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Energy Procedia 75 (2015) 1549 - 1554 Energy

Procedia

The 7th International Conference on Applied Energy - ICAE2015

Cost-effectiveness Analysis on Measures to Improve China’s

Coal-fired Industrial Boiler

Manzhi Liua,b ,Bo Shenb, Yafeng Hanb’c, Lynn Priceb, Mingchao Xub,d *

aSchool of Management, China University of Mining and Technology, Xuzhou Jiangsu 221116, China

bChina Energy Group, Lawrence Berkeley National Laboratory, Berkeley CA 94720, USA cSehool of Economics and Finance of Xi’an Jiaotong University, Xi’an Shanxi 710000, China

___________d China Energy Conservation and Environmental Protection Group, Beijing 100082, China_________

Abstract

Tackling coal-burning industrial boiler is becoming one of the key programs to solve the environmental problem in China. Assessing the economics of various options to address coal-fired boiler is essential to identify cost-effective solutions. This paper discusses our work in conducting a cost-effectiveness analysis on various types of improvement measures ranging from energy efficiency retrofits to switch from coal to other fuels in China. Sensitivity analysis was also performed in order to understand the impacts of some economic factors such as discount rate and energy price on the economics of boiler improvement options. The results show that nine out of 14 solutions are cost-effective, and a lower discount rate and higher energy price will result in more energy efficiency measures being cost-effective. Both monetary and non-monetary barriers to energy-efficiency improvement are discussed and policies to tackle these barriers are recommended. Our research aims at providing a methodology to assess cost-effective solutions to boiler problems.

Peer-review under responsibility of Applied Energy Innovation Institute

Keywords: Energy efficiency improvement;fuel switch; cost-effectiveness; coal-fired boiler; China

1. Introduction

While industrial boiler is an important energy conversion device to meet industrial production needs, it is also the main source of energy consumption and air pollution. Industrial coal-fired boilers account for a significant share of boilers that are currently being operated in China. As of the end of 2012, there are 467,000 coal-fired industrial boilers in China, with a total capacity of 1.78 million steam tons and an annual coal consumption of about 700 million tons, accounting for more than 18% of the country’s total coal consumption. The overall coal-fired industrial boilers energy efficiency in China is relatively low. Their actual operational efficiency is about 15% lower than the international advanced level, presenting very large energy saving potentials. In addition, the coal-fired industrial boilers’ pollution emission intensity is high, which makes the boilers a key source of air pollution. Annual soot emissions, SO2

emissions, and NOx emissions account for 33%, 27%, and 9% of the national total emissions, respectively. In recent years, there has been a wide range of prolonged severe fog and haze, which is closely related to the regional high intensity and low-altitude emissions from industrial systems including coal-fired boilers

Peer-review under responsibility of Applied Energy Innovation Institute doi: 10.1016/j.egypro.2015.07.330

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[1].. Eliminating or retrofitting coal-fired boilers has become one of the key focuses in China's energy conservation and emission reduction effort [2], Pursuing elimination or retrofit of coal-fired boilers requires assessing the cost-effectiveness of energy efficiency improvement and fuel substitution measures.

Techno-economic analysis methods are developed to assess the cost-effectiveness of energy efficiency and other measures to lower GHG emissions. In 1982, Meier introduced supply curve of conserved energy which provides a consistent accounting framework for assessing diverse conservation measures [3], McKinsey developed GHG abatement cost curves for a wide range of GHG abatement measures in different countries [4], Studies have also been conducted to assess energy savings and emissions reduction opportunities and their cost-effectiveness in industrial boilers and associated steam systems. Einstein, et al evaluated energy use and energy efficiency improvement potentials in steam systems in the U.S. via calculating the Cost of Conserved Energy (CCE) to assess the cost-effectiveness of relevant retrofit measures[5], Hasanbeigi constructed a bottom-up model to estimate the energy efficiency improvement and C02 emission reduction potentials in China’s steam system [6], Yang, et al analyzed energy and environmental benefits of non-electric boiler in Shenzhen, China, and used emission coefficient method to estimate and examine the impacts on air pollutants and greenhouse gas emissions of implementation of fuel substitution [7]. Sun analyzed the characteristics of emissions on coal-fired industrial boilers and discussed feasible measures to conserve energy and reduce emissions [8], Despite the coverage of a wide range of aspects, however, these studies have given less attention to some important factors such as fuel switch from coal to cleaner fuels, operation costs, and government incentives. These factors affect the comprehensive understanding about the cost-effectiveness of energy savings and emissions reduction opportunities for industrial boilers. This research aims to develop a method that takes consideration of several important factors for a comprehensive assessment of energy savings and emissions reduction potentials for coal-fired industrial boilers in China.

