12th International Symposium on District Heating and Cooling

The <strong>12th</strong> <strong>International</strong> <strong>Symposium</strong> on District Heating and Cooling,September 5 th to September 7 th , 2010, Tallinn, Estonia2.2. Market DriversThe rational of strong DH development in China isbased on eliminating the small and polluting coal firedboilers in the northern, western and central provincesand to provide feasible living conditions to thepopulation massively moving in to the cities.DH has been encouraged by the Chinese governmentfor several decades. China's DH heating area hasincreased from over 276 Mm 2 in 1991 to over1100 Mm 2 in 2000, and exceeded 2500 Mm 2 in 2005,with an annual growth rate of 17%. The growth in DHmainly came from the northern and the northeastregions. In China, residential buildings account forabout 70% of the total DH area and commercialbuildings the balance of about 30%.The urban communities are very densely built, whicheffectively supports centralized heating and coolingsolutions. The new buildings comprise about half of theDH connections, whereas the balance for existingbuildings, the latter previously having had been heatedby small coal boilers.2.3. Main BarriersThe DHC sector is expanding fast but there are stillsome barriers regarding economy, policy, financing andtechnology as summarized below.ECONOMIC AND PRICING BARRIERSIn order to become cost-effective and an attractiveinvestment, power and heating reform policies will needto be undertaken. Some of the key issues include:Energy price policy reform is a priority. At present,in China, the coal price is based on the market,which has grown rapidly in recent years. However,electricity and heating prices are still controlled bythe government, and have only slightly increased.While the government has provided limitedsubsidies to DH companies, most CHP enterprisesand DH companies are currently not making aprofit as a result of the lack of energy price reform.In addition, heating reform needs to be furtherdeveloped. Currently, in most cases, heat tariffsare based on the building area, rather than on theactual heat consumption, which has a negativeinfluence on improving the energy efficiency indistrict heat facilities and buildings.Power sector reform is also needed. At present,the electricity produced by most DHC (and someCHP) projects cannot interconnect with the powergrid, which has strongly reduced development. Thetechnical issues of grid connection can likely beaddressed. However, there are also administrativeinterconnection issues, such as added-capacitycharges and power grid balancing that need to beaddressed. At present, the State Power Grid Groupis responsible for the power grid operation. Assuch, more communication and coordinationactivities could be conducted between the DHCindustries and the State Power Grid Group.Centralized DHW would benefit CHP. MissingDHW load hampers economic development ofCHP schemes. Without DHW, the CHP plants canoperate all year round only if there is industrialsteam load existing nearby.POLICY BARRIERSThere also exist barriers in the area of economicsupport and administrative policies related toCHP/DHC, including:There is a lack of monitoring and enforcement ofthe government‟s policies related to the efficientoperation of CHP projects. Currently, it appearsthat some newly- built CHP projects are operatingonly in thermal generation mode after they havebeen approved, thereby reducing their energyefficiency.There is a lack of targeted policy for smaller CHPunits. In order to fulfill the energy conservationtarget, China is attempting to increase the numberof more efficient large power generation plants andto close down smaller, older units. While it isimportant that the smaller, more inefficient units beclosed down, some small CHP units with highefficiency are also being targeted for phase-out.Based on the goal of increasing energy supplyefficiency, a different policy should be adopted. Forexample, in regions with low heating loads, smallCHP units could provide most of their energyneeds at a fraction of the cost of larger units.FINANCING BARRIERSThere are promising energy conservation projects– particularly in the DH sector – that could be realized ifthere were sufficient funds or other means available toaddress the gap in investment capital. In particular:Some planned CHP/DHC projects are not operatedefficiently because they lack sufficient resources toinvest in expanded heat pipeline infrastructure.Further, at many existing DHC projects, the heatloss in pipelines is high, reducing the overallefficiency of the heating system. Additionalfinancing is needed to invest in cost-effective heatpipeline retrofit projects, which will generatesizeable energy efficiency benefits and GHGreductions.217