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The Socio-economic Impacts of Advanced Technology Coal-Fuelled Power Stations

Report by the Coal Industry Advisory Board


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Coal Industry Advisory Board

The Coal Industry Advisory Board (CIAB) is a group of high-level executives from coal-related industrial enterprises, established by the IEA in 1979 to provide advice to the Secretariat on a

wide range of issues relating to coal. The CIAB currently has around 35 members from 16 countries, contributing valuable experience in the fields of coal production, trading and

transportation, electricity generation and other aspects of coal use.

For more information about the Coal Industry Advisory Board, please contact Maggi Rademacher, CIAB Executive Co-ordinator ([email protected]).


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Acknowledgements This report represents the 2014 Work Programme of the Coal Industry Advisory Board (CIAB) and was prepared for the CIAB by Charles River Associates (CRA), The Lantau Group (TLG) and KPMG with direct support from Peabody Energy, RWE and Shenhua.

Christopher Russo of CRA was the project leader and instrumental in the development of the report. The following individuals served as leaders and contributors to the report on behalf of their respective organisations:

CRA

Leader: Christopher Russo

Other Contributors: Robert Kaineg

TLG

Leader: Mike Thomas

Other Contributors: Xinmin Hu, Ning Wang

KPMG

Leader: Roy Hinkamper

Other Contributors: Rajesh Ivaturi, , Gaurav Angira, Santosh Kamath, , Hiran Bhadra

Peabody Energy

Leader: Cartan Sumner

Other Contributors: Amanda Boyce

RWE

Leader: Hans-Wilhelm Schiffer

Other Contributors: Björn Seidel, Claudia Hillebrecht

Shenhua

Leader: Lu Bing

Special thanks to members of the CIAB Editorial Panel, who provided valuable input to the development of this report.

Chair: L. Cartan Sumner, Peabody Energy

Rick Axthelm, Alpha Natural Resources

Lu Bing, Shenhua

Amanda Boyce, Peabody Energy

Prach Chongkittisakul, Banpu

Gina Downes, Eskom

Nikki Fisher, AngloAmerican

John Lowell, Arch Coal

Itaru Nakamura, JPOWER

Maggi Rademacher, E.ON

Jarik Jansen van Rensburg, BHP Billiton


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Hans-Wilhelm Schiffer, RWE

Benjamin Sporton, World Coal Association

Skip Stephens, Joy Global

Alex Zapantis, Rio Tinto


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Table of contents Acknowledgements ........................................................................................................................... 2

Executive summary ........................................................................................................................... 8

Case studies ............................................................................................................................... 8

Highlights of key findings ................................................................................................... 9

Introduction .................................................................................................................................... 13

Advanced coal technology today............................................................................................. 13

Implications for policy makers ......................................................................................... 14

Direct benefits ......................................................................................................................... 16

Plant construction ............................................................................................................ 16

Indirect benefits ...................................................................................................................... 16

Mining and extraction ...................................................................................................... 16

Coal transport .................................................................................................................. 17

Coal treatment ................................................................................................................. 17

Induced benefits ...................................................................................................................... 17

Lower electricity prices .................................................................................................... 17

Environmental improvement ........................................................................................... 18

Societal impacts ....................................................................................................................... 19

Taxes ................................................................................................................................ 19

Energy independence ...................................................................................................... 19

Case studies ..................................................................................................................................... 21

India ......................................................................................................................................... 21

Profile of the Reliance Power Plant ................................................................................. 21

Economic rationale for coal-fuelled power generation ................................................... 22

Price comparison of electricity generated from coal-based power plants, renewable sources and gas-fired power plants ................................................................................. 22

Socioeconomic conditions in the study area before Reliance Sasan power plant .......... 26

Literature review, study methodology and limitations ................................................... 30

Approaches for impact quantification ............................................................................. 32

Social impact assessment ................................................................................................ 33

Economic impact of Reliance Sasan power plant ............................................................ 35

Social impact of Reliance Sasan power plant .................................................................. 40

China ........................................................................................................................................ 46

Case study of power stations ........................................................................................... 47

Ninghai power station ..................................................................................................... 49

The role of coal in China’s power sector ......................................................................... 49

Summary .......................................................................................................................... 52

Indirect benefits and economic value multipliers ........................................................... 56


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Induced and broader socioeconomic benefits of coal ..................................................... 56

Induced benefits: Environmental improvement ............................................................. 63

Induced benefits: Enhancement of energy security ........................................................ 65

Summary .......................................................................................................................... 66

Germany .................................................................................................................................. 69

Kraftwerk Neurath profile ................................................................................................ 69

The German electricity market ........................................................................................ 71

German energy policy and the Energiewende ................................................................ 73

The need for flexible generation ..................................................................................... 74

Quantification of economic impacts ................................................................................ 75

Simplified production cost analysis of coal’s effect on the German electricity market .. 79

Appendix .................................................................................................................................. 81

SaskPower’s Boundary Dam ............................................................................................ 82

List of acronyms and abbreviations ................................................................................................ 84

References ....................................................................................................................................... 85

List of figures

Figure 1 • Levelised cost of new generating technologies (2014) .................................................. 14 Figure 2 • German all hours wholesale energy prices across coal scenarios .................................. 18 Figure 3 • World greenhouse gas emissions by sector ................................................................... 18 Figure 4 • Only 31% of households in India have access to tapped water ..................................... 28 Figure 5 • Sectoral consumption of electricity in India (2012-13) .................................................. 38 Figure 6 • Annual losses suffered due to outage by small, medium and large enterprises .......... 39 Figure 7 • Flue gas treatment process in Zhoushan power plant ................................................... 48 Figure 8 • China’s annual gas consumption and local supply ......................................................... 50 Figure 9 • Typical price ranges of coal and imported gas ............................................................... 51 Figure 10 • Estimated industrial tariff large user with coal-based pricing for China ...................... 60 Figure 11 • Estimated industrial tariff large user with gas-based pricing for China ....................... 60 Figure 12 • Break-even carbon cost for gas-fuelled power plants to replace coal-fuelled power

plants .......................................................................................................................... 65 Figure 13 • Energy security assessment.......................................................................................... 65 Figure 14 • Historical coal and LNG prices in Australia and Japan .................................................. 66 Figure 15 • Kraftwerk Neurath BoA 2 and 3 ................................................................................... 69 Figure 16 • Garzweiler mine with Neurath and Frimmersdorf in background ............................... 70 Figure 17 • Energy imports for Germany in 2013, MTCE ................................................................ 72 Figure 18 • Stylised German merit order curve .............................................................................. 72 Figure 19 • Energiewende targets .................................................................................................. 73 Figure 20 • Typical flexibility parameters for coal- and gas-fuelled power plants ......................... 74 Figure 21 • Natural gas plant operational flexibility ....................................................................... 75 Figure 22 • Advanced coal flexibility curve ..................................................................................... 75 Figure 23 • Net imports of fuel as a percentage of total consumption (2012)............................... 75 Figure 24 • German wholesale all hours energy prices across coal scenarios ................................ 80 Figure 25 • Change in natural gas consumption in Germany ......................................................... 80


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List of tables

Table 1 • Economic impacts due to construction and operation of Reliance Sasan ........................ 9 Table 2 • Sasan UMPP employment impacts .................................................................................. 10 Table 3 • Economic Impacts due to construction and operation of Zhousan (Unit 4 only) and

Ninghai (Units 5 and 6 only) ............................................................................................ 11 Table 4 • Economic impacts due to construction and operation of Neurath F and G .................... 12 Table 5 • Neurath F&G employment impacts ................................................................................. 12 Table 6 • Operating parameters of subcritical and supercritical technology ................................. 13 Table 7 • Beneficiary states from Sasan power .............................................................................. 21 Table 8 • Comparison of supercritical coal to solar and nuclear for equal investment ................. 23 Table 9 • Integrated energy policy of India recognises coal as the most dominant energy source

even under the optimistic “Forced Scenario”.................................................................. 23 Table 10 • Generation capacity and load factors under “Forced Scenario” ................................... 24 Table 11 • Significant installed power generation capacity based on gas is stranded due to severe

shortage and plants have been running at low PLFs..................................................... 25 Table 12 • India’s coal reserves (2014) can be expected to last for many more decades even at

increasing rates of consumption ................................................................................... 25 Table 13 • Rajasthan, Uttar Pradesh and Madhya Pradesh lag behind the country in per capita

GSDP .............................................................................................................................. 27 Table 14 • Major beneficiary states are below or close to the national average in providing access

to electricity to its population ....................................................................................... 27 Table 15 • Overall literacy rates in the beneficiary states have been below (or comparable) to the

national average ............................................................................................................ 29 Table 16 • Direct, indirect and induced economic impact due to construction and operation ..... 36 Table 17 • Summary of direct, indirect and induced jobs created ................................................. 40 Table 18 • Number of people whose electricity needs can be fulfilled by the plant ..................... 41 Table 19 • Improvement potential in school enrolment ................................................................ 42 Table 20 • Households and individuals enabled to access to water due to Reliance Sasan .......... 43 Table 21 • Estimated emissions abated .......................................................................................... 46 Table 22 • Comparative performance: coal vs natural gas ............................................................. 50 Table 23 • Comparative performance: Coal vs natural gas ............................................................ 53 Table 24 • Direct impacts: Operational stage employment and costs ........................................... 53 Table 25 • Fuel purchases ............................................................................................................... 53 Table 26 • Implications for expenditures on goods and services for variable and fixed operations

and maintenance requirements .................................................................................... 54 Table 27 • Implications for coal mining employment ..................................................................... 54 Table 28 • Direct costs for transportation by rail and seaway (USD) ............................................. 55 Table 29 • Summary of expenditure of plants at construction and at operational stages ............. 55 Table 30 • Urbanisation impacts in Zhejiang province (Part 1) ...................................................... 58 Table 31 • Urbanisation impacts in Zhejiang province (Part 2) ...................................................... 58 Table 32 • GDP and power relationship .......................................................................................... 59 Table 33 • Comparative costs ......................................................................................................... 62 Table 34 • Costs per megawatt to China of a gas vs coal strategy ................................................. 62 Table 35 • Benefit from 500 TWh advanced coal vs. natural gas ................................................... 63 Table 36 • Annual benefit of displacement (500 TWh) – based on ZPS unit 4 ............................... 64 Table 37 • Annual benefit of displacement (500 TWh) – based on NPS units 5 or 6...................... 64 Table 38 • Summary of benefits based on actual generation......................................................... 67 Table 39 • Coal saving, environmental and health benefit (assuming 500 TWh of displacement) 68


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Table 40 • 2013 power sector emission reduction if all coal-fuelled plants have Zhoushan unit 4’s emissions rate................................................................................................... 68

Table 41 • Electricity cost saving comparing to gas generation ..................................................... 69 Table 42 • Gross electricity production in Germany, 2010 - 13 ...................................................... 71 Table 43 • Net imports of fuel as a percent of total consumption (2012) ...................................... 76 Table 44 • 2010 production and employment effect of the Rhenish brown coal industry ............ 76 Table 45 • Economic benefits from Neurath construction 2006-12 ............................................... 77 Table 46 • Economic benefits of Neurath plant operation (2013) ................................................. 77 Table 47 • Economic benefit of lignite mines serving Neurath demand (2013) ............................. 79 Table 48 • Active coal units in Germany by age class ..................................................................... 79


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Executive summary There are over 3.5 billion people in the world who live without adequate electricity, which is vital for basic needs. Electrification is a critical element in the development of societies; the ability to provide reliable electricity has far-reaching effects on economic and social development that defy easy quantification. Electrification leads to advancements in public health, education, transportation, communications, manufacturing and trade. In some places, access to electricity is a fundamental social right, and yet the demand for electricity continues to outstrip some regions’ ability to supply it because of a lack of fuels, transmission, or infrastructure.

Electricity production sits at the intersection of a complex economic and technical system that encompasses a supply chain with its own economic impacts, which include jobs, economic activity associated with the operation and the maintenance of the plant, and economic activity from associated industries. In many regions, the increased availability of electricity leads to substantial public health benefits and economic activity, and may help satisfy policy objectives such as energy independence and industrial development.

Electricity’s fundamental role in society means that policy decisions regarding the electricity industry have effects that reach far beyond individual power plants, mines, or transmission wires. Leaders must balance issues of technology choice, energy independence, economic development, and others, with no obvious easy answers. In such a context, a complete and current set of facts, as well as a full and unbiased accounting of effects is critical to such decisions.

This study identifies and quantifies some of those effects, which go beyond simply the production of additional electricity. These effects spread into the realms of social development, public health, and energy independence because they depend on smarter choices about how electricity is produced, the environmental standards achieved, and the overall costs incurred. These effects are referred to as “socioeconomic” in nature.

To illustrate and quantify these effects, the authors analysed the effects associated with Advanced Coal (AC) power plants from three different countries where coal forms an essential part of the energy infrastructure: India, China and Germany. The results from this diverse set of case studies can inform policy makers as they make decisions in what may be very different environments.

Case studies

This report focuses on three case studies from around the world to highlight how new approaches and advanced technologies for using coal for power generation can and do support economic development and outstanding and improving environmental outcomes.

India, China and Germany share a critical characteristic: coal is an indispensable portion of the current electricity supply mix, and doing without coal-fired generation is impractical. All three countries have substantial availability of coal, limited realistic alternatives for replacing coal with other sources of energy, and an indigenous coal supply chain to serve the power industry.

Their shared need for electricity stems from another shared characteristic: as economies with strong industrial sectors, reliable electricity is critical to their economic growth and development. Finally, these three countries share a concern regarding environmental impact. While at different levels of industrialisation, each country must contend with society’s rightful concern regarding the environment.


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In many cases, there is an additional geopolitical dimension to the use of advanced coal technology. Coal is frequently an indigenous, domestic resource (as it is in the three case studies chosen). By using a domestic fuel rather than an imported fuel, more socioeconomic benefits accrue to the population, rather than being exported.

As these three regions differ, so do the benefits which accrue from AC technology. In India, many of the benefits of coal power stations are seen in the increased availability of electricity for public health and productivity, leading to major public welfare impacts. In China, advanced boilers and state-of-the-art emissions control technology are moving to the forefront in order to tackle China’s severe air quality challenge and rapidly growing need for electricity.1 In the case of Germany, the extraction, power generation and refining of lignite is a major driver in the regional economy, and generation from flexible, advanced coal power stations contributes to price stability and helps maintain Germany’s leading manufacturing position.

Three different facilities serve as case studies:

The Sasan Ultra Mega Power Project (UMPP), an advanced 3960 megawatt (MW) coal-fuelled power plant in Madhya Pradesh in central India.

The Ninghai and Zhoushan power plants in Zhejiang Province in eastern China, which together comprise 5 310 MW of generating capacity. We focus on the latest units at each power plant, unit 4 at Zhoushan, and units 5 and 6 at Ninghai.

Kraftwerk Neurath, a 4 200 MW lignite fuelled power plant in western Germany with two advanced, supercritical units of 1 100 MW each.

These different regions span the spectrum of industrialisation, from the highly industrialised heartland of Germany to the rapidly developing regions of India and the thriving manufacturing economy of China, and thus benefit in different ways from AC plants.

Highlights of key findings

The benefits for each region vary according to the unique characteristics of each site, making the rigid categorisation of benefits difficult, but each of these plants, and the regional coal industry, has large economic benefits by any measure.

India

Reliance Sasan Power is expected to provide an economic impact of USD 12 billion during the construction phase lasting four years and an additional USD 42 billion during the operating lifetime of 25 years.

Table 1 • Economic impacts due to construction and operation of Reliance Sasan

Construction (USD billion) O&M (USD billion)

Direct economic impact 2.40 9.21

Indirect economic impact 3.51 11.29

Induced economic impact 6.24 21.88

Total impact 12.15 42.39

Total economic impact 54.54*

* Cumulative benefits accrued during the construction phase of four years and the operating lifetime of 25 years.

1 As discussed later in our report, China’s environmental issues are often cast as resulting from burning coal, but this does not convey the true story. Weak or ineffective environmental practices have been the main factors.


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Sasan’s increased efficiency reduces greenhouse gas (GHG) emissions because of its advanced super critical technology. The plant’s effect is the equivalent of removing 641 000 vehicles from the road in a year.

Over its operating life time of 25 years, Sasan would employ approximately 600 people directly for its operations and a further 19 500 people would benefit through indirect and induced jobs.

In addition, over the construction period of four years, it had provided direct employment to approximately 5 000 people annually for this four-year period. This would have benefitted an additional 16 000 people through indirect and induced jobs for this period of four years.

Increased access to electricity due to Sasan would result in addition of more than 157 000 new jobs.

Table 2 • Sasan UMPP employment impacts

Construction O&M Total

Years of employment For 4 years For 25 years

Direct jobs 5 000 639 5 639

Indirect jobs 3 700 3 970 7 670

Induced jobs 12 250 15 532 27 782

Total jobs created 20 950 for 4 years 20 141 for 25 years 41 091

At full capacity, the power plant can generate enough power to fulfil the electricity requirements of more than 17.5 million people across seven states, enabling 22 million people to get access to safe water supplies.

Electricity from the Sasan power plant is expected to electrify more than 12 000 schools increasing enrolment by more than 96 000 students, and is also expected to provide street lighting to approximately 400 000 households.

In healthcare, potentially 10 000 new beds may be added in rural areas and a savings of approximately USD 19 million would result in urban areas as health care becomes more affordable.

China

Coal meets two-thirds of China’s overall primary need for energy, and is used to generate three-fourths of China’s electricity. The deep integration of coal within China’s economy means that a shift from coal to more expensive energy sources would create unfathomable challenges and detriments to China’s socioeconomic development.

China’s severe air quality challenges are well known, but what is less well known is how China has deployed new boiler technologies and emission control systems in its power sector to the point where China’s primary air quality focus has shifted to the non-power sectors, where, for example, about 650 000 smaller, older, less efficient boilers still operate with limited to no emission controls. Displacement of these high emitting sources by, for example, coal-based AC technologies and emission control systems supporting electricity and heat (steam) generation are key to solving China’s air quality challenge.


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Zhoushan Unit 4 is China’s first AC power plant with an emissions profile that is the same or better than a natural gas-based combined cycle gas turbine (CCGT) as a result of innovations in the installed air quality control system.2

The authors estimate direct, indirect, and induced economic benefits exceeding USD 4 011 million annually from the three units (having a combined capacity of 2 350 MW).

Table 3 • Economic Impacts due to construction and operation of Zhousan (Unit 4 only) and Ninghai (Units 5 and 6 only)

USD million Construction period Annual operations

Direct 1 422 617

Indirect 178 77

Induced n/a 3 317

Total 1 600 4 011

The ultra-low level of non-GHG emissions from the case study units creates over USD 350 million per year in air quality benefits compared to the average emission levels achieved in China just before China started to reform its power sector emission control standards (beginning gradually from 2006).

An additional approximately 500 TWh of power generation from relatively older, less efficient, and higher emitting power stations could be displaced by either AC technology or enhanced by retrofit advanced air quality control systems, representing a further USD 13 billion in non-GHG air quality benefits annually, in addition to other direct, indirect, and induced benefits.

In addition, upgrading this least efficient 500 TWh of power generation in China to the latest AC technology as represented by the Zhoushan or Ninghai units would:

Reduce China’s CO2 by about 850 million tonnes each year. And it would achieve this reduction at a much lower cost than any other equivalent, scalable, emission reduction strategy available in China currently.

Save China around USD 75 billion annually relative to the cost of an equivalent natural gas-based displacement strategy after taking into account the negative macro-economic impact of unnecessarily higher power generation costs. Every megawatt generated more expensively using natural gas puts between USD 52 and USD 248 of value at risk somewhere in the Chinese economy.

China gains additional energy security benefits from the lower cost uncertainty associated with coal as compared to natural gas.

Germany

Neurath units F&G produce approximately 17 TWh of electricity per year, satisfying the electricity demand of more than 2.3 million inhabitants in Germany.3

The development of Neurath, including its construction and engineering costs, contributed approximately EUR 5.3 billion to the local economy.

2 To put this performance in perspective, if all of China’s existing coal-based power plants achieved the emission profiles of Zhoushan Unit 4, power sector SO2, NOx and PM emissions would be reduced by 99.6%, 94.8% and 97.2%, respectively. 3 Assumes 88% capacity factor for Neurath units and 7 309 kWh consumed per resident per year (total electricity consumption divided through the number of inhabitants).


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Table 4 • Economic impacts due to construction and operation of Neurath F and G

Construction (million EUR, 2006-2012)

O and M (million EUR per year)

Direct economic impact 2 560 52*4

Indirect economic impact 2 046* 25*

Induced economic impact 738* 9*

Total impact 5 344 865

*CRA calculation using economic multipliers from 2010 RWE research

The Neurath units entered operation in 2012 and since that date have been responsible for EUR 70 million in wages and 960 FTEs within Germany annually. This figure includes the 420 direct employees (including contractors) that work on-site in the facility as well as an estimated 270 indirect employees, and 270 induced employees.

Table 5 • Neurath F&G employment impacts

Construction (FTE, 2006-2012)

O and M (FTE per year)

Direct jobs 2 500 840

Indirect jobs 2 800 *419

Induced jobs 1 700 *285

Total jobs created 7 000 1 544

*Author’s calculation using economic multipliers from 2010 RWE report

The Rhenish lignite mining industry contributes approximately EUR 3.7 billion annually to the regional economy, with approximately 42 000 jobs in Germany.

The lignite generating fleet in Germany, which includes Neurath, saves consumers approximately EUR 2.2 billion annually compared to replacement with gas-fuelled generation, reducing wholesale electricity prices by approximately 7%.

4 This figure includes production effect of employee wages in addition to EUR 15 million per year of ongoing expenditures for capital goods and services. 5 This total includes the production effect of wages as well as the EUR 15 million per year on capital goods and services.


