Feasibility Study on Programme CDM to Introduce the High-Performance Tenters to the Dye Works in Zhejiang Province, PR China

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Title of Feasibility Study (FS)Feasibility Study on Programme CDM to Introduce the High-Performance Tenters to the Dye Works in Zhejiang Province, PR China
FYFY 2010
Main Implementing EntityKyushu Electric Power Co., Inc.
FS Partner(s)Mizuho Corporate Bank, Ltd., Green Ensign (Beijing) New Energy & Utility Technology Development Co., Ltd
Location of Project ActivityChina (Zhejiang Province)
Category of Project ActivityOthers (Energy Efficiency)
Targeted GHGCO2
CDM/JICDM
Duration of Project Activity/ Crediting Period2012.1.1 - 2039.12.31 (28 years)/ 2012.1.1 - 2021.12.31 (10 years)
Summary of FS ReportSummary(PDF 340KB)
Description of Project ActivityThis project aims to replace existing outdated tenters with high-efficiency tenters in the dye works in Zhejiang Province, China. The Project thus reduces the consumption of coal which is used to heat up the heating medium, and also helps reduce greenhouse gas emissions through less coal burned in the coal-fired power generation plants thanks to reduced electricity use at the works. The project is to promote high-efficiency tenters through a program CDM project (PoA), and plans to register the dye works in Zhejiang Province as a CDM program activity (CPA) under this PoA.
The project assumes Green Ensign (Beijing) New Energy & Utility Technology Development Co., Ltd (private ESCO company) as the Coordinating/Managing Entity of the PoA. Green Ensign (Beijing) New Energy & Utility Technology Development Co., Ltd is the project counterpart in the host country China. There are no capital ties or contractual relationships that might serve as an incentive for implementing the project as a PoA between Green Ensign (Beijing) New Energy & Utility Technology Development Co., Ltd and the dye works within the PoA boundary. This PoA is a voluntary action of the Coordinating/Managing Entity.
Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd. is assumed to be used as the model company for the CPA, and the operation is planned to start in early 2012 for the time being. Based on these assumptions, the average reduction of 10,994tCO2/year can be expected. It is our hope to expand the endeavor throughout Zhejiang Province.
Methodology to be appliedAMS II.C (version 13) "Demand-side energy efficiency activities for specific technologies"
Baseline Scenario
  • New installation, improvement and replacement
    When considering the policies for the dye industry in Zhejiang Province, China, which is the boundary for the respective CPA implemented under this PoA, it is appropriate to limit the activities under this PoA to replacement activities.
  • Timing of the equipment replacement
    The respective CPA contains replacement plans for one or more tenters at the concerned site, and the appropriateness of the plans must be evaluated. The appropriate timing of the tenter replacement shall be decided in the respective CPA-DD, using the latest tool to determine the remaining lifetime of equipment.
    When using this tool, it is deemed appropriate for the project participants to determine the remaining lifetime of the equipment by obtaining an evaluation from experts.
  • Combination of the multiple tenter replacements
    The baseline scenario is the combination of the tenters “which would be introduced and operated at the same replacement times in the absence of the project.” Using the said tool, the plans to replace multiple tenters at the respective CPA site are further specified. The remaining life of the tenters is judged for each tenter.
    Combinations of multiple tenters
    • The method above is used for this CPA, which adopts the combination of the replacement timings for the 16 units shown below:
Existing tenters introduced at Qianjiang
Replacement planned
New units to commission
1999
2 units
2011
2012
2001
4 units
2011
2012
2002
5 units
2012
2013
2006
1 unit
2016
2017
2007
2 units
2017
2018
2009
2 units
2019
2020
    The project period of this CPA will be 28 years, until the end of the service life (20 years) of the units that will be introduced lastly, as seen in the combination above.
Demonstration of Additionality
  • Investment analysis
    In this survey, the investment analysis was conducted through economic analysis of Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd., which is a CPA candidate. IRR of this project is 10.91% without credit and 14.50% with credit.Profitability
    Without
    credit revenue
    With
    credit revenue
    IRR
    10.91%
    14.50%

