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Reports of New Mechanisms Feasibility Studies: FY2011

Title of Feasibility Study (FS)New Mechanism Feasibility Study for Multiple Application of Energy Efficiency Improvement Measures at Coal Thermal Power Plants in Mongolia
FYFY 2011
Main Implementing EntitySuuri-Keikaku Co., Ltd.
FS PartnersGovernment Implementing Agency Energy Authority, Ministry of Mineral Resources and Energy, Thermal Power Plant 4 Company, Thermal Power Plant 3 Company
Location of Project ActivityMongolia
Category of Project ActivityEnergy Efficiency
Summary of FS ReportPDF (684KB)
Description of Project/ ActivityWith introduction of the Japanese low carbon technologies in a comprehensive and composite manner to the combined heat and power coal-fired thermal power plants (CHPs) which are operated in the central power system in Mongolia, it will reduce the coal-derived CO2 emissions as well as the air pollutants that are emitted due to insufficient processing and realize the co-benefits of measures against global warming and air pollution.
The project assumes the introduction of energy-saving technology -like highly efficient turbines and combustion systems in the facility aspect, and the adoption of the equipment management technology in the operational aspect. These activities will increase the energy efficiency of the CHP2 while reducing the coal consumption, contributing to the reductions of the CO2 emissions.
In this FS survey, the questionnaires and the on-site interviews are implemented to each CHP. Energy-saving measures and reference scenario are examined. In addition, quantification of GHG emission reductions and MRV methods are fully examined. And the feasibility of the Bilateral Offset Credit Mechanism (BOCM) is studied.
Reference Scenario and Project/ Activity BoundaryThe reference scenario can be classified into “introduction of technology to CHP” and “operation method of CHP”. The reference scenario is set as follows by implementing the on-site interviews for CHP.
The reference scenario of “introduction of technology” assumes that “the different (low level) new technology will be introduced”. The reference scenario of “operation method of CHP” assumes “(1) Continuation of current practice (current operation) (before the operation start of CHP No.5” and “(2) Introduction of new operation methods (after the operation start of CHP No.5“. This new operation method can be comprehended by monitoring in the CHP No.4 and CHP No.3 after the operation start of CHP No.5. Additionally, the physical boundary of this project/activity is “within a power plant”.
Monitoring Methods and PlanAbout monitoring methods and plan, the existing monitoring items of each CHP are fully utilized, and there are no introduction of new monitoring equipment and no addition of monitoring items.
Monitoring items can be classified into the direct monitoring items and indirect monitoring items which are calculated from monitoring data and various parameters.
Direct monitoring items are "total amounts of electricity supplied to the grid by the power plant", "total amounts of electricity generated in the power plant", "total amounts of heat supply to Ulaanbaatar District Heating Company and factories around the plant", "average temperature at inlet to steam condensers", etc.
Indirect monitoring items are "total coal consumption", "total amounts of net heat quantity used for power generation in turbines", "total amount of net heat quantity taken out for district heat distribution system", "total fuel consumption due to electricity supply and heat distribution", etc.
The items like "coal consumption due to electricity supply to the grid", "coal consumption due to heat distribution", etc. should be recorded monthly. Other items should be recorded daily because these items are continuously monitored.
GHG Emissions and ReductionsGHG Emissions and Reductions of the sum from 2014 to 2023 are as follows;

Emissions of Project
Emissions of Reference Scenario
Emission Reductions
CHP No.3
about 9.2 million tCO2
about 9.6 million tCO2
about 0.4 million tCO2
CHP No.4
about 49.1 million tCO2
about 51.5 million tCO2
about 2.3 million tCO2
MRV System for GHG ReductionsEach CHP in Mongolia has very complex processes. Therefore, the MRV system was established by fully utilizing the current operational processes of CHP, as follows. In addition, the MRV methods were verified by the experts who are familiar with the project/activities.

- Measurement (M)
In order to implement monitoring plan steadily in accordance with projects/activities, persons and organization related to monitoring activities are identified, and their roles and responsibilities are clarified. In addition, the monitoring organizations, which could certainly acquire GHG emission reduction credits, are proposed. In the proposal, the current operation system of CHP and PDCA cycle of ISO are also considered.

- Reporting (R)
In order to secure GHG emission reduction credits, the procedure and items for checking are proposed on records of monitoring data are proposed. Records of monitoring data are implemented now for the operation of CHP. However, since the data is usually kept for short-term, the new measures for long-term data storage are proposed, in order to acquire these credits, and its necessity is emphasized.

- Verification (V)
The rules in CHP corresponding to verification are proposed. Making the organization which can respond to the verification process including the establishment of the internal audit team is proposed.
In this FS survey, the scheme of expert judgment was implemented. The experts know the local conditions and the related industry in detail. The experts evaluated "reference scenario", "monitoring methods", "quantification methods for GHG emission reduction", and "MRV methods". As a result, the experts judged that these were reasonable.
In addition, there are issues on the expert requirements. These issues are that the expert committee, which consists of several experts, should be established and will implement the verification process in the future, and etc.
Analysis of Environmental, Socioeconomic and other Impacts (including Securement of Environmental Integrity)This project/activity will have favorable impacts including reduction of the local impact of air pollution caused by use of coal by improving the efficiency of the CHP. Adverse impacts to the environment upon the operation are not specified at the present moment. The impact caused by the construction work for refurbishment of equipment, including noise to the surrounding environment, should be minimal since it is carried out within the plant site.
Financial PlanningThe results of a trial calculation of the initial investment and operation cost and income that are required for the implementation of the projects/activities are as follows by assuming that 1 USD = 80 JPY (Japanese Yen);
- Initial investment: 16331 million JPY
- Operating cost: 327 million JPY
- Annual operating cost reduction: 295.2 million JPY
- Income of Bilateral Offset Credits: 152 million JPY
- Benefit of social economy: 286.4 million JPY
The calculation shows that it is financially tough as the business of a single electric generation plant. Increase in the GHG emission credit price is also important for the improvement of the business, but it is actually affected more the exchange rates. The business, may be able to stand alone if the exchange rates are at the level such that 1USD = 100 JPY and the emission credit is 20 USD/tCO2, or 1 USD = 120 JPY and the emission credit is 10 USD/tCO2.
Introduction of Japanese TechnologyThere is a variety of potential energy saving menus for this project/activity ranging from more cost-effective ones including the "combustion improvement (low O2 operation)" to less cost-effective ones including the "adoption of LED", and from these that require lower installation cost including "combustion improvement (low O2 operation)" to higher installation cost including the "replacement to high efficiency turbine".
It is desirable to enhance the competitive advantage of Japanese industrial firms by establishing the criteria such as the cost effective menu, the menu with a higher CO2 emission reduction effect and the menu with the Japanese technologies that meet the needs of Mongolia and packaging multiple measures by including the implementation of the measures with hardware as well as the software support that is required for the operation of the hardware, and introducing the technologies in Mongolia by utilizing ODA.
(i.e. Improvement of Local Environmental Problems)
The reduction effect of air pollutants is estimated for not only emission reductions but also reductions of the ambient air concentration. In addition, the monetary value of the benefits of improved health effect was estimated and project potential was estimated by using both this monetary value and GHG emission reduction credit.
When coal consumptions of CHP No. 3 and CHP No. 4 are reduced with 1%, amount of PM10 is reduced from 4,318 (ton/year) to 4293 (ton/year). The air dispersion simulation in each case of measures in the thermal power plants is implemented based on each inventory to create the grid-based distribution map of the PM10 concentration.
The Population Weighted Exposure (PWE) based on the grid-based population is estimated with the air pollutant concentration of each grid, population and area size of each khoroo (small jurisdiction unit).
The number of deaths and people suffering from the effects on health classified according to the disease are calculated by using the exposure-response function.
The monetary values of death and each disease in the respective measure cases and the sum of these monetary values are estimated by using “WTP (Willingness To Pay)” and “Cost of Illness”. The benefit to health by the measure is calculated by subtracting the monetary value of the case with the measure implemented from that of the case without the measure.
As mentioned above, the social benefits by the improvement of air pollution was shown. In other words, if possible, this project/activity was evaluated so that it might become basic materials for policy support of Mongolia.
Contribution to Sustainable Development in Host CountryAccording to a document named "DNA Approval Criteria (approval criteria for CDM project)" published by the DNA of Mongolia, the criteria of "sustainable development" are classified as "impact on environment", "impact on society" and "impact on economy and technology". The comments on former "impact on environment" and "impact on society" have been shown in "Analysis of Environmental, Socioeconomic and other Impacts" and "Co-benefits" as above.
The components of the criteria on "impact on economy and technology" are "efficient resource utilization (financial, technical and human resource)", "transfer of technology and know-how" and "creation of infrastructure (road, transport, water pipe, and energy grid etc.)". The implementation of this project/activity is assumed to contribute to these criteria.
There should be some effect on coal mines in Mongolia by the decrease of coal production caused by the project activity. Sustainable-development-related viewpoint is, however, duration of production is expanded so remarkably that the contribution to sustainable development is highly evaluated. As the coal amount bound for export should be increased in place of domestic use, huge contribution to the economy through accumulation of foreign currency can be imagined.

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