1. The Approach of the Working Group on Energy Strategies and Technologies

　　having addressed in its 1994 Report key issues pertaining to the impact of existing energy strategies and technologies to China's development, the effect these are having on the country's environment, and developed a discussion of the strategies and Technologies, in this Report, focuses on mechanisms by which the application of advanced, energy efficient technologies can be encouraged and established, and on strengthening the scientific basis on which its conclusions are based .

　　The Integrated Resource Planning (IRP) approach, which has been introduced and led by Working Group members, has given rise to the preparation of energy supply and demand scenarios. These will provide a consistent, scientific common data base for Working Group activities and Council recommendations. In addition, an in- depth study on China's Transportation sector is also under way, which will equally provide a better basis for energy related recommendations to be made. The IRP initiative has been promoted and disseminated in two successful Workshops, and is reported upon below.

　　The Working Group continues to support their previously proposed concept of Demonstration Projects in key advanced, energy efficient technologies, as a powerful means to speed up the wider practice of energy efficient technology an renewable sources of energy, and to abate pollution. Inefficient and polluting plant should, in principle, gradually be phased out and replaced by modern efficient. and clean plant. Retrofitting is often a less desirable option, but may be a compromise forced by financial constraints.

　　The WG notes that its prime mandate is to provide advice on energy strategies and technologies for sustainable development to CCICED, congruent with the objectives of China's Agenda 21, and to undertake the analysis and other activities it considers necessary to develop its advice. The role of the WG in respect of demonstration projects is that of advisor and broker. By convening and chairing Work shops in technologies selected for possible demonstration projects the WG gains a better understanding of the merits/demerits of specific technologies, and is brought into contact with the practical realities of achieving higher standards of sustainability. Projects themselves, once momentum is established, are a matter for the respective enterprises and the technology owners. The WG maintains a close interest in the outcome and in particular in the catalytic effect on dissemination.

　　The Working Group has also embarked upon a proactive sponsoring of Workshops in those selected advanced technologies which have formed part of their previous re commendations to CCICED, and which have received Council support. Two such Workshops (in Steel-making, and in urban Fuel-cell Bus Transportation) have been held under the aegis of CCICED. This approach has proved popular with potentially interested Chinese enterprises, and with foreign technology owners. These workshops are reported upon below. The success of these two events has stimulated the WG into planning further workshops as regular prior features of future WG meeting.

　　2. Integrated Resource Planning

　　The Working Group's Workshop on IRP/DEFENDUS (Development Focused, End-Use oriented energy strategy) was held May 8-16th 1995, in Beijing. It was attended by so me 40 participants from several provinces, including some who had not attended t he 1994 event.

　　Integrated Resource Planning (IRP) is an approach in which the energy system is considered as whole, linking the supply and demand side together, and it includes also the concept that, not only are conventional natural energy resources considered as "Resource", but also the potential for energy savable by conservation. The IRP approach includes a levelled cost analysis to assign the priority of different technologies relating to both energy supply and to conservation.

　　The Working Group first introduced discussion of IRP at an advocacy workshop in January 1994.This was followed by the first IRP/DEFENDUS workshop in May 30-June 8th 1994, and by the formation of an IRP Promotion Network(IRPPN)in China. A second workshop was staged in May 8-16th 1995.The latter workshop was executed by Prof.Qiu Daxiong (INET/ITEESA, Qinghua University) and Prof.A.K.N.Reddy(President, International Energy Initiative, an WG member).DEFENDUS methodology and international experience in applying IRP (especially USA, and also China)were discussed.

　　The IRPPN now numbers more than 40 members drawn from energy managers, researchers form central Government commissions and Ministries, provincial authorities, corporations and enterprises, with interest in IRP and Demand Side Management (DSM). Its work is guided by a high level Advisor Group led by Prof.Yang Jike, with members from the State Science and Technology Commission(SSTC),the State Planning Commission(SPC),the State Economic and Trade Commission, the Ministry of Electric Power, the China Energy Conservation Investment Corporation, and other bodies concerned.

　　The first workshop stimulated interest in case studies for rural areas and for municipalities, e.g., Shanghai. Certain localized power grids and enterprises have also expressed interest in carrying out IRP and DSM case studies relation to their situations, following on the second workshop.

