Guangzhou's Garbage Goldmine: From Waste to Renewable

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TAGS: EFIN SENV PGOV SOCI ECON CH
SUBJECT: Guangzhou's Garbage Goldmine: From Waste to Renewable
Energy


1. (U) Summary. Is trash the ticket to solving Guangzhou's energy
woes? The city government sure thinks so. Local officials are
hoping that converting more of Guangzhou's waste into energy will
help solve power shortages and strengthen environmental protection.
Two garbage power plants are already operating; there are plans for
further expansion. The city aims to burn all of its garbage for
electricity by 2015. However, a lack of power lines for
transmission and distribution, landfills and incinerators stand in
the way of meeting this goal. Interestingly, the decline in
consumption in south China due to the global financial crisis has
also led to a decline in the amount of garbage produced. It is
unclear whether this is a temporary phenomenon or whether less
garbage spells less energy in the future. End Summary.

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Is Garbage Guangzhou's Energy Goldmine?
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2. (SBU) With persistent power shortages and a mandate to diversify
its energy mix, it's no wonder that Guangzhou has turned to garbage
to help meet its energy needs. According to the 11th Five-year
Plan, China will construct 60 refuse-fired power plants, and under
the National Waste Disposal Plan, China is planning to increase
waste-derived energy to 30% of waste disposal by 2030. Guangdong
Province will be a leader in this effort. Director General of the
Guangzhou Environment and Sanitation Bureau, Lu Zhiyi, recently
announced that Guangzhou would incinerate all residential garbage to
generate electricity by 2015.

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Xingfeng Landfill Methane Recovery Plant
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3. (SBU) Xingfeng Municipal Solid Waste Sanitary Landfill,
Guangzhou's only municipal-funded landfill, is looking to help
bridge Guangzhou's electricity gap and promote renewable energy by
capitalizing on its primary resource - garbage. Constructed as one
of the key environmental projects in Guangzhou's 10th Five-year
Plan, Xingfeng was awarded first place among landfills in China's
2007 Modern Cities Inspection. Xingfeng's Simon Sandral, General
Manager of Veolia Environmental Services (the plant's operating
company),tells us that the plant has a total capacity of 25.6
million tons of municipal waste, excluding hazardous waste.
Xingfeng is the first Chinese waste treatment facility designed and
operated by a multinational company.


4. (U) With an initial investment of USD 7 million, Xingfeng began
to generate electricity in 2004 through a process of methane
recovery, using landfill gas to generate energy. Xingfeng's power
plant is equipped with three-1 megawatt GE generators, and one-2
megawatt Caterpillar generator. Xingfeng currently generates
10,500 cubic meters of landfill gas per hour. Capturing gas through
landfill pipelines and converting it into a renewable energy source
reduces the amount of greenhouse gas emissions that would otherwise
be generated from decomposition if the garbage were simply
land-filled.


5. (SBU) Xingfeng's renewable energy project is earning carbon
emissions credits under the Carbon Development Mechanism (CDM).
Following a 2007 agreement, Xingfeng is currently trading its
credits with ICECAP, a UK-based carbon business. Through 2012,
ICECAP plans to invest USD 50 million into the development of
Xingfeng's methane-based power generation projects. In return,
Xingfeng has promised to cut its carbon dioxide emissions by five
million tons. This agreement is one of the first CDM Carbon
Projects to be established in Guangdong.

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Likeng Garbage Incineration Plant
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6. (U) Likeng Waste-to-Energy Plant was Guangzhou's first waste to
energy (WtE) incineration power plant. Waste-to-energy plants burn
trash to recover energy and produce electricity. Phase I of the
project commenced operation in 2005 with a total investment of RMB
750 million (approx. USD 110 million). Equipped with two
incinerators, Likeng can take in 1,040 metric tons of garbage per


day and with its one-22 MW generator, generate 130 million KWh per
year. On average, every ton of garbage generates 360 kwh of
electricity, and every two tons of incinerated garbage can produce
the same amount of energy as one ton of coal. China's first WtE
plant was constructed in Shenzhen in 1988.


7. (U) Phase II, operation of Guangzhou's second WtE plant, will
begin June 2009 and is expected to have a daily garbage intake
capacity of 2,000 tons per day, almost one-fifth of Guangzhou's
total. Phase II's power plant is expected to generate 200 million
kWh of electricity annually. With an investment of RMB 970 million
(USD 140million),the power plant will utilize Danish technologies
to help reduce waste gas emissions.

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Challenges: Capacity and Transmission Lines
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8. (SBU) It is unlikely that Guangzhou will be able to meet its
goal of incinerating all municipal garbage, or of significantly
increasing its waste-derived electricity generation, according to
Sandral. Two of the biggest challenges facing the plan are the lack
of landfill and incinerating facilities (due to a growing supply of
garbage),and insufficient electricity transmission lines. Xingfeng
is designed to take in a maximum of 2,000 tons of garbage daily;
however, it currently accepts upwards of 7,300 tons accounting for
nearly 80% of the 9,776 tons of waste generated each day in
Guangzhou. The landfill is filling up at double the initially
planned rate due to a lack of alternatives. Xingfeng landfill is
likely to hit its capacity by 2015. Likeng's facilities are
similarly overworked. Guangzhou officials are currently planning to
build another landfill in the valley neighboring Xingfeng pending
land acquisition. In addition, U.S.-based energy firm Covanta has
signed a deal with Guangzhou Development Industry to construct other
garbage-to-energy plants.


9. (SBU) Lack of power lines also constrains the contribution of
garbage plants to Guangzhou's power supply. Sandral told us that
Xingfeng started off with a transmitting capacity of six gigawatts;
however, the transmission lines were only capable of accommodating
two gigawatts, resulting in a loss of electricity. Sandral said the
Power Bureau has been slow to authorize the construction of
sufficient transmission lines. Currently, Xingfeng feeds five
gigawatts of electricity into the Guangzhou power grid; in the next
six months, Xingfeng is hoping to add two megawatts, if it can raise
the necessary capital.

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Economic Downturn Affects Trash Supply Too
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10. (SBU) Although unlikely to change long-term trends, the global
economic downturn has caused a substantial decline in the amount of
municipal waste generated in Guangzhou, according to Sandral.
Starting around July 2008, garbage volumes dropped significantly due
to the effect of inflation on the consumption of food and fuel. As
Sandral explained, Guangzhou residents simply stopped eating out and
began staying at home more. Now, with the continued downturn of the
global economy, and China's growth slowing to the lowest levels seen
in a decade, trends of reduced consumption continue. Since
mid-2008, Xingfeng's garbage intake has declined by 6% where
previously there had been 6% growth.


GOLDBERG