Renewable Energy for Poverty Reduction
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FINAL REPORT Renewable Energy for Poverty Reduction TA No: 4309 – PRC Submitted to ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 0401 Metro Manila Republic of the Philippines 31 May, 2006 Submitted By DSCL Energy Services Company Ltd 2nd Floor, Kanchenjunga Building 18 Barakhamba Road, New Delhi – 110 001 India Tel: + 91 11 23316801 Fax: + 91 11 23319062 Renewable Energy For Poverty Reduction ADB TA No: 4309-PRC TABLE OF CONTENTS EXECUTIVE SUMMARY .........................................................................................6 INTRODUCTION........................................................................................................6 1.1 BACKGROUND OF THE TA....................................................................................6 1.2 TA OBJECTIVE AND PURPOSE .............................................................................6 2 KEY TASKS PERFORMED................................................................................6 2.1 POLICY REVIEW AND BARRIER ANALYSIS ..........................................................7 2.2 RE POTENTIAL & PERFORMANCE ASSESSMENT ................................................7 2.3 FEASIBILITY REPORT OF DAGUSHAN HYDRO PROJECT .....................................7 2.4 FEASIBILITY REPORT OF STALK GASIFICATION PROJECT.................................7 2.5 DESIGN & IMPLEMENTATION OF PILOT PROJECT..............................................7 2.6 BUSINESS PLAN FOR RENEWABLE ENERGY ........................................................7 2.7 ENVIRONMENT ASSESSMENT FOR ERLONGSHAN HYDROPOWER PROJECT.......7 3 KEY FINDINGS FROM THE TA PROJECT ...................................................8 3.1 POLICY REVIEW, BARRIER ANALYSIS & RECOMMENDATIONS..........................8 3.2 RE POTENTIAL ASSESSMENT AND PERFORMANCE ANALYSIS .........................10 3.3 COMMERCIAL DEVELOPMENT POTENTIAL FOR RURAL RE SYSTEMS ............13 3.4 SOCIAL DEVELOPMENT & POVERTY ANALYSIS OF PRIORITY PROJECTS .......16 3.5 ENVIRONMENTAL IMPACT OF PRIORITY PROJECTS .........................................16 4 WORK PROGRESS............................................................................................17 5 CONCLUSION ....................................................................................................17 6 LIST OF ANNEXES............................................................................................18 6.1 ANNEX 1 - SUMMARY OF DAGUSHAN FEASIBILITY REPORT............................19 6.2 ANNEX 2- ECONOMIC & FINANCIAL EVALUATION OF STALK GASIFICATION PROJECT ......................................................................................................................47 6.3 ANNEX 3- SOCIAL DEVELOPMENT & POVERTY ANALYSIS OF PRIORITY PROJECTS ....................................................................................................................58 6.4 ANNEX 4- ENVIRONMENT ANALYSIS OF PRIORITY PROJECTS .........................69 6.5 ANNEX 5- WORK METHODOLOGY & WORK PLAN...........................................71 6.6 ANNEX 6- RECORD NOTES OF DISCUSSION OF THE FINAL WORKSHOP...........76 SELECTED BIBLIOGRAPHY & REFERENCES ...............................................................80 2 Final Report - 2 - Renewable Energy For Poverty Reduction ADB TA No: 4309-PRC LIST OF TABLES TABLE 1 STATUS OF DEVELOPMENT OF HYDROPOWER IN HEIHE RIVER.......................11 TABLE 2 POTENTIAL FOR STALK GASIFICATION IN ZHANGYE CITY..............................11 TABLE 3 ANNUAL MANURE RESOURCES IN ZHANGYE CITY (IN 10000 TCE)...............12 TABLE 4 RESULTS OF FINANCIAL & ECONOMIC ANALYSIS OF PRIORITY PROJECTS......15 TABLE 5 OPTIMIZED INDEX ON CASCADE DEVELOPMENT SCENARIO OF HEIHE RIVER (SECTION FROM HUANGZHANG TEMPLE TO DAGUSHAN)......................................21 TABLE 6 ANNUAL MEAN FLOW AT DIFFERENT FREQUENCY ........................................22 TABLE 7 FLOOD FLOW AT DIFFERENT FREQUENCY ......................................................22 TABLE 8 PROJECT COST ESTIMATES IN MILLION CNY.................................................33 TABLE 9 DHP: INDICATIVE FINANCING PLAN...............................................................36 TABLE 10 DHP CALCULATION OF WACC....................................................................36 TABLE 11 ELECTRICITY DEMAND FORECAST - NW PRC & GANSU NETWORK (TWH) 37 TABLE 12 POWER BALANCE ZHANGYE GRID................................................................38 TABLE 13 ENERGY BALANCE - ZHANGYE GWH ...........................................................38 TABLE 14 POWER BALANCE, WINTER MAXIMUM DEMAND MW .................................38 TABLE 15 POWER BALANCE, SUMMER MAXIMUM DEMAND MW ................................38 TABLE 16 ASSUMPTIONS FOR TECHNICAL OPTIONS FOR LEAST COST ANALYSIS .........39 TABLE 17 LEAST COST ANALYSIS: DHP VS THERMAL (AMOUNTS IN MILLION CNY) 40 TABLE 18 LEAST COST ANALYSIS - SUMMARY OF RESULTS.........................................40 TABLE 19 ESTIMATE OF ECONOMIC VALUE OF FUEL PRICES........................................41 TABLE 20 WILLINGNESS TO PAY FOR ELECTRICITY......................................................42 TABLE 21 CALCULATION OF EIRR FOR DHP - AMOUNTS IN MILLION CNY ................43 TABLE 22 DHP: SENSITIVITY ANALYSIS ......................................................................44 TABLE 23 CALCULATION OF FIRR FOR DHP (AMOUNTS IN MILLION CNY)................44 TABLE 24 SENSITIVITY ANALYSIS ................................................................................45 TABLE 25 ESTIMATE OF ECONOMIC VALUE OF FUEL PRICES........................................48 TABLE 26 WILLINGNESS TO PAY FOR ELECTRICITY......................................................49 TABLE 27 WILLINGNESS TO PAY FOR COOKING GAS....................................................50 TABLE 28 EIRR OF STALK GASIFICATION PROJECT......................................................51 TABLE 29 FINANCING PLAN OF STALK GASIFICATION PROJECT (UNIT: CNY) .............53 TABLE 30 WACC (AMOUNTS IN CNY) .......................................................................55 TABLE 31 FIRR FOR PILOT PROJECT (ALL AMOUNTS IN CNY) ....................................55 TABLE 32 SENSITIVITY ANALYSIS ................................................................................56 TABLE 33 RISK ASSESSMENTS ......................................................................................56 TABLE 34 POVERTY INDICATORS..................................................................................58 TABLE 35 POVERTY INCIDENCE IN ZHANGYE CITY.......................................................59 TABLE 36 POVERTY TOWNSHIPS AND VILLAGES IN ZHANGYE CITY.............................60 TABLE 37 HOUSEHOLD ENERGY USE............................................................................61 TABLE 38 ANNUAL CONTRIBUTION TO SOCIETY BY IA (DHP) ...................................64 TABLE 39 DISTRIBUTION OF PROJECT IMPACTS ............................................................66 TABLE 40 STALK GASIFICATION - DISTRIBUTION OF NET ECONOMIC BENEFITS & POVERTY IMPACT ANALYSIS ................................................................................67 TABLE 41 CONSULTING TEAM MEMBERS AND RESPONSIBILITIES ................................71 TABLE 42 MEMBERS OF THE TA PROJECT MANAGEMENT OFFICE................................72 TABLE 43 KEY ACTIVITIES-PRIORITY PROJECTS ...........................................................72 TABLE 44 STAKEHOLDER CONSULTATIONS ..................................................................73 3 Final Report - 3 - Renewable Energy For Poverty Reduction ADB TA No: 4309-PRC ABBREVIATIONS ADB – Asian Development Bank CDM- Clean Development Mechanism CER – Certified Emission Reductions CNWIDRI – China North-West Investigation & Design Research Institute DG – Distributed Generation DHP – Dagushan Hydropower Project DSCLES – DSCL Energy Services Co. Ltd. DSCR – Debt Service Coverage Ratio EA – Executing agency EDR- Equalizing Discount Rate EE – Energy Efficiency EIA – Environment Impact Assessment EIRR – Economic Internal Rate of Return FIRR – Financial Internal Rate of Return FNPV – Financial Net Present Value LPG – Liquefied Petroleum Gas MDG – Millennium Development Goals NDRC - National Development & Reform Commission GHG- Greenhouse gases HH Household HR – Human Resource IA – Implementing agency - Gansu Heihe Hydropower Stock Company Ltd. M&E- Monitoring and Evaluation O2- Oxygen O&M Operation and Maintenance PLF – Plant Load Factor PMO – Project Management Office PRC – People's Republic of China PPTA- Project Preparatory Technical Assistance PSP – Pumped Storage Power plant PV – Photo Voltaic RE – Renewable Energy ROR – Run Of River SD – Sustainable Development SEIA- Summary Environment Impact Assessment SFERF – Shadow Foreign Exchange Rate Factor SOCC – Social Opportunity Cost of Capital SWRF – Shadow Wage Rate Factor TA – Technical Assistance TCE – Tons of Coal Equivalent TOR – Terms of Reference TVE – Township and Village Enterprise UNDP – United Nations WACC – Weighted Average Cost of Capital WB – World Bank WHO – World Health Organization 4 Final Report - 4 - Renewable Energy For Poverty Reduction ADB TA No: 4309-PRC WTP – Willingness to Pay XHP- Xiagoshuan Hydro Project UNITS, WEIGHTS AND MEASURES OC- Degree Celsius kCal – kilo Calorie kg – Kilogram km – Kilometer kV – kilo Volt kW - kilo Watt kWh – kilo Watt hour m- meter m2 – square meter m3 – cubic meter mm – milli meter mg- milli gram MJ – Mega