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Factors that affect innovation, deployment and diffusion of energy-efficient technologies

- Case studies of Japan and iron/steel industry

May 23, 2005In-session Workshop on Mitigation at SBSTA22

Prof. Mitsutsune YamaguchiTeikyo University, Japan

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Outline

1. Effects of energy efficiency measures in Japan

2. Energy efficiency technologies of iron/steel industry

3. Factors that affect diffusion of energy efficiency technologies - Case study of technology transfer between Japan and China

4. Lessons learned

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Effects of energy efficiency measures in Japan - macro perspective

The energy intensity of Japanese manufacturing industry improved by 30% because of investment in energy efficiency technologies during 1980s.

The accumulated energy cost-saving during 1980s due to such investment is estimated at 18 trillion yen (US$ 170 billion), while the total investment in energy efficiency measures was 3.3 trillion yen (US$ 31 billion).

1,000

1,200

1,400

1,600

1,800

2,000

2,200

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

actual capital stock for energy conservation stable case

1010kcal/ IIP FY1995=100（ ）

FY

(1010kcal/Index of Industrial Production (FY1995=100))

Actual Without investment

8%

Change in production process

Change in capacity utilization rate, etc.

30%

Effect of energy efficiency measures

Source: Institute of Energy Economics of Japan (2005)

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Effects of energy efficiency measures in Japan - micro perspective (case study of a Japanese steel plant)

Introduction of Heat/gas pressure recovery system to generate electricity (Coke Dry Quenching (CDQ), Top-pressure Recovery Turbine (TRT), etc.Reduction in number of processes (continuous casting etc)Improvement in efficiency of each processWaste recycling (use of plastic waste in cokes ovens, recycling of dust and sludge, etc)

Improvement of energy intensity: 22% (in comparison with late 1970s)

Saving of 20% of all electricity demand (= saving of US$ 80 million per year per plant)

- Reuse of more than 90% of steam

- Reuse of H2 and CO in exhaust gas to generate electricity

(base year: 1979)

Improvement of energy intensity

0

5

10

15

20

25

'79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03

year

Impr

ovem

ent o

f en

ergy

inte

nsity

(%)

5

90

100

110

120

130

140

150

100105

110

120

130

150

125

Japan Korea EU15 USAChina

large averageRussia

Energy efficiency technologies of iron/steel industry- international comparison

Source: Japan Iron and Steel Federation

(Ind

ex f

or J

apan

set

at 1

00)

Trends in crude steel production

Source: International Iron & Steel Institute

Potential of CO2 reduction for steel industry in China and Russia

(Assuming national average energy efficiency is improved to the level of Japan)

China: 180 M tons of CO2/year

Russia: 25 M tons of CO2/year

International comparison of energy intensity of iron/steel industry

Diffusion rate in Japan CDQ: 90% TRT: 100%

0

50

100

150

200

250

92 93 94 95 96 97 98 99 00 01 02 03

Mt

EU15 ChinaJapan USRussia

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Energy efficiency technologies of iron/steel industry- typical examples

CDQ (Coke Dry Quenching)Heat recovery system in which heated inert gas is used to generate electricity after quenching hot cokes.

Effects of CDQ - Energy conservation (generation of electricity) CO2 emission reduction - Improvement of quality and strength of cokes - Prevention of air pollution (SOx, dust, etc.) - Reduction in usage of water

Cost of installation US$ 20-40 million

Payback period 3-5 years (model case in China)

Cooling chamber　

Generator

Heat recovery boiler

Conveyor

Fan

Dust collector

Steam produced

Cokes basket

Cokes

Heated cokes

Steam turbine

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Energy efficiency technologies of iron/steel industry- typical examples

TRT (Top-pressure Recovery Turbine)Turbine generator system using the pressure of gas generated in blast furnaces

Effects of TRT - Energy conservation (generation of electricity from conventionally wasted gas) CO2 emission reduction

Cost of installation US$ 20-30 million

Payback period 4-5years (model case in China)

