Beijing seeks to kill coal with gas

Public anger over air pollution has helped drive plans, once thought fanciful, to make a wholesale shift away from coal. But can other cities follow suit? An Geng and Xu Nan report.

For Beijing, a wholesale switch from coal to natural gas was once considered a pipe dream. But today, a gas-powered capital looks like an ever closer possibility.

Unlike most developed-nation cities, Beijing and the rest of urban China have seen mass car ownership appear before replacement of local coal-fired power generation with cleaner alternatives. As a result, Chinese cities are grappling simultaneously with pollution from coal burning and fumes from their ever more crowded roads.

The consequences haven’t been pretty, and Beijing’s air quality in particular has become a focus of a searing national debate. Specifically, its levels of pollutant PM2.5 – fine particulates which pose particular hazards to human health – have shot up the list of public concerns. The need to deal with urban China’s dual affliction is increasingly clear.

Hong Feng, Beijing’s vice-mayor, has said that around 22% of Beijing’s PM2.5 pollution comes from vehicles and 17% from coal combustion, in power plants and district boilers, and scattered, small-scale burning.

On March 3, the Beijing Development and Reform Commission (BDRC) announced a new round of targets to cut coal use, with the aim of improving air quality and reducing PM2.5 levels. The city’s plan is to cap coal use at 15 million tonnes a year by 2015, the end of the 12th Five-Year Plan period. Now, it has said it will extend and deepen this cap, cutting use to 10 million tonnes by 2020, which represents a 60% drop on 2010 figures.

Natural gas is a core part of the strategy to wean the city off coal. Under plans released in 2010, Beijing’s four remaining coal-burning power plants are due to switch over to natural-gas combined heat and power (CHP) systems by the winter of 2014 at the latest. Despite concerns about cost and supply, Beijing has pulled out the policy stops to drive through the switch, and looks set to be the first Chinese city to consign coal power to the history books. But that does not mean it will be easy for others, without the clout of the capital, to follow suit.

And meanwhile, debate about the make-up of China’s future gas supplies and returns for investors as sources become less conventional, rumbles on. So too do global arguments about the environmental impacts of gas: though less carbon intensive than coal, it is still a fossil fuel and, say environmentalists, one diverting investment away from genuinely clean renewable sources. Energy and water-intensive methods to extract unconventional gas, notably from shale, and the footprint of the vast pipelines needed to convey supplies have also prompted serious concern. 

A long time coming

These are not the first moves by Beijing to change the make-up of its energy supply. In fact, there has been a long-running strategy to move towards gas.

In 1997, the first phase of the Shaanxi-Beijing natural gas pipeline completed, providing the capital with a guaranteed supply of a certain quantity of natural gas, and allowing policymakers to start plotting to get rid of coal. Since 1998, Beijing has built no new coal-fired power plants.

Under the energy strategy for the 2008 Beijing Olympics, the four existing coal-power plants were retained, but emissions standards were raised. A set of “air quality assurance measures” issued ahead of the games required Beijing Jingneng Thermal Power and other major coal-burning power stations and coal-fired boilers to cut emissions by 30%.

Then, in November 2009, Zhang Guobao – at that time head of the National Energy Administration (NEA) – chaired a meeting about the need to retrofit Beijing’s four remaining coal plants, on the grounds their technology was outdated and their city-centre location was affecting urban development and emissions-reduction efforts.

But the prospect of a wholesale switch to natural gas drew almost unanimous opposition from the energy industry; companies complained of high generating costs, a constrained fuel supply and even problems guaranteeing employee safety. The plants had already spent heavily on improved equipment in the run up to the Olympics, they said, and were in line with both national and city standards. Their plants would be considered advanced even on the global stage, they insisted.

Energy companies weren’t the only ones worrying about a gas-fired future. Beijing officials were also concerned – primarily about cost.

Deputy mayor Huang Wei had worked out some troubling figures. If all the city’s thermal power plants switched to natural gas, and prices for gas, electricity and heat remained steady, then the state could sustain losses of over 15 billion yuan (US$2.4 billion) in power-generation, and 3.5 billion yuan (US$551 million) in heat-generation. If the price of natural gas went up, however, from 1.95 yuan per cubic metre to, say, 3 yuan, total losses would rise to more than 27 billion yuan (US$4.3 billion).

In the end, cost concerns weren’t sufficient to defeat the plan, however. Beijing decided to foot the bill and is pushing ahead with the switch to gas.