2. Methodology

2.1. Cost of Saved Energy (CSE) curve

(l)The efficiency of the industrial boiler was defined as:

* =

IE

(1)

Where:

R

: Industrial boiler system efficiency;

OE

: Thermal output (energy) by industrial boiler system;

IE

: Fuel input (energy) to industrial boiler system;

(2) Cost of Saved Energy for retrofitting coal-fired boiler.

F

+

O - P

xM - 5

CSE =

--- (2)

AE

Where:

CSE

: Annualized Cost of Saved Energy (CSE);

F

: Annualized capital cost of the retrofit;

O

: Annual change in O&M costs (other than fuel costs);

P

: Coal price;

AE

: Annual energy saving;

S

:

Annualized incentive.

The annualized capital cost

F

and annualized incentive can be calculated from Equation 3.

F

=

Capital Cost

x---—--- (3)

1 - (1 +

d)-n

S

=

Total Incentive

x

-1 - (-1 +

d)-n

(3)

Manzhi Liu et al. / Energy Procedia 75 (2015) 1549 - 1554 1551

CSE for individual retrofit measures can be ranked in ascending order and plotted to create an energy efficiency cost curve (EECC) which shows the cost-effectiveness of comparative measures with measures that fall below the x-axis being identified as “Cost-Effective”. On an EECC, the width of each measure (plotted on the x-axis) represents the savings potential by that measure while the height (plotted on the y- axis) corresponds to the annualized cost of saved energy resulting from the measure.

(3) Calculation of annual fuel savings

Our research is to understand and compare the cost-effectiveness of various measures. Savings potentials of various measures are thus assessed independently without considering of the influence of other measures. The annual fuel savings from the implementation of individual retrofit measure are calculated as follows:

• Boiler annual energy savings (tce/a)

AE

=[ hourly steam production (t/h)] * [annual boiler operation hours (h/a)] *[[energy consumption per unit of steam production in baseline system (tce/t)] - [energy consumption per unit of steam production in new system (tce/t)] ]

• energy consumption per unit of steam production in new system * system efficiency after the retrofit = energy consumption per unit of steam production in baseline system * Baseline efficiency of the boiler system

(4) Cost of Saved Energy for fuel switch of coal-fired industrial boiler

As an alternative to efficiency retrofit, fuel switch from coal to natural gas, electricity, and biomass to lower the emissions from coal-fired boiler are also assessed in terms of their cost-effectiveness as follows:

CSE

F

+

O -

(

P0 x E0 - Px

x

E

x) -

S

E0 - Ex

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Where:

P

0: Coal price;

P

x: Alternative fuel price;

E

0: Coal consumption;

E

x: Alternative fuel consumption in coal equivalent. S: annualized incentives for encouraging phasing out coal-fired boiler.

2.2.Data source

Our research focuses on the coal-fired boiler of 10 steam tons per hour (t/hr) because China’s new "Atmospheric Pollution Prevention Action Plan" has set its target on this size and below. Information on the fuel efficiency of industrial coal-fired boilers, the ratio of energy efficiency improvements of various retrofit measures, the technical lifetimes of both retrofit measures and fuel switch were obtained from the China’s national catalogue of key recommended energy-savings technologies (batch 1 to batch 6), Chinese national catalogue of key recommended low-carbon technologies and other means in which we used Delphi method to seek expert advices. Worrell et al. (2004) examines the approaches of determining discount rate and suggests use low discount rates (4% to 10%) for addressing long-term issues such as climate change or public sector projects and high discount rates between 10% and 30% to reflect the existence of barriers to energy efficiency investments. We used a discount rate of 15% in this study but also examines the impacts of varying discount rates on our results through a sensitivity analysis.