　　Preliminary scenarios for energy supply and demand in China by 2020 were presented at its May 1995 Meeting of the Working Group. Many supporting studies are under way to develop the analytical tools and to collect the necessary data. A draft for review and comments for the next meeting in May 1996 is expected to be available in November 1995.

　　A Fellowship program, expected to inaugurated in 1995,linking IEI and INET/ITEESA, Qinghua University has developed out of mutual cooperation on IRP and DSM, and is a benefit to China and IEI which has been fostered by WG activity.

　　3.Demonstration Projects

　　3.1 Energy-efficient Steel-making (Bejing, May 15-16th 1995)

　　The basic materials industries account for the dominating part of industry's energy consumption. In contrast to the largely saturated markets for basic materials in the industrialized countries, demand growth is steady in China, with a projected doubling of production within the next decades. Obviously, the performance of the technologies that will be employed in this expansion will have a decisive impact on the emerging situation.

　　Against this background, a seminar attended by representatives of Ministries and 12 steel companies in China, and also by members of universities and research instituted, included presentations by Dr. Ernst Worrell (Utrecht University, The Netherlands), Dr. Krister Torsell (Consultant, Sweden), Dr. Peter Heinrich (MAN CHH, Germany), and Dr. Günther Flemming (SMS Schloemann-Siemag, Germany).

　　The key parameters affecting energy efficiency (structural and technical) were reviewed by Worrell. The former are set by the economic development situation of society (availability of scrap, major product types-slabs, ingots, hot or cold rolled products), while the latter (implicit in the steel plant used (OHF, BOF), the casting process, ore preparation, and the coke/coal input to the Blast Furnace (BF) can be changed without changing the products/resources used. Savings in energy consumption are potentially large, up to 2.5 GJ/tonne (t) in a typical reference case of 20 GJ/t.

　　Advanced processed such as COREX (for example, a 300,000 t/y 1990 new build in S. Africa) can achieve 17-18 GJ/t pig iron in a state of the art BF. It was built in 3 years, using existing infrastructure, at a capital cost of  400/tonne of pig iron (tpi). Problems with furnace linings affected year 1, but now larger scale plants are planned, where the reduction reaction will be further optimized and further energy reductions are expected. Steam coal can be used provided the sulphur level is below 1%, and a good level of ash tolerance is acceptable at 15 -30%. Some coal may be needed for Chinese coals. Korea plans a 600,000 t/y COREX plant.

　　BSC/Hoogoveens NL's Cyclone Converter Furnace holds promise of major energy reductions in pig iron production, using premixed ore with syngas and oxygen in the cyclone, Energy consumption as low as 11-13 GJ/t is envisaged.

　　Direct Iron Ore Smelting (DIOS): A180,000 t/y demo plant is being built under the auspices of the Japan Iron and Steel Federation, at a capital cost of  750/t pi. For this demo plant, energy consumption in the COREX rage is expected, and a capital cost of some 750/tpi. Commercial scale plants would achieve better figures.

　　Strip-casting 5 plants are now operational, in the USA (NUCOR, 800,000 t/y 60 mm strip, by SMS, Germany), Italy (ARVEDI, 500,000 t/y 40 mm strip, by Demag/Mannesmann, Germany). Up to 45% energy savings are obtained compared with cintinuous casting/hot strip mill. Ultimately, 60-80%energy savings are believed to be obtainable.

　　Other options: Increased use of scrap, with preheating, and better BOF control. Electric are furnace using ultra high power, DC furnace and fuel injection.

　　Bench marks for world performance on steel-making were shown by Torssell. Overall, it is important that function and product plant lifetimes are taken into account, and not only projection statistics, when assessing the performance of the s teel industry.

　　Modern BFs now achieve 500 kg fuel/tpi consumption. In Sweden, dust production/y in absolute terms has dropped below 1900 levels, despite a 10,000 times increase in steel production. The phasing out of sinter, and use of acid and olivine pellets has in recent years reduced slag production to 150kg slag/tonne of hot metal(thm), i.e. to a quarter of 1974 levels. This increases productivity/hearth area by increasing iron yield and extending the life of refractories.

