A Clean Drive

SHANXI is well known as a major source of the energy driving China’s social and economic development. The province supplies a quarter of the nation’s coal, two-fifths of its coke and one-17th of its coal-generated electricity. And as anywhere in the developing world, the boom of its energy and chemical industries, two of the mainstays of the local economy, has come at a cost to the environment and the region’s resources.

Now, the government has called for an end to the shortsighted practice of striving for economic gains at the expense of future generations. And major industrial players, including Shanxi Electric Power Corporation, are responding.

“Electricity is a symbol of modern civilization, and is fundamental to the realization of a prosperous society. As a big corporation, Shanxi Electric Power must meet its social responsibilities as it goes about making an economic contribution. That is the only way to win the public’s respect,” Wang Shuxiang, the company’s general manager, told his employees recently.

Regulating Polluters

Pollution is a chronic plague for Shanxi, and enforcing measures to address the problem often meets with tremendous local resistance. Many of the targets the government has set to reduce energy consumption and pollution remain unmet. To change the situation once and for all, Shanxi launched a concerted campaign against polluting enterprises in 2006, bringing together the efforts of 14 provincial administrations, including those of environmental protection, power, the railway, banks and the local inspection enforcement commission of the Communist Party of China (CPC).

In 2007, the provincial government signed pacts with nine of its cities to overhaul their iron and steel industries. Each city is now required to compile a list of polluting iron and steel manufacturers, and shut them down. Within a month of the list’s release, those on it will be cut off from water and power supplies, and banned from using the railway network. Within three months, their operating licenses will be revoked.

No single measure is as effective a deterrent to polluters as severing their access to power, water, transportation and bank loans. The message is loud and clear C violators will face severe consequences from now on.

Shanxi Electric Power Corp. is a steadfast supporter and essential participant in the drive. In 2006, and in collaboration with the country’s environmental protection authorities, it suspended power supplies to 218 mines and 263 factories involved in coking, metallurgy and chemistry, and dismantled the power infrastructures of over 26 highly polluting plants.

The total amount of power saved was nearly one billion KWH. In 2007, the company enforced a blackout penalty on 117 polluting factories, and implemented other punitive measures on 148 others considered to be ecologically irresponsible.

Prevention is always the best policy, and to that end the company has ruled that new enterprises cannot be connected to the power grid without having been certified as meeting national and local environmental protection standards. And it has intensified its inspection of electricity lines, particularly those to coal mines, to prevent electricity from being illegally transferred or stolen.

Meanwhile, the corporate giant follows the dictum that one must begin with one’s own front yard. It has promoted de-sulfurization work in its power plants, and has striven to heighten energy efficiency and environmental friendliness. In 2007, it issued its first social responsibility report in which it pledged to observe decisions made by the central and provincial governments on environmental protection, and specified measures to be taken toward that end.

Time for Change

Since the onset of reforms nearly 30 years ago, the Chinese economy has made spectacular progress. That prosperity, however, has come at a heavy environmental and public health cost. Indeed, pollution has reached a level that risks poisoning China’s future development, rousing the nation to take prompt remedial measures.

For the 11th Five-year Plan period (2006-2010), China set a goal of reducing its unit GDP energy consumption by 20 percent and its output of primary pollutants by 10 percent.

The 2007 Central Economic Work Conference vowed to push firmly and steadily for strong control of energy use and emissions. Shanxi has an abundance of coal. As locals like to boast: “All it takes is a shovel to exploit coal in Shanxi.”

Rich coal deposits generate huge volumes of electricity, boosting Shanxi’s economy, but they also pollute the atmosphere. Of its air pollution, 57 percent is caused by sulfur dioxide, and half of the chemical’s discharge can be traced to the local power industry.

A key solution to the problem is to install de-sulfurization facilities in coal-burning power plants, a formidable task given their great number in Shanxi and the projected loss of output, and consequently of profits, caused by the downtime during construction.

Weighing short-term costs against long-term gains, Shanxi Electric Power Corp. has since 2006 offered incentives for its plants to implement de-sulfurization upgrades, and has carefully scheduled its operation to make feasible the suspension of production in some plants for the purpose. Thanks to its overall plan and stop-gap measures, the impact of these temporary shutdowns of generators on the local economy was reduced to a minimum.

According to figures of the State Environmental Protection Administration, sulfur dioxide emissions in Shanxi fell by 37,900 tons, or 2.5 percent, in 2006 over the previous year. The drop, while modest, was the first in 20 years of robust economic growth. And the momentum continued in 2007.

In the first six months of the year, the region’s sulfur dioxide emission and COD (chemical oxygen demand) reported a decline of 6.6 and 3.5 percent, respectively, and per-unit energy consumption in industrial production is estimated to have fallen by over 4.23 percent. Meanwhile, Shanxi’s gross production value reached RMB 251.16 billion, a 14.1 percent rise over the same period in the previous year. By the end of 2007, de-sulfurization work was completed in all of the province’s power plants.

A Painful Reorganization

In a bid to lessen emissions and increase efficiency, the state has called on local governments and enterprises to close their smaller generating units, and to replace them with larger ones created through mergers and acquisitions.

State Council documents specify that Shanxi must eliminate minor generator units with a total capacity of 2.67 million KW during the 11th Five-year Plan period, with the share for 2007 being 660,000 KW.

Before year’s end, the province had abandoned minor generator units totaling 660,000 KW. Shutting down so many generators in such a brief period inevitably resulted in strains on the local power grid, and threatened significant energy prices hikes.

Shanxi Electric Power Corp. responded with a variety of counter-methods. For instance, after stalling four generator units of 12,000 KW in its Bagang Plant and four units of 25,000 KW in its Houma Plant, the company swiftly transferred their generation quotas to other power plants. It also sent personnel to other regions facing similar problems to learn from their experience, and then worked out viable plans of its own after considering local conditions.

Across-the-Board

Regulation

In recent years, Shanxi Electric Power Corp. has abided by the state demand for more output by larger and cleaner generator units, and less on smaller and less efficient ones. In light of this principle, it works out annual power generation quotas for its plants under the direction of the province’s economic commission, and monitors their production throughout the year. It hires supervisors in plants and releases their reports monthly on the grid control information Website, and has them meet quarterly.

Under these circumstances, the Tianqiao and Wanjiazhai hydroelectric plants have managed to generate record volumes of power. Shanxi’s large and medium-sized generator units have been running at 6,000 or more hours per year. And the annual working hours of units with de-sulfurization functions have increased by 50 hours, 100 hours for air-cooling units and 100 hours for heat-supplying units.

The operation of units of combined heat and power hinges on the amount of heat needed by enterprises. The operation of minor units fueled by coke-oven gas, blast-furnace gas, coal-bed gas and waste heat is scheduled according to the amount of waste gas and heat available to stoke them. Minor hydropower units run at a capacity that minimizes the loss caused by wasted water. And coal-fed units have cut down their total operations.

In addition, Shanxi Electric Power Corp. has lowered its line loss rate from 7.45 to 7.35 percent through grid investment and management.

Discriminative Rate as a Lever

For enterprises that use energy and resources heavily and wastefully, punitive energy costs are a heavy burden, providing the strongest incentive for them to be more efficient.

On October 1, 2006, Shanxi Electric Power Corp. increased its electricity rate by RMB 0.1 and 0.03 per KWH, respectively, for enterprises in the industries that local government is to prohibit and restrict, such as iron and steel, ferro-alloy, cement and calcium carbide. On January 1, 2007, it jacked the rate up by a further RMB 0.15 and 0.04 per KWH for as many as 400 factories. The price hike has meant that it is imperative for high energy-consuming enterprises to adopt technical upgrades, or else risk financial failure.

According to a document jointly issued by Shanxi’s price administration, the development and reform commission, the economic commission, the environmental protection administration and the electricity supervision office, electricity payments account for a considerable share of the cost of energy-intensive manufacturing. It comprises up to 50 percent in the production of ferro-alloy and calcium carbide, for instance.

However, the price hike for particular enterprises didn’t raise Shanxi’s profits. Instead, closing some of those enterprises under price pressure caused sales to decline by an estimated 1.3 billion KWH. In addition, the cut-off of power supplies to polluting enterprises has further affected sales. In 2006 alone, that accounted for a reduction of 700 million KWH.

Shanxi Electric Power Corp. knows keenly that in the battle against pollution and energy waste, victory will not come cheaply. However, the economic price to be paid is well worth it. As a company dealing with one of the most important energies in modern human society, it is obliged to join global and national efforts to make the Earth a cleaner and more sustainable place.