the production of liquid organic fertilizer, the fermented liquid is biologically treated and then undergoes filtration.  Two thirds of the fermentation liquid will be recycled as medium quality water (such as toilet water);  the other one third of the fermentation liquid is rich in organic material and can be used as liquid fertilizer after undergoing additional filtration to remove harmful substances.  70 tons of liquid fertilizer can be produced daily along with 200 tons of medium quality water per day.

During the process of anaerobic digestion, 100-140 cubic meters of biogas are produced.  Through the use of a biogas electricity generator, every cubic meter of biogas produced can generate 1.6 kWh of electricity.  Therefore 100 cubic meters of biogas produced can generate 160 kWh, which is used to provide power on-site, but can be also sold to the electric grid.

Beijing’s Haidian District government (where China’s elite universities are located along with Beijing’s Silicon Valley, ZhongGuanCun) has visited Dongran’s facility and is planning to use the company’s technology to build a biogas waste management system.  The large scale biogas digester is an excellent technology to not only solve the problem of proper waste treatment, but create a marketable product as well.

Yunnan’s Ming Hong Company is a Model for Sustainable Farming

During the International Biogas Training Workshop, our group traveled to visit Ming Hong Company in Chuxiong, a town about 150 kilometers away from Kunming, Yunnan. Ming Hong Company is a farming company partnered with Yunnan Normal University’s biogas Professor Zhang Wu Di, who provides technical consulting to the company.

Ming Hong Company raises over 100,000 organic pigs every year. The pig manure is transferred to the large biogas digesters on site to generate power. The biogas digester has an installed capacity of 10,000 KW and has an annual power generation capacity of 6.5 million kWh. After the fermentation of the manure through the biogas digester, the bioslurry is used to produce organic fertilizer. The organic fertilizer is used to grow green fodder for the pigs, and the fodder is processed and then fed to the pigs. Currently, 50,000 tons of organic fertilizer is produced each year. This farm-fertilizer-feed-food model (the 4F model) forms the circular economy. While there is no formal definition of circular economy, it can be defined as a circular flow of materials where fewer pollutants and unwanted products are released into the environment, but instead are recycled.

The Ming Hong Company was founded in January of 2005 with a total capital investment of 11 million RMB and 197 acres of land. The site is divided up into several different sections: 1) pig breeding and meatpacking factory, 2) organic fertilizer production, 3) organic feed processing, 4) biogas power generation, and 5) a dairy breeding site and meatpacking factory.

Through the use of biogas, the methane that would have otherwise been released in the air is used for power generation. Since the greenhouse gas emissions of this company is significantly reduced through using the manure from the 100,000 pigs for biogas power generation and the company’s early founding in 2005, Ming Hong Company was the first enterprise in Yunnan to be granted as a CDM project.

The company is also planning to expand its production capacity by building an additional four breeding demonstration sites in Wu Ding County (close to Kunming) and at Rong Ren County. Each breeding demonstration site would have the capacity to raise 100,000 pigs. This sustainable farming model raises the selling price for pork (organic pork is 2-3 times higher than regular pork) and increases farmers’ incomes, provides consumers with a higher quality of meat, reduces waste, and generates power on-site.

The company’s programs in raising pigs, producing organic fertilizer, generating power from biogas, cultivating green fodder, organic feed processing, raising cows, and meatpacking required a total investment of 195 million RMB. The Ministry of Agriculture provided 25% of the funding, bank loans covered another 25% of the funding, and the additional 50% of total funding came from the enterprise itself. After investment and construction of the facility, the yearly gross sale is approximately 506 million RMB and the yearly total profit after taxes is 26 million RMB.

It is impressive that Ming Hong Company had already started this sustainable farming business back in 2005 and was successful in raising a significant amount of money and government support to make this business possible. The Ming Hong Company is an excellent model for sustainable farming in China, and if future sustainable farming enterprises are to succeed, government support, capital investment, and education on the importance of circular economy is all essential.