    The benchmark for Chinese textile industry is 14%, and 10.91% without credit and IRR in the sensitivity analysis are both below the benchmark. Thus, the project has low profitability without CDM and is not deemed attractive enough to investors. On the other hand, 14.50% with credit offers high profitability and can be considered an attractive project.
  • Common practice analysis
    There is no common practice that implements activities similar to the CPA projects under this PoA, nor mandatory law or regulation that promotes the implementation of this PoA. The absence of any common practice can be demonstrated for this CPA, from the aspects of the energy performance and initial investment.
Estimation of GHG Emission ReductionsHangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd. is to replace the 16 tenters it owns with high-efficiency tenters developed independently in Japan, more specifically, 6 units in 2012, 5 units in 2013, 1 unit in 2017, 2 units in 2018 and 2 units in 2020.
For the calculation of the baseline and project emissions, the emissions per tenter are calculated. The emissions reduction is calculated as shown below:
  • Baseline emissions calculation
    The energy to be reduced is fossil fuel and electricity, and the calculation is done separately and the results are added up.
    • Fossil fuel: BEFy = EFBL,y * EFCO2,F,y = 896t-coal/y x 23.7TJ/Gg-coal x 25.8kg-C/GJ x 44/12 = 2,008tCO2/y
        • * The heat value of the coal used at the works and emission factor of bituminous coal are assumed
    • Electricity: BEEy = EEBL,y * EFCO2,F,y + Qref,BL * GWPref,BL = 479MWh/y x 0.7826tCO2/MWh + 0 ＝ 375tCO2/y
        • * CM (Combined Margin) of East China Power Grid, per Chinese government (2009)
    • Total: BEy = BEFy + BEEy = 2,008 + 375 = 2,383tCO2/y
  • Project emissions calculation
    The amounts attributable to fossil fuel and electricity are added up to obtain the project emissions in the same manner as with the baseline emissions.
    • Fossil fuel: PEFy = EFPJ,y * EFCO2 FUEL,y = 480t-coal/y x 23.7TJ/Gg-coal x 25.8kg-C/GJ x 44/12 = 1,076tCO2/y
    • Electricity: PEEy = EEPJ,y * EFCO2 ELEC,y = 445MWh/y x 0.7826tCO2/MWh = 348tCO2/y
    • Total: PEy ＝ PEFy + PEEy ＝ 1,076＋348 ＝ 1,424tCO2/y
  • Leakage
    AMS II.C. (version 13) stipulates that “If the energy efficiency technology is equipment transferred from another activity, leakage is to be considered.” However, the leakage is zero in the CPA since the replaced equipment will be disposed.
  • Emissions reduction calculation
    The emissions reduction is calculated as follows according to AMS II.C. (version 13):
    ERy ＝ (BEy － PEy) － LEy ＝ 2,383tCO2/y － 1,424tCO2/y － 0tCO2/y ＝ 956tCO2/y

The estimated emissions reduction achieved by the project are as shown in the table.Greenhouse gas emission reductions
Monitoring Plan
  • Monitoring plan as PoA:
    The Coordinating/Managing Entity is to have DOE conduct verification for each CPA. In respective CPA, the monitoring is done according to the monitoring methodology in the Methodology AMS II.C. (version 13) “Demand-side energy efficiency activities for specific technologies,” and the data is reported to the Coordinating/Managing Entity periodically after the validity of the data is cross-checked. The Coordinating/Managing Entity prepares monitoring reports encompassing all CPAs within the PoA, so that DOE can carry out verification for each CPA. The monitoring data collected and stored for each CPA for this purpose is reported to the project database that the Coordinating/Managing Entity controls. CERs are then calculated for each CPA and for the entire PoA.
    The primary monitoring data is stored by each CPA and the Coordinating/Managing Entity for a certain period of time. The calculation results are kept by the Coordinating/Managing Entity for a set period, and the feedback is given to CPAs after the preparation of the monitoring reports, especially about CERs that the respective CPA is responsible for.
    Data collection and storage procedure
  • Monitoring plan as a CPA (Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd.:
    The project participants carry out monitoring based on the method below, and use the results for the verification of emissions reduction during the crediting period.
    (1) Monitoring method applied to the project
      The project aims to reduce greenhouse gas emissions by using less heat and electricity through the utilization of energy-saving equipment. Since the annual energy reduction of 44.28GWh is 60 GWh or less, the project meets the requirements for the small-scale CDM methodology and the provisions set forth in AMS II.C, thus the monitoring method described in AMS II.C. may be applied. Based on the provisions of SSC-PoA-DD, the monitoring plan for Qianjiang Printing and Dyeing Co., LTD in Zhejiang Province, which is CPA, is explained.
    (2) Monitoring organization
      The project participants organize a CDM team that deals with data collection, management and verification. The team leader who is in charge receives a technological training and support from CDM experts.
    (3) Parameters needed for the monitoring of the project
      • The project participants carry out monitoring based on the method below, and use the results for the verification of the emissions reduction during the crediting period.

    (4) Monitoring machines and equipment


    (5) Quality management and quality assurance
      The main items to be monitored in this project are electricity and heat used by the tenters. The procedures for quality management and quality assurance of monitoring are:
      1. Monitoring machines － installation of wattmeters and flowmeters, periodical data measurement and recording
      2. Inspection and periodical calibration of wattmeters and flowmeters

    (6) Data management
      The monitoring data obtained and maintained is submitted to the Coordinating/Managing Entity of PoA, and the Coordinating/Managing Entity prepares the monitoring report periodically. Also, the Coordinating/Managing Entity keeps the backup copy of the monitoring data reported from all CPAs (for two years as a rule).

