Wednesday 8 October 2008

Inefficient operation: the real "China" problem

I have always wondered why China appears to have such poor energy efficiency numbers. The basic thinking was that China's power plants were using old technologies and no environmental regulation so what do you expect.

I never liked this answer. There had to be something else. This following article tells us that it is not technology but the operation of this technology.

This article provides a far better answer.

MIT report debunks China energy myth [MIT news]

A detailed analysis of powerplants in China by MIT researchers debunks the widespread notion that outmoded energy technology or the utter absence of government regulation is to blame for that country's notorious air-pollution problems. The real issue, the study found, involves complicated interactions between new market forces, new commercial pressures and new types of governmental regulation.

China's power sector has been expanding at a rate roughly equivalent to three to four new coal-fired, 500 megawatt plants coming on line every week, said Edward S. Steinfeld, associate professor of political science at MIT.

After detailed survey and field research involving dozens of managers at 85 power plants across 14 Chinese provinces, Steinfeld and his co-authors, Richard Lester (professor, nuclear science and engineering and director of the MIT Industrial Performance Center) and Edward Cunningham (doctoral candidate, political science) found that in fact most of the new plants have been built to very high technical standards, using some of the most modern technologies available. The problem has to do with the way that energy infrastructure is being operated and the types of coals being burned.

New market pressures encourage plant managers to buy the cheapest, lowest quality and most-polluting coal available, while at the same time idle expensive-to-operate smokestack scrubbers or other cleanup technologies. The physical infrastructure is advanced, but the emissions performance ends up decidedly retrograde.

Understanding the realities of China's energy infrastructure and management is crucial, Steinfeld said, for gaining leverage over the whole gamut of global energy-related challenges. China's electric power sector is vast -- second only to America's in size -- and globally unparalleled in terms of the speed of its growth. "To a significant degree, our planet's energy and environmental future is now being written in China," he and his two co-authors wrote in a recent MIT Industrial Performance Center working paper (PDF available). Findings from the research have also recently been published in The China Economic Quarterly and an additional paper is currently under review at Energy Policy.

Steinfeld, who has been working in China since the late 1980s and has been carrying out this research project there since 2005, said that at present the Chinese government lacks reliable data on how the nation's powerplants are built and operated. Officially available data tend to be collected haphazardly and often by local authorities who have a vested interest in the outcomes. The survey work conducted by Steinfeld and his colleagues represents a first-of-its-kind effort by outsiders to collect unbiased, objective data of this sort at a national level.

One of the most surprising findings was that "the kinds of technology currently being adopted in China are not cheap. They're not buying junk, and in some cases the plants are employing state-of-the-art technology."

The findings suggest that emissions levels from Chinese powerplants, he said, "depend almost entirely on the quality of the coal they use. When they're hit by price spikes, they buy low-grade coal." Lower-grade coal, which produces high levels of sulfur emissions, can be obtained locally, whereas the highest-grade anthracite comes mostly from China's northwest and must travel long distances to the plants, adding greatly to its cost. Contrary to what many outsiders believe, the Chinese state has substantially improved its ability to implement and enforce rules on technology standards. It has been slower, however, to develop such abilities for monitoring the day-to-day operations of energy producers.

In some respects, the situation is more amenable to change than many people had assumed, Steinfeld said. With expanding regulatory capacity and increasingly sophisticated efforts to regulate through market-friendly pricing mechanisms, reformers could achieve change relatively quickly, he said. "At least the technology -- the physical infrastructure of China's energy system -- is not an impediment," he said. Indeed, it can ultimately prove a key asset for achieving better environmental outcomes.

Since coal quality is one important leverage point, "some new regulatory efforts probably need to be focused on the mines and coal markets," Steinfeld suggested. "That's the kind of question that this research begins to allow you to address."

The three co-authors of the study are members of the Industrial Performance Center's China Energy Group. The research was supported by Shell, the MIT Energy Initiative, and the MIT Sloan School of Management China Program.


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