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Introduction Two critical components to understanding the socioeconomic effects of advanced coal (AC) plants are understanding the technology itself, and how the economic effects are measured. This section provides an introduction to state-of-the-art coal technology today as well as a primer on how socioeconomic benefits are defined and measured.

Advanced coal technology today

In most countries of the world, coal is the fuel source capable of generating electricity at the lowest cost most of the time. Indeed, in many cases, achieving electrification would simply not be possible without coal-fuelled power plants. Its role in the electricity system serves a key role in ending electricity poverty for billions of people and contributing to economic development.

But rarely stated in the debate is the fact that coal power plants today bear little resemblance to those constructed only ten years ago. Coal power plants have undergone a rapid evolution in the past decade; access to new supercritical and ultra-supercritical technology has precipitated a new generation of plants with efficiencies far surpassing prior technologies. Emission control system performance has increased dramatically as well, with the realistic and practical result that a coal-fuelled power station and natural gas-fuelled power station have non-carbon emissions profiles that are essentially equivalent. Coal plants have become more flexible as well, with the effect that their ability to vary output rapidly is critical to the incorporation of intermittent generation sources to the grid.

Put simply, the “conventional wisdom” associated with coal plants is often outdated and wrong.

Efforts towards efficiency improvement in the field of steam based power generation plants have been realised mainly through increases in the pressure and temperature of the working fluid – this means that less coal is needed to produce each unit of electricity. Supercritical technology is now prevalent worldwide due to the need to achieve higher efficiency and reduce greenhouse gas emissions. It is an established and mature technology, with over 500 supercritical units operating worldwide, constantly improving, driven by innovation in materials science, information technology, and process optimisation.

Table 6 contains a comparison between supercritical and subcritical technologies in terms of efficiency and CO2 emissions.

Table 6 • Operating parameters of subcritical and supercritical technology

Parameters Older subcritical boiler Current supercritical

steam generator Percent improvement

Efficiency (%) 34 43 26

CO2 emissions (TCO2e/MWh) 0.91 0.77 15

Source: IEA, 2013b.

The levelized cost of energy from installation of a supercritical power plant is typically only around 5% higher than that of a subcritical power plant, and such cost (cost/MWh) decreases as the capacity of the plant increases, favouring efficient centralised plants.6

6 The increased cost of the boiler and turbine in a super critical plant is partly offset because of a reduction in size of the coal and ash handling plant and other ancillaries. The overall cost of a super critical plant if compared with a recirculation subcritical plant is not more than 10 - 20% that of the subcritical plant.


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The operational costs of supercritical units, especially fuel costs, are substantially lower compared to subcritical plants due to lesser fuel requirement for the same electrical output. Increasingly, the most advanced technologies are the most viable and economic choice.

Over time, coal plants have become significantly more energy efficient while simultaneously controlling emissions to meet increasingly tougher emission limits. Technology advances since the 1960s have improved installed efficiencies by nearly 26% and decreased carbon emission rates by 15%. These improvements have been made possible primarily by more durable materials able to withstand higher boiler temperatures and pressures. Incremental improvements based on thermodynamic principles and economies of scale have also contributed to the gains.

New advanced coal (AC) technologies can be cost competitive with gas-fuelled combined cycle (CC) units on a levelised cost of energy (LCOE) basis in many regions, as illustrated by Figure 1. Even with the cost of energy from a gas-fuelled combined cycle or an advanced coal plant being equivalent, the decision to build either a new AC or new CC may have a drastically different distribution of benefits between the domestic economy and imports, depending on where the capital goods and fuels are sourced.

Figure 1 • Levelised cost of new generating technologies (2014)

Source: US Energy Information Administration, 2014.

Germany, for example, is a major producer of both power plant capital equipment and lignite, but imports the majority of its natural gas. Comparing AC and gas-fuelled combined cycle units, the coal unit is approximately three times more capital-intensive than the gas-fuelled unit.

Assuming the capital equipment and construction labour for both units are sourced from German firms and that all fuels are imported, the decision to construct the coal unit will produce a greater economic benefit for the domestic economy, while the gas plant will provide more economic benefits to the fuel exporter (in the case of Germany this would be Norway and Russia). Under a scenario in which the fuel can be produced locally, i.e. a lignite mine, even greater benefits will be captured in the German economy.

Implications for policy makers

To achieve prudent energy policy, policy makers should demand a comprehensive accounting of impacts and effects in their decisions. In the case study countries presented here and throughout the world, the opportunity exists to follow a well-established and proven pathway to modernise the electricity system while promoting economic development through 21st century coal. Regulators can marry technology and better regulation in ways that incentivise or compel faster adoption of more efficient boilers and state-of-the-art air quality control systems. This approach

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has strong a precedent, having been the essence of the approach followed by the United States in response to air and water quality concerns that arose in the 1970s across sectors, including power, non-power, and transportation. When joined with prudent regulation that focuses on cost-effectiveness and outcomes, advanced coal generation technologies have an exceptional track record of achievement.

Compared to other conventional thermal power plants, coal-fuelled power stations have a particularly long supply chain, and thus substantial socioeconomic benefits. The extraction and transport of coal generates substantial economic activity, and leads to ancillary benefits as portions of this infrastructure can serve multiple purposes.

The economic benefits of new AC units can be measured through increased employment, local investment, and wages accrued during both the construction and operational phases of new coal units. In addition to the “direct” economic effects, the ongoing operation of the facility creates local demand for additional goods and services, including the supply chain for the mining, refining, and transport of fuel; which can provide domestic economic benefits when displacing fuel imports.

The social or societal benefits of advanced coal generation, (which can be more difficult to quantify, but which are of infinite importance), include domestic energy security, increased competitiveness of energy intensive industries, and improved access to electricity.

Finally, the health benefits of AC units can be measured in human terms. Displacement of older technologies in advanced economies, and wood-fuelled stoves and diesel generation in the developing world, results in the measurable reduction of harmful pollutants and particulates. From a human perspective, improved air quality and access to electricity leads to healthier populations, measured in improved access to health services and reduced instances of respiratory disease.

Whilst there are formal economic definitions of different benefit concepts (i.e. direct, indirect, and induced), in practice, the lines can often be blurred, as effects on electricity prices can fall into several categories, and the effects on society can span numerous sectors. The authors have not attempted to adhere to rigid categories, but rather to enumerate all of the benefits and quantify them to the extent possible.

The following definitions illustrate the different types of benefits:

Direct benefits – These contributions include the direct value added by construction and operation of AC plants. They include employee compensation, reductions in electricity prices, returns to investors, income on property and payments to government (e.g. taxes). Direct employment is generally greatest during the construction phase, but large plants do maintain a significant workforce for operations and maintenance throughout their lives.

Indirect benefits – The main indirect contributions result from the ripple effect of payments for the construction and operations of AC plants. The greatest of these indirect contributions by coal plant operations are clearly seen in the mining and transportation sectors. These indirect benefits are lost through leakage that occurs when imported resources, goods and services are procured at costs that exceed options domestically available.

Induced benefits are those that result from increased spending in the local economy from economic gains caused by the plants. These economic gains can come from increased household income due to increased employment that is spend on final goods


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and services, or from increased household income resulting from lower electricity prices caused by the more efficient plant.

Neither the direct nor indirect contributions end as the coal plants print pay checks for employees, pay their suppliers, distribute dividends to shareholders or remit taxes to the government. That money is filtered back into the economy by household and government spending, thus greatly increasing the overall contribution of the industry. For the purposed of this report, these contributions are included in indirect contribution estimates.

In addition to formal economic definitions of benefits, quantified societal and health benefits are identified as well. These include all ancillary benefits not included as direct or indirect benefits, such as the benefits of improved health, environmental outcomes, energy security, poverty reduction, socioeconomic enhancement, and economic competitiveness. Whereas some of these benefits may be difficult to quantity precisely, evidence exists to indicate they can exceed the direct and indirect benefits noted above. These effects do not conform closely to formal economic definitions, but nonetheless have real effects.

Direct benefits

For the purpose of this report, so-called “direct benefits” refer to the investment, employment, and price impacts of a coal fuelled unit in both the construction and operational phase.

Plant construction

Advanced coal units can be multi-billion dollar investments that can provide a significant boost to local economies, as well as domestic equipment suppliers, and the construction of the current generation of AC units is a multi-year process that employs thousands of construction workers and engineers.

Many of these jobs require highly skilled workers with specialised skills (and correspondingly high wages). As an example, the construction of the most recent AC blocks at Neurath took approximately six years, and during that time more than 7 000 full-time jobs were supported, ranging from engineering and financial services to construction and unskilled labor.

Indirect benefits

Mining and extraction

Coal plants are unique in that they require a constant supply of solid fuel that must be mined and transported, and that the by-products of combustion (e.g. ash) must be safely disposed of.

Mining practices vary widely based on coal characteristics and the local terrain. Lignite and some subbituminous coal reside less than 100 meters from the surface, and can be mined in open-pit surface mines. Harder subbituminous and bituminous coals reside deeper in the ground, and must be removed using underground mining techniques. But a common characteristic is that the mining of coal is a highly capital-intensive process which results in much economic activity.


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Coal transport

Once mined, coal must be transported to the power plant. This is done usually by rail or by sea, and in very limited cases, by truck.7 In the United States, for example, 70% of all coal transportation is done via rail. Other delivery methods include by ship, by truck, and by conveyor or slurry pipeline. The method of transportation depends on plant access, size, and supply region. Worldwide, transportation methods depend on whether a country is an importer or exporter of coal. Most coal transported in the Asian Pacific is done via barge. In Germany, most lignite plants are located at mine sites, limiting transportation costs.

The impact of coal on infrastructure development is more noticeable in developing nations due to the absence of pre-existing infrastructure. The rail lines and roads that are built to transport coal from the mine to the power plant can be utilised by a variety of industries. The investment in infrastructure caused by the energy industry helps to foster economic development.

Coal treatment

Coal treatment prior to combustion depends on the chemical composition of the supply coal, technological specification of plant equipment, and any environmental regulations that may apply to the plant. Numerous technologies exist to dry wet coal (therefore increasing the energy content) or apply chemical treatments to the coal to limit formation of various pollutants (primarily NOx and SO2).

Here again, the economic effects from coal’s supply chain are felt in multiple industries and regions. The capital equipment, labour, chemicals and jobs from coal treatment facilities all contribute to the economic benefits of coal power plants to the region.

Induced benefits

Lower electricity prices

Lower electricity prices have far-reaching effects on the economy. Lower electricity prices benefit citizens and families by reducing energy costs. But lower prices increase industrial competitiveness as well. Countries which enjoy a lower cost of energy can produce goods at a lower price, thus increasing the profits to the home country, and increasing economic activity. Most nations, even highly industrialised ones, are becoming increasingly electrified (e.g. electric cars). As the penetration of electric technologies into the grid increases, so increases the value of lower and more stable electricity prices.

The research included an analysis of the potential benefits if the fleet of aging coal plants were to be replaced by new AC units. Germany was used as the example because of good data availability and synergies with our analysis of Neurath.

Modern coal plants have reached efficiencies of over 43%, as evidenced by the Neurath F and G lignite plants commissioned in August 2012. However, the majority of the world’s fleet is much older and much less efficient. The United States coal fleet averages 32% efficiency, with the lowest decile at 27.6%. Worldwide, the average is 33% efficient. These inefficiencies contribute to the higher cost of power.

7 The volume of coal required by a typical plant is simply too large for trucks. Trucks are sometimes used for smaller waste-coal facilities or much smaller conventional coal plants.


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Charles River Associates (CRA) estimates if all German coal was converted overnight to state-of-the-art technology, German power prices would decrease by 6.8%, saving consumers EUR 1.9 billion annually. If all German lignite plants over 30 years old were removed from the supply stack and replaced with gas, CRA estimates power prices would increase by 11.6%, costing consumers more than EUR 3.4 billion annually.

Figure 2 • German all hours wholesale energy prices across coal scenarios

These are clearly “bounding” analyses, as there is no realistic possibility that this could occur,8 but the significant impact serves to illustrate the potential impact that AC technology has on power markets and the economy.

Environmental improvement

In addition to providing lower energy costs, improvements in efficiency can significantly improve emissions and air quality. As shown in Figure 3, world electricity production accounts for 41% of all greenhouse gas emissions. Therefore, improving coal efficiency by ten percentage points can reduce global carbon emissions by more than 10% (without considering fringe benefits like reduced transportation emissions).

Figure 3 • World greenhouse gas emissions by sector

Aside from boiler efficiency, new advanced coal units employ emissions control systems that eliminate more than 95% of nitrogen oxide, sulphur dioxide, and particulate matter. Beyond

8 It is unclear, in fact, whether any new coal plants will be permitted to be constructed in Germany at all.

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these common air emissions, advanced plants also help reduce carbon dioxide. In fact, these plants have a carbon emissions rate 15-25% lower than the oldest facilities.

Societal impacts

Taxes

Governments receive a significant amount of revenue from taxing coal-related activities. In 2011, US mining activity contributed over USD 20 billion in tax payments to federal, state, and local governments. This figure includes direct contributions from the mining industry, but not indirect and induced tax contributions from mining activity or the taxes imposed on coal-fuelled electricity generation, which would further increase the effects.

For example, in China electricity consumption is a significant source of tax revenue via a Value Added Tax (VAT) of 17%. Based on the latest on-grid prices for Zhoushan Unit 4 and Ninghai Units 5, their annual VAT contribution is USD 19 million and USD 65 million, respectively. The combined taxes of VAT, income tax and urban construction and education surcharges by Zhoushan Unit 4 and Ninghai Units 5 and 6 is USD 153 million annually.

Similarly, some EUR 83 million of tax revenue was collected as a result of the construction phase of Neurath Units F&G between 2005 and 2011. Furthermore, the units are estimated to provide EUR 1.4 million per year in tax revenues through unit operation.

Public health and welfare benefits from increased electrification

In addition to the economic benefits, clean coal technologies can produce health benefits resulting from emissions reductions through retrofitting and replacing old coal units. AC power plants have substantially lower emissions than the older generation of plants. These emission reductions result in health improvements which can be estimated based on statistical relationships between emissions and population health.

Coal technology research funding has effects throughout the economy. A great deal of funding has been awarded to academic institutions to promote research on advanced coal technologies. In 2012, the US Department of Energy awarded over USD 2.7 million to universities to support research and development. A large portion of this funding was awarded to researchers focused on the development of new technologies and materials to increase the efficiency of coal generation. New materials, such as new alloys used to produce turbines, can be used for other purposes and in other industries. Progress in advanced coal generation can have a resounding impact on technological advances in other industries.

Energy independence

Coal is an abundant resource which can be sourced domestically in many developed and developing nations. The widespread nature of coal resources creates a saturated world market with multiple options for any nation to obtain additional coal supplies. Coal provides energy security in ways that other fuels cannot, due to its chemical make-up. Coal can be transported and stored safely and easily. Coal can be stored at power stations and used in the event of emergencies to maintain a reliable energy supply.

Furthermore, some countries or regions rely heavily on imported fuels to satisfy domestic energy demand. Often the source of these fuels can be unstable, or vulnerable to political risks. For example, central European nations rely on imports of Russian natural gas, and recent tensions in that region have resulted in Russia reducing natural gas exports. Eighteen countries in the


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European Union rely on natural gas from Russia to satisfy a large percentage of their natural gas consumption. In June of 2014, Russia halted all exports to Ukraine after Ukraine balked at its gas debt to Russia, claiming that the price of gas had been unfairly hiked. This example provides a strong case for why nations need to rely on coal-fuelled generation in order to have energy security. Not all nations have extensive natural gas resources, but most nations have coal resources. As natural gas supply emerges as a potential political weapon, it is important that nations be reminded of the important role coal-fuelled generation plays in national security.


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Case studies

India

Profile of the Reliance Power Plant

To tackle the crippling power shortages in India, the government of India has laid great emphasis on large power plants, called Ultra Mega Power Projects, with capacities of around 4 000 MW each. Nine such UMPPs were identified, with the Sasan UMPP being the first project to be awarded.

Reliance Sasan UMPP is a 3 960 MW coal-based power plant located in the state of Madhya Pradesh and is the largest integrated power and coal mine in the world. It is a pit head power plant with three captive coal blocks - Moher, Moher Amlori extension and Chhatrasal - estimated to be capable of producing 25 million tons of coal per year. The power plant has six units of 660 MW each.

The project is estimated to cost around USD 4 billion and is being financed by 75% debt. The plant provides power at the very low levelised tariff of USD 0.02/kWh due to economies of scale and low transportation cost. Fourteen distribution companies from seven states have long-term PPAs with the Reliance Sasan plant. The allocation of power is elaborated in the below table.

Table 7 • Beneficiary states from Sasan power

S. No Procuring State Contracted capacity

1 Delhi 450 MW

2 Haryana 450 MW

3 Uttar Pradesh 500 MW

4 Rajasthan 400 MW

5 Punjab 600 MW

6 Uttarakhand 100 MW

7 Madhya Pradesh 1500 MW

All 6 x 660 MW units will run on super critical boilers, steam turbines and hydrogen cooled generators. The use of super critical technology ensures improved efficiency, reduced emissions, reduced coal consumption, reduction in water usage and lesser start-up time of the boilers.

At full capacity, coal requirement for the project is expected to be 14.99 million tons per year, with gross calorific value of 4 445 kCal/kg. The Plant Load Factor (PLF)9 is expected to be 90% with Station Heat Rate (SHR) of 2 175 kCal/kWh.

The first unit of the plant was commissioned on December 2013 and all units are expected to come on stream by December 2014. The socioeconomic benefits estimated in subsequent sections have been quantified from the point in future when all units will be commissioned.

9 PLF is sometimes referred to as the Capacity Factor in other regions of the world.


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Economic rationale for coal-fuelled power generation

One-third of the households in India lack access to electricity. As of July 2014, coal-fuelled power plants constitute 60% of India’s installed power capacity and generate 74% of India’s electricity. They are the proverbial workhorse and the backbone of the Indian power sector.

Out of the total 19.7 GW of capacity added in 2013 to 2014, coal-based plants constituted 76% as well as 78% in the year 2012 to 2013. A further 15 GW, out of 17.8 GW, is targeted to be thermal power capacity in the year 2014 to 2015. This heavy reliance on coal-fuelled power plants is not a mere coincidence but is due to relatively easier availability of coal and more affordability of coal-based electricity. This is expected to continue for next few decades.

Price comparison of electricity generated from coal-based power plants, renewable sources and gas-fired power plants

Electricity from coal-based power plants is 30% cheaper than electricity from renewable sources and 16% cheaper than domestic natural gas. The Madras high court has said that electricity supply is a legal right and denial of power supply is a violation of human rights. India’s village electrification now stands at 95.65% as of June 30th 2014 (However, only 10% of households need to be electrified to include a village amongst the list of “electrified-villages”).

While access to electricity has been increasing gradually in India, its affordability has become a matter of deep political discourse in recent times.

In the year 2011 to 2012, the average cost of supply of electricity was USD 0.073 per kWh as against the average revenue of USD 0.055 per kWh. The gap of USD 0.018 per kWh highlights the rising cost of generation as well as poor affordability of Indian consumers. Thus, power remains a regulated sector in India and electricity prices are fixed by electricity regulatory commissions. Affordability, along with accessibility, remains the biggest impediment in increasing India’s per capita electricity consumption, which stood at an abysmal 917 kWh per annum (for 2012-13). The purchasing power of people in India, especially rural people, is low. Yet, electricity demand is expected to soar as per capita consumption is one of the lowest in the world. Coal-fuelled electricity is the most affordable of all sources of electricity in India,10 especially considering the unavailability of domestic gas for even the currently installed capacity.

When compared to coal, other scalable options like nuclear and solar prove to be very expensive to both construct and operate in India. For roughly the same investment, supercritical coal can provide approximately 1.4 times more installed capacity and six times more energy compared to solar. Similarly, it can provide approximately 4.4 times more installed capacity and 4.5 times more energy compared to nuclear.

In addition, electricity through supercritical coal at pithead costs nearly half of that of solar and nuclear. Therefore, if a similar investment goes into nuclear and solar, the overall socioeconomic benefits due to access to electricity would be around just one-fifth of possible benefits with coal.

As the table below shows, coal-fuelled power plants can keep the overall electricity prices anchored to an affordable level, which is an important consideration for supplying India’s growing energy demand.

10 Based on KPMG analysis; tariffs compared are for supply of power Rajasthan State Discoms from state and central government coal projects, central government hydro power projects, the gas power station in Rajasthan, the wind power plant in Rajasthan, the solar power plant in Rajasthan and the nuclear power plant in Rajasthan.


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Table 8 • Comparison of supercritical coal to solar and nuclear for equal investment

Ratio of possible installed capacity to

supercritical coal Ratio of possible energy generation

compared to supercritical coal Tariff

(USD/kWh)

Coal 1.0 1.0 0.05

Solar 1.4 6.0 0.11

Nuclear 4.4 4.5 0.10

Sources: for Nuclear - Times of India; Department of Atomic Energy and Nuclear Power Corporation of India, 2014. For solar and thermal: Central Electricity Regulatory Commission, 2014.

Coal to remain dominant fuel in India’s energy mix

Energy requirements of a country are driven by the growth of GDP, rise in population, share of non-commercial energy, energy efficiency and conservation measures taken, as well as a rise in standards of living. The causality of energy demands and some of the above factors tends to be bi-directional. It is therefore imperative to assess the quantum of energy required and the share of energy sources to meet the demand, albeit the projections may vary depending on the assumptions made. The primary energy required is estimated to reach 900 million tonnes oil equivalent (Mtoe) by 2021-22 and 1650 Mtoe by 2031-32 if a GDP growth rate of 8% is assumed. A few possible fuel mix scenarios have been developed in the Integrated Energy Policy of India. The projections of two of those scenarios are summarised in the table- below.