　　Oxygen-making, being energy intensive, also offers savings when new methods are used to make less pure, but adequate oxygen for those processes where high purity is not needed, e.g., in the BF. For refractories and electrodes, it was noted that the quality criteria accepted by the enterprise affects the energy consumption of the unit.

　　Energy efficient Near Net Shape casting, using powders, has also been convincingly shown to be practical for even large and complex objects, with the added advantage that weld weaknesses can be avoided. Also, slip casting, single belt thin slab continuous casting, with tiltable feeder looks most promising, in raising productivity, and thereby energy efficiency. Even wire can be made by casting directly from the melt, using a feeder wire 20% of the final weight. This technology can remove several energy-using processing steps and is in use in USA (NUCOR for austenitic stainless steel wire).

　　Advanced smelting technology offers the cleanest method for iron-making, e.g., Pressurized Coal Iron Gasification (PCIG), a pilot plant carried out with NIPPON Steel at the island of Mefos. Producing 4-6 thm/hour, this process operates at 2. 5 bars, requires 2 tC/hour and 15MW electricity. Most of the sulphur ends up in the slag, a small amount in the dust and none in the gas.

　　How to decrease the energy consumption in China's steel-making industry? There is a dilemma in the choice between building new plant of the current "best world level", or aiming at the "tomorrow's technology", with its greater promise.

　　"Best world level" of today, can demonstrate and inspire today's enterprises to improve. The effect of a number of relatively small investments can be shown, without the risk of there being no production at all. There improvements will create demand for rawmaterials, such as better coal refractories, electrodes, alloys, and gases. Pressure will be created on the suppliers to perform, because if the y do not, then the steel-making will not either. Gradually the overall quality performance will improve, and with it the morale and quality of personnel also. There will be a continuous optimization towards high iron-yielding processes, a higher availability of equipment, better process control and thereby smaller quality variation. Production will increasingly be geared to specific orders. Low energy usage will result from this virtuous circle, which can come about provided the will is there, from top to bottom.

　　"Tomorrow's technology" will speed up the technological revolution, and will set new domestic bench-marks for the steel industry. It will have a more dramatic effect in forcing today's industry to become more competitive, with the poorest performers being forced to close earlier. However, the bigger the leap the bigger the technical/commercial risks. It is a starker choice than the above, and carries with it an economic penalty of the cost of non-profitable operation for long periods of time.

　　The performance of modern Iron and Steel plants was reviewed by Dr. Heinrich of MAN, who pointed out that EAF power, refractory and electrode consumption has be en greatly reduced by the MAN pioneered DC Arc furnace, one of which had just been bought by Shanghai No.5 Steelworks. Tapping capability has also risen (now 20 0 t), and other processes such as the CONSTEEL Continuous Scrap Feed (up to 100t per heat at MUCOR), and the TWINSHELL tiltable electrode have speeded up the FA F operation, raising productivity, and thereby, energy efficiency.

　　Looking to the future, Heinrich cautiously supports COREX prediction that by 2010, BFs will lose their current circa 90% position in iron-making equally to COREX and DIOS/HISMELT types of processes, perhaps retaining only 30% of the market.

　　There will be many competing processes, and many failures. Leapfrogging will be difficult (how can you find the right frog?). The task is however very great. For example, the largest COREX plant today (in Korea) in rated at only 600,000t/y, whereas the largest BF (Schwelgern No. Germany) is 5 times as large. Also, it should not be overlooked that the BF itself has considerable scope for improvement. For example, in the Tulchernet (Russia) project, iron making by BF will increase productivity by 60%, and reduce coal consumption 40%, by using a cold oxygen blast.

　　Downstream technology has major scope for increases in energy efficiency. To give one example, this has been demonstrated convincingly by the success of Compact Strip Production (CSP) technology, pioneered by SMS Schloemann-Siemag, Germany, as presented to the Seminar by Dr. Flemming of SMS. Since the first commercial plant came on stream in 1989 at NSC's Crawfordsville, Indiana steelworks (820,00 0 t/y 40-50 mm strip), there have been 3other startups, and there are now in tot al 16 casting machines (totalling 15 million t/y), and 66 rolling mills in the pipeline. The second NSC plant at Hickman, Arkansas is already showing double the productivity/month compared with the Crawfordsville plant as experience rides the learning curve.