3. Results and Discussions

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We used the methodology described above to construct energy efficiency cost curve (EECC) for the 10t/hr industrial coal-fired boiler in China, which is shown in Figure 1. Among the 14 measures shown in Figure 1, the measures that are below zero are cost-effective while those placed above zero are not cost effective in Figure 1. Information that matches Figure 1 is provided in Table 1 which lists the name of the measures, cost of per unit of energy saved, and annualized energy savings potential. The shaded area in the table 1 are measures that are not cost-effective.

cost of saved energy (CNY 103 ¥/tce) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 14 11 12 13 3 5 7 9 1 2 4 6 8 10 1000^^—-2000" 3000 4000 5000 6000 7000 8000 9000 10000 saved energy (tee/a)

Fig. 1. Energy efficiency cost curve for 10t / h industrial coal-fired boiler

Table 1. Results of cost-effectiveness analysis of energy savings measures for 10t / h industrial coal-fired boiler measures

No. Type Retrofit M easure

Cost per unit saved energy (CNY 103 ¥/tce) Annual Fuel Savings Potential (tee) 1 Retrofit Corrosion and scale inhibition technology of

boiler water treatment -0.805 1286

2 Retrofit Optimization of boiler blowdown and recovery

of heat from boiler blowdown -0.648 140

3 Retrofit Optimized insulation of steam piping, valves,

fittings, and vessels -0.643 245

4 Retrofit Optimization of condensate water recovery -0.545 203

5 Retrofit Loss On Ignition (LOI) optimization -0.479 245

6 Retrofit Flue gas thermal energy recovery -0.419 354

7 Retrofit Flash-steam recovery -0.388 193

8 Retrofit

Removal iron technology of high-temperature condensate water on low-pressure industrial boiler

-0.157 236

9 Coal-processing Pulverized coal boiler -0.148 800

10 Fuel substitution Natural gas boiler 3.315 1429

11 Fuel substitution Industrial boiler with biomass fuel 7.266 964

12 Fuel substitution Combined heat and power using natural gas 7.786 1766

13 Retrofit Warning system on intelligent grey

optimization and online coking 8.142 45

14 Fuel substitution Electric boiler 10.092 1603

Our analysis reveals that in the case of 10t/h industrial coal-fired boiler system, there are 9 out of 14 measures are cost effective based on China’s current fuel prices and government incentives. For these 9 measures which are all efficiency retrofits, their annualized capital cost and annual change in O&M costs (other than fuel costs) are less than the sum of saved cost from reduced energy use and annualized

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Manzhi Liu et al. / Energy Procedia 75 (2015) 1549 -1554 1553 incentives. “Corrosion and scale inhibition technology ofboiler water treatment” is the most cost-

effective measure followed by “Optimization ofboiler blowdown and recovery of heat from boiler blowdown”. Among fuel switch measures, natural gas boiler performs better than either biomass or electric boiler in techno -economic analysis and “electric boiler” is ranked the lowest in terms of cost- effectiveness.

3.2.Sensitivity analysis

Several parameters play an important role in assessing energy-savings potentials of improving industrial coal-fired boilers. It is therefore useful to conduct a sensitivity analysis to examine how these factors affect the cost- effectiveness of different improvement measures. The discount rate and the fuel prices are two parameters that we considered for our sensitivity analysis as they can affect the results distinctly. The discount rates can differ based on the purpose of the analysis and the price of coal varies greatly by region and by industry in china. As can be seen from table 2, higher discount rate will result in less cost-effective energy saving potential. The cost-effectiveness of energy saving potentials can been directly influenced by the energy price. A higher energy price can result in more energy efficiency measures being cost-effective.

Table 2 Sensitivity analysis for 10t/h industrial coal-fired boilers in China with different discount rates

Discount Rate 5% 10% 15%“ 20% 25% 30%

Annual fuel savings potential of cost-

effective measures (tce/a) 3702 3702 3702 3702 2666 2666

Sum of CSE of cost-effective measures

(CNY 103¥/tce-saved) b -5.31 -4.8 -4.23 -3.62 -3.07 -2.62

“ The 15% discount rate is the base scenario which is used in the main analysis presented in this report. b Negative number indicates cost effective.