According to the Integrated Energy Policy by the Government of India, coal is expected to supply as much as 54% of the overall primary commercial energy by 2031-32 in the base case. Even under a forced scenario, which aims to estimate the minimum coal requirement, it is the dominant fuel with a share of over 41% in the energy mix. This translates to over 51% of the electricity generation mix. The level of gas use projected in the ‘Forced Scenario’ is based on somewhat optimistic assumptions of gas availability and of its ability to compete with coal on price. Should these assumptions not hold true, coal dependence will increase further.

Table 9 • Integrated energy policy of India recognises coal as the most dominant energy source even under the optimistic “Forced Scenario”

2031-32 Coal dominant case Forced nuclear + hydro + gas + renewable + coal efficiency +

rail share up + transport efficiency

Crude oil 25.7% 22.8%

Natural gas 5.5% 9.8%

Hydro 0.7% 2.2%

Nuclear 4.0% 6.4%

Renewables 0.1% 5.6%

Non-commercial 9.8% 12.0%

Coal 54.1% 41.1%

Source: Government of India , 2006.page 44.

The power generation capacities required for different energy sources under the forced scenario have been elaborated below. The projections in the table below assume exploitation of full hydro potential of 150 GW in the country, a capacity addition of 63 GW from nuclear power sources and a 33 GW capacity from wind farms by 2031-32.


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Table 10 • Generation capacity and load factors under “Forced Scenario”

Capacity (GW) Plant load factor (%)

Coal 270 67

Natural gas 70 27

Nuclear 63 68

Hydro 150 30

IGCC pet coke 3 68

Wind 33 20

Biomass 51 70

Solar 10 17.5

Total 701 50

The forced scenario is unachievable, as most other energy sources suffer from a wide variety of problems, including scalability, safety and availability issues. Each type of power generation has its own set of problems – organisational, technical or political. Hydro power has the following problems in India:

Resettlement and rehabilitation is a major issue in the implementation of storage-based hydro development. Furthermore, these projects often require forest land for their implementation and compensatory afforestation on the non-forest lands;

Geological surprises during construction cannot be ruled out even after extensive investigation due to uncertainty in the sub-surface geology;

Difficult or inaccessible potential sites and long gestation periods;

Storage vs. Run-of-River projects: The type (Storage/R-O-R) of hydro project that is built depends upon the topography, geology and hydrology of the area and is site-specific. Most of the distress caused by storage schemes occurs in the hill states, whereas the benefits are largely in the states in the plains, which are perceived to be more prosperous. Therefore, hilly states prefer R-O-R schemes; and

Hydroelectric power, especially run-of-river, is very unpredictable in India. Many rivers are monsoon-fed and monsoons can neither be accurately predicted nor controlled.

Nuclear power plants also face many different problems:

Nuclear plants produce waste and nuclear reprocessing does not eliminate the need for geological waste repository;

The risk of cancer is higher among uranium miners; and

Long development period.

The problem is compounded due to the shortage of fuels such as natural gas, which is not available domestically and unviable to import. Significant existing capacity is either left stranded or is running at low plant load factor (PLF) due to deficient supply of fuel:

While gas is primarily imported and plants suffer from a severe shortage of gas, coal is primarily produced domestically and reserves are expected to last for 80 years. The PLF of gas-fuelled plants plummeted to 26% in the period April to-September 2013, from 46% in the same period in the previous year. Indeed, gas shortage was the reason behind 51% of this shortfall in generation.


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Table 11 • Significant installed power generation capacity based on gas is stranded due to severe shortage and plants have been running at low PLFs

Coal Gas Hydro Nuclear

Stranded capacity in Jul 2014 (MW) 7 230 5 349 0 0

Average PLF in Sep 2013 (%) 65% 24% 52% 74%

Source: Stranded capacity: Ministry of Power, Government of India’s reply to Loksabha unstarred question no 2307 on 24th July, 2014 on closure of generation projects, pg. 1. Average PLF: Central Electricity Authority, Operation Performance Monitoring Division: Report on electricity generation during the period April’13 to September’13 dated 11th October, 2013, Category wise Plant load factor of Plants, p. 2.

Indian power plants consumed 487.9 million tonnes of coal, 86% of India’s total production in 2013-14. The Government of India undertaking, Coal India Limited (CIL) produced 462.4 million tonnes of coal, while 71.6 million tonnes of thermal coal was imported in 2013-14. India has 125.9 billion tonnes of proven coal reserves out of a total of 301.56 billion tonnes of coal resources. The dependence on imported coal can be reduced, if not eliminated, with the anticipated success of recent policy and efficiency improvement efforts.

Table 12 • India’s coal reserves (2014) can be expected to last for many more decades even at increasing rates of consumption

Proved

(Bn tonnes) Indicated

(Bn tonnes) Inferred

(Bn tonnes) Total

(Bn tonnes)

125.9 142.5 33.1 301.6

Source: Government of India, 2014.

Coal-fuelled power plants are indispensable in the near future and thus more focus should be put on making coal technology more efficient and clean. It is a false notion, at least for the next 50 years, that coal-fuelled power plants can be completely replaced with non-conventional technology. Therefore, it is prudent that concerted efforts be directed towards making coal-technology more efficient and in spreading awareness of the successes achieved already.

Non-conventional power infrastructure will depend on, or benefit from coal-fuelled plants

Non-conventional power cannot exist without conventional power. Let us consider a scenario – a 100 MW solar photovoltaic power plant is generating electricity and transmitting it over a 765-kV transmission line. The cost of installing a 765-kV transmission line is approximately USD 0.167 million per circuit kilometre. If all this cost were to be allocated to this power only, then the price to the end consumer would become unaffordable. The Renewable Energy Certificate (REC) market, which was expected to contribute to revenue, has not taken off. It has weakened the economics of solar power plants, in particular. Also, the load curve would not match the demand. Typically, solar energy is available during day-time, while base demand remains into the night. There is a seasonal variation as well in the PV generation profile, with generation dwindling during the months of monsoon and winter. Wind energy also suffers from similar issues and is intermittent in nature.

Coal-fuelled plants can make renewable energy more viable; some partnerships like bundling of power have been proven to be quite effective.

Bundling of power: In order to facilitate grid-connected solar power generation in the first phase, a mechanism of “bundling” relatively expensive solar power with power from the unallocated quota of the Government of India (Ministry of Power) generated at NTPC (National Thermal Power Corporation) coal-based stations, which is relatively cheaper, was proposed by the Jawahar Lal Nehru National Solar Mission (JNNSM). This “bundled power” would be sold to the


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Distribution Utilities at the Central Electricity Regulatory Commission (CERC) determined prices. NVVN (NTPC Vidyut Vyapar Nigam), a Government of India (GoI) entity, is identified by the GoI as the nodal agency for facilitating purchase and sale of 33kV and above-grid connected solar PV power under JNNSM. NVVN purchases solar power from developers as an intermediary seller and sells it to Discom after bundling it with the unallocated coal-based power.

In another example of successful partnership of renewable power and coal-based power, NTPC has installed solar plants within the premises of thermal power plants, sharing human resources, land and transmission infrastructure.

It is thus imperative to focus on both renewable sources as well as coal based plants in order to ensure affordable and reliable availability of electricity.

Socioeconomic conditions in the study area before Reliance Sasan power plant

The seven states which would benefit from the Sasan power plant are in the northern region of the country. Most of the states in this region have typically been lagging in critical Human Development Index indicators compared to the southern states and the country overall. Since the Sasan power plant hasn’t been fully commissioned as yet, the current socioeconomic parameters of the beneficiary states have been considered as a baseline for the quantification of benefits.

GDP and employment effects

The seven beneficiary states have unemployment rates comparable to the nation and together have around 5.6 million people who are unemployed. A significant portion of these are in the single state of Uttar Pradesh which has not been able to provide employment to approximately 2.6 million people.

Table 13 • Unemployment in the seven states

Region No. Unemployed

Delhi 500 113

Haryana 435 335

Punjab 288 087

Rajasthan 577 726

Madhya Pradesh 927 299

Uttar Pradesh 2 615 544

Uttarakhand 296 285

Total 5 640 389

Source: Government of India, 2011.

The larger states like Madhya Pradesh, Uttar Pradesh and Rajasthan lag behind the country in terms of per capita GSDP (Gross State Domestic Product) /GDP by 15 to 50%. With approx. 28% of the population of the country residing in these three states, improving the GSDP of these states can go a long way towards augmenting the overall GDP of the country.


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Table 13 • Rajasthan, Uttar Pradesh and Madhya Pradesh lag behind the country in per capita GSDP

Region Per capita GSDP (2013-14)

Delhi 227 627

Haryana 146, 773

Punjab 110 653

Rajasthan 70 699


Uttar Pradesh 41 988

Uttarakhand 125 072

Total 88 961

Source: Government of India, New Delhi, 2011, Census. www.census2011.co.in/states.php.

Quality of life: 33% of households do not have access to electricity. The figure is much worse in some of the beneficiary states

Access to electricity has been one of the major bottlenecks in the region. Major states like Rajasthan, Uttar Pradesh and Madhya Pradesh house about 32% of the country’s total households. Access to electricity in these states has been either equal to or much below the country’s average.

Table 14 • Major beneficiary states are below or close to the national average in providing access to electricity to its population

Region % Households with no access to electricity (2011)

India 32.8

Rajasthan 33.0

Uttar Pradesh 63.2

Uttarakhand 13.0

Madhya Pradesh 32.9

Punjab 3.4

Haryana 9.5

Delhi 0.9

Source: Government of India, Census of India (2011), Ministry of Home Affairs Source of Lighting: 2001-2011 (website).

Only 31% of households in India have access to tapped water.

Larger states amongst the seven beneficiary states like Uttar Pradesh, Rajasthan and Madhya Pradesh have struggled to provide basic amenities like tapped water to more than two-thirds of their population. Madhya Pradesh has performed extremely poorly on this parameter with just 10% of its households having tapped water.


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Figure 4 • Only 31% of households in India have access to tapped water

Source: Government of India Ministry of Drinking Water & Sanitation, (2012-13), p. 12.

Healthcare: below the norm of one primary health centre per 30 000 people

Access to healthcare in the rural areas of the seven beneficiary states has been a cause for concern. As per the national norm, India aims to have one Primary Health Centre (PHC) for every 30 000 people in the plain areas and for every 20 000 in hilly and difficult areas. Against this very conservative norm, the country faces a shortfall of 15% as of 2012. The seven beneficiary states fare even worse and the seven states put together have one PHC for approximately 40 000 people. This is much below the national average of 32 250 excluding these states.

Table 16 • The beneficiary states fall considerably short of the conservative norm of one PHC per 30 000 persons

Region PHCs required (2012) Shortfall (2012)

India (excluding below 7 states) 19 492 15%

Rajasthan 2 326 34%

Uttar Pradesh 5 172 29%

Uttarakhand 351 27%

Madhya Pradesh 1 977 42%

Punjab 577 22%

Haryana 657 32%

Delhi NA NA

Source: Government of India, 2012, Table 11, pg. 49.

Similarly, the seven states lag behind rest of the country in terms of people served by each hospital bed as well. Overall, these seven states have 3 300 people depending on each bed with state of Uttar Pradesh faring much worse at 4 574 people per bed.

In addition to the rural areas, many urban areas in these states suffer from extensive power cuts. Healthcare facilities in such regions have to depend on back-up options, like diesel generators, for critical functions. This puts financial strain on such facilities and impacts the affordability of the healthcare in such regions.

0%

10%

20%

30%

40%

50%

60%

70%

Rajasthan Uttar Pradesh Uttarakhand Madhya Pradesh Punjab Haryana Delhi

% h

ouseho

lds with tap

ped wa

ter (201

2-13

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Table 17 • Uttar Pradesh and Madhya Pradesh have worse people/bed ratio than the country as a whole

Region People/Bed (2012)

India (excluding below 7 states) 3 043

Rajasthan 2 698

Uttar Pradesh 4 574

Uttarakhand 2 300


Punjab 2 638

Haryana 1 404

Delhi NA

Education: 26% of the country is still illiterate, which impacts their employability in the modern economy

The literacy rate in the seven beneficiary states has been below or comparable to the overall average of the country. This has proved to be a hindrance in the overall economic growth of these regions and has forced the population of these states to be less employable in the modern economy. Southern states have benefited from much higher literacy rates compared to the seven northern states in consideration.

Table 15 • Overall literacy rates in the beneficiary states have been below (or comparable) to the national average

Region Literacy rate (2012-13), %

India (excluding below 7 states) 74.0

Rajasthan 67.1

Uttar Pradesh 69.7

Uttarakhand 79.6

Madhya Pradesh 70.6

Punjab 76.7

Haryana 76.6

Delhi 86.3

Source: Government of India, 2013a.

Railways: diesel-based locomotion costs more than electric locomotion

Indian Railways, which has approx. 128 470 track kilometres of assets under operation, has achieved 43% electrification of its tracks. The line haul cost for electric locomotives is 41-47% cheaper than diesel.

In addition, electric locomotives provide other advantages like lower maintenance requirements, higher hauling capacity per locomotive, higher speeds, lower downtime, etc. Moreover, diesel costs are dependent on crude oil and are therefore inherently more volatile. Due to this obvious advantage, Indian Railways uses electricity to haul 67% of its goods traffic and 48% of its passenger traffic by gross tonne kilometres. Clearly, additional electricity committed towards electric locomotion can contribute significantly to Indian Railways and also save precious foreign exchange for the nation.


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Literature review, study methodology and limitations

A super critical power plant has far-reaching impacts across the country, impacting not only the local community but also the regions receiving the corresponding electricity. Furthermore, many other areas which provide necessary products and services for the power plant benefit. The following are likely to be the interested and affected parties for this study:

local community around the power plant and coal mines

employees working for the plant and coal mines

people working for the organisations supplying direct or indirect inputs to the power plant and coal mines

people consuming the electricity supplied by the power plant

regulators, administrators, environmentalists, social workers and government officials.

Review of existing studies

Most of the existing socioeconomic impact studies of power plants have focused on an upcoming project and have analysed the impacts of the power plant on the local community. These studies include base lining of the plant site, including the demography, culture, economic status, health, education, infrastructure and environmental condition of the locality. Upon completion of the base lining process, the impact of the upcoming plant is assessed by studying the proposed corporate and social responsibility (CSR) activities, proposed infrastructure improvement programs and analysing the impact on job creation, impact on GDP, income improvement and value addition. Environmental impact is also measured by analysing the waste management facilities in the upcoming plant and estimating the expected emission levels.

Some of the more structured reports, like the “Environmental and Social Impact Assessment of Athi River Thermal Power Plant” by the World Bank, perform a systematic study of the entire operational phase of the plant from the construction phase up to the decommissioning phase. In this study, all proposed policies of the plant such as its safety action plan, policy frameworks and environmental action plans have been studied to assess the total socioeconomic impact of the plant.

However, most studies focus only on the plant-specific functions and analyse the impact of the same on the local community. This approach has limitations, as a power plant not only affects the local community but its impacts span across geographies. Therefore, it is imperative to also study the impact of the electricity supplied, rather than focusing on just the plant-specific activities.

Our approach and methodology

Our study aims to look at a more holistic picture of the impact of the power supplied to people. Furthermore, environmental impacts also cannot be limited to the local community and therefore, an air quality assessment of the neighbouring regions has little importance as compared to a quantitative analysis of the overall health impact of the emissions from the plant. It should also be noted that fulfilling the energy requirement of the people of India is of great importance and has to be met by any and all sources available, provided that the environmental impact of the source is limited. The environmental impact of the plant should, thus, be analysed by comparing it to other sources and other technologies that are available for the fulfilment of the same energy requirement, rather than on an absolute basis.

Reliance Sasan UMPP has a far-reaching impact across the country. It affects not only the local economy, but also the seven states where power is being distributed and many other


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geographies which provide necessary products and services for the power plant and coal mines. It also effects people across different strata of society and enables the poorest section of society to access basic necessities like quality healthcare and education. The socioeconomic and environmental assessment of the plant thus needs to incorporate a comprehensive study which encompasses all sections of society, all geographies and all industries that would be affected.

The following steps were taken in carrying out the study:

Scoping and identification of the impacts: A power plant supplying electricity to millions of people would impact many lives and would have numerous benefits. Scoping is done to identify most important of those impacts.

Identification of the indicators measuring the impacts: An impact may have one or more quantifiable sub-components. They must be identified so that they are mutually exclusive and collectively exhaustive for that particular impact.

Selecting the impact quantification approaches and data collection: The parameters can be quantified, ideally, by tracing them from the source of the activity till the end. That may require locating all the effected people, organisations and geographies, as well as having access to all the accurate data. This approach (“bottom-up”) can be most accurate, albeit tedious and at times, impractical, and has been used wherever possible. In other places, a slightly less accurate but more convenient approach of isolating the impact of this power plant from all the other power plants and other sources put together (the “top-down” approach) has been used.

Analyses and results: The results are presented in practical and relevant context for direct action and use of stakeholders.

Scoping, identification of impacts and indicators

Socioeconomic and environmental analysis aims to study a wide range of interrelated aspects. The social aspects may involve quality of life, safety, access to education, healthcare and many other factors. Similarly, economic factors would include creation of employment, impact on GDP, and improvement of income, among other factors. Since the plant affects a wide range of factors, it is essential to select the most substantial impacts and prioritise the analysis accordingly.

The key objective of this study is to quantify the socioeconomic benefits of an advanced coal-fuelled power generation facility in India.

While no comprehensive list of focus areas can be developed, a broad list of socioeconomic impacts has been identified for our analysis. These parameters reflect the most pressing issues impacting India. It is inherent in the objective that the study quantifies the impact the power project has on a city or region when people have access to affordable and reliable electricity. The measures may include median income, life expectancy, infant mortality, education levels, quality of healthcare and industrial competitiveness.

The economic analysis focuses on impact on GDP and job creation. With a largely young population and millions of individuals entering the workforce every year, job creation is one of the most crucial concerns in India and takes centre stage in many political discussions. The Reliance Sasan UMPP will create direct, indirect and induced jobs across sectors.

Access to electricity helps millions of people get access to the basic necessities of life and allows them to live with dignity and safety. Quantifying the impact of the power plant on the quality of life of people is thus crucial for assessment of the social impacts. Access to electricity is also expected to increase enrolment in schools, help schools run for longer duration, provide adult


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education programmes and help students study for a longer duration. With a low literacy rate and high dropout rates, assessment of the impact on education also becomes important.

Impact on healthcare services was also a focus. While in urban areas improvement in reliability of electricity would improve affordability of healthcare, electricity in rural areas will bolster the setup of more healthcare centres.

Coal-based power plants produce many harmful emissions while 21st century coal technology helps in reduce the environmental impact substantially. This study focuses on the environmental impact of advanced technology power plants in comparison to vintage technologies and other sources of energy. The study also aims to quantify the health impact from the emissions reductions achieved by using the best available technology.

Along with the study areas mentioned above, analysis of other impacts like corporate social responsibility have also been done. The table below provides the list of socioeconomic and environmental impacts that are analysed in this study:

Table 19 • Broad list of indicators

Impact area Indicators Geographic focus

Economic impact

GDP impact All India

Direct job creation Local community

Indirect and induced job creation All India

Quality of life

Access to electricity seven states

Access to drinking water seven states

Improvement in street lighting seven states

Access to heating & cooling system seven states

Infrastructure development Electrification of railways and corresponding improvement in affordability

All India

Education and literacy Improvement in school enrolment seven states

Healthcare Improvement in healthcare affordability seven states

Increase in hospital beds seven states

Corporate social responsibility

Improvement in access to quality education

Local community

Number of new hospital beds Local community

Environmental impact

Increase or decrease in harmful emissions

Across geographies

Impact on health Across geographies

Approaches for impact quantification

Economic impact assessment

Different econometric models and multipliers have been used to analyse the economic impact of the Reliance Sasan power plant. The assessment of the economic impact was focused on three main factors:

job creation due to the operation of the power plant and coal mine

additional job creation due to greater availability of energy

the impact on GDP due to the electricity supplied.


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Business output

In order to analyse the impact on job creation, data on direct jobs created in the power plant was taken from plant management. However, the operation of the plant leads to a ripple effect across other industries in the value chain, due to increased demands from the plant (indirect impact) and increased disposable income in the community (induced impact). In order to analyse the indirect and induced jobs created by the operation of the plant, job multipliers were used.

The job multiplier for a given industry is the total overall increase in jobs for all industries per unit increase in output of the given industry (measured in dollar value). The job multiplier can be calculated using the Input-Output Transactions Table (IOTT), which illustrates the dependence of one industry on other sectors. The indirect job multiplier for the power sector has been calculated in a report published by National Council of Economic Research (2014). This multiplier has been calculated for the entire country. However, owing to the comparable economic condition and similar labour requirements in different states of India, the same multiplier can be used for analysing the impact of Reliance Sasan power plant.

Induced jobs are created due to the additional income of people who are directly and indirectly employed by the power plant. Additional disposable income leads to higher consumption, which in turn has a multiplying effect on other sectors. The number of induced jobs created per direct jobs in the electricity sector has been calculated in a report published by National Council of Economic Research (2014).

Apart from direct, indirect and induced job creation, additional job creation is also expected due to the increased supply of electricity. A report from World Bank calculates the number of jobs created with each additional kWh of electricity supply (IFC, 2012). The study establishes a positive causality of electricity supply and job creation. It has been assumed that the same causality would hold true for the seven states to which electricity from Reliance Sasan is being transmitted.

To analyse the impact of electricity supplied by the power plant on the GDP of the country, energy intensity is taken into consideration. A study of the trend of energy efficiency of the country can help us analyse the amount of energy required per dollar of GDP growth. The energy efficiency of India is increasing per year due to increased focus on the service sector, which requires comparatively a much lower level of electricity. Analysing the trend of increase in energy efficiency can thus help assess the energy required for GDP growth in the future.

Analysis of the input-output table can help to assess the impact of the plant on the business output of its entire value chain. The input-output table approach is based on the fact that production of an output requires inputs and these input output linkages are recorded in the form of matrices. Analysis of input-output tables can thus help to understand the inputs required for production of electricity and the impact on the entire value chain.