DC

VS

VS

Turbine Generator

Hot Stove Blast Furnace

BF gas

DC: Dust CatcherVS: Venturi Scrubber

Among many energy efficiency technologies, CDQ & TRT were selected because of their energy-saving potential, ease of installation, etc. by experts in the steel/iron industry

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Energy efficiency technologies of iron/steel industry- emission reduction potential in China

CO2 emission reduction potential of specific technologies in China(Unit: Mt-CO2/year)

CDQ TRT Cement Industry

(5 technologies)

Chemical & Oil refinery

(4 technologies)

Physical potential

4.0 1.0 13.3 8.6

Economically practical

potential *

5.0 2.0 8.4

*This means the CO2 reduction potential corresponding to the CER price up to 10$/t-CO2.

Source:“CDM Potential in the power generation and energy intensive industries in China, A technology-based bottom up study”, Climate Policy, Vol. 5, Issue 2, 2005, Mitsutsune Yamaguchi, forthcoming

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Factors that affect diffusion of energy efficiency technologies- demonstration projects

*Average project size: approx. US$ 10 -20 million for 2-3 years

The Ministry of Economy, Trade and Industry has implemented 36 projects since 1993 and contributed to the diffusion of energy efficiency technologies in the Asian region.

ChinaSteel (16: CDQ (1), TRT (1))Cement (2)

IndonesiaPulp (1)Cement (1)Power generation (1)Oil (1)Steel (1)

IndiaSteel (2: CDQ (1))Cement (1)

ThailandSteel (1)Pulp (1)Industrial waste (1)Textiles (1)

Viet NamCement (1)Brewery (1)

KazakhstanCogeneration (1)

MalaysiaPulp (1)

MyanmarFertilizer (1)Power generation (1)

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Demonstration project at a steel plant in Beijing to install CDQ

Period: 1997-2001 Budget: \ 2.97 billion (US$ 28 million)Site: Shougang Corporation, No.1 Cokes OvenTechnical support: Nippon Steel CorporationEnergy conservation: 24,700 toe/year CO2 emission reduction: 68,300 t-CO2/year

Follow-up program of the demonstration project (on-site seminars, operational advice, etc.)

A joint venture between Chinese and Japanese steel companies (Oct 2003) to design, produce and sell CDQ and other energy conservation facilities

8 CDQ will be installed in China because of this demonstration project

Factors that affect diffusion of energy efficiency technologies-case study of CDQ in China

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Keys for success

(1) Awareness of local industry

(3) Local environmental policy

(2) Initial cost reduction through localization of manufacturing

10th 5-year National Plan in China (target of diffusion rate of CDQ: 60% by 2005)Pressure from local governments (air quality, water usage, etc.)

Business strategies, such as IPR, of the investing company from JapanLocal competitor

Energy-saving effectCo-benefits such as better air quality (very visible in CDQ)

Factors that affect diffusion of energy efficiency technologies- implications from case study of CDQ in China

Local steel manufacturers tend to choose investment to increase production capacity, but this can be changed by:

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Lessons learned

The energy-saving potential is enormous. By exploring these opportunities, a win-win situation can be created: energy security, lower energy cost, better air quality, higher competitiveness, etc. This is clear from Japan’s experience.Technology transfer and diffusion are not unilateral actions but collaboration between developed and developing countries.

•Business incentives for investment: reform of CDM (next slide)

IPR protection•Local industry’s awareness and host government’s environmental policy

Bilateral and multilateral cooperation should have a sectoral focus which would enable us to enhance technology transfer by clearly identifying technology needs and energy-saving opportunities.

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Lessons learned- promotion of CDM activities

CDM should be designed to facilitate technology transfer by providing business incentives for investment in energy efficient technologies.Such CDM projects would contribute best to sustainable development in developing countries.

<Recommendation>For host country - Clear rules - Collection of accurate data

For developed countries - Scheme to promote CDM (ex. financial support, such as Japan’s Upfront Payment)

For CDM Executive Board

- Turning from perfectionism to “learning by doing”

<GOJ’s initiative>The GOJ has been holding workshops, seminars and establishing WGs for energy efficiency etc. by CDM experts to identify challenges.

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Thank you for your attention!