    (7) Monitoring method for the tenter expansion, new installation and disposal
      When the participants replace tenters, the specifications, serial numbers and the replacement date of the equipment to be disposed shall be recorded at the time of the replacement. The CPA Implementation Agreement shall require that the replaced equipment is not to be disposed until the verification is complete at the presence of the Coordinating/Managing Entity. For expanded or newly installed equipment, the specifications, serial numbers and the replacement date shall be recorded and monitored in the same manner.
Environmental Impact AnalysisThe standards that relate to the environmental impact of this CPA are shown below:Standards and codes
Standard
Code
Ambient air quality standardGB3095-1996
Emission standard of air pollutants for boilersGB13271-2001
Emission standard for industrial enterprises noise at boundaryGB12348-2008
Environmental quality standard for noise for urban areasGB3096-2008
Integrated wastewater discharge standardGB8978-1996
Discharge standard for the dyeing and finishing textile industryGB4287-92
This CPA satisfies all of the environmental standards above.
Project FeasibilityZhejiang Hangmin Stock Co., Ltd., which is the parent company of Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd., Green Ensign (Beijing) New Energy & Utility Technology Development Co., Ltd. and Kyushu Electric have concluded an agreement regarding the examination of energy conservation and modification of the plants, which seems to offer a system suitable for the implementation of the project under the PoA.

Green Ensign which is planned to function as the Coordinating/Managing Entity considers the implementation of the project under the PoA promising, due to following reasons:
    (1) The Chinese government welcomes P-CDM applications.
    • There are only three P-CDM projects approved by the Chinese government at this point. However, the reason is not the examination standards being more stringent for P-CDMs than for general CDMs. It is because of the small number of applications submitted by the business operators since it takes enormous work to put together multiple, small-scale projects.
    • (2) Great potential
    • There are 5,000 - 6,000 tenters in China, of which 2,000 - 3,000 are in Zhejiang Province. If we assume the same number of tenters per plant as the No.1 CPA candidate Qianjiang, then 100 – 200 companies may be CPA candidates.
    • (3) Green Ensign is willing and meets the requirements to be the Coordinating/Managing Entity (CME)
    • The provisions of Chinese Administrative Permission Law limit the entities that can be a Coordinating/Managing Entity in China to agencies, organizations and corporations excluding those that are governmental agencies and business units (e.g. industrial associations that receive public funds). Green Ensign qualifies to be the CME since it is a private corporation, and understands the functions of the Coordinating/Managing Entity (CME).

Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd. which is planned to be a CPA model site considers the PoA in a positive light due to reasons below:
    • (1) The high-efficiency tenters developed independently in Japan (hereinafter “high-efficiency tenters”) are technologically reliable.Qianjiang values the performance of the high-efficiency tenters, and plans to visit Japan in March to further validate the technology of the tenters.

    • (2) High expectation for economical benefit from implementing the projects under CDThe price was a concern if the project was to be undertaken as a general project. However, sufficient economical benefit can be expected from the sales of emissions reduction under CDM, which persuaded Qianjiang to be positive about the project.

    (3) Qianjiang trusts Green Ensign which will be the Coordinating/Managing Entity (CME), and approves the method where Green Ensign acts as a window dealing with buyers to receive the revenue from the credit sales and distribute it to the companies concerned.