3.3. Uncertainties and limitations

There are some uncertainties and limitations for this study. First, assumptions and generalizations had to be made due to the lack of enough information. Because of the lack of first-hand data, this analysis relied heavily on information obtained from discussing with Chinese experts based on their best knowledge. Second, this study only examined 10 t/h boiler and thus cannot assess the full energy savings potential of boilers in other sizes. Finally, our analysis only assess the techno-economic performance of individual measures without taking into the consideration of the cross-impact of multiple measures.

This study presents a methodology of assessing the cost-effectiveness of energy savings measures for industrial coal-fired boilers and deep and more comprehensive studies of examining more factors and covering other sizes ofboiler can be carried out as better data become available.

3.4. Policy implications

The results of the study have several policy implications. First, Figure 1 and Table 1-2 show that under the current market conditions most efficiency retrofits for industrial coal-fired boilers is cost-effective in China. In reality, however, these cost-effective opportunities have not been fully adopted. Lack of information and capacity in companies especially in small and medium enterprises create barriers to deploying these measures. Programs such as disseminating best practices, creating technical training programs, promoting benchmark learning, and developing efficiency assessment tools and guilds related to boiler efficiency improvement can help address the knowledge and capacity barriers. Second, it is important to create suitable financing mechanisms to support the wide adoption of these measures. Third,

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China can be better off to strengthen its standards on industrial boiler to include requirements for energy efficiency. Finally, addressing boiler problems needs to take a system approach to capture opportunities beyond boiler itself and focus on the entire steam system in which boiler is a part.

4. Conclusion

This study provides a methodology of construct an energy efficiency cost curve to evaluate the techno economics of various measures of improving industrial coal-fired boilers, a major source of air pollution and green house gases emissions. The study reveals that energy efficiency measures are cost effective in reducing energy use and thus emissions from coal-fired industrial boilers. To promote the wide adoption of energy efficiency measures in China, policies and programs are needed to remove the information, capacity, and financial barriers and to create better standards and greater opportunities for capturing system-wide potentials.

Copyright

Authors keep full copyright over papers published in Energy Procedia

Acknowledgements

The authors would like to thank Zhang Qi for his help on the technical assessment.

References

[1] China National Development and Reform Commission, Ministry of Environmental Protection, et al. Comprehensive improvement preject implementation plan on energy saving and environmental protection of coal-fired boilers (SDPC, ZHB[2014] No. 2451). Available at http://www.miit.gov.cn/nll293472/nll293832/nl2843926/nl3917012/16240306.html, 2014-11-06

[2] The State Council issued "Atmospheric Pollution Prevention Action Plan" (full text). China network. Available at http ://legal.china.com.cn/2013-09/12/cont ent_30005965.htm

[3] Alan Kevin Meier. Supply curves of conserved energy. Lawrence Berkeley Laboratory and Unix ersity of California, Ph. D. thesis, 1982

[4] McKinsey&Company. China’s green revolution-prioritizing technologies to achieve energy and environmental sustainability, 2009. Available at http://www.mckinsey.com/locations/greaterchina/mckonchina/reports/china_green_revolution.aspx

[5] Einstein D, Worrell E, Khrushch M. Steam systems in industry: Energy use and energy efficiency improvement potentials[R].

Lawrence Berkeley National Laboratory, 2001. Available at http://escholarship.org/uc/item/3ml781fl

[6] Ali Hasanbeigi, William Morrow, Jayant Sathaye, Eric Masanet, Tengfang Xu. A bottom-up model to estimate the energy efficiency improvement and C02 emission reduction potentials in the Chinese iron and steel industry. Energy, 2013, 50: 315-325

[7] Yang Lei, Huo Jiepeng, Zhuang Dachang. Environmental benefits assessment on energy substitution of boilers in Shenzhen’s non-power plants. Environmental pollution and control, 2013, 35(11), 93-97

[8] Sun Degang. Study on emission characteristics of coal-fired industrial boilers and measures of energy conservation and emission reduction. Master degree thesis ofTsinghua Unix ersity, 2010

Biography

Manzhi Liu is an associate professor of Management School, China University of Mining and Technology, China. Her research interests include energy efficiency and management.