　　In CSP technology, liquid steel is cast direct to thin slabs so that they are as near as possible to the end product. Both in the continuous casting and rolling areas, the new technology requires a comparatively small amount of plant and considerably reduces the energy requirements and operating costs per ton of hot strip. This can make the construction of mini-steel-works with capacities of less than 1 million t/y economically interesting.

　　The choice of the optimal steel-making technologies for China (as anywhere) will depend on a number of factors, such as the fuel availability, power availability, societal factors such as constraints on emissions, and the market requirements in terms of product range, quality and delivery requirements. The WG would welcome the early establishment of an integrated new plant where best current technologies in iron-and steel-making, and in downstream processing can all be demonstrated.

　　3.2 Fuel Cell Powered Buses

　　The fuel cell has been identified by the Working Group as offering especially great promise for transportation in China (see Box A)-- with initial emphasis on b us applications.

　　Box A:Fuel Cells for Transportation

　　The fuel cell is a device that converts the chemical energy of fuels directly in to electricity without first burning the fuel. The fuel cell offers a large gain in energy efficiency compared to the internal combustion engine, improved vehicle handling as a result of the use of electric drive (e.g., offering high torque at low speeds), low maintenance requirements, virtually pollution-free operation without the need for pollution control equipment, substantially reduced lifecycle emissions of primary energy sources for transportation.

　　The fuel cell is attracting considerable attention in the industrialized countries as an alternative to the internal combustion engine, especially for areas that have serious urban air pollution problems. In particular, the proton exchange membrane(PEM) fuel cell, developmental efforts for transport applications. When mass produced, this fuel cell would potentially be competitive with the internal combustion engine in automotive applications, which represent the largest potential transportation market for the fuel cell in industrialized countries. The most important initial market for the fuel cell, however, will be for buses. Several prototype fuel cell buses powered be hydrogen and methanol have been built to date. Fuel cell buses will probably be available commercially before 200. Fuel cell cars will be introduced at a later date.①

　　The ideal fuel for a fuel cell vehicle is hydrogen, which might be stored onboard the vehicle as gaseous hydrogen. A hydrogen fuel cell vehicle would emit zero air pollution. The most likely sources of hydrogen are natural gas, coal, and bionass, from which hydrogen can be derived via thermochemical processing. Hydrogen can be produced from natural gas with commercially well-established "steam-reforming" technology and from coal using commercially ready oxygen-blown coal gasfiers. Even though hydrogen produced from such sources will be more costly than gasoline or diesel per unit of contained energy, it will usually be less costly per km of driving, because of the much higher thermodynamic efficiency of the fuel cell vehicle.

　　Fuel cell vehicles can also be fueled with gasoline, diesel, or alcohol fuels that would be converted onboard the vehicle into a hydrogen-rich gaseous fuel that is suitable for use in the fuel cell. Because of fuel processing losses, overall fuel utilization efficiency with these fuels would be somewhat less than for hydrogen but still much higher that for hydrocarbon-fueled internal combustion engine vehicles, while local pollutant emissions would not be zero in these cases, emissions would be a minuscule fraction of those for internal combustion engine vehicles, and this could be achieved without the use of pollution control equipment. Such easy-to-use liquid fuels may well be used in fuel cell vehicles before a hydrogen infrastructure is in place.

　　①Recently, Dr. Michael Kramer, Research Director of Daimler-Benz ［a company that is developing PEM fuel cell cars in a joint venture with Ballard Power System s, Inc. of Vancouver, BC. and which introduced a prototype hydrogen fuel cell van in April 1994］, when asked when fuel cell cars would become available, replied:"Assuming everything went right, preparation for mass production may well be possible by the year 2000. So. let's say you might be about to buy one of the firs t fuel cell cars in about ten years time." ("Fuel Cells Lit the Road". Daimler-Benz High Tech Report, pp. 14-25, March 1994).