Social impact assessment

Health

The electricity allocated to health facilities in the beneficiary states was calculated from the “State-wise Electricity Consumption & Conservation Potential in India” report produced by the Bureau of Energy Efficiency (2009). The share of electricity taken up by different sectors is assumed to be similar to the numbers in 2009. A further rural-urban split of power in this case and beds per million unit of electricity were calculated from credible data on categorised health facilities and their number of beds and categorical electricity consumption. This was done to


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make the calculated result closer to the actual numbers, which are unavailable. The study discovers the potential of additional health facility creation in rural parts of the beneficiary states and has a long-term affordability perspective for healthcare in urban spaces. For that, the average diesel generator cost was a result of KPMG’s internal research and analysis. A parallel analysis was carried out to ensure that the replacement of Diesel Generators (DGs) in urban health facilities was a reasonable idea to conceive in the long run.

Street lighting

Due to the absence of direct and comprehensive data in this segment, assuming the sectorial split of power remains similar to the values in 2009, streetlight allocation of power was calculated using “State-wise Electricity Consumption & Conservation Potential in India” (Bureau of Energy Efficiency, 2009). Furthermore, the consumption of a typical public streetlight was calculated using a typical wattage value. A reasonable figure regarding the number of households benefitting from a streetlight was assumed.

Heating/cooling

The latest and most credible data available in this regard was from the Ministry of Environment and Forest (2008). This, in conjunction with “State-wise Electricity Consumption & Conservation Potential in India”, was used to determine the exact allocation of power into heating/cooling facilities in households. The bifurcation of power to rural-urban heating/cooling facilities was calculated using the product of households in rural/urban spaces with the electricity consumption by one such typical household.

Education

Availability of electricity in schools can improve students’ concentration, quality of education and eventually leads to an increase in enrolment. A study published by World Bank (Khandker, 2012) establishes a positive causality between availability of electricity and increase in enrolment in schools and colleges in India. The same causality is assumed to hold true for all the seven states benefitting from electricity from the plant. It has been assumed that the proportion of electricity supplied to educational institutes is the same across all these seven states. Furthermore, in order to analyse the maximum potential impact of Reliance Sasan UMPP, it has been assumed that the additional electricity available due to the plant is used entirely for electrifying non-electrified schools. This assumption gives us the maximum impact potential although the actual impact might be lower since some of the excess energy would be used for enhancing facilities in already electrified schools.

Water

Electricity is integral for water supply. To assess the impact of the Reliance Sasan plant on water supply, the amount of energy used per litre of water supply has been calculated. Due to unavailability of credible data for all states, the average energy required to supply each litre of water is calculated for Delhi and has been assumed to be similar across other states. This assumption has been taken considering the fact that ancillary functions performed by water works departments and technology usage would be comparable across states. Furthermore, average water usage per capita is considered to be similar across six states, apart from Delhi. Water usage per capita for Delhi is higher than the national average because the state is entirely urbanised.


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Physical connectivity

Access to additional electricity may help rapid electrification of railway tracks. In order to analyse the cost saving from electrification of tracks (which currently uses diesel locomotives), data on the cost of running diesel and electric locomotives has been taken from Indian Railways’ annual reports. This data helps analyse the estimated cost saving per kWh of energy supplied. In order to calculate the maximum potential fuel cost saving, it has been assumed that the entire additional energy supplied would be used for electrifying tracks. The actual saving, however, might be lower, since some amount of energy would be used for enhancing services in railway stations and within trains.

Environmental

The differential coal consumption per unit of electricity produced due to Sasan’s super critical technology was calculated using values from a socio-environment study and Reliance’s CDM-PDD document to UNFCCC (2009). The emissions factors, as per IPCC guidelines, were taken and different emission values for gasses were taken from a greenhouse gas emissions report by Banktrack (2010). Values of NOx, CO2 and Particulate Matter (PM) from the plant were compared with that emitted by all on-road vehicles in the country and vehicles reduced was calculated by taking the minimum of the all categories of pollutants. Furthermore, a private study by Resources for the Future (2012) was used to calculate the lives that would possibly be saved by reduction in emissions from the plant. CSR data is taken from Reliance Sasan UMPP (2010).

Data collection

The socio-economic analysis performed in this report has been prepared using a combination of primary and secondary data and is based on reports published by the Government of India, the World Bank and the UNFCC, among other sources.

The primary data was collected from the Reliance Sasan UMPP.

Limitations

While not comprehensive, effort has been made to quantify the most important impacts. It should be noted that many socioeconomic conditions are hard to identify and quantify as they are related to human beings, whose characteristics vary from community to community and across geographies. This limits the accuracy of the study, together with the following uncertainties:

scientific uncertainty – limited understanding of the ecosystem or community affected;

data uncertainty – The study relies on the data and information available in the public domain or as provided by the stakeholders. Also, as the methodology rests on several assumptions, it may be insufficient for a few purposes other than the purpose of this report;

policy uncertainty – unclear or disputed objectives or standards may alter the study results.

Economic impact of Reliance Sasan power plant

Reliance Sasan power’s impact on India’s GDP

In an energy deficit country like India, access to electricity is a key factor for economic development. It enables industries to employ machinery fully, enables use of capital-efficient and power-intensive production methods, improves competitiveness of industries and allows the manufacturing sector to move up the value chain into more complex manufacturing. Additional


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power supplied to the northern states of the country by Sasan would have an exponential effect on the economies of these power-starved states.

To analyse the total economic impact of the Reliance Sasan power plant, the study has been divided into two distinct steps. The first step analyses the impact of the construction and operation of the power plant on the economy. This step provides a detailed understanding of the impact of the investments made in the power plant and the business growth expected in other sectors which provide products and services to the power plant and its employees. The second step analyses the improvement in productivity in other sectors due to excess availability and reliability of power.

Step 1: Economic impact due to the construction and operation of the plant

Reliance Sasan’s economic impact at net present value is expected to be USD 55 billion11 over the construction and operations phase of around 30 years.

The power plant would have a direct impact on the economy due to the investments made for setting up and running the plant. In addition, it would have a bigger impact as the output of all businesses which provide products and services to the power plant are also expected to grow. Furthermore, people whose earning potential increases due to the operation of the plant and its supply chain are expected to spend more, which in turn would increase output of many sectors, including retail, consumer goods and real estate, etc.

The overall investment in the power plant construction and coal mine development has been about USD 4 billion over the period of four years. It has been assumed that 40% of all materials used for the construction were imported and these materials are not expected to have any major economic impact on the local economy. Furthermore, yearly expenditure in the power plant is estimated considering an EBIDTA (earnings before interest, taxes, depreciation and amortisation) margin of 37%. Reliance Sasan Power is expected to provide an economic impact of USD 12 billion during the construction phase of four years and an additional USD 42 billion during the operating lifetime of 25 years.

Table 16 • Direct, indirect and induced economic impact due to construction and operation

Construction (USD billion) O&M (USD billion)

Direct economic impact 2.40 9.21

Indirect economic impact 3.51 11.29

Induced economic impact 6.24 21.88

Total impact 12.15 42.39

Total economic impact 54.54

Step 2: Economic impact of increased productivity due to greater electricity access

A significant impact is also expected due to the increased access to electricity which would help industries and other users employ more productive production methods. The impact of the increased availability and reliability of electricity in the two main sectors (agriculture sector and industrial sector – including both manufacturing and services) has been analysed below.

Agriculture and allied services

Sasan Power may help realise a direct GDP impact of USD 2.5 billion from the agriculture sector.

11 Net present value, 2014


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Agriculture is a labour-intensive activity. Cost of cultivation data shows that labour accounts for more than 40% of the total variable cost of production in most cases (Department of Agriculture and Cooperation, 2013). Agriculture and allied services contributed 18.2% to India’s GDP, while it accounted for 53% of employment in the year 2013-14. Agriculture is one of the most significant contributors to the ability of poor people to earn a living and is one of the areas where electricity can have the greatest impact in terms of improving existing earnings. Energy in the form of electricity plays a key role along the entire agricultural production chain:

Improvement in productivity – While a scientific assessment on yield loss due to poor quality of irrigation has not been performed, a high-level survey (Shakti Foundation, 2014) reveals that farmers feel that the crop yield could improve by 10% if the required volume of water were available.

Better-quality products and increase in earnings – Availability of electricity for irrigation from stored water allows farmers to grow as many as three crops in a year, to diversify to more remunerative cash-crops (for example, pomegranates, coloured capsicum, gerbera flowers, oranges, dates and icebox melons) and to bring additional land under irrigation. Moreover, farmers’ income could increase up to five times from the current levels.

Access to market information - Apart from the production technologies, farmers need access to market information, which requires access to electricity. The online agricultural market E-choupal, which is widely acclaimed and hugely successful, is accessible wherever electricity and Internet are available. Similarly, ‘Kisan Call Centre’, a telephonic information dissemination system, requires electricity to function.

Millions of such farmers would benefit from direct grid supply of electricity from Sasan UMPP. At least 90% of electricity supplied to agriculture is used in water pumping and diesel pumps are likely to be gradually replaced by electric pumps. A typical diesel-pump of 3 HP irrigates an area of 3 hectares for one crop, yielding crops whose value can be an average USD 1.67 thousand per annum. However, an electric-pump can now allow the farmers to grow two crops per year due to better cost-economics. Furthermore, an increase in productivity by about 10% is reported on account of better quality of power. This is because the poor quality of the electricity supply seriously impairs pump operating efficiency and results in financial costs for the farmers. Due to low voltage, tail-end pump-sets often do not work or have low discharge. In such a situation, the farmers are forced to make alternative arrangements for irrigation or endure crop failure due to the unavailability of adequate water. Thus, the farmer may either make an additional expenditure for irrigation or lose a significant portion of his income due to crop failure. Low voltage is a major cause of motor burnout in pump-sets.

Sasan UMPP is likely to supply about 5 507 million units of electricity per annum to the agriculture sector once it runs on full steam. Considering an average pump which consumes 3600 units per annum,12 about 1.37 million electric pumps can be energised. An additional INR 10 000 per annum of productivity increase would amount to USD 230 million of additional income. Further, an additional crop per annum per pump would amount to USD 2.3 billion of additional income per annum. Thus, a direct GDP impact of USD 2.5 billion can be realised from the agriculture sector.

Industrial sector

Electricity from Reliance Sasan UMPP can reduce losses due to power shortages in small and medium-sized enterprises by more than USD 1.5 billion.

12 3 kW x 6 hours a day x 200 days per year


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Apart from the impact on the agriculture sector, electricity from Reliance Sasan UMPP is expected to positively affect the industrial sector. As can be expected, the industrial sector in India has the largest share of electricity consumption (45%).

Figure 5 • Sectoral consumption of electricity in India (2012-13)

Source: Government of India, 2014, pg. 49.

Inconsistent supply of electricity impacts small, medium and large enterprises by:

Reducing productivity.

Increasing the cost of production as industries resort to other means of electricity supply, such as generators. These generators are less efficient and use diesel, which is more costly. The cost of running power backup may be in excess of USD 80 per hour in some cases.

Firms spend USD 40 000 to 85 000 on installation of power backup. This is quite a substantial investment for small and medium enterprises.

Maintenance of generators increases cost of production further.

Industries need to maintain an inventory of fuel in order to ensure uninterrupted power supply, which increases inventory cost of these industries.

The impact of erratic electricity supply varies from industry to industry and across states. Industries in some states witness an average of 1 hour of power outage per week while industries in other states witness 40 hours of power outage per week.

A study published by FICCI in 2013 elaborates the monetary losses suffered by small, medium and large scale industries due to power shortages. According to this study, industries face losses from below USD 15 per day to over USD 650 per day due to power outages.


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Figure 6 • Annual losses suffered due to outage by small, medium and large enterprises (in USD)

Source: Federation of Indian Chambers of Commerce and Industry ,2013, pg. 50.

Sasan power’s impact on employment generation

The power from Sasan is not only expected to benefit overall GSDP of the beneficiary states but also help them provide more employment opportunities to their population. A detailed quantitative assessment of the impact of Reliance Sasan UMPP on increasing jobs and GDP in India is presented below.

Total job creation due to construction & operation of the plant Around 41 000

Total formal sector job creation due to access to electricity 157 000

Net job creation due to Reliance-Sasan as a percentage of total yearly job creation in India 3%

The power from Sasan is not only expected to benefit overall GSDP of the beneficiary states but also help them provide more employment opportunities to their population. A detailed quantitative assessment of the impact of Reliance Sasan UMPP on increasing jobs and GDP in India is presented below.

Jobs due to construction and operation of power plant and mines

A total of about USD 4 billion worth of investment has gone into developing the Reliance Sasan UMPP and its three captive mines. The equipment and services that this money has purchased required quite a lot of people to work for many months. There are many more jobs which were created for skilled, semi-skilled and unskilled workforce in keeping this plant and the mines running. It would not be an overstatement to state that every household in Sasan would have at least one member working directly or indirectly for the Reliance Sasan UMPP. Indeed, the power plant is now the identity of this place called Sasan.

As with the economic impact, the jobs created by the Sasan UMPP can be grouped into three categories – direct, indirect and induced – based on their proximity to the activities in the plant.

Direct jobs

The plant directly employs engineers of various disciplines, managers, personnel related to finance, administration, human resources and security. It also provides employment to consultants, auditors, contractors and various unskilled workers. It includes local contracts like manpower supply, housekeeping, horticulture works, vehicle supply, etc.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Small enterprises Medium enterprises Large enterprisesBelow 6000 6001-30000 30001-60000 60001-150000 150001-240000 Above 240000


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Reliance Sasan Power directly employs 650 people in the operations and maintenance of the power plant. The direct jobs created in three pit-head coal mines, which supply coal to the power plant, are considered as indirect jobs created by the power plant.

In addition, Reliance Sasan Power has provided approx. 5 000 jobs for a total period of four years of construction.

Indirect jobs

The indirect jobs are created in areas like mining, transportation, communication, spares and consumable supply, financial services, etc. According to a report from the National Council of Economic Research, 6.21 indirect jobs are created for each direct job created in the power plant while 0.74 indirect jobs are created for each direct job created during the construction phase. In total, about 7 600 indirect jobs were created.

Induced jobs

The direct and indirect jobs that the Reliance Sasan UMPP created led to higher disposable income for many individuals and organisations. The additional income results in higher expenditure in items like food, consumer durables and leisure activities. These additional expenditures create additional employment across different sectors of the economy. According to a report from the National Council of Economic Research, for each direct job created in the electricity sector 24.31 induced jobs are created and for each direct job created during construction of the plant, 2.45 induced jobs are created. These induced jobs would be spread across various different sectors like agriculture and retail with a majority being added in the informal sector.

In total, 27 700 induced jobs would be created by Reliance Sasan UMPP. The details of number of jobs created have been elaborated in the table below.

Table 17 • Summary of direct, indirect and induced jobs created

Construction O&M Total

Years of employment For 4 years For 25 years

Direct jobs 5 000 639 5 639

Indirect jobs 3 700 3,970 7 670

Induced jobs 12 250 15 532 27 782

Social impact of Reliance Sasan power plant

Access to an affordable and reliable source of electricity is fundamental for poverty reduction and societal uplift. Electricity from Sasan provides a wide range of social benefits and plays a crucial role in helping thousands of people live with greater dignity and safety. It touches the lives of millions by enhancing the quality of education, supporting affordable healthcare, generating local employment and improving the overall quality of life of all its beneficiaries.

The following section aims to provide a holistic view of the social impact of Reliance-Sasan power plant and the benefits that matter most. The focus of the study would include both the communities impacted by the power plant and coal mine as well as the regions where the electricity is being transmitted to.

Access to electricity

Approximately 18 million people’s electricity needs may be fulfilled.


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As of 2011, 24.7% of India’s population did not have electricity. Absence of electricity thus denies 306 million Indians basic amenities and forces them to use other means of energy which are more polluting, expensive and dangerous.

Electricity from Reliance-Sasan power plant reaches some of the poorest states of India and therefore helps some of the poorest sections of the society get access to electricity. At full capacity, the power plant can generate enough power to fulfil the electricity requirements of more than 17.5 million people across 7 states. In Uttar Pradesh, Madhya Pradesh and Rajasthan the percentage of households with access to electricity is quite low at 37%, 67% and 67% respectively; Sasan would therefore help millions of people in these states get access to electricity for the first time.

Table 18 • Number of people whose electricity needs can be fulfilled by the plant

States No. of people whose electricity needs can be fulfilled by the plant (in Mn)

Delhi 1.59

Haryana 1.41

Uttar Pradesh 2.31

Rajasthan 1.64

Punjab 1.82

Uttarkhand 0.40

Madhya Pradesh 8.48

Total *17.69

*Note: Addition may give different result due to approximation error.

Access to education

Approximately 12 000 schools may become electrified and nearly 96 000 additional children may enrol.

The importance of education on development of a country, poverty reduction and overall societal uplift cannot be over emphasised. Quality of education and the number of years spent in education is strongly related to one’s income level years after.

Access to electricity improves the quality of education, allows use of modern technology like internet to help students and teachers, enables schools to extend beyond daytime and thereby increase the number of classes, improves concentration of students and helps improve administrative functions. Access to electricity at home allows students to study longer and therefore helps them perform better. Evening classes also help those who work during the day and are essential for adult literacy programs. Electricity access is therefore crucial for reducing illiteracy in India. However, the number of electrified schools in India is quite low, with less than 38% in Uttar Pradesh, 48% in Madhya Pradesh and 23% in Rajasthan providing electricity.

A working paper published by The World Bank Development Research group in 2012 studied the outcome of electrification of schools on the children’s education in India. The study was based on school enrolment of children between 7 and 15 years of age and calculated the impact of electrification on enrolment, study time and number of schooling years completed. The study showed that electricity access increases enrolment in a school by 6% for boys and 7.4% for girls. Furthermore, study time increases by more than one hour per week due to electrification at home, which also contributes to an increase in number of schooling years by 0.3 for boys and 0.5 for girls.


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Table 19 • Improvement potential in school enrolment

States No of institutions that can be electrified Increase in student enrolment

Madhya Pradesh 5 632 47 058

Uttar Pradesh 3 200 33 575

Rajasthan 1 911 15 672

Haryana 660 (all un-electrified schools) 7 411

Uttarakhand 631 3 329

Delhi negligible negligible

Punjab negligible negligible

Total 12 034 96 597

Source: World Bank data

Assuming that the proportion of the total power provided to educational institutions in the seven states does not change drastically in the near future, electricity from Reliance-Sasan power plant can potentially electrify more than 12 000 schools which do not have access to electricity currently. This could increase enrolment by more than 96 000 students in these schools.

Electrification of railway

Additional electric locomotion can save Indian Railways approximately USD 34 million and the country can save approximately USD 50 million in foreign exchange.

Potential cost saving due to electrification of tracks (41-47% saving per tonne kilometre) USD 34 million/ year

Potential reduction in Import USD 50 million/year

The Indian Railway network is one of the largest in the world and carries 23 million passengers daily. It is the backbone of India’s transport network and handles a large share of both passenger and freight traffic in India. Prevalence of diesel as fuel for locomotives is high in the country and only 43% of the tracks are electrified. This leads to high fuel cost which impacts the affordability and profitability of Indian Railways. In addition, electric locomotives provide other advantages like lower maintenance requirements, higher hauling capacity per locomotive, higher speeds, lower downtime, etc. Moreover, diesel costs are dependent on crude oil and are therefore inherently more volatile. Therefore, Government of India has given major importance to the electrification of the network.

Electricity supplied from Reliance Sasan power plant to Indian Railways, at full capacity, can lead to reduced use of fuel by 66.9 million litres per year. This would lead to a cost saving of USD 33.65 million due to reduced use of diesel locomotives. In addition, this would also help the nation save foreign exchange of approximately USD 50.37 million per year at current global rates of diesel.

Water

Potentially 22 million people can get access to tapped water.

Both urban and rural households across India face an acute shortage of drinking water. As of 2013 only 30.80% of Indian households had access to piped water. Even in those households, availability of water is quite infrequent and the quantity of water supplied is often inadequate. Households therefore have to use other means to collect water. These include use of neighbourhood ponds and lakes or collecting water from canals, wells, and hand pumps. Water


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from these sources is often highly polluted and unsafe for drinking. Access to proper drinking water can thus lead to a decrease in the number of cases of water borne diseases.

Availability of piped water can also help reduce the amount of time and effort spent in collecting water from other sources and the same can be utilised for more productive work or in education. Long queues in front of community tube wells are a common site across India. In the desert regions of Rajasthan and Gujarat, woman travel for miles in order to collect the daily requirement of water.

Increased access to electricity is key to providing piped water to households as it is essential for extraction, pumping, treatment of water, desalination and many other functions. Electricity from Reliance Sasan reaches some of the most water starved states in India like Rajasthan (26% of households have piped water), Uttar Pradesh (20% of households have access to piped water) and Madhya Pradesh (10% of households have access to piped water). Therefore, Sasan can potentially help thousands of households get access to water.

The below table provides a details of the number of households and individuals that can benefit from Reliance-Sasan.

Table 20 • Households and individuals enabled to access to water due to Reliance Sasan

State Households Individuals

Madhya Pradesh 929 917 4 649 587

Uttar Pradesh 271 906 1 549 862

Rajasthan 683 372 3 758 547

Haryana 736 514 3 903 525

Uttarakhand 210 805 1 054 023

Delhi 491 576 2 271 087

Punjab 988 719 5 141 342

Total 4 312 808 22 327 973

Healthcare

Potentially, 10 000 new hospital beds could be added in rural areas. In addition, reduced health-care costs in urban areas could save approximately USD 19 million.

Healthcare is widely recognised to be a public good. A just healthcare system should meet four criteria - universal access, fair distribution of financial costs, training providers and special attention to vulnerable groups such as children, women, disabled and the aged.