Currently, a negotiation is underway between the PoA Coordinating/Managing Entity and the CPA company about the conclusion of a letter of intent for the introduction of the high-efficiency tenters that are developed independently in Japan. Whether the negotiation leads to the conclusion or not is based on the measurements of energy consumption which is to prove the energy saving effect in comparison to the Korean equipment competing in China and the results of the Japanese dye plant inspection where the high-efficiency tenters are operated. We will emphasize the superiority of the high-efficiency Japanese tenters in comparison to less expensive Korean and other tenters through measures listed below:
    (1) Energy saving effect
      • To further quantify the energy saving effect by measuring the energy consumed by the high-efficiency tenters and the competing (Korean) tenters in China during operation. With the result, the superior energy saving effect of the high-efficiency tenters will be proven. From the research conducted on energy consumption of the existing Korean tenters at Hangzhou Qianjiang Printing & Dyeing Chemical Co., Ltd., it was confirmed that approximately 600,000kcal/h of thermal energy as well as 70kW electric energy are used per tenter. This finding further confirms that the values of fossil fuel and electricity assumed for baseline emissions calculation were appropriate. Project emissions will be measured and verified when high-efficiency tenters developed independently in Japan are introduced into CPA.
    • (2) Price
      • The high-efficiency tenters are at a disadvantage compared to the competing (Korean) equipment in terms of prices. We will make an appeal that such a price difference can be recovered through the energy cost reduction thanks to the energy saving and revenue from emissions credit sales, and that there are other advantages to be considered other than prices, such as enhanced performance and durability.
    • (3) Promotion
      • To invite CPA companies for the inspection of the high-efficiency tenters that are put to operation in Japan and see for themselves the energy saving effect and superior quality.
      • To introduce the high-efficiency tenters in seminars held by the Zhejiang Dyeing and Printing Association or in the trade paper, etc. to increase their recognition.
      • To examine showcasing and publicizing the first case of CPA since the information spread very effectively between companies by word of mouth in the dye industry in Zhejiang Province.
　　
Of the 200 dye companies in Zhejiang Province, 40 companies, which accounts for 20% of the entire dye companies, were listed as CPA candidate works and plants, that showed great interest in energy saving through high-efficiency tenter introduction and the utilization of P-CDM.
Based on the research findings, if CPAs of 200 companies and 2,000 tenters are assumed in Zhejiang Province, greenhouse gas emissions reduction of approximately 2 million t-CO2/yr and 400,000 t-CO2/yr could be expected, at this point, from POA (entire Zhejiang Province) and 40 confirmed CPA candidate companies respectively.
"Co-benefits" (i.e. Improvement of Local Environmental Problems)(1) Evaluation of the effects such as mitigation measures of environmental pollution in the host country
According to “Manual for Quantitative Evaluation of the Co-Benefits (ver. 1.0),” if an evaluation method in Tier2 or Tier3 is chosen for the evaluation in the area of air quality improvement, it is necessary to obtain data on the fuel consumption and pollutant concentration in the fuel at the source of the air pollutant emissions both for the baseline and the project case. When there is decreased coal consumption as well as indirect reduction of air pollutants, as is case with this PoA, the information from the power grid company (East China Power Grid) must be disclosed since it is the source of such substances. During the survey in 2009, a comment received indicated the lack of such data. Therefore, for the co-benefit evaluation, the indirect effect from using less electricity is estimated by estimating the emissions intensities for SO2, NOx and soot and smoke at the power plants, in the same manner as for CO2 reductions.Emissions intensities of air pollutants from coal-fired power plants [t/GWh]
1996
2000
2002
2005
2007
SO2
10.4
8.15
6.11
8.03
4.67
NOx
5.77 (Note)
4.21
3.87
6.90
3.11
Soot and smoke
8.21
2.84
2.01
3.35
1.10
Note: 5,77kg/t-coal, the unit different from others.Emission factors of air pollutants
OM
BM
CM
SO2
4.67t/GWh
200mg/m3
=> 0.25t/GWh
2.46t/GWh
NOx
3.11t/GWh
400mg/m3
=> 0.50t/GWh
1.81t/GWh
Soot and smoke
1.10t/GWh
30mg/m3
=> 0.04t/GWh
0.57t/GWh

By multiplying the above emission factors with the electricity saving of 35MWh/yr for CPA which is the target of this research, the reductions in air pollutants may be evaluated.

(2) Proposal of co-benefit indexes
It is possible to reduce environmental load itself and also the external environmental cost through reduction of environmental load, and this can be a co-benefit index. In this study, the damage reduction due to WTP (Willingness to Pay) to avoid damage from environmental load is calculated tentatively and the effect converted to currency. The calculation is done using Japanese method of impact assessment “LIME: Life-cycle Impact assessment method based on endpoint modeling (issued through cooperation between the National Institute of Advanced Industrial Science and Technology (AIST) and the LCA project by the national government). The value expressed in currency only indicates the level of acceptance in Japan.
The conversion factors of LIME reflect local characteristics of Japan, and are to be used as damage factors in Japan. Thus, if the method is applied to China, we must assume the same value of WTP as in Japan.Weighting factors for currency conversion in LIME
Emissions
Conversion factor
(JPYen/kg)
CO2
1.74
NOx
141.22
SO2
1,014.73
The trial calculation produced about 90,000yen/yr for SO2, about 10,000yen/yr for NOx and about 50,000yen/yr for CO2. When the impact from air pollutants is added to the external environmental cost for CO2, the effect is about tripled, indicating a large contribution made by SO2 reduction.
    • External environmental costs from the project


Emissions
Electricity saved
(GWh/yr)
Emissions intensity
(t/GWh)
Air pollutant emissions reductions
(t/yr)
Conversion factor
(JPYen/kg)
External environmental cost
(10,000JPYen/yr)
SO2
0.035
2.46
0.09
1,014.73
9.1
NOx
1.81
0.06
141.22
0.8
Soot and smoke
0.57
0.02
-
-
CO2
782.6
27.39
1.74
4.8
Total
14.7
Contribution to Sustainable Development in Host Country-