Pro-gas advocates argue the environmental benefits this will bring are clear. Natural gas emits around half as much carbon dioxide as coal-fired generation and less than a third as much nitrogen oxides, according to the US Environmental Protection Agency, and creates none of the ash and slag. The BDRC estimates that the changes at the four plants will result in annual reductions of 11 million tonnes of carbon-dioxide emissions, 7,500 tonnes of sulphur dioxides and 12,000 tonnes of nitrogen oxides by the end of the 12th Five-Year Plan.

Hard to copy

Beijing isn’t the only city looking to gas. Shanghai also has a good number of natural gas power plants, and Chongqing is trying to subsidise a switch over from coal. For the rest of China’s cities, Beijing’s policies may look like an easy route to bluer skies. But, away from the centre of government, the pro-gas lobby may have a harder time getting its way.

A draft strategy for dealing with air pollution in the south Chinese city of Guangzhou from 2012 to 2016 proposes reducing levels of PM10, PM2.5, sulphur dioxide and nitrogen dioxide by 12%, 7%, 12% and 10% respectively on 2011 levels. But the costs involved in switching to gas – an important part of the strategy – have united the city’s power companies in opposition to the plan.

Though Beijing has seen similar opposition from business, its symbolic status as the capital of the nation has allowed the switch to gas to win the policy support necessary to drive it through. Gao Xinyu, head of the energy office at the BDRC, told the media: “Beijing is the capital of China and to a degree represents the nation, and so it must bear the costs of developing clean energy.”

The National Development and Reform Commission (NDRC), China’s top economic planning body, sets a price of 0.472 yuan per kilowatt hour (kW/h) for electricity supplied to the grid. But, for natural gas power plants in Beijing, that is increased to 0.573 yuan.That means Beijing subsidises natural gas power plants to the tune of about 0.10 yuan per kW/h.

That the meeting on adjusting Beijing’s energy structure was chaired by the head of the NEA – not at all the norm – was in itself a sign of the political weight behind the proposed shift. Clearly, Beijing hopes to be a model in China’s push to eliminate coal.

But even for Beijing, there are still risks, notably when it comes to security of supply. Background statistics included in Beijing’s 12th Five-Year Plan for developing the use of natural gas show that, from 2006 to 2010, daily demand for natural gas fluctuated by up to 49 million cubic metres, while monthly demand varied by up to 1.22 billion cubic metres. Beijing adjusted prices to try and even out demand, but it became increasing difficult to moderate those peaks.

In the winter of 2009, peak gas demand in Beijing hit 53 million cubic metres and the authorities had no choice but to impose emergency measures, vigorously constraining industrial gas use and reducing supply to district boilers, in order to guarantee power plants could continue to operate at full capacity.

It as against this background that work started on a thirdpipeline in the Shaanxi-Beijing project in May, 2009, which was up and running by the end of the following year. And, in February 2010, at a ceremony to seal a new partnership between the Beijing Natural Gas Group and power giant Datang International, Zhang Guobao sought to alleviate concerns: “The Shaanxi-Beijing 1st and 2nd Pipelines provide over 20 billion cubic metres of gas a year. The 3rd Pipeline will open at the end of 2010, and the construction of the 4th Pipeline has been confirmed. Together those four routes will supply over 40 billion cubic metres of gas – enough to meet Beijing’s future demands,” he said.

Through this system of pipelines, Zhang explained, north China is now linked up to central Asian gas supplies, providing a major boost to energy security.

Strong support for Beijing’s “gas project” from the NDRC and the NEA has calmed the nerves of many in the city. But worries persist, about both supply and cost – expected to rise in line with demand – as well as the uncertainty of the gas market as unconventional sources come online. Speculation that China could join the United States in experiencing a shale-gas boom is rife, but this is a nascent industry with an unclear future, and environmentalists are up in arms about its effect on groundwater, among other impacts. More fundamentally, many in the green community argue that natural gas is more of a sticking plaster than a real solution to China – and the world’s – pollution and climate challenges.

Guaranteeing a stable and sustained supply will be the major concern for Beijing as it restructures its energy mix, and also the key difficulty when it comes to replacing coal with natural gas further afield. “Large-scale refitting of coal-burning power stations across China still needs time and preparation,” said Zhang Baoguo.

An Geng is a reporter at China Energy News. Xu Nan is managing editor in chinadialogue’s Beijing office.

This article is published as part of our Green Growth project, a collaboration between
chinadialogue and The Energy Foundation.

Homepage image by Greenpeace. Flue gas desulfurisation gypsum is transported from the power plant and dumped into the coal ash disposal site, in Huinong, Shizuishan, Ningxia.