　　On 16-17 May, 1995 the Working Group convened a two-day workshop at the Beijing international Convention Center on fuel cells for bus applications. There were 15 Chinese participants at the workshop, representing the Beijing, Tianjin, Shanghai, and Harbin Public Transportation Companies, the Environmental Protection Bur eau of the Beijing Municipal Government, Qinghua University, and the Beijing Chemical College. The expertise of those attending included mechanical and electrical engineering, chemistry, control technology, fuel cell technology, manufacturing, professional management and public administration.

　　The workshop began with an overview of fuel cell technology an fuels for fuel cell vehicles by Working Group member Robert Williams. Subsequently, presentations were made by Dr. Russ Jal Kevala from H-Power Corporation (US) and by Dr. Kenneth Dircks from Ballard Power Systems, Inc (Canada). Drs. Kevala and Dircks gave detailed description of their companies' developmental efforts, illustrating the principles of fuel cells, and design, performance, and test results of applications of the fuel cell to buses. Dr. Kevala demonstrated the operation of a small fuel cell stack operated on a canister of hydrogen. He also showed a video of the Georgetown Fuel Cell Bus, a prototype methanol-fuelled phosphoric acid fuel cell bus that was built for and delivered in 1994 to the US Department of Energy under the direction of H-Power Corporation. Dr. Dircks showed a video of the Balla rd Buss, a prototype hydrogen fuel cell bus that Ballard built in 1993 using its own proton exchange membrane fuel cell. Since then Ballard has also built a second-generation commercial demonstration unit for the bus Ballard plant to offer commercially beginning in 1998.

　　The workshop not only presented a good overview of the prospects for fuel cells for bus applications but also it gave the Chinese participants a sense of confidence that this technology is approaching commercial readiness with good prospects for wide applications. All the represented bus companies indicated they are going to give serious attention to this option, and the Beijing Public Transportation Company in particular has already appropriated 50,000 yuan to start a preliminary prefeasibility study.

　　The Working Group is exploring with these bus companies means by which a small fleet of fuel cell buses might be demonstrated in Beijing as an initial step in t he process of introducing this "leapfrogging" technology to China.

　　3.3 Commercial Buildings

　　The WG considers that the first demonstration project should focus on new construction and that retrofitting should be ranked as a second priority. The objective is to show how important are the energy efficiency gains when the construction of new buildings is preceded by careful design integrating a comprehensive package of energy efficient technologies, considering the entire building system. The criteria for demonstrating those gains must be visible and understood in the market, such as, for example, operating costs considerably lower than the prevailing norm. Hook-up fees, reflecting the total power load for the new building can also be effective. Energy efficiency of a building needs to be elevated to a level of concern at least equal to the prestige aspects of appearance, position and finish. The WG noted the importance of planning for parity with international bench-mark parameters, and scorekeeping from the start, as a means to monitor and interpret the impact of measures taken. Them first Workshop is planned for the fall of 1995.

　　3.4 Wind Energy-Bsseload Windpower for China?

　　The Ministry of Electrical Power Industry is already cognizant of the attractions of wind energy as a renewable energy resource with considerable scope for development in certain areas of China, notably Xinjiang and Inner Mongolia. Small wind farms are already operational in both areas which have enabled the local MEPI authorities to gather pilot experience on the local wind resource, and also the comparative performance of various foreign suppliers of wind turbines. The contribution of power to the grid from these wind farms is a tiny fraction of the potential that could be supplied from large scale facilities. In some parts of the world wind energy is opposed because of its visual impact in attractive scenery and because of the noise intrusion of the turbines. None of these problems are p resent in the locations with optimum wind condition is China. This is because these areas are ones with very low population density, and there is no adverse impact on the prevalent modes of agriculture. Shepherds may graze their flocks through and among the 30m high towers.

　　The Mongolian wind resource is very large and blows over a huge area of desolate grassland. Here it would be possible to build a major wind farm of sufficient size to economically justify transporting the power to Beijing.

　　The Working Group is beginning a project to explore the potential for developing wind power at large scales in wind-rich areas of China that are remote from major electricity demand centers, by coupling "overbuilt" wind farms to long-distance transmission lines, possibly used in conjunction with compressed air energy storage or hydroelectric reservoirs that are configured to provide backup to intermittent resources (see Box B). The goal of the project is to understand better the potential for and the economics of wind electric turbines that would be mass -produced in China/The initial focus of this project is on exploiting the wind energy potential in Inner Mongolia, e.g. via long distance transmission lines to Beijing and/or Harbin.

