Coal power struggles in war on sulfur

PUBLISHED : Saturday, 23 June, 2007, 12:00am
UPDATED : Saturday, 23 June, 2007, 12:00am

After construction of the huge, silver desulfurisation tower at the Meixian coal-fired power station in Meizhou is finished, employee Gu Liang thinks it will be beautiful to look at but too expensive to use.

At the small power plant in Guangdong more than 100 men and women are working against time to put the tower and its labyrinth of pipes in place.

In the end, it will be as big as a football field, cost more than 100 million yuan and have just one purpose - to capture sulfur dioxide, a major ingredient in acid rain.

But if a similar project at a neighbouring power plant is any guide, the new facilities will have no impact.

'Now they only turn [the desulfurisation equipment] on when inspectors come,' Mr Gu says.

The situation in Guangdong is repeated all over the country. Some officials estimate that of the 100 or so desulfurisation projects installed in mainland power plants, only about 10 are running as required.

As a result, China is the biggest sulfur dioxide emitter in the world and half of the country is covered by acid rain. The country pumps out more than 23 million tonnes of the gas each year, at an estimated economic cost of 110 billion yuan.

About 60 per cent of the national output comes from the coal-fired power industry and although authorities have sought to impose administrative orders to get coal-fired plants to clean up their act, there has been no lasting effect.

Now the central government is hoping a new carrot-and-stick approach - outlined earlier this month in regulations released by the National Development and Reform Commission (NDRC) and the State Environment Protection Administration (Sepa) - will help the country meet its green targets.

The rules are the nation's first regulations for the desulfurisation of coal-fired power and aim to reverse the tide in emissions with a combination of financial incentives, tighter monitoring and tougher penalties.

The mainland began to tackle the sulfur dioxide issue seriously in the late 1990s, when reports emerged of forests in southern China dying off because of acid rain and the high prevalence of breathing problems and respiratory illnesses among the elderly and children due to pollution.

The mainland had a power surplus at the time so the administration simply shut down a large number of inefficient, small plants.

It worked. Sulfur emissions decreased noticeably, the amount of acid rain dropped and the media hailed it as 'more proof of the advantage of a socialist market economy'.

But, in 2000, the rapid economic expansion, rising living standards, and a lack of installed capacity combined to create a severe power shortage. Almost every generator in the nation was running at full throttle, and most provinces began investing in new coal-fired power plants. Over the next five years, generation capacity doubled and with it the amount of sulfur dioxide emitted.

Once again, the emissions had to be addressed but authorities could not risk damaging the economy by telling plants to close. So they decided to encourage power stations to install desulfurisation equipment by making banks give loans for installation, and by approving construction of new power plants only if they included the equipment in their plans.

In just a couple of years, the proportion of power stations with the equipment rose from 5.4 per cent of the national total to 65.8 per cent.

But emissions also continued to rise. Last year sulfur dioxide emissions were 30 per cent higher than in 2000, mainly because only a fraction of the plants with the equipment actually use it.

Industrial analyst Wang Feng says the equipment is rarely used because it adds dramatically to the cost of running the plant, and penalties for not using it are not great.

For example, a desulfurisation facility for a small, 60 MW power plant consumes about four tonnes of limestone an hour and takes about 1.5 per cent of the total amount of electricity generated to power up.

Such costs, together with the interest on bank loans for the equipment purchase, can be enough to drive most existing power stations out of business, Dr Wang says.

He says power plants at worst face a 50,000 yuan fine for emitting pollutants, while the daily cost of desulfurisation can exceed 150,000 yuan.

'There is no incentive at all [to desulfur],' Dr Wang said.

So the central government began to experiment with different approaches to overcome these problems. The NDRC and Sepa worked together to develop a desulfurisation scheme which includes subsidies, supervision and punishment. They spent more than two years on trials and finally published the regulation earlier this month.

Chai Fahe , from the Chinese Research Academy of Environmental Sciences, says the new rules highlight subsidies and make them work. The government first tried an economic incentive scheme in 2004, subsidising 1.5 fen for each KWH of electricity generated by desulfurised power stations. But, Professor Chai says, the compensation was far from sufficient in many places because it did not take coal sulfur content levels into account.

He says that the higher the sulfur levels in the coal the higher is the cost of capturing it. For some power plants using coal with higher concentrations of sulfur, the extraction process can add 500,000 yuan every day to plant operating expenses, even with the 1.5 fen subsidy.

Under the new rules, each province can set its own subsidy rates based on the quality of the coal used. There is also no upper limit to subsidies for desulfurisation running costs.

'The [pollution] situation will quickly improve with the easing of economic burdens,' Professor Chai said.

That burden will go straight to customers, State Grid Power Economic Research Institute Energy and Environment Department director Bai Jianhua says.

Professor Bai says the cost of desulfurisation will no longer be borne by the Treasury but customers of a market economy whose demand for a clean environment is rising.

He says the state grid will soon raise electricity prices to fully reflect the cost of desulfurisation.

'Efficiency [in the overall system] will increase because of supply and demand economics,' he said.

In addition to more efficient incentives, the regulation also specifies a more rigorous and transparent monitoring system, according to Professor Bai.

All subsidies are paid by the state grid. But the grid can assume only that all power stations with desulfurisation facilities are running them full-time because they have no access to each plant's operational status.

Therefore, many power plants are receiving lucrative government subsidies even though their machines are dormant.

Under the new approach, each desulfurisation tower will have three digital detectors installed collecting environmental data and transmitting it to provincial environment authorities. That data will then be passed on to the state grid, which based on operational records, will decide the subsidies each plant receives.

'It is difficult to cheat,' Professor Bai said.

If caught contravening pollution standards, the penalties will be serious, observers say.

Environmental engineering consultant Ma Xiaoyu says any cheating will cost a power plant a fine equivalent to five times the subsidy they would otherwise receive.

And the fines will no longer be collected by city environmental officials, Mr Ma says, but by the state grid, the only buyer of electricity on the mainland.

It's 'a job [the state grid] is willing, and capable, of doing,' he said.

If all goes as planned, by 2010, the mainland's sulfur dioxide emissions will be 10 per cent of the 2000 level.