Electricity, as one of the vital inputs to healthcare, allows for three out of the above four criteria. Electricity makes healthcare possible and hence, accessible. Numerous medical activities like emergency and night time operations, vaccine storage and diagnostics facilities cannot be possible without electricity access. The affordability of electricity is passed on to patients making health care much more affordable. A supercritical power plant such as Reliance Sasan UMPP replaces the diesel generation sets used by many rural and urban hospitals with one of the lowest-cost sources of electricity in India. Further, electricity in healthcare has a direct impact on women, aged, children and disabled through maternity wards, neonatal intensive care units, and in-patient departments running round the clock. This has a direct implication on infant mortality, mother’s health, quality of life and life expectation.

Additionally, the power from the plant going into the rural areas would undoubtedly help rural citizens gain greater healthcare access in their vicinities. We estimate that about 9 950 additional


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beds can be supported by the power supply of Reliance Sasan UMPP to the healthcare sector. This is a significant addition considering the fact that rural bed density in India is in the range of 1.0 to 1.5 beds per 1000 in population. Regarding affordability, the cost of running a diesel generator is about USD 0.25 per kWh as against an average grid electricity tariff of USD 0.113 /kWh. Almost all of the savings can be passed on to the beneficiaries while the exact amount would depend on the type and location of service availed. As per certain estimates, it may lead to reduction in input costs by about 14% and final pricing by about 10 to 12% in cities. Further, the reliable and sufficient supply of electricity would phase out certain operational bottlenecks originating from outages. This could lead to greater savings that are estimated to be in the vicinity of USD 19.67 million in urban areas, annually.

Street lighting

Approx. 400 000 households may benefit from additional street lights being installed. The notion of street lights deterring crimes may sound simplistic but it is well-proven by studies conducted over the years across the globe. Typically, the occurrence of crimes happening on a daily basis can be attributed to multiple factors such as inept policing, poor laws, poor infrastructure or inappropriate support services. It is encouraging to know that sufficient street lighting is understood to be effective, second only to increased police presence, in preventing crimes. A variety of studies conclude that improvement in street lighting helps in reducing crimes by about 7 to 20%. In the Indian context, women and aged citizens are more vulnerable than others. Poorly lit streets do not help in avoiding road accidents either. In fact, there are certain semi-urban and rural areas wherein wild animals take advantage of darkness and attack cattle as well as humans at night time. Thus, street lighting alone can help raise the living standards of a large chunk of the population.

It is estimated that Sasan power plant would wheel around 229 million units (MU) of electricity to the public lighting systems in the beneficiary states. This would provide ample lighting to approx. 400 000 households.

Community benefits

The community in the vicinity of the Sasan power plant may benefit in several areas, such as education, healthcare, better re-settlement, etc.

2 200 local community students receiving free, quality education along with economic incentives in the school for the community

24 000-26 000 Out-patients benefitted annually from the hospital functioning typically for local community.

Rehabilitation and resettlement plans encompass allocation of a 400-acre land for the displaced.

Corporate social responsibility (CSR) is an integral part of development in India and globally. Many Indian corporations are willingly and repeatedly exceeding the statutory requirement of mandatorily investing 2% of their profits in to CSR activities. As a result, every large scale project strives to give back to the local community in as many ways as possible.

Reliance Sasan UMPP has already invested in opening a school, a healthcare facility and a community centre for the people of Sasan village. The 3 960 MW power plant has carried out numerous activities in favour of community and also undertaken initiatives in the sectors of Health, Employability and Rehabilitation and Resettlement (R&R). It has built up a long term R&R plan that offers higher compensation to the affected community than the mandated compensation. The R&R colony having all basic amenities such as a school, healthcare centre, market place, Panchayat Bhavan (local law body) and place of worship has been constructed by


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Sasan Power and covers over 400 acres of land. Various CSR activities are being implemented for the overall development of the local community.

Heating and cooling

Potentially 4.5 million households may be benefitted due to access to heating and cooling devices improving the quality of life.

Life without heating and cooling facilities can be very difficult in the harsh summer and winter months, respectively, in some parts of India. The beneficiary states of Reliance Sasan UMPP are in the Northern part of India where the temperature varies from sub-zero to about 40⁰ Celsius. From blistering summers to freezing winters, these states experience extremities. The residents find it hard to continue with their daily operations efficiently and are robbed of their comforts at homes. It impacts residents in more ways than one - by causing physical discomfort that can be linked to lower efficiencies at work places, increased fatigue levels, health issues and overall, poor quality of life. Hence, the operation of heating and cooling equipment in households becomes a principal requirement.

Our analysis indicates that the power supplied by Sasan UMPP has the potential to facilitate the usage of heating and cooling devices, mainly – air conditioners, air coolers, fans, and water heaters in as many as around 4.5 million households, across the cities and villages of the beneficiary states of Reliance Sasan UMPP.

Environmental impact

Abatement of harmful gasses by Reliance-Sasan through employing super critical technology could lead to 720 fewer lives being lost every year

GHG emissions abated because of Reliance-Sasan Power plant are equivalent to putting over 641 000 all on-road vehicles off the road in a year

The Integrated Energy Policy of the Government of India urges the efficient and environmentally friendly use of coal to contribute to clean power for sustainable economic growth. The Reliance Sasan UMPP seems is a big step in that direction as its supercritical technology leads to better fuel-efficiency as compared to subcritical power plants. The reduced fuel consumption results in reduced emission of greenhouse gases (GHGs) and other harmful gases such as NOx and SOx as well as the particulate matter.

Small particulate matter (PM), fine particles below 2.5 micrometres, emitted by the power plants have been found to likely cause respiratory symptoms, decrements in lung function and asthmatic problems. It is also established that exposure to small PM causes infections and chronic obstructive pulmonary disease. Moreover, a long term exposure to small PM leads to lung cancer. SO2 increases the severity and occurrence of respiratory symptoms. Inhalation of SO2

causes inflammation of airways and decreases lung function. An association between community-level SO2 levels and hospitalisations for respiratory problems, particularly in the case of children and the elderly, has been seen. Even low concentration of SO2 in ambient air poses risk of death from heart and lung conditions. For every 10 parts per billion (ppb) increase in SO2 concentration there is a 0.4% to 2% increased risk of death.

Nitric oxides (NOx) produced from fossil fuel combustion from power plants react with chemicals in atmosphere to produce a variety of pollutants. Asthmatic children when exposed to NOx experience wheezing and chronic cough. Also, exposure to low levels of NOx causes decrement in lung function and increases the risk of contracting viral and bacterial infections whereas higher levels of NOx causes airways inflammation.


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Mercury emissions from power plants are another major health concern. The United Nations estimates that 26% of global mercury emissions come from the combustion of coal in power plants. Mercury emitted from burning coal in power plants is deposited into waterways and passed into the aquatic food chain. Consumption of mercury-contaminated food by pregnant women can cause developmental effects to the foetus.

Typically, the emission figures for Indian coal-based power plants as estimated by the Central Electricity Regulatory Commission (CERC) are 1 250 mg/m3 for SO2 and 750 mg/m3 for NOx. Moreover, the Indian emission standard for Particulate Matter (PM) is 150 mg/m3.

A holistic assessment of the environmental impact of a power plant (and its associated mines) involving emissions estimates during construction, commissioning and operation phases through the lifetime of the project was carried out. We have found that Sasan UMPP, by using super critical technology, abates about 2.86 million tons of CO2 per year, which is equivalent to around 641 000 vehicles taken off the road in a year. The Reliance Sasan UMPP curbs about 62 000 tons of SO2, NOx and PM in total; its emissions as of August 2014 are: around 150 mg/m3 for SO2 and approximately 50 mg/m3 for NOx.

Table 21 • Estimated emissions abated

Pollutant Emissions saved (in tons)

CO2 2.86 million

SO2 45 250

NOx 9 776

PM 7 840 (maximum)

China

China’s recent economic development has been unrivalled, with GDP growth of around 10% on average every year since 1984. To put this growth in perspective, China has required an average of 89 433 MW of new power generation capacity – more than the size of the United Kingdom’s total installed capacity – each year from 2004 to 2013.

Socioeconomic development clearly depends on efficient access to energy. Coal has two very significant advantages as China’s primary energy resource to support growth:

Coal is readily available and abundant compared to other energy sources in China; and

Coal is much less expensive as a source of primary energy for conversion to electricity and heat.

Recently, however, China’s severely deteriorating air quality has become a serious concern. With estimates suggesting that coal combustion contributes more than 70% of China’s particulate matter (PM) emissions; 90% of China’s sulphur dioxide (SO2) emissions; and 67% of China’s nitrous oxide (NOx) emissions; as well as much of China’s carbon emissions, it is not surprising that China’s coal use draws criticism.

However, such criticism does not address the real problem. Coal is an input into a complex energy conversion process. Coal itself is not the cause of China’s air quality problem. What matters is not what goes in, but what comes out. And, what matters is how coal is used. It is important, therefore, to understand how quickly and radically China is changing the way it uses coal, by imposing and enforcing strict emissions standards for coal-fuelled power stations, and adopting high-efficiency advanced boiler technology.


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This section presents two case studies of coal-fuelled power stations in Zhejiang Province on China’s eastern coastal border, just south of Shanghai, focussing on how each case-study power station fits into China’s overall power system and economy. The case studies exemplify an important trend in China’s power system of using advanced boiler technology and emission control systems to reduce reliance on and emissions from older, smaller boilers, most of which have not had meaningful emission controls.

The first power station, Zhoushan Power Station (ZPS), is located on Zhoushan Island in one of China’s higher quality air sheds. The second power station, Ninghai Power Station (NPS) is located about 63 miles away, at Ninghai, in an industrial region connected deeply to Zhejiang Province’s 500 kilovolt (kV) transmission system. Guohua Power, a subsidiary of the China Shenhua Group, China’s largest coal supplier, operates both power stations.

The selected power stations have broad relevance, since the key features of these power stations can be (and are being) replicated throughout China, and elsewhere.

Case study of power stations

Zhoushan power station

ZPS is a four-unit, coal-fuelled power station with a combined generating capacity of 910 MW. The four ZPS units were built at different stages, with each subsequent unit being more efficient and larger than the previous one:

Unit 1: 125 MW (Stage I, subcritical), built in 1997,

Unit 2: 135 MW (Stage I, subcritical), commissioned in March 2004,

Unit 3: 300 MW (Stage II, subcritical), commissioned in October 2010 and

Unit 4: 350 MW (Stage II, supercritical), commissioned in June 2014.

The primary focus of our case study is ZPS Unit 4. ZPS Unit 4 is part of China’s program of “Larger Plants Replacing Smaller Plants”.13 This replacement program promotes newer, advanced coal-fuelled power generation technology with higher efficiency and lower emissions to displace generation from older, less efficient, and higher emitting power stations.

Being relatively small, at 350 MW, ZPS Unit 4 is theoretically not as efficient (thermally) as the 1 000 MW ultra-supercritical units that represent the state of the art in current power sector boiler design. In practice to date, however, ZPS Unit 4 has achieved thermal efficiency levels equal to or even better than levels achieved in some ultra-supercritical units, a result that reflects how factors across the spectrum of design, construction, operation, and fuel characteristics interact in complex ways to affect actual outcomes.

ZPS, the main power station serving Zhoushan Island and neighboring islands, is connected to Zhoushan Island’s 220 kV island grid.14 Zhoushan Island itself is then connected to Zhejiang Provincial Power Grid via three 110 kV undersea cables and two 220 kV overhead transmission circuits. The overhead circuits were commissioned in July 2010 and have a maximum transmission capacity of 600 MW. Prior to commissioning Unit 4, Zhoushan Island depended on less reliable (due to harsh weather conditions across the Strait) imported power from Zhejiang Provincial Grid to supplement locally generated power.

13 Zhoushan Unit 3 was also part of this program. 14 Note that Unit 1 of Liuheng Power Plant of Stage I (2 x 2 000 MW) was commissioned on 11 July 2014 and Unit 2 is nearing completion. Liuheng Power Plant is located in the third largest island of Zhoushan City, but its output is directly sent to Zhejiang Provincial Grid via 500 kV transmission lines and does not connect to Zhoushan City directly.


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Guohua Power, a wholly owned subsidiary of Shenhua Group, holds a 51% stake in the power station. The remaining 49% is owned by Zhejiang Energy Investment Group Limited (40%) and Zhoushan City Government (9%). Zhejiang Energy Investment Group Limited is a provincial level government-owned investment company that participates in infrastructure projects within the Zhejiang province. It is common in China for provincial and local governments to be involved in the financing (along with the state-owned enterprises or other investors) as a way to attract and support critical infrastructure development.

All coal used in Zhejiang Province is imported from other provinces or from international sources, as local coal resources are depleted and of poor quality.15 The coal for ZPS typically originates from Shenhua’s mines in Datong of Shanxi Province, Jinjie of Shaanxi Province, or from Inner Mongolia at Junggar. These mines are large, efficient, open-cut mines with mechanised operations, good safety records and practices, and some of the highest productivity rates and lowest mining production costs in China.16 The mines produce high quality coal with low sulphur, phosphorus, and ash content. Coal from these mines is then hauled via designated railways to China’s northern ports at Huanghua and Qinhuangdao where it is loaded onto ships.

ZPS Unit 4 implements a state-of-the-art combination of emission control technologies and systems. ZPS Unit 4 employs two Electrostatic Precipitators (ESPs), as summarised schematically in Figure 7.

Figure 7 • Flue gas treatment process in Zhoushan power plant

Source: reproduced by The Lantau Group from the 2013 Social Responsibility Report of Guohua Power Limited, with permission.

The first is a traditional ESP installed just before the Flue Gas Desulfurisation (FGD) stage. The second is a wet ESP which is installed just after the FGD stage. As a result, Zhoushan Unit 4 achieves some of the lowest particulate matter emission rates amongst thermal power stations

15 The last small production coal mine in Zhejiang Province shut down in 2013, as China has moved aggressively to modernize, and enhance the efficiency of its coal supply industry. 16 Over the past twenty years, China’s coal supply sector has been consolidating, with an increasing number of closures of smaller, less safe, less efficient mines and smaller mining companies and expansion of larger-scale, modern mines operated by large-scale expert mining owner/operators such as Shenhua.


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globally, with a level of residual non-carbon air emissions below that commonly achieved by natural gas-fuelled power stations.17

Ninghai power station

The Ninghai Power Station (NPS) has six generating units built in two stages. The first stage, commissioned in 2004, consists of four 600 MW units of supercritical boiler design. The second stage, commissioned in August 2009, consists of two additional 1 000 MW ultra-supercritical units (Units 5 and 6). NPS has a total installed generation capacity of 4 400 MW, making it one of the larger power generation sites in China, at present.

Ninghai Units 5 and 6 were constructed using state-of-the-art ultra-supercritical boiler technology, which has developed even further in the last five years. Increasingly, China relies on these larger, advanced units for its power generation, favouring them in dispatch where possible, which means they effectively displace higher emissions from older, less efficient power stations. The units have integrated advanced air quality control systems, yielding non-carbon air emissions well below China’s latest more stringent standards, and also below comparable standards in North America and Europe. However, the Ninghai Units achieve this without the additional wet stage ESP found in Zhoushan Unit 4.

The role of coal in China’s power sector

The bulk of Zhejiang’s provincially generated power comes from coal-fuelled power stations. With a maximum demand of 54 625 MW but provincial generating capacity of only 43 252 MW at the end of 2013, Zhejiang must import about one quarter of its electricity supply from other provinces, such as Anhui (coal), Hubei (hydro), Sichuan (hydro) and Fujian (nuclear). Zhejiang has some hydro resources, but by 2010, 80% of the developable hydro resources had been developed already, amounting to a combined generation capacity of only 6 610 MW. Zhejiang’s remaining potential hydro-based capacity is limited, expensive, and challenging to tap.

Natural gas

Zhejiang has about 8 000 MW of gas-fuelled generation capacity at the end of 2013. Due to continuing periodic shortages of gas supply, and due to the relatively high cost of natural gas in China, the utilisation of these gas plants is low, at about 33% on average.18 Even as more natural gas-fuelled power stations are built in China, they will not necessarily generate that much electricity, as the electricity generated from these units is mostly for seasonal or peaking support.

In fact, natural gas plays essentially no material role in China’s electricity generation mix due to limited availability and comparatively high cost. Domestic natural gas production has been unable to keep up with demand for natural gas by residential, commercial, and non-power industrial consumers—sectors which are less price sensitive and for which coal or other fuels is not a viable option.

A broader problem is emerging, however. Increasingly China must rely on imported gas, as shown in Figure , and recently imported gas has been even more expensive.

17 As a coastal facility, the Zhoushan power station uses once-through seawater cooling, and is also in the process of building a desalination plant for its fresh water supply requirements. In addition, solid waste by-products are principally recycled into construction materials. 18 The average annual operating hours over the three years from 2010 to 2012 was about 2 865 hours.


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Figure 8 • China’s annual gas consumption and local supply

Source: National Bureau of Statistics of China.

At the same time, incremental demand for natural gas at current high gas import prices is limited. To deal with this economic reality, China has been using subsidies and blended gas pricing to support or promote gas use in some sectors or locations. Such efforts can hide the full realisation of the underlying unfavourable economics, but they do not change the fundamental situation: on a per British thermal unit (BTU) basis, natural gas in China is two to three times higher than the price of coal (Figure 9). Consequently, the use of gas at large volumes (which is what would be required to support power generation) would significantly increase the cost of delivered electricity.

Table 22 below summarises basic design and performance data for Zhoushan Unit 4 and Ninghai Units 5 and 6 as compared, for reference, to a typical natural gas-fuelled CCGT unit in China.

Table 22 • Comparative performance: coal vs natural gas

Pollutant Zhoushan

Unit 4 Ninghai

Units 5 & 6 Typical CCGT

(Gas-fuel)

Gross capacity (MW) 350 2 x 1,000 400

Project cost (million USD) 183 1,239 200

Cost per kW sent-out (USD) 525 619 527

Short-run marginal cost (USD/MWh)19

38 34 9120

Heat rate (MMBtu/MWh) 7.77 7.67 6.09

SO2 (kg/MWh) 0.009 0.097 0.086

NOx (kg/MWh) 0.110 0.622 0.134

PM (kg/MWh) 0.010 0.044 ~0.000

CO2 (kg/MWh) 775 765 360

Annual availability (%) 95 92 91

Sources: Zhoushan and Ninghai plant data are from Guohua Power and typical CCGT data are based on sources including NEA 2013 reports, plant operational data from natural gas-fuelled plants in Fujian Province, as well as emission data based on Huadian Group’s Quenshan East CCGT of 2 x 400 MW using West-East Gas Pipeline gas with SCR de-NOx removal efficiency of 50%.

Notes: CO2 emission rates are calculated by TLG on the basis of fuel emission rate (carbon content) and plant generation heat rates. Furthermore, Guohua Power Limited intends to invest RMB 10 billion or USD 1.62 billion to retrofit 48 units out of its 61 units in operation in order to achieve similar emission as Zhoushan Unit 4 by 2017. This includes all six units in Ninghai Power Plant. The additional cost to add further emission controls to bring Ninghai to the level of emissions of Zhoushan—and thus even further below the standards for a natural gas fuelled power station is a very modest additional RMB 0.005 per kWh.

19 Based on recent market conditions 20 At China’s national average gas price (2013) of USD 14.75/MMBtu (assumed at power plants), which is below the cost of incremental imported natural gas

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The capital cost (in USD/kW) of each of the two case study plants compares favourably to the capital cost of a new combined cycle gas turbine power station (CCGT), a result that contrasts with some experience outside of China where the construction cost of CCGT power stations is usually less than that of coal-fuelled power stations. In these other markets, the higher capital cost of the coal-fuelled power station must be offset by lower fuel cost, which is a reason coal-fuelled power stations are commonly operated in base-load mode. In China, however, CCGT power stations often have very little, if any, construction cost advantage, and they are more expensive to operate due to the relatively higher cost of natural gas in Asia compared to Europe and North America. Currently the strongest case for natural gas-fuelled power generation in China depends more on other factors, such as specific locational requirements or other constraints.

Figure 9 • Typical price ranges of coal and imported gas

Source: TLG analysis based on 2013 data based on imported gas data from General Administration of Customs of China, 2013 and data on coal from Nanhua Futures, 2014.

In summary, the case study units have proven to be similar in cost to build and much less expensive to operate than a gas-fuelled power station, and non-carbon emissions are broadly comparable. Only carbon emissions differ materially. The lower cost and higher efficiency of advanced coal-fuelled boilers, however, means that the power generated by them can displace power generated from older, less efficient units, yielding a net reduction in China’s carbon emissions. In 2012, China’s average dispatch (utilisation) of newer, more efficient power stations, were dispatched about 11% more in 2012 than older, smaller, less efficient units. This differential is set to increase significantly as China strengthens its transmission grid to allow higher utilisation of newer units without triggering grid constraints.

Nuclear

Zhejiang has seven nuclear power reactors in operation with an electric output capacity of 4,310 MW, and four more units are under construction. The seven existing units met seven percent of Zhejiang’s provincial demand in 2013. Over time, nuclear power generation will increase, however, nuclear’s role in China’s overall fuel mix remains constrained by the availability of sites as well as by the availability of qualified personnel to safely meet specialised construction and operations requirements. Although China’s nuclear program is large by global standards, it has not kept pace with China’s even more rapid economic development.

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Renewable energy

China’s renewable energy sector has been growing rapidly in recent years, but it begins from an exceptionally small base in proportion to China’s overall energy requirement. For example, Zhejiang currently has about 1 000 MW of generation capacity from non-hydro renewable resources. Zhejiang has potentially developable wind energy along its coastline and inland mountain areas. Technically exploitable wind resources may support 1 300 MW of generation capacity. Zhejiang’s average annual sunshine duration typically ranges from 1 650 to 2 105 hours and has a currently estimated potential for developing 2 500 MW of grid-connected solar PV generation capacity. Aggressive development of all of these opportunities would still leave Zhejiang with significant and growing requirements for additional generation from other sources.

Nationally, potential renewable resources such as wind and solar energy are located mainly in China’s north and northwest regions, which are far away from load centres such as Zhejiang Province. Increased access to these regions depends on significant as-yet un-built infrastructure and will require careful integration into China’s overall power system due to increased intermittency of generation output. The option to develop these resources more aggressively depends on the development of expensive and technically complex large-scale transmission infrastructure. To date, China’s transmission grid struggles to accommodate faster growth in these more remote regions due to an array of technical and other challenges linked to the sheer cost and complexity of reliably integrating massive new power injections from numerous long-distance UHV AC and UHV DC transmission lines into the existing grid, which must also be continuously reinforced to keep pace with local demand as well as to integrate imported power flows.

Summary

Without coal, China would be a much smaller, struggling economy, hampered severely by a less reliable and inadequate power supply.

Being abundant, flexible, available, and relatively inexpensive on a cost-per-BTU basis, coal has been and continues to be the energy foundation of China’s economic development.21 China is large enough that other energy sources may appear significant in an absolute sense in comparison to their presence in other countries. Yet, even after combining non-fossil fuels, including: hydro, wind, nuclear and “other”, these collectively meet less than 10%22 of China’s primary energy requirements. Only coal has been able to match China’s growth. By also being comparatively lower cost, coal has also enabled that growth to be faster and more robust.

Direct benefits

The development of a power station is a large investment with numerous impacts arising from direct and indirect expenditures, as well as induced impacts due to the influence of the cost and availability of electricity to the Chinese economy. In this section, we focus on the direct and indirect benefits associated with the construction and operation of the case study power stations.

Direct benefits relate to expenditure of money and the employment of labour for the construction and operation of the power stations themselves. Indirect benefits include the

21 For many years, China was self-sufficient in coal production, given the country’s vast domestic coal resources. China’s proven coal reserves rank third largest after those of the United States and the Russian Federation, and account for 13% of the world’s total proven coal reserves. 22 Non-fossil fuel accounts for 9.8% of China’s primary energy consumption in 2013 and have a target of 15% for this by 2020.


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impacts on associated supporting industries, most notably mining and transport, but other sectors as well through the ripple effect that is typically captured by economic multiplier values.

Construction stage

Construction stage benefits are substantial, as each unit involves hundreds of millions of dollars of costs and significant construction related employment, as summarised in Table 23.

Table 23 • Comparative performance: Coal vs natural gas

Power Station Cost (gas-fuel)

Ninghai Units 5 & 6

The total project cost of the two Ninghai 1 000 MW ultra-supercritical units (units 5 and 6) was USD 1.2 billion. The units were constructed over the period from 28 December 2006 to 14 October 2009, just under three years. Ninghai Stage II included a companion coal wharf expansion and associated facility projects that were also completed by February 2009. The coal wharf is able to host 50 000-tonne ships and involved a total investment of USD 32 million.

Zhoushan Unit 4

The total project cost of Zhoushan Unit four was USD 183 million. The unit was constructed over the period from 28 November 2012 to 25 June 2014 (grid synchronisation). During the construction period an average of 700 persons were employed each day of the approximately 18-month construction period.

Total Direct Investment Approximately USD 1.4 billion

Operational stage

Operational stage costs mainly include employment and fuel purchases, as well as additional operations and maintenance equipment and services. Expenditures in these areas become income to individuals and other companies, which in turn supports expenditures on other goods and services.

Employment related costs are estimated based on the number of full time employees required.

Table 24 • Direct impacts: Operational stage employment and costs

Power Station Cost

Ninghai Units 5 & 6 (million USD) (before tax) 8

Zhoushan Unit 4 (million USD) (before tax) 5

Annual Operating Costs (million USD) 13

Note: Ninghai data is provided by the Plant. Zhoushan Unit 4 is estimated based on the total 563 employee of four units and the average salary for Ninghai Units 5 and 6.

Fuel purchase costs are summarised in Table 25 based on data provided by Zhoushan and Ninghai Power Plants. After subtracting the costs of transportation, the units inject USD 398 million to the coal sector each year.

Table 25 • Fuel purchases

Zhoushan

Unit 4 Ninghai

Units 5 & 6 Total

Coal price paid in 2013 (RMB/tonne) 511 527

Coal consumption (million tonnes) (5200kcal/kg) 0.72 4.72 5.44

Direct expenditures (million RMB) 369 2,485 2,854

Direct expenditure (million USD) 59 401 460


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The other area of expenditure concerns the goods and services required to operate and maintain the power station. These annual costs are estimated below based on information provided by each power station.

Table 26 • Implications for expenditures on goods and services for variable and fixed operations and maintenance requirements

Zhoushan

Unit 4 (million USD)

Ninghai Units 5 & 6

(million USD) Total

Plant fixed O&M cost (excl. employee cost) 32 44 76

Other variable O&M cost (excl. fuel cost) 1 14 15

Other sector impacts: mining sector

Shenhua Group sources the required coal, which must meet plant design specifications, mainly from Shenhua Group’s own coal mines but also through purchases from other coal suppliers:

Most coal to NPS is from Jinjie/Shendong Coal Mine in Shaanxi Province; Datong Coal Mines in Shanxi Province; or Junggar in Inner Mongolia.

Most coal for ZPS comes from the Huojitu, Daliuta, and Shigetai Mines in Shaanxi Province, and the Bulianta Coal Mine in Inner Mongolia. The required specification of coal supplied is demanding in terms of having low sulfur and ash content.

The average annual productivity from Shendong Coal Mines is assumed to be 0.029 million tonnes per employee based on a productivity of 124 tonne per work shift per worker.23 Based on Jinjie’s labor productivity, we estimate a minimum of 190 long-term, full time jobs are supported by the case study units, Zhoushan Unit 4 and Ninghai Units 5 and 6, as summarised in Table 27.

Table 27 • Implications for coal mining employment

Zhoushan Unit 4 Ninghai Units 5 and 6

Generation coal consumption (MMBtu/MWh) 7.77 7.67

Capacity (MW) 350 2 000

Utilisation hours 5480 6 338.64

Raw coal (kcal/kg) 5 200 5 200

Annual raw coal consumption (million tonnes) 0.76 4.72

Annual productivity per employee (tonnes/employee) 28 786 28 786

Number of direct employees supported 26 164

Other sector impacts: Transport sector

The transportation sector benefits because coal must be shipped to the power stations by a combination of rail and seaway. Direct coal and seaborne transportation-related costs for Zhoushan Unit 4 and Ninghai Units 5 and 6 are summarised in Table 28. 24

23 Shendong is among the highest productive coal mines in China with open-cut and mechanically mining. 24 Based on discussion with China Shenhua Energy Company Limited, we estimate the average railway distance from Shenhua’s Shenfu Coal Mines to Huanghua Port to be approximately 830 kilometers. Shenhua Group owns and operates several major coal railway routes from coal mines to sea ports in North China. Coal for Zhoushan and Ninghai Power Plants is from Shenhua Group’s coal mines in Shanxi, Shaanxi and Inner Mongolia and is first transported to Huanghua and Qinhuangdao Ports then shipped to the power plants. We assume railway transportation cost in 2013 averaged RMB 0.051 per tonne per kilometer. For seaborne transport, we apply an average shipping rate per tonne of coal in 2013 of RMB 0.041 per kilometer. Once delivered to the plant, the coal is transported via coal conveyers to the boilers.


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Table 28 • Direct costs for transportation by rail and seaway (USD)

Zhoushan Unit 4

(million USD) Ninghai Units 5 & 6

(million USD) Total

Railway 5 32 37

Seaborne 3 22 25

Total transportation fee 9 54 63

Source: Seaborne cost is based on Zhoushan’s RMB 25-30 per tonne transportation cost from Huanghua Port to Ningbo Port and other estimates by TLG based on various sources.

Other sector impacts: grid investment

To date, no additional grid investment has been required beyond the addition of a substation at the Zhoushan Unit 4, given the transmission capacity is sufficient to take and transmit the power from the Unit on Zhoushan Island. However, a new transmission route has been constructed to connect Ninghai Power Plant to the Cangnan Substation in Shaoxing with a circuit length of 97.20 km. The total transmission project cost was USD 77 million (with 1 US Dollar = 6.83 RMB), of which USD 8 million was spent on environmental protection. The project started construction on 18 August 2008 and was commissioned on 28 June 2009, with a construction period of ten months.

The transmission project is designed to carry a maximum load of 3,000 MW, which, being larger than the output of Ninghai Units 5 and 6, allows for growth and flexibility in future power system development and dispatch.

Overall direct benefits

Coal-based power generation investments in China directly affect a broad range of domestic sectors. The technology, construction, mining operations, transport, and transmission sectors are all direct beneficiaries of expenditures on these power stations and are all virtually entirely domestic economic impacts, with further implications for employment and long-term sustainable industry due to the fact that the power generation assets themselves will last for several decades before becoming eligible for displacement, upgrade, or replacement.

Table 33 summarises the expenditures resulting from Zhoushan Unit 4 and Ninghai Units 5 and 6 during construction and operational stages.

Table 29 • Summary of expenditure of plants at construction and at operational stages

Values in USD millions Zhoushan Unit 4 Ninghai Units 5 and

6 Total

Construction Stage (upfront impacts)

Project cost 183 1 239 1 422

Grid cost 77 77

Total construction stage cost 183 1 315 1 498

Operational Stage (annual impacts)

Coal purchase cost (at mine mouths, estimated) 51 347 398

Railway coal transportation cost 5 32 37

Sea born coal transportation cost 3 22 25

Plant employment costs 5 8 13

Plant fixed O&M cost (excl. employee cost) 32 96 128

Other variable O&M cost (excl. fuel cost) 1 14 15

Total annual expenditure at operational stage 97 519 616

Sources: Construction and operational data from the two Plants (except that mine mouth cost and transportation cost, and plant employee benefit of Zhoushan Unit 4, are estimated by TLG. Ninghai Grid construction cost is from a Ministry of Environmental Protection of PRC publication.


Page | 56

Indirect benefits and economic value multipliers

The above estimated direct benefits represent one measure of how the investment and expenditure on the power stations affect other sectors of the economy. Direct expenditures support employment and growth. The economic impact of these expenditures is even larger, however, as each stage of expenditure becomes income to another stage or economic segment. In fact, China’s economy is built up of complex economic interactions between consumers and producers and between importers and exporters. These additional benefits are achieved indirectly, through the ripple effect, the value of which is represented by an economic value multiplier.

Based on recent academic macroeconomic research on the Chinese economy, we estimate the applicable economic value multiplier for investment ranges from a low value of 1.2 to a high value of 3.6.

The economic multiplier effect works positively as money is injected into an economy but works in reverse when costs are incurred.25 We apply these multipliers conservatively by focusing only on the economic profit associated with direct expenditures. To estimate this incremental macro-economic value, we assume a pre-tax economic profit rate of between 5% and 10%.26 Consequently, the total additional value created27 is on the order of an additional USD 75 to 150 million from construction, which when multiplied becomes a value between USD 90 to 540 million from the construction stage and between USD 29 and 176 million per year from the operational stage, on top of the direct construction and operational costs.

Induced and broader socioeconomic benefits of coal

The estimated direct and indirect benefits form only a relatively small part of the overall impact of the case study power stations. These benefits do not reflect the fact that, were coal not available for use in the power sector, the cost of electricity to China would be much higher. As a result, China captures a substantial socioeconomic benefit (or avoids a much larger economic detriment) because it is more competitive and able to support more jobs, medical care, housing, poverty reduction, education, and other general economic development benefits associated with steadily rising standards of living.

In this section, therefore, we first consider the inter-related nature of electricity supply and these broader socio-economic benefits. We then estimate the cost that China would have to bear were it forced to substitute, for example, natural gas for coal.

25 Consider a company attempting to produce a widget for sale. If the company makes a profit after buying electricity and other inputs required for widget making, then it has added value to the economy. As a rough simplification, total economic value added is the simple sum of economic profits across the whole value chain. If the price of electricity, a key input to widget making, increases too much, then the widget maker will no longer be able to sell widgets profitably. All else equal, the result is a small contraction of the economy. The value added by widget making will be lost, as will the value added of the electricity that was previously sold to the widget maker, as well as the value added of any other goods or services required by the widget making industry. If the increase in the price of electricity reflects a real underlying increase in costs, then the contraction, however unappealing, is at least economically rational. To sell widgets profitably when the real cost of electricity has increased means that the electricity industry must lose money for widget makers to make money. This would not be value-added, however, as it is simply a transfer of value from one part of the economy from another.

26 A value that is somewhat higher than the average profit earned by the major generating companies, but somewhat below the profit earned by key stakeholders in other stages and supporting industries

27 Above the recovery of the costs of the investment and operational stages


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Overview

Clean, reliable, and affordable electricity supports vibrant economic development throughout Zhejiang Province, which enjoys some of the highest living standards in China. In 2013, Zhejiang’s provincial GDP exceeded USD 600 billion, fourth largest of China’s 31 primary regions.28 With a residential population of nearly 55 million people at the end of 2013 (comparing to a registered household population of 48 million at the end of 2013), Zhejiang’s provincial GDP per capita is more than USD 11,000, which is also fourth highest among these regions. The province has enjoyed steeply upward trending income growth in recent years. Accordingly, the province amply meets the threshold for the upper-middle income club as defined by the World Bank.

Zhejiang’s maximum provincial dispatched electricity demand was 54,625 MW in 2013, almost equivalent to the maximum demand of the United Kingdom. Electricity consumption reached 345.3 TWh in 2013.29 The industrial sector accounted for 74% of this consumption, whereas the residential sector accounted for about 13%. The remainder supported the construction, transportation, and commercial sectors.

Industrial electricity consumption grew by just 5.9% from 2012 to 2013, reflecting a combination of factors including China’s moderate economic slowdown, the increasing maturation of the industrial sector in the province, trends in China whereby faster urbanisation and industrial growth is beginning to impact inland provinces, and the growing impact of energy efficiency investment in industrial and manufacturing processes. In contrast, residential consumption increased over 12% from 2012 to 2013, consistent with rapidly rising standards of living as rising incomes allow residential customers to use more electricity for safety, productivity, comfort, and general enhancement of their daily lives.

Importance of urbanisation

Much of China’s economic development has been supported by migration of people from rural areas to the more prosperous and urbanised coastal regions. This migration process supports growth of China’s middle class, long considered an important element of broader economic development and societal stability. Unemployment rates in urban areas (around three percent over the past decade) are much lower than those in rural areas (as much as 20%). Population in China’s urban areas increased by over 20 million people from 2011 to 2012, whereas population in rural areas decreased by about 15 million people.

The urbanisation rate in Zhejiang Province – the percentage of the provincial population living in urban areas – reached 64% in 2013, the second highest urbanisation rate for a province in China, after Guangdong. Urbanisation has steadily increased. Six million people originally from other provinces live and work in Zhejiang Province.30

China’s development depends on China being able to sustain its urbanisation trend, which supports opportunities for growth in disposable income and rising standards of living, facilitating national cohesion and stability. This fundamental trend yields a wide range of socio-economic benefits as urbanisation reduces unemployment in the rural areas and allows urban workers to send supporting funds back to family members, relieving the risks of lower income or reduced opportunity that could otherwise hold back future generations.

28 Based on 2013 data, including China’s provinces, autonomous regions, and key municipalities 29 About 64.5 GW of capacity is installed within Zhejiang Province, including embedded generation; the rest (about 24%) is imported from other provinces.

30 These six million come from other, typically inland, less developed provinces.


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Urbanisation trends in Zhejiang province

Table 30 and Table 31 highlight the dramatic and continuing improvement in various urbanisation and quality of life measures for Zhejiang Province. Several basic measures of development are on par or even above the equivalent measure in the United States. All persons in Zhejiang have enjoyed electricity access since 2006 – even those who live on remote islands or in mountainous areas.

A similarly beneficial trend is the use of electric motorbikes instead of gasoline fuelled motorbikes. Electric motorbikes not only provide a more efficient mode of transport, but also contribute less to street level air and noise pollution. In rural provinces, outside of Zhejiang, the electrification of heating is another trend that reduces the need for open burning of coal or other energy sources without adequate emission controls.

Table 30 • Urbanisation impacts in Zhejiang province (Part 1)

Hospital beds

per 1000 persons

Number of doctors per 1000

persons

University students per 1000 persons

Net primary school

enrolment rate

City unemployment

rate

2001 2.55 1.70 6.24 99.97% 3.70%

2002 2.64 1.64 8.31 99.99% 4.00%

2003 2.78 1.74 10.17 99.98% 3.70%

2004 2.95 1.81 11.92 99.99% 4.10%

2005 3.07 1.91 13.30 99.99% 3.70%

2006 3.21 2.04 14.46 99.99% 3.51%

2007 3.34 2.15 16.00 99.99% 3.27%

2008 3.09 1.95 16.65 99.99% 3.49%

2009 3.23 2.05 17.25 99.99% 3.26%

2010 3.38 2.21 17.13 99.99% 3.20%

2011 3.57 2.28 17.56 99.99% 3.12%

2012 3.89 2.37 18.02 99.99% 3.01%

2013 4.18 2.52 18.51 99.99% 3.01%

USA 2011 2.90 2.50 n.a. 94.00% 9.30%

Source: Zhejiang Province data are from Zhejiang Provincial Bureau of Statistics. The US data are from The World Bank Open Data. Some US data are not provided because they cannot be normalised or are not available or sufficiently comparable.

Table 31 • Urbanisation impacts in Zhejiang province (Part 2)

House area (m

2)

per capita (city) Park grass area (m

2) per capita

Road area (m2)

per capita Tap water

access rate Treatment rate of waste water

2001 20.30 5.12 9.77 93.52% 35.70%

2002 21.12 6.51 10.86 96.64% 40.33%

2003 21.60 7.49 12.75 98.24% 45.90%

2004 23.94 8.42 14.04 98.86% 53.44%

2005 26.10 9.31 16.03 99.10% 59.46%

2006 26.44 9.79 17.11 99.40% 61.50%

2007 34.72 8.79 14.60 99.58% 70.08%

2008 34.33 9.60 15.20 99.70% 75.10%

2009 35.10 10.76 16.03 99.81% 78.88%

2010 35.29 11.05 16.70 99.79% 82.74%

2011 36.90 11.77 17.53 99.84% 85.09%

2012 37.10 12.47 17.88 99.88% 87.50%

2013 38.80 12.44 17.83 99.97% 89.28%

USA 2011 n.a. n.a. n.a. 99.00% n.a.

Source: Zhejiang Province data are from Zhejiang Provincial Bureau of Statistics. The US data are from The World Bank Open Data. Some US data are not provided because they cannot be normalised or are not available or sufficiently comparable.


Page | 59

GDP and tax benefits

The value of electricity to China’s economy is clearly substantial. On average (based on 2013

data), each kWh of electricity consumed in Zhejiang Province supports 1.76 USD of provincial

GDP. With a total electricity supply from Ninghai Units 5 and 6 of about 12.08 TWh per year, the

two units directly support the GDP of about USD 21.1 billion. On the same basis, Zhoushan Unit 4

can be reasonably expected to support approximately USD 3.2 billion in Zhejiang Provincial GDP

each year of its operation, as shown in Table 32.

Table 32 • GDP and power relationship

Zhoushan Unit 4 Ninghai Units 5 or 6 Total

2013 GDP rate per kWh (USD) 1.76 1.76 1.76

Sent-out electricity (TWh) 1.82 12.08 13.90

Provincial GDP support (billion USD) 3 21 24

Also, electricity consumption is a significant source of tax revenue via a Value Added Tax (VAT) of

17%. The latest on-grid prices for Zhoushan Unit 4 and Ninghai Units 5 is RMB 458 per MWh,

which is effective from 1 September 2014. Based on the above annual amount of sent-out

electricity from Zhoushan Unit 4 and Ninghai Units 5 and 6, their annual VAT contribution is

USD 19 million and USD 65 million, respectively. The combined taxes of VAT, income tax and

urban construction and education surcharges by Zhoushan Unit 4 and Ninghai Units 5 and 6 is

USD 153 million annually.

Quantification

Were China unable to utilise coal for power generation, it would face a wide range of almost

unfathomable challenges and detriments to its socioeconomic development. The economic

development risk associated with efforts to force a material shift away from coal to, say, natural

gas, are similarly very high. Were China to replace all of its coal-fuelled capacity with natural gas,

the change in operational costs (fuel) alone would be equivalent to a USD 171 billion tax on

China’s overall economy each year at current fuel prices. And the resulting emissions reduction

would be no more than what could be achieved by switching at much less cost to advanced

technology boilers and advanced air quality control systems through systematic upgrade and

displacement of the oldest and highest emitting units in the system and investing prudently in

advanced technology to meet growth, as well.

These tariff comparisons in 10 underscore the point that a shift away from coal to another

similarly scalable generation technology (presumptively natural gas) would result in an

exceptional tariff impact on China’s residential, commercial, and industrial (shown) consumers.

China’s electricity costs would shift to the top tier of Asian countries in terms of power prices.

Given the energy intensity of China’s economy – a reflection of its industry mix as much as any

other factor – such an increase in costs would be devastating. Shifting China’s industry and

development status to the current levels of Japan or Singapore will probably not happen quickly

or without costly consequences. Furthermore, a shift of industry out of China to other countries,


Page | 60

such as Vietnam, would not reduce global emissions, as the emerging environmental standards in

China are much more stringent than found in other developing countries.31

Figure 10 • Estimated industrial tariff large user (6.6 KV or 22KV) with coal-based pricing for China

Source: TLG analysis based on 2013 data.

Figure 11 • Estimated industrial tariff large user (6.6 KV or 22KV) with gas-based (right) pricing for China

Source: TLG analysis based on 2013 data.

31 The Philippine economy is a rapidly developing economy with relatively high power prices due to an absence of subsidies and a relatively high-cost archipelagic system, and millions of customers with very low energy usage and reliance on relatively high cost domestic natural gas. Contrasted to China, the Philippine economy has not been able to sustain a robust industrial or manufacturing sector.

0

5

10

15

20

25

Hanoi Seoul Taipei Mumbai China Sydney London New York Manila Tokyo

2013

Actua

l indu

stria

l tariff (USD

cents/

kWh)

0

5

10

15

20

25

Hanoi Seoul Taipei Mumbai Sydney London New York Manila China Tokyo

Tariff if

China sw

itches all coal to ga

s (USD

cents/kW

h)


Page | 61

Table 33 provides a more detailed analysis of a hypothetical “gas future” for China rather than a

“coal” future. A gas future would imply a more than doubling of the “wholesale” cost of China’s

electricity from about USD 50 per MWh to USD 116 per MWh.


Page | 62

Table 33 • Comparative costs

Zhoushan

Unit 4

Gas-fuelled generation

alternative for Zhoushan Unit 4

Ninghai Unit 5

Gas-fuelled generation

alternative for Ninghai Unit 5

Plant size (MW gross) 350 390 1000 4 x 390

Project capital (million USD) 183 237 619 946

Plant life (Years) 25 25

Heat rate as generated (MMBtu/MWh) 7.77 6.09 7.67 6.09

Annual generation (TWh) 1.92 1.86 6.34 6.16

Annual sent-out (TWh) 1.82 1.82 6.04 6.04

Plant auxiliary use (%) 4.92 2.00 4.72 2.00

VOM (USD/MWh) 0.67 0.71 1.11 0.71

FOM (million USD/Unit/Year) 37 8 52 31

Fuel cost (million USD) 60 167 201 554

Emission cost (million USD) 12 5 38 18

Total cost (million USD) 128 208 363 7714

Sent-out cost (USD/MWh) 60 112 47 116

Notes: Non-carbon emission charges are the actual charge rates that are effective from 1 April 2014. The emissions from the gas-fuelled power plants are based on gas-fuelled plants in the United States since China does not have emissions data for gas-fuelled power plants (actual emissions rather than emissions standard caps). The emission charges are for SO2, NOx, PM, and CO2 (CO2 cost is calculated using current EU carbon allowance prices of Euro 6 per tonne). The total unit costs (USD/MWh) of Zhoushan Unit 4 and Ninghai Unit 5 are their actual generation cost plus the CO2 charge. FOM of Zhoushan Unit 4 and Ninghai Unit 5 include the capital cost of the plants and their VOM includes the non-carbon pollutant charges. Separate emission cost for the two plants are only the cost of carbon dioxide emitted from the two plants.

The above calculations are based on the following assumptions (Zhoushan Unit 4 and Ninghai Unit 5 are actual numbers for 2013/2014 except that there is no carbon charge). Coal prices are actual prices paid by Zhoushan Unit 4 and Ninghai Unit 5 at plant sites. Gas price is the national average price that a new gas fired power plant would need to pay in 2013 (Note that Zhejiang’s new gas plants may pay higher gas prices. For example, Xiushan Gas-fired CCGT pays USD16 per MMBtu higher than the national average of USD 14.76 per MMBtu). We use national average gas prices because we calculate the cost of displacing national demand of 500 TWh. We include carbon charges to account for the low carbon dioxide emissions from gas-fuelled power station.

Applying the multiplier values used to calculate induced benefits, we estimate the full impact on China’s economy of a gas-driven increase in electricity prices, as shown in Table 34.

Table 34 • Costs per megawatt to China of a gas vs coal strategy

Multiplier Level Based on gas rather than

Zhoushan Unit 4 achievement (USD/MWh)

Based on gas rather than Ninghai Units 5 & 6 achievement

(USD/MWh)

Value loss 1.0 multiplier 52 69



We estimate that every MWh generated unnecessarily under a more expensive “gas regime” puts between USD 52 and USD 248 of value at risk somewhere in the Chinese economy. This means that ZPS Unit 4, with its expected 1.9 TWh annually, accounts saves China USD 98 to 471 million each year relative to using natural gas instead.

And if we extend this analysis to the same 500 TWh of electricity generation from older generation technology that we estimate are the prime candidates for displacement by lower-emitting technology, then the cost savings from using coal-fuelled plants like Zhoushan Unit 4 or


Page | 63

Ninghai Unit 5 or Ninghai Unit 6 instead of gas-fuelled CCGTs are of the order of USD 26 billion to USD 124 billion each year, as set out in Table 35.

Table 35 • Benefit from 500 TWh advanced coal vs. natural gas

Multiplier Level Based on gas rather than

Zhoushan Unit 4 achievement (billion USD)

Based on gas rather than Ninghai Units 5 & 6 achievement

(billion USD)




Induced benefits: Environmental improvement

China’s air quality degradation largely reflects the lingering presence of less efficient technologies or ineffective or non-existent emission control systems (or regulations) in many sectors (not just power). In the power sector, China is making steady improvement largely through technology displacement as newer, more efficient power stations with advanced emission control systems displace older power stations.

This trend is set to accelerate, particularly after 2013, given China’s recent significant tightening of emission standards and increasing adoption of ever-improving boiler and emissions control technology. The case study power stations highlight the magnitude of benefit that can be achieved through displacement.

Two key factors mainly contribute to the decline of emissions per unit of electricity generated by coal-plants in China.

The first is that China is slowly concentrating power generation around a relatively manageable number of large-scale generating sites,32 which facilitates more cost-effective and more easily monitored emission control approaches, supports larger scale technologies with enhanced energy conversion efficiency, and reduces land and other resource requirements, as compared to the literally hundreds of thousands of smaller sources of higher emissions and lower efficiency boilers that are currently scattered throughout China’s non-power sectors. By the end of 2013, China had 60 units of at least 1000 MW in operation.

The second factor is the increasing installations of de-SO2, de-NOx and advanced de-dust equipment. More than 91% of China’s coal-fuelled plants have installed de-SO2 equipment, and about 50% have installed de-NOx equipment.33

As a result, China has the opportunity to follow a well-established environmental improvement pathway – to marry technology and better regulation in ways that incentivise or compel faster adoption of more efficient boilers and state-of-the-art air quality control systems. For example, aggregate emissions of six common pollutants (SO2, NOx, PM, CO, VOC, Pb) have fallen steadily in

32 Such as the 4 400 MW Ninghai facility that is a subject of our case study. There are hundreds of small hydro and non-thermal generation sites, but fewer than 1 000 thermal power stations. While even 1 000 may sound like a large number, it pales in contrast to the over 600 000 small industrial boilers. 33 In 2013, China’s national average coal-fired emission rates for SO2, NOx, and PM were 2.08 gram per MWh, 2.11 gram per MWh, and 0.36 gram per MWh respectively. These rates have fallen significantly from China’s historically even higher levels. Even so, the emissions rates achieved by Ninghai Units 5 and 6 and Zhoushan Unit 4 are much lower still – highlighting the continuing scope for improvement in air quality that China can achieve by using advanced coal-fuelled boilers and better air quality control systems.


Page | 64

the United States, despite an increase of 234% in GDP since 1970 and a more than 50% increase in population.

Tables 40 and 41 summarise our estimates of the environmental benefits achieved from displacement throughout China of older generation technology by newer generation technology. We then extend this estimated displacement benefit to cover approximately 500 TWh, which is our estimate of China’s power generation that could most easily be displaced by advanced technology coal-fuelled power stations for material environmental improvement.34

Table 36 • Annual benefit of displacement (500 TWh) – based on ZPS unit 4

Zhoushan

Unit 4 National average

Potential improvement

amount Units of saving or reduction

Heat rate (MMBtu/MWh) 7.77 9.47 30.62 million tonnes standard coal

SO2 (kg/MWh) 0.009 5.571 2.78 million tonnes of SO2

NOx (kg/MWh) 0.110 3.044 1.47 million tonnes of NOx

PM (kg/MWh) 0.010 1.631 0.81 million tonnes of PM

CO2 (kg/MWh) 774.94 994.57 84.82 million tonnes of CO2

Table 37 • Annual benefit of displacement (500 TWh) – based on NPS units 5 or 6

Ninghai Units

5 & 6 National Average

Potential Improvement

Amount Units of Saving or Reduction

Heat rate (MMBtu/MWh) 7.67 9.47 32.4 million tonnes Standard Coal

SO2 (kg/MWh) 0.097 5.571 2.7 million tonnes of SO2

NOx (kg/MWh) 0.622 3.044 1.2 million tonnes of NOx

PM (kg/MWh) 0.044 1.631 0.8 million tonnes of PM

CO2 (kg/MWh) 765.21 994.57 89.7 million tonnes of CO2

These displacement benefits are robust to a wide range of assumptions about the value of CO2 reduction. As summarised in Figure 12 we estimate, based on current costs of coal and natural gas in China, that it would take a CO2 price greater than USD 150 per tonne in China for a new natural gas-based power station to be economic for base-load power generation as compared to existing coal-based power generation. And it would take a CO2 price of over USD 70 per tonne before a gas-based power station in China could economically displace a new advanced technology coal-based power station. These threshold values far exceed similar calculations for North America, which explains, in part, why different regions of the world invariably develop different strategies: they face different choices.

34 According to the Chinese government, at the end of 2012 China had more than 360 GWs of coal-fired capacity with unit size smaller than 350 MW. The plants accounts for 44% of 2013 installed coal-fired generation capacity in 2013. In 2013, the total coal-based capacity in China was 817 GW, which generated 3950 TWh of electricity in the year. If we assume these plants contribute 85% of their capacity share to generation share in 2013 because dispatch preference of larger plants over smaller coal fired plants, the generation by these plants would be 1479 TWh. If we then assume that new advanced technology units (like Zhoushan Unit 4 or Ninghai Units 5 and 6) can reasonably displace about 30% of this generation, then about 500 TWh of electricity will be displaced.


Page | 65

Figure 12 • Break-even carbon cost for gas-fuelled power plants to replace coal-fuelled power plants

Note: Asian LNG prices are generally indexed to oil prices. We have assumed such a linkage via a slope parameter of 0.1385 (the approximate current slope for new LNG contracts in Asia) whereas, gas prices for gas plants in Europe and the United States are assumed to be set at NBP and Henry Hub respectively.

Source: TLG 2014 analysis.

Induced benefits: Enhancement of energy security

Coal enhances China’s energy security. To estimate the value of increased energy security to China, we first must define what we mean by the concept of energy security. In particular, we focus on:

Physical energy security – meaning the avoidance of physical disruption and outages that lead directly to involuntary loss of physical energy supplies to the end consumers.

Economic energy security – meaning the prudent management of exposure to fuel price volatility or other sources of disruptively extreme levels of cost.

Coal-based generation contributes positively to China’s energy security in both respects. Firstly, coal is readily available and storable, and thus less susceptible to major disruption. And, secondly, the price of coal is less volatile than the price of natural gas (and the contribution of the price of coal to the final delivered electricity price is much less than the contribution of the price of gas). As a result, coal-fuelled power generation should command a value premium over gas-fuelled power generation from an energy security perspective. Figure qualitatively summarises various metrics of coal relative to gas contributing to China’s energy security.

Figure 13 • Energy security assessment

Source: TLG research, 2014.

- 100

- 50

0

50

100

150

200

Asia Europe USA

Cost per ton

ne of CO

2 (USD

)

Existing gas vs new coal

New gas vs new coal

Existing gas vs existing coal

New gas vs existing coal


Page | 66

Next, the volatility inherent in the cost of generation using different fuels that must be purchased

at market prices is estimated.

Figure 14 illustrates the historical monthly Australian coal, oil-linked LNG, and average Japanese

imported LNG price. The standard deviation of Australian coal price is USD 1.3 per MMBtu while

that of Asian incremental LNG price is USD 4.9 per MMBtu and average Japanese imported LNG is

USD 4.7 per MMBtu.35 As China imports both coal and gas,36 we can use historical international

coal and gas prices. Significantly increasing natural gas usage in China’s power sector would

expose China to greater volatility in energy prices, which reduces value, all else equal, through

the perceived higher financial risk to end users.

Figure 14 • Historical coal and LNG prices in Australia and Japan

Source: World Bank Pink data.

Summary

China’s new Air Pollutant Emissions Standards for Thermal Power Plants became effective from 1

July 2014. In establishing new, tougher standards, China is forcing a faster transition from older,

higher emitting and less efficient energy production to advanced technologies with much lower

emissions. China is effectively embarking on a policy pathway that parallels the successful

strategy pursued by the United States in tackling air and water quality challenges from the 1970s

to the present day. Advanced energy conversion and emission control technology prudently

promoted through cost-effective regulatory mechanisms has tremendous potential to improve

environmental outcomes.

Table 38 summarises the socio-economic benefits created by Zhoushan Unit 4 and Ninghai Units

5 and 6.

If 500 TWh of generation were to be displaced by units of similar performance as Zhoushan Unit 4 or Ninghai Unit 5 or 6, the environmental and health benefit will be significantly enlarged as shown in

35 For relative standard deviation (absolute standard deviation/mean), coal has about the same relative standard deviation as LNG (Australian coal is 57%, Asian incremental LNG is 59% and Japanese average LNG is 61%). 36 For domestic coal prices, they are market-based, and thus they are influenced by international market and track well with the internal coal prices. For domestic gas prices, the Chinese government has rolled out a gas pricing mechanism that links the city gas prices to oil products (LPG and fuel oil), and thus its price could track closely with the oil-linked Asian LNG prices.

0

5

10

15

20

25

Left

axis

label

AU Coal JP LNG Asian Incremental LNG Price


Page | 67

Construction stage

Zhoushan Unit 4

(USD million)

Ninghai Units 5 & 6

(USD million)

Direct benefit Project expenditure 183 1239

Indirect benefit Ripple effect of direct value added 23 155

Operational stage

Operational stage

Direct benefit Upstream direct expenditure (coal mines and transportation)

59 401

Plant operation and maintenance expenditure

38 118


Induced benefit

Non-health avoided cost of emissions reduction of SO2, NOx, PM and cost reduction from heat rate improvement

128 822

Health benefit of emission reduction 23 146

Competitiveness benefit using coal rather than natural gas

237 1 961

Table 39.

Table 38 • Summary of benefits based on actual generation

Construction stage

Zhoushan Unit 4

(USD million)

Ninghai Units 5 & 6

(USD million)

Direct benefit Project expenditure 183 1239


Operational stage

Operational stage

Direct benefit Upstream direct expenditure (coal mines and transportation)

59 401

Plant operation and maintenance expenditure

38 118


Induced benefit

Non-health avoided cost of emissions reduction of SO2, NOx, PM and cost reduction from heat rate improvement

128 822

Health benefit of emission reduction 23 146

Competitiveness benefit using coal rather than natural gas

237 1 961


Page | 68

Table 39 • Coal saving, environmental and health benefit (assuming 500 TWh of displacement)

Risk metric Zhoushan unit 4 Ninghai units 5 or 6

Tonnage savings of coal consumption (million tonnes of standard coal equivalent (7 000 kcal/kg))

30.6 32.4

Cost savings of reduced coal consumption (million USD) at USD 116 per tonne of standard coal equivalent

37

3 550 3 758

Tonnage savings of SO2, NOx and PM (million tonnes) 5.06 4.74

Cost savings of reduction (million USD) 13 322 12 969

Additional health benefit of reduction (million USD) 2 384 2 310

Put differently, by building more advanced technology coal-fuelled power stations and steadily displacing or replacing generation from older facilities, China’s power sector would eventually eliminate almost all of its non-carbon air emissions, as shown in Table 40.

Table 40 • 2013 power sector emission reduction if all coal-fuelled plants have Zhoushan unit 4’s emissions rate

If all Coal plants emit

at Zhoushan unit 4 rate (million tonnes)

Actual coal-fuelled generation emissions

(million tonnes)

Emission reduction (percent achieved)

SO2 0.035 8.2 99.6

NOx 0.43 8.34 94.8

PM 0.040 1.42 97.2

By using advanced coal technology, China can create substantial and durable economic value. For example, if China were to switch 500 TWh of generation to gas-based generation instead of encouraging more power plants like Zhoushan Unit 4 or Ninghai Unit 5 or Unit 6, then the additional cost of supplying this 500 TWh would be USD 26 billion to USD 34 billion each year, which means that this direct value would be removed from China’s economy.

But even more importantly, these higher direct costs would siphon value from the broader economy through a negative multiplier effect – as all economic sectors in China would have to pay higher costs for electricity that could have been produced with equivalent environmental impacts far less expensively. Each sector bears higher costs, has less money to invest or spend, which implies less income to other affected sectors, and so on, cumulatively throughout the economy.

Academic estimates of the multiplier effect in China highlight that the cumulative impact of such value effects are between 1.2 and 3.6 times the size of the investment at stake. For every billion dollars spent (relative to what would be spent on a coal-based strategy) to shift China away from coal to more expensive alternatives, China loses 1.2 to 3.6 billion dollars in economic value. This additional value loss could be as great as USD 124 billion annually, as summarised in Table 41.

For societies battling with the challenges of electrification, the provision of reliable electricity supply enables enormous improvement in quality of life, health, education, and productivity. Where electrification has largely been achieved, as in Zhejiang Province, however, the benefits of electricity are more deeply embedded in the fundamental growth of the economy as a whole. In China, electricity supports urbanisation, industry development, and job creation, which in turn supports migration of labour from less productive regions and applications to more productive regions and applications, raising incomes and standards of living. These substantial and positive

37 The price is at the level that was paid by Zhoushan Power Plant, and Ninghai Power Plant in 2013.


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impacts would be lost progressively were electricity supply to become materially more costly or less reliable.

Table 41 • Electricity cost saving comparing to gas generation (assuming 500 TWh of displacement)

Zhoushan Unit 4

(billion USD) Ninghai Units 5 or 6

(billion USD)

Electricity cost saving compared to gas generation 3.6 multiplier 94 3.6 multiplier 124

Germany

Kraftwerk Neurath profile

Figure 15 • Kraftwerk Neurath BoA 2 and 3

Kraftwerk Neurath first came online in 1972, and is located in Grevenbroich-Neurath; just outside of Cologne, Germany. The station houses seven lignite-fuelled units comprising more than 4 200 MW of net generation capacity.

In 2006 construction work started on units F & G, two of the world’s most modern lignite units. The two BoA (Braunkohlenkraftwerk mit optimierter Anlagentechnik, or lignite power plant with optimised plant technology) units, rated at 1 100 MW (net) each, came online in August of 2012 and feature optimised processes that increase thermal and emissions efficiency by more than 30% compared with the replaced units. The newly built units Neurath F & G replaced older RWE units in the region. In addition, the two BoA units boast improved flexibility, and can increase or decrease its output by more than 500 MW within 15 minutes to adapt to changing market conditions.

We have discussed at length the economic effects of improved efficiency, but the flexibility of thermal power plants is a critical ingredient in the ability of a power grid to incorporate greater


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amounts of intermittent renewable generation. The increasing penetration and construction of renewable resources generation requires thermal plants to have both shorter start-up times as well as greater ability to “ramp”, or to rapidly change output to meet changing demand. While the ability of grid operators to predict changes in wind and solar patterns has improved over the years, there are still, and will always be, uncertain elements which require rapid response.

Historically, coal-fuelled plants were slow to start, and once started, slow to change their output in response to grid conditions. Neurath, however, represents a new generation of technology which can change its output nearly as rapidly as gas-fuelled power plants.

Neurath sits in western Germany in a region of substantial lignite deposits. Situated nearby Neurath are also the Frimmersdorf lignite power plant, the Niederaußem lignite plant, the Garzweiler surface mine and the Hambach surface mine, which supply lignite for the nearby power plants.

Lignite, often referred to as “brown coal,” is a softer brown coal formed from naturally compressed peat. Physically, it has a different colour and a softer texture than hard coal, and is often mined from strip mines instead of underground. It has a lower heat content than hard coal, meaning that less energy can be extracted from its combustion per unit volume, necessitating the movement and transportation of greater quantities of lignite to supply the same amount of generation. For this reason, many lignite plants are constructed very close to their associated mines to minimise transport.

Figure 16 • Garzweiler mine with Neurath and Frimmersdorf in background

Because of the highly localised nature of lignite production, there is a limited market for lignite compared to other traded products. This means that lignite costs are typically very stable and not prone to fluctuations, leading to stable production costs for power from lignite-fuelled plants.


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The German electricity market

Like many countries in Europe and North America, Germany operates an organised, competitive electricity market in which power plants are operated, or “dispatched” by the system operator to provide reliable electricity at the lowest overall costs.

Table 42 shows the percentage of generation from various fuel sources in Germany over the last several years. Coal contributes roughly 45% of the generation in Germany, and lignite contributes more than half of that amount. Note also that this percentage may rise slightly over the next decade as Germany continues to phase out nuclear energy, requiring additional fossil fuel-based power plants to maintain system reliability.

Coal represents a critical component of the electrical supply mix in Germany. Germany has large indigenous supplies of coal, and the ability to rely on domestic power sources is an important part of Germany’s energy independence.

Table 42 • Gross electricity production in Germany, 2010 - 13

2010 2011 2012 2013

TWh % TWh % TWh % TWh %

Gross production 633.0 100% 613.1 100% 629.8 100% 633.6 100%

Hard coal 117.0 18.5% 112.4 18.3% 116.4 18.5% 124.0 19.6%

Lignite 145.9 23.0% 150.1 24.5% 160.7 25.5% 162.0 25.6%

Oil 8.7 1.4% 7.2 1.2% 7.6 1.2% 6.4 1.0%

Natural gas 89.3 14.1% 86.1 14.0% 76.4 12.1% 66.8 10.5%

Nuclear 140.6 22.2% 108.0 17.6% 99.5 15.8% 97.3 15.4%

Wind 37.8 6.0% 48.9 8.0% 50.7 8.0% 53.4 8.4%

Hydroelectric 27.4 4.3% 23.5 3.8% 27.4 4.4% 26.3 4.2%

- of which renewable

21.0 3.3% 17.7 2.9% 21.8 3.5% 20.5 3.2%

Biomass 29.6 4.7% 32.8 5.4% 39.7 6.3% 42.6 6.7%

Solar PV 11.7 1.9% 19.6 3.2% 26.4 4.2% 30.0 4.7%

Waste 4.7 0.7% 4.8 0.8% 5.0 0.8% 5.2 0.8%

Other 20.3 3.2% 19.7 3.2% 20.1 3.2% 19.6 3.1%

Source: BMWi, 2014.