　　The WG believes that a case can be made for a significantly larger demonstration plant than any of the pilot projects to date, situated in Mongolia and, principle to Beijing. As a precursor, a Workshop on Large Scale Wind Energy in China will be held in the fall of 1995. Those attending would include representatives of the wind energy community in China, the electric power industry in Inner Mongolia, representatives of power companies in cities that might import Inner Mongolia wind power, representatives of the Chinese Ministry of Electric Power, and Chinese and/or foreign experts on long-distance transmission technology, compressed air storage, and wind turbine manufacturers using mass production techniques.

　　Box B: Wind Power Progress and the Prospects for

　　Exploiting Remote Wind Energy Resources

　　Over the last decade the wind energy industry has expanded rapidly, with global installed generating capacity reaching 3,600 MW in 1994, half of which is in the US, mostly in California. The cost of electricity from wind power in wind-richregions of the industrialized world is now about the same as the cost of electricity from new coal-fired power plants.

　　Since the late 1980s, about 30 MW of large grid-connected wind turbines (with capacities per turbine of 100-450KW) have been installed in China based on foreign technology, generating about 80GW·h per year. The Chinese Ministry of Electric Power has set a goal of 1000 MW of installed wind capacity by 2000. Several hundred MW of additional capacity based on such large turbines are in various stages of planning.

　　China probably has among the best wind resources of the developing world. However, in China, as in much of the rest of the world, the best wind resources tend to be remote from the large electricity demand centers, in sparsely populated regions such as Xinjiang Province and Inner Mongolia. The wind-electric potential on 7% of the land area of Inner Mongolia where the wind-rich resources are concentrated is about 1600 TW·h/year①， more than twice the total electricity generation rate for all of China at present; yet the good wind sites are bout 500 km from Beijing and about 1400km from Harbin.

　　Studies carried out for the US wind energy situation② indicate available high-quality wind resources can be exploited at costs that are competitive with new coal power plants by coupling large (multi-GW) "overbuilt" wind farms to long-distance transmission lines. Building a wind farm with a rated installed wind turbine capacity that exceeds the capacity of the transmission line leads to an increase in the capacity factor of the transmission line with very little "electricity spillage" (because high speed winds occur much less frequently than medium speed winds) and thus improved overall economics, until the transmission line capacity factor increases to over 50%. The capacity factor can be increased further, to 90% or more (thus providing "baseload" wind power at the end of the transmission line) at very little increased cost per kW·h by coupling the wind farm to compressed air energy storage (or, alternatively, to a nearby hydroelectric plant).

　　①From Table 1, P. D-51 in Zang Rui and Feng Shouzhong (Wind Power Research Institute of Inner Mongolia Electricity Managing Bureau) Proceedings of the Beijing International Conference on Wind Energy, Beijing, 9-13 May 1995, it is reported that in Inner Mongolia, the wind-rich areas amounts to 83,000km2 (7% of the land area of Inner Mongolia), that the average wind power density (at 10m) is 240320 W/m2, that the yearly utilizable wind time is 6100 to 7800 hours, and that the exploitable wind energy density is thus 1500 to 2480 kW·h/m2 per year.

　　Modern wind turbines have hub heights of 50m. Assuming average wind speeds scale with height to the 1/7 power (a good approximating for flat, grassy terrain), t he exploitable wind energy density at 50 meters is higher than at 10m by a facto r of 5(3/7)=2.0, of 3000 to 4960 kW·h/m2. Assuming an efficiency of 35% for modern wind turbines and 12% array and other losses, the electricity generation potential is 924 to 1528 kW·h/m2 or 1226 kW·h/m2 on average. Assuming turbines are in an array spaced at 10 rotor diameters downwind and 5 rotor diameters across the wind, the average wind electric generation potential per unit of ground are a is ［pi/(4*5*10)］*1226=19.3kW·h/m2/year, so that the total electricity generation potential on 83,000 km2 is 1600 TW·h.year.

