Accelerating Investment in Distributed Energy in Rural Qingdao

Client: Asian Development Bank

Duration: 2015-2017

Location: Qingdao, Shandong province, PRC

Contract Value: USD 308,150

Catalogue: Energy

Project Description

While it is costly and difficult to convert to a natural gas-based district heatingsystem or to extend the heating pipelines from existing centralized district heating networks (located in the cities) to rural cluster communities due to the small population and long distances, the technical assistance (TA) explores the application of distributed energy for heating supply using locally available renewable resources, such as biomass, shallow-ground geothermal, wind, solar, and waste-to-energy. The TA will help the Qingdao municipal government increase its readiness for investment in a distributed energy project in rural Qingdao. It will (i) select a pilot area in rural Qingdao for deployment of distributed energy; (ii) undertake cost–benefit analyses; (iii) propose a cost-effective solution to providing reliable energy for pilot cluster communities; (iv) identify investment needs; (v) review and assess existing policies and standards, and identify gaps; and (vi) recommend an appropriate business model to promote a distributed energy-based heating supply.

Services Provided by NAREE

Cost–benefit analysis and cost-effective solution provided – NAREE performed a cost-benefit analysis foreach solution (including wind, solar, biomass, geothermal, waste-to-energy and wastewater treatment) as well as a comparison of the cost of using a natural gas system versus a renewable energy-based distributed energy heating system. An affordability and willingness-to-pay analysis of beneficiaries was also conducted. The most cost-effective technical solution for rural Qingdao basedon cost-benefit analyses was selected.

Identificationof investment need – Considering the local conditions, NAREE prioritized the investment needs in the short-, mid- and long term for the selected technical solutions. We identified possible financing sources and provided suggestions to increase private sector participation.

Assessmentof existing policies and standards – NAREE assessed existing national and local policies and standards for implementing distributed energy projects in rural Qingdao, policygaps and provided recommendations for changes.

Recommendationon an appropriate business model – NAREE developed the appropriate business model for sustainable implementation of distributed energy in rural Qingdao. The model made use ofadvantages from both the private and public companies to optimize projectoperation.