Shaanxi Energy Transition and Innovation Demonstration in the Heating Sector

active

Prospective

The proposed project is designed to support Shaanxi in the trajectory of heating sector decarbonization on two dimensions, heat supply from renewable and low-carbon energy sources and pricing and billing reform. On the heat supply, investment financing will demonstrate an innovative technical solution that combines multiple energy sources from renewable energy and low-carbon sources. The project will also facilitate scaling up the use of geothermal heating which is viable but still marginal in the fuel mix in Shaanxi, by financing infrastructure and strengthening the regulatory environment, with the parallel GEF support. On the reform, a stepped approach will be followed. The project will support i) pilots of the first-stage reform with investment in metering infrastructure that is necessary for implementing the pricing and billing reform, combined with technical assistance to support design, implementation, and evaluation of the reform pilots and fill the gap in institutional capacity; and ii) technical assistance for preparation of the second-stage reforms. Investment financing will be provided to three project areas in Xi’an and Yulin, two major cities in Shaanxi. The project will serve as a basis to engage with Shaanxi province on both dimensions for a period of five years. These dimensions are in line with two of the four areas in the proposed framework.Concerning the pricing and billing reform pilot, the proposed project will support Shaanxi in adopting and scaling consumption-based billing (CBB). It will serve as a foundation for Shaanxi to undertake the ambitious sector reform in the longer run. The pricing and billing reform will need a gradual approach with trial and error, learning and refinement during implementation given that there is no standard reform program that has fully worked in China. All three project areas will be supported to adopt CBB during project implementation period. Heating services will be billed based on actual heat consumption in the project areas. At the same time, technical assistance will be provided for consumer and stakeholder consultations and assessment of heating service cost, affordability, and willingness to pay, to prepare design and implementation of tariff reform and raise social acceptance of CBB in the project areas. This approach supports the three project areas to take the first stage out of the three steps articulated in the proposed roadmap for heating sector reform and initiate technical assistance and analytics for readiness for the second stage. The project consists of three components as described below.Component 1: Investment in Renewable Heating Infrastructure (Total Financing US$458 million, of which IBRD US$230 million). This component will finance two new heating systems, located in Xi’an and Yulin, the two major cities in Shaanxi, to increase heat supply capacity from renewable energy and low-carbon energy sources, including geothermal, waste heat and electricity. This component will cover a total of 8.9 million m2 of heating floor area. The details of the investment scope in the project areas are provided below. a. Sub-component 1.1: Xi’an Xincheng District Geothermal Heating. This sub-component will support development of mid-depth low temperature geothermal heating network in the four urban redevelopment areas at Xincheng District, Xi’an, Shaanxi. The investment will include 29 mid-depth geothermal heating wells, seven heating stations with 19 electric heat pumps and pipeline network. It will cover about 50 residential and public buildings, with a total heating floor area of 430,000 m2. This sub-component will be implemented by Xi’an Xinye Industrial Company, a public company owned by Xincheng District Government.b. Sub-component 1.2: Yulin Kechuang Science and Innovation City Clean Heating. This sub-component will develop innovative distributed heating systems that optimize and deploy multiple clean heating sources, including low temperature shallow geothermal and mid-depth geothermal, waste heat from a data center and fuel cell, and electricity, to provide heating and cooling for eight distributed areas in Kechuang Science and Innovation City, a newly developed urban area in Yulin, Shaanxi. The investment will cover shallow and medium-depth geothermal wells, electric boilers, thermal storage water tanks, associated valves and pipelines for heating network, hydrogen fuel cell and hydrogen storage equipment, and electric heat pumps. The eight investment areas include about 500 buildings for municipal convention center, data center, industrial park, school campuses, sports center, office and residential compounds, with a total heating floor area of 8,470,000 m2. Four of the eight investment areas have sites identified in the city but still at project development stage, while the other four investment areas have detailed technical design ready for procurement. The sub-component will be implemented by Yulin Kechuang Youneng Science and Technology Company, which is a joint venture between Yulin City Government and Qingan Youneng Technology Development (Xi’an) Co., Ltd., a private sector company.Component 2: Investment for Pricing Reform Pilot (Total financing US$122 million, of which IBRD US$65 million). This component will finance investment in heat metering infrastructure and associated supporting systems in the three project areas to enable a transition of the pricing and billing system from floor area-based billing to CBB. Among the three project areas, two are newly developed urban areas and the other is an existing urban area, covering a total of 135,000 households, 340,000 residents, and 550 public buildings, with a total of 20 million m2 of heating floor area. The details of the investment scope in the project areas are provided below.a. Sub-component 2.1: Xi’an Xincheng District Reform Pilot. This sub-component will develop infrastructure required to implement consumption-based billing for new residential and public buildings that will be also supported under Sub-component 1.1. It will cover about 3,400 households and 8,000 residents living in 50 buildings, with a total heating floor area of 430,000 m2. The sub-component will finance measuring and controlling devices to actively manage and reduce heat consumption. They include heat meters, automatic valves, and smart remote controllers at building level, and room temperature detectors, automatic valves and smart room temperature controllers at household level, to allow heat consumption measurement at building level and temperature control by both residents and the heating company at household level. This sub-component will be implemented by Xi’an Xinye Industrial Company.b. Sub-component 2.2: Yulin Kechuang Science and Innovation City Reform Pilot. This sub-component will develop infrastructure required to implement consumption-based billing for public and residential buildings in eight investment areas in Kechuang Science and Innovation City which will be also supported under Sub-component 1.2. The eight investment areas include about 500 public and residential buildings, with a total heating floor area of 8,470,000 m2. The residential buildings in the target areas will host about 12,500 households and 32,000 residents. The sub-component will finance installation of devices for heat consumption measurement and temperature control to actively manage and reduce heat consumption. They include heating meters and associated smart automatic valves, and remote controllers. The sub-component will be implemented by Yulin Kechuang Youneng Science and Technology Company.c. Sub-component 2.3: Yulin City District Heating Reform Pilot. This sub-component will support additional infrastructure required to implement consumption-based billing and actively manage and reduce heat consumption in the existing district heating network supplied by a CHP plant in Yulin, Shaanxi. It will cover about 7,600 buildings, 120,000 households and 300,000

FY17 - Energy and Extractives

World Bank Group

Project

Water Supply and Storage, Hydrogen, Manufacturing (Industrial), Data Center, Geothermal, Power Generation (CCGT), Government, Residential, Commercial