Figure 17 shows the percentage of fuels used in Germany for 2013; the red portions of the bars indicate the imported percentage. (Nuclear fuel has a blended colour since its supply chain and processing are unique.) Coal and renewable energy are Germany’s key indigenous sources, and, contrary to what some believe, are complementary.

Coal-fuelled power, and lignite specifically, makes up a substantial portion of generation in Germany, forming the “base-load” portion of the supply curve. The German electric power market is a competitive one in which plants are dispatched in merit order, and the final wholesale price for electricity is set by the last, or the “marginal” plant dispatched.


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Figure 17 • Energy imports for Germany in 2013, MTCE

Figure 18 provides a stylised supply curve of the German power market which shows how a merit order of operation results in a market price to meet the level of demand prevailing in a given hour. This shows renewable energy sources (such as on-shore and off-shore wind turbines, solar and hydro units) with relatively low marginal operating costs (and hence bid prices).38 Nuclear units also have relatively low marginal operating costs. The generating units with relatively high marginal operating costs (because of their input fuel cost and emissions) consist of hard coal, gas and oil-fuelled plants.

Figure 18 • Stylised German merit order curve

In the German market, the lignite plants may be expected to be at the margin, setting wholesale prices during night-time off-peak periods of low demand. Coal-fuelled plants may be expected to be at the margin during “shoulder” periods between off-peak and peak demand periods. This is shown in the figure above. Gas and oil-fuelled plants may be expected to be at the margin during periods of peak demand.

38 The separate tranches of types of generation technology are depicted as blocks but this should not be taken to imply each generating plant within a technology type has the same marginal cost. Differences in marginal costs between plants both within and across generation types are reflect in the progressively increasing supply curve.

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Germany, and most of Europe, still has natural gas prices significantly higher than those in North America. Removing lignite plants from the merit order would shift the supply curve to the left, substantially increasing energy prices by pushing the marginal price much more towards natural gas or oil-fuelled plants.

German energy policy and the Energiewende

In September 2010 the Federal Government adopted the energy concept, which sets out Germany's energy policy until 2050 and specifically lays down measures for the development of renewable energy sources, power grids and energy efficiency.

The Energiewende, or clean energy transition, is the term used for the fundamental shift in Germany’s energy supply. It describes the country's politically supervised shift in direction from nuclear and fossil fuels to renewable sources of energy, with a view to slashing greenhouse gas emissions by between 80-95% by 2050.

The generation and consumption of electricity are central to the Energiewende because the shift to greater renewables will increase the share of Germany’s heating and transportation provided by electricity in the medium term. The Energiewende’s targets in the power sector are:

Renewable energy: The electricity supply will consist of at least an 80% share of renewable energies by 2050. There are also intermediate targets of at least 35% share by 2020, at least 50% by 2030, and at least 65% by 2040.

Energy efficiency: Electricity consumption shall be reduced by 10% by 2020 and 25% by 2050 compared to 2008 levels.

Figure 19 • Energiewende targets

Nuclear phase out

Shortly following the Tohoku earthquake on 11 March 2011 and the incident at the Fukushima nuclear power plant in Japan, the German government imposed a moratorium on nuclear energy. Eight nuclear power stations in Germany were shut down temporarily while the German government considered the effects and consequences of the Fukushima incident. Subsequently, the 13th Amendment to the Atomic Energy Act (AtG) was passed in August 2011. Under the 13th


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AtG Amendment, the plants affected by the moratorium lost their licenses for power operation and all remaining units are planned to be phased out by 2022.

The need for flexible generation

The increasing contribution of renewables in meeting electricity demand has important implications on other generating units on the electricity grid because of the variable nature or intermittency of wind and solar. Unlike thermal power plants (e.g. coal and gas) that can easily produce a constant and predictable output, resources like wind and solar farms depend on factors like sunlight and wind speed to produce electricity. Therefore, if wind speed drops at a wind park or clouds move over a solar farm, the power generated by these sources can change significantly and at very fast ramp rates. In some cases, a grid operator can see a significant portion of their total generation capacity drop off in just a few seconds.

Energy markets in the near future will continue to incorporate increasing amounts of intermittent and variable energy flows, increasing the requirements on the transmission and distribution networks to manage these flows efficiently and avoid constraints. Demand and renewable energy feed-in fluctuations must be continuously balanced to provide electricity grid stability, and this is putting pressure on the conventional power generation portfolio.

The increasing penetration of intermittent renewable generation generally requires non-renewable units to operate more flexibly to ensure grid stability. Without flexible forms of energy to balance increasing intermittency, the system could become unstable and insecure. It could lead to the system operator taking actions to curtail power from wind, solar or other inflexible generation in order to maintain system security, and in extreme cases could also lead to black-outs. This happened in India in late July 2012, when over 600 million people went without power for several days, incurring significant repair cost in addition to productivity losses and social impacts.

Figure 20 • Typical flexibility parameters for coal- and gas-fuelled power plants

Parameter Units NGCC new

build* Hard coal new build

Existing hard coal (optimised)

Capacity MW 800 800 300

Minimum load/nominal load % ~60% ~25-40% ~20%

Mean load change rate** % min ~3.5 ~3*** ~3

* Standard operation of two gas turbines and one steam turbine ** With respect to nominal load *** In the lower load range (25 to 40%) the load change rate differs from this value Source: RWE

A misconception is that coal plants and intermittent renewable generation are incompatible. Outdated coal-fuelled plants may have made that true at one point, but the current generation of advanced coal plants have flexibility parameters equivalent to the most modern gas-fuelled combined cycle. Figure and Figure show the ability of each type of coal plant to ramp and respond to changes in output for gas and coal plants respectively. The curves are nearly identical in terms of rate of change. Figure also shows the projected parameters for a newer generation of advanced coal station BoAplus at Niederaußem with even better performance.


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Figure 21 • Natural gas plant operational flexibility

Figure 22 • Advanced coal flexibility curve

Quantification of economic impacts

Overview and impact of the German lignite industry

Coal is an important energy resource for Germany, which has very little oil and natural gas production and relies heavily on imports for these fuels. Figure 23, which shows the proportion of fuels that were imported by Germany in 2012, and illustrates that lignite, or brown coal, is the only wholly indigenous fuel.

Figure 23 • Net imports of fuel as a percentage of total consumption (2012)

Source: BMWi, 2014.

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As seen in Table 43, in 2013 lignite made up 39% of domestic energy production, accounted for just over 12% of total primary energy consumption, and fuelled 26% of total electricity production. Additionally, 22 424 people in Germany were directly employed in the mining and processing of lignite (including at lignite-fuelled plants).

Table 43 • Net imports of fuel as a percent of total consumption (2012)

% Domestic energy

production % Primary energy

consumption % Gross electricity

generation Total direct employment (mining and processing)

Lignite 38.5 11.6 25.6 22 424

Source: BMWi, 2014.

RWE performed a study in 2010 that examined the total economic benefits of the lignite industry in the state of Nordrhein-Westfalen and for the entire country of Germany. Specifically, they evaluated the productions effect (or total economic value) and employment impacts of three industries: (1) lignite mining and extraction, (2) lignite-fuelled power plants, and (3) lignite preparation and processing. As part of this study, RWE quantified both the direct impact of the lignite industries, but also the indirect and induced benefits.

In general, they found that the Rhenish lignite industry (RWE Power AG) as a whole contributed (EUR 2010) 3.7 billion in production effects and some 42 000 full time jobs in Germany. These figures were achieved by examining the impact of ongoing expenditures and capital expenditures related to the three lignite industries, and include indirect and induced economic effects.

As seen in Table 44, RWE found that, on aggregate, for each employee directly employed by the lignite industry, there were 2.11 additional upstream and downstream jobs created. Furthermore, each euro directly spent by the industry for ongoing expenditures and capital goods creates an additional EUR 0.97 of production effect for the economy.

Table 44 • 2010 production and employment effect of the Rhenish brown coal industry

Ongoing operations Capital investments Total

Production effects (EUR)

Direct (RWE) 1 297.8 578.2 1 876.0

Indirect 853.0 462.1 1 315.1

Induced 333.7 166.7 500.4

Total 2 484.5 1 207.0 3 691.5

Employment effects

Direct (RWE) 13 438

Indirect 16 794 7 474 24 268

Induced 2 741 1 369 4 110

Total 41 816

Quantifying the benefits of Neurath

When examining the economic benefits of the Neurath advanced coal facility, the authors considered three metrics across two time scales; covering the construction and operational phases of the units.

The first metric is employment which can be measured in total wages or through the number of full-time equivalent (FTE) jobs created. The wages and employment figures considered in this report account for (1) direct employments or wages which are paid to


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RWE employees or contractors that work on-site at Neurath; (2) indirect benefits, which include wages and FTE’s created that supply, support, or service the ongoing operation of the units, but do not work on site; and (3) induced effects, which capture the multiplicative effects on the local economy that occur when employees and suppliers demand increased goods and services.

The second metric that considered is increased demand for raw materials and equipment created by the Neurath units. This figure is quantified in terms of the total annual outlays for goods and materials as a result of plant operation.

The third metric is similar to the second, but covers capital goods as opposed to fuel or other expended materials. As part of the build out of the Neurath units, RWE invested in all stages of the lignite production, processing, and transport process, and renewed or restored infrastructure in the surrounding area.

Construction phase

The construction phase for Neurath F&G lasted approximately 6 years. According to RWE, the owner of the Neurath units, the total capital outlay for the units was EUR 2.6 billion; 95% of which was allocated to suppliers within Germany. This figure includes the cost of capital goods, in addition to construction and engineering costs. Based on the relationship between direct capital expenditures and indirect and induced effects determined in the 2010 RWE study, the construction phase resulted in approximately EUR 5.3 billion of production effect for Germany.

During the construction phase, the project was responsible for an estimated 7 000 FTEs within Germany annually; comprised of 2 500 direct employees, 2 800 indirect employees and 1 700 induced employees. Furthermore, during project execution as many as 4 000 people worked on the construction site.

Table 45 • Economic benefits from Neurath construction 2006-12

Production Eeffect (million EUR) Employment effect (FTE)

Direct 2 560 2 500

Indirect 2 046* 2 800

Induced 738* 1 700

Total 5 344 7 000

*Author’s calculation using economic multipliers from 2010 RWE report.

Operational phase

The Neurath units entered commercial operation on the 15 August 2012 and since that date have been responsible for EUR 70 million in wages and 960 FTEs within Germany annually. This figure includes the 420 direct employees (including contractors) that work on-site in the facility as well as an estimated 270 indirect employees, and 270 induced employees.

Table 46 • Economic benefits of Neurath plant operation (2013)

Production effect

(million EUR) Employment effect (FTE)

Direct 28* 420 (includes contractors)

Indirect 19* 270

Induced 7* 270

Total 54 960



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Operation of these units also creates demand for lignite. It is estimated that approximately 7% of the employees at the Garzweiler mine and 20% of the employees at the Hambach mine are used to extract and transport the coal used by the new Neurath units; meaning that demand from the units supports another 420 direct employees and approximately EUR 23 million in wages.


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Table 47 • Economic benefit of lignite mines serving Neurath demand (2013)

Production effect

(million EUR) Employment effect (FTE)

Direct 9* 420

Indirect 6* 149

Induced 2* 15

Total 18 564


RWE estimates that EUR 15 million per year is spent on materials and capital goods.

Simplified production cost analysis of coal’s effect on the German electricity market

Modern coal plants have reached efficiencies of over 43%, as evidenced by the Neurath F and G lignite plant commissioned in August 2012 in Germany. However, the majority of the world’s fleet is much older and much less efficient. The United States coal fleet averages 32% efficiency, with the lowest decile at 27.6%. Worldwide, the average is 33% efficient. These inefficiencies contribute to higher cost of power

Table 48 • Active coal units in Germany by age class

Hard coal Lignite

Age (Years) # of Units Capacity (MW) # of Units Capacity (MW)

50 or greater 7 720 1 70

40-49 17 4 200 9 3 340

30-39 13 6 460 9 3 600

20-29 20 7 250 7 1 930

10-19 3 350 10 5 990

less than 10 3 1 730 5 2 830

We developed a production-cost model of the electricity market in Germany utilising the AuroraXMP electricity model along with our internal proprietary database of the European electricity network. This allowed us to simulate the effect of two potential policy changes on the German market: a decision to retire all lignite plants and replace them with new gas-fuelled capacity and reliance on imports, as well as a decision to replace existing lignite plants with advanced coal technology.39

Figure 24 shows the impact on wholesale prices to customers in Germany that would result from each of these policy decisions.40 The retirement of the coal plants causes a sharp rise in the cost of electricity as more expensive forms of generation must be utilised and imports relied upon. The replacement of older lignite power plants with efficient units causes a decrease in the cost of electricity to consumers as older units are phased out of the generating fleet.

39 Neither of these scenarios, to the authors’ knowledge, has been proposed in a practical context, but these examples serve as “Bounding” exercises for policymakers and illustrate the directional impact of policy decisions. 40 The cost of electricity represented in these charts includes not only the marginal cost of energy, but also the embedded and levelized cost of new capacity, which pays for the capital cost of new gas and coal fired power plant construction as well as the necessary financial costs, such as capital recovery and debt service costs. Note that these prices do not include retail transmission and distribution costs, which are assessed by local utilities.


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CRA estimates if all German coal was converted overnight to state of the art technology, German power prices would decrease by 6.8%, saving consumers EUR 1.9 billion annually. If all German lignite plants over 30 years old were removed from the supply stack and replaced with gas, CRA estimates power prices would increase by 11.6%, costing consumers more than EUR 3.4 billion annually.

Figure 24 • German wholesale all hours energy prices across coal scenarios

Equally important to Germany is the issue of energy independence. Retirement of existing coal plants would increase the reliance on natural gas imports from Russia and Norway significantly. Figure 25 shows the increase in natural gas imports that would result from retiring the coal plants. The sharp increase in the curve starting in 2021 represents the point at which significant new generating capacity would be necessary to maintain system reliability, necessitating the construction of large quantities of new gas-fuelled generation.

Figure 25 • Change in natural gas consumption in Germany

The same figure also shows a relatively stable consumption of natural gas under a replacement scenario, but gas consumption increases somewhat as the demand for new electricity increases in Germany. Note that both of these scenarios include projections from the German government incorporating aggressive additions of renewable intermittent generation.

The cost of increased reliance on natural gas is already included to some extent in our prior chart, but it likely understates the effect. There is a political risk dimension as well, as it may not be desirable to rely upon imports from Russia to fuel Germany’s economy.

There is also the cost to volatility, albeit difficult to quantify. Consumers of natural gas must manage price exposure to energy costs. The greater the volatility, the greater the cost. Coal and lignite’s highly stable pricing decreases this cost to energy users.

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Appendix

Sample calculation

The following example may be helpful in understanding the different types of socioeconomic benefits. Consider an example of a hypothetical power plant (with only illustrative numbers):

Pouring the foundation for a hypothetical power plant project requires the purchase of USD 500 000 in cement and USD 500 000 in contractor services to pour the cement.

The direct impact will be the value of cement and services, as well as the jobs at the concrete mixer and contractor that are supported by the purchases. If the concrete mixer and contractor are both local business, the local direct impact would be USD 1 million.

The indirect impacts result from the mixer and contractor purchasing goods and services from suppliers, who then in turn may purchase goods and services from other suppliers. The indirect impact would likely be greater for concrete expenditures, which requires the concrete mixer to purchase materials from cement manufacturers and businesses, than for the contractor spending, which is mostly paid out to employees and owners as direct impacts. The local impact is greater when there is more purchasing from within the local area. In this example, if the concrete mixer purchases cement from outside the local area, the indirect impact would be a lower value. A moderate indirect impact multiplier of 10% would yield an indirect impact of USD 1 million.

Induced impacts result from households increasing their spending in the local area due to increased wages or business owner income. Industries such as food, entertainment and medical services benefit from these impacts. Induced impacts also result from local governments spending their increased tax revenue. Industries such as government employment and education benefit from these impacts. The value of these impacts is determined largely by the location and size of the study area. In this example, the hypothetical induced impact is USD 200 000, based on a moderate induced impact multiplier of 20%.

The societal and health impacts result from the increased access to electricity from the construction of the plant, the increase in economic activity associated with development of infrastructure, and the public health benefits from displacement of higher-emitting sources.

Downstream economic benefits also result from coal-fuelled generation in the form of reduced fuel costs and lower electricity prices. Furthermore, in cases where countries have to import alternative fuels (such as natural gas) coal units keep spending within the domestic economy.

In the example, USD 1 million is spent on the cement and related services, but the total impact is USD 1 300 000. There is an economic multiplier of 1.3. Multipliers vary based on project details, such as the type of spending, the location, and the size of the study area.


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SaskPower’s Boundary Dam

The world’s first coal-fuelled carbon capture and storage (CCS) facility

Highlights

Coal-fuelled power plant becomes a model of modern-day sustainability

Reduces CO2 from the plant by 90%

Captures up to 1 million tonnes of carbon dioxide (CO2) annually; the equivalent of removing 250 000 cars from the road each year

A blueprint for CO2 capture and storage

All eyes are on the town of Estevan in Saskatchewan, Canada as the precedent-setting Boundary Dam Project provides an example of how cutting edge technology can help societies benefit from abundant coal resources while achieving carbon reduction goals. It’s all possible thanks to a newly imagined half century-old coal-fuelled power plant renovated to capture and store carbon dioxide (CO2).

The Boundary Dam integrated Carbon Capture and Storage (CCS) Demonstration project not only creates affordable, reliable energy out of the region’s abundant coal supply, but also reduces greenhouse gas emissions by an astounding 90% by capturing carbon dioxide (CO2). That’s the equivalent of taking 250 000 cars off Saskatchewan roads every year.

Some of the captured CO2 is transported by pipeline to nearby oil fields where it’s used to reinvigorate already tapped oil wells. In addition, the CO2 not used for oil recovery is being stored in underground geological formations, also called deep saline reservoirs, where it will keep safely for thousands of years.

The Boundary Dam Project represents the best of 21st century thinking. With the transformation of Unit #3 at Boundary Dam into the world’s first-ever commercial-scale CCS facility, Saskatchewan is setting a new standard for power utilities. It’s truly the tipping point between old and new technology.

In fact, today Unit #3 is a reliable, long-term producer of more than 110 megawatts (MW) of clean base load electricity. Additionally, when it’s fully optimised, it operates at an emissions level that’s cleaner than that of natural gas.

The Boundary Dam Project truly is leading the way as it makes a viable technical and environmental for the continued use of a resource that’s abundant in many parts of the globe - coal.

The project is a USD 1.47 billion partnership between the Government of Canada, SaskPower and private industries, requiring ongoing evaluation and monitoring. SaskPower supports Unit #3 with the Carbon Capture Test Facility (CCTF) and the Amine Chemical Laboratory. Aquistore, an independent research and monitoring project, is also an important partner contributing to The Boundary Dam Project’s success. Aquistore demonstrates that storing CO2 deep underground is a safe, workable solution to reduce greenhouse gas emissions.

The Boundary Dam CCS Project is the first of its kind, but it won’t be the last. The United States, Europe, Australia and Japan are all researching CCS technology on a commercial scale. Now they can look to the Boundary Dam Project as a model for what’s possible.

The project is proof that aging coal-fuelled facilities are capable of being transformed into powerful producers of cleaner, greener energy. Not only can the captured CO2 be utilised for oil


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recovery, but other by-products that have economic impact as well. For example, sulphur dioxide (SO2) can be captured and sold for industrial use. Other by-products can be used in concrete.

Saskatchewan has approximately a 300-year supply of coal. It’s not alone. Many other parts of the world are rich in coal, too. The Boundary Dam CCS Project is shining a light on fuelling the future through coal-fuelled CCS technology.


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List of acronyms and abbreviations AC Advanced Coal

CCGT Combined gas turbine power station

CERC Central Electricity Regulatory Commission

CIAB Coal Industry Advisory Board

CIL Coal India Limited

CRA Charles River Associates

CSR corporate social responsibility

DG diesel generator

EBITA earnings before interest, taxes, depreciation and amortisation

ESP Electrostatic Precipitators

FGD Flue Gas Desulphurisation

FTE full-time equivalent

GDP gross domestic product

GOI Government of India

GSDP Gross State Domestic Product

INR Indian rupee

JNNSM Jawaharlal Nehru National Solar Mission

KV kilovolt

LCOE levelised cost of energy

MTOE million tonnes oil equivalent

MU million units

NPS Ninghai Power Station

NTPC National Thermal Power Corporation

NVVN Vidyut Vyapar Nigam – (same as NTPC in English)

O & M operations and maintenance

PHC Primary Health Care

PLF plant load factor

PM particulate matter

PPB parts per billion

R & R resettlement and rehabilitation

REC Renewable Energy Certificate

R-O-R run of river

TLG The Lantau Group

UMPP Ultra Mega Power Project

VAT value added tax

ZPS Zhousan Power Station


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www.environment.gov.au/climate-change/repealing-carbon-tax.

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BMU (Bundesministerium für Umwelt) and BMWi (Bundesministerium fur Wirtschaft und Energie) (2010), Energy Concept for an Environmentally Sound, Reliable, and Affordable Energy Supply.

BMWi (2014), Zahlen und Fakten Energiedaten Nationale und Internationale Entwicklung.

Census of India (2014), Ministry of Home Affairs, Government of India, http://censusindia.gov.in.

Central Electricity Regulatory Commission (CERC), Ministry of Power, Government of India (2014) - Benchmark Capital Cost Norm for Solar PV power projects - Table 3: Breakup for Capital cost projection, www.cercind.gov.in/2014/whatsnew/SO353.pdf.

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