　　②A. Cavallo, "High Capacity Wind Energy Systems," Journal of Solar Engineering, February 1995; A Cavallo and M.B.Keek, "Cost-Effective Seasonal Storage of Wind Energy", in SED-vol. 16, Wind Energy, W.D.Musial, S.M.Hock, and D.E.Berg, eds., Book No. H00926-1995, American Society of Mechanical Engineers, 1995.

　　4. Energy Supply

　　4.1 Biogas

　　Consequent upon the 4th Meeting of the WG a Workshop on Biogas Technology for China was held on November 28-29th 1994, in which the International Energy Initiative collaborated with the Department of Energy and Environmental Protection, and the Ministry of Agriculture. 34 Chinese experts attended, as well as 8 WG members, and 5 foreign experts. There were numerous presentations from both the foreign and Chinese sources, testifying to the scope for wider application of this proven technology in China and to the interest of the Chinese side in working toward this objective.

　　It was concluded that Biogas is an important bio-resource-derived energy carrier produced by the anaerobio fermentation of cellulosic material in rural (animal wastes and leafy agro-wastes), industrial waster (from animals and effluents) and urban sector (municipal wastes and landfills). The current biogas potential shows that it is a major source of energy. Apart from its contribution to narrowing the energy shortfall, biogas technology can lead to environmental protection ( by converting wastes from health hazards to useful resources) and to sustainable agriculture through fertilizer production. Biogas is produced where people live and therefore saves on transportation and transmission costs.

　　A three pronged approach is envisaged: rural, industrial and urban:

　　*the rural strategy should be directed at maximizing working family biogas plant s, colder areas, community biogas plants in dense areas, electricity production and sustainable agriculture.

　　*the industrial strategy should be directed at industrial scale animal-farm waster for biogas and fertilizer, and treating bioeffluent for biogas production.

　　*the urban biogas strategy should be aimed at generating biogas from urban sewage plants and landfills.

　　Governmental policy has a major contribution to make in bringing about beneficial change in this area, through dissemination of information, strengthening support for biogas institutions, investment policies, particularly of "priming the pump", fiscal assistance, human resource development and the appropriate legislation to ensure that, inter alia, it will no longer be a preferred option of polluters to pay the fine rather than curbing effluents.

　　4.2 Natural Gas

　　Recent discoveries of natural gas have added to the reserves and fuelled optimism that this trend will continue and permit the expansion of natural gas utilization in China from its present minor role. The generally inconvenient distribution of this resource in relation to its potential major markets in the east of the country however continues to hold back its rapid development and consequently the financial support that a more aggressive exploration programme for natural gas would call for remains difficult to attract.

　　In the most successfully explored region to date, the densely populated Sichuan Province, these problems are lessened by the fact that there is a ready market on the doorstep, and major cities and industries. It is a fact also that some of the severest urban air pollution in China occurs in this region because of the reliance that has had to be placed, up to now, upon locally derived coal with an above average sulphur content. The WG believes that the most practical location to widen the use of natural gas according to the objectives of China's Agenda 21 would be in Sichuan, where the gas industry is already well established.

　　In Sichuan, gas production amounted to some 7 billion m3 in 1993 and closed loop gas transportation system is in operation. 2/3rds of the production comes from the eastern part of the province to the northeast of the city of Chongqing. An additional gas pipeline is planned to come on stream in 1996. In southern Sichuan, reserves are relatively depleted and there are long established gas based industries such as fertilizer plants. In the southwest, where there is a large and g rowing market around the capital Chengdu, gas has been produced for many years and prospects for additions many exist.

　　The difficulties that are experienced by the cities of Sichuan in combatting pollution by SO2, NO2, and dust particles, with the increasing impact of acid rain on the neighboring agriculture are well documented (see the Bulletin on Environmental Condition in Sichuan Province, Sichuan Provincial Environmental Protection Bureau 1993). The authorities plan an increasing reliance on hydroelectric power to accommodate growth in demand and coal consumption is to be hold at the current level.

　　The WG believes that natural gas should also be considered as a clean power gene rating fuel, to help close the energy gap that hydropower may not fully succeed in doing, and, if possible, to begin to replace the coal burning capacity that is so damaging the environment. Specifically, the WG recommