May 25, 2012
The Energy Saving and Environmental Protection Development Outline for the 12th Five-year Plan has been published and is comprised of three main sections: (1) improved sewage treatment, (2) harmless solid waste disposal and (3) atmospheric pollution control are the clear lines of development for industries over the next 5 years. Among the atmospheric pollution controls announced, the State Environmental Protection Administration released the Thermal Power Air Pollutant Standards in December of last year.
The standards for thermal power emission denitrification have been greatly improved, requirements include the need for the construction of new coal-fired units to coincide with construction of desulfurization and denitrification equipment; coal-fired units of capacity 300MW or over (inclusive) must also install denitrification equipment, resulting in higher overall industrial standards and opening up a denitrification market of more than RMB 100 Bn.
Newly Published Thermal Power Emissions Regulations are the Strictest Yet. As shown in the figure below, these standards have been adjusted several times since their introduction in 1996, from initial levels of (650-1,000 mg/M3), to current restrictions of (100-200 mg/M3). The difference is evident.
Figure 1: Historical Thermal Power Emission Denitrification Standards (mg/M3)
Source: CEC and GCiS Note: Figures are standards for the highest acceptable limits of NOX/M3 by applicable year.
From the emissions standards of the various countries in the figure shown below, note that China’s denitrification standards are stricter than both Europe and the USA’s.
Figure 2: Various Countries Thermal Power Plant Denitrification Emissions Standards
Source: Thermal Power Plant Air Emissions Standards
An RMB 100 Bn Market, Where to Start?
As of March 2011, China’s 700 GW of thermal power capacity is only matched with around 97GW of denitrification capacity, meaning that around 85% of the market is running without this necessary equipment. The current working units with proper denitrification equipment in operation are concentrated in economically developed areas, such as Beijing, Tianjin, The Yangtze River Delta and The Pearl River Delta. During the 12th Five-year Plan, many domestic power plants listed denitrification projects as priority. Examples of this include a power plant in Hubei where RMB 20 Mn was planned for equipment investment to meet denitrification standards in 2013. Guodian Luanhe Power Plant, Huaneng Dezhou Power Plant, Huadian Laicheng Power Plants and many others have all made preparations to meet national standards.
Currently, the three main types of denitrification are:
a) Selective non-catalytic reduction (SNCR),
b) Selective Catalytic Reduction (SCR)
c) A mix of both SNCR and SCR.
Figure 3: Denitrification Technology
Source: Ministry of Environmental Protection and GCiS
SCR technology has the highest rate of denitrification efficiency and is currently the most widely used technology globally. For most of the thermal power capacity already built, in progress and planning to be built, most will use SCR denitrification technology.
According to CEC plans, thermal power installed capacity will rise from 670 GW in 2010 to 970 GW in 2015 and 1,200 GW in 2020. This means that during the second half of the 12th Five-year Plan, new capacity will reach 250 GW, and by 2020, nearly 500 GW.
Figure 4: Historical Growth of Installed Thermal Capacity (GW)
In order to satisfy the new emissions standards, existing thermal power capacity amounting to around 338 GW, combined with new thermal power capacity of around 250 GW will need to install denitrification equipment. A conservative estimate of RMB 80/KW in cost may be assumed for this. In addition, the existing older units will need to be retrofitted with air pre-heaters, fans and bracket reinforcements -- requiring a total investment of around RMB 120/KW. Thus, the most conservative estimates mean that the market for denitrification will reach at least RMB 60 Bn in size.
According to plans made by the Ministry of Environmental Protection, new construction projects and those built in the 2004-2011 period must all implement flue gas denitrification; the same applies to certain units built before 2004. By 2015, total capacity requiring denitrification equipment could very well reach 817 GW. In accordance with the 80-120 RMB/KW cost estimates for this, the market for denitrification should reach RMB 100 Bn by the end of the 12th Five-year Plan tenure.
With strong experience in power generation, GCiS has spoken with number power stations, equipment suppliers, engineering companies, contractors and other key players in recent years. Based on our understanding, most plants have budgeted around 500,000 – 2,000,000 RMB to invest in air quality control systems.
With the previous five year plan, one of the primary spending points was on desulphurization projects. As the market for desulphurization has more or less matured and stabilized, the next market with great potential during the 12th Five-year Plan period will be denitrification. Of all China’s total nitrogen emissions, more than 50% come from thermal power stations. GCiS expects that most thermal plants will invest in denitrification equipment before 2014 to meet new standards.
About GCiS China Strategic Research
GCiS (www.GCiS.com.cn) is a China-based market research and advisory firm focused on business to business markets. Since 1997, GCiS has been working with leading multinationals in sectors ranging from technology to industrial markets, medical, chemicals, resources, building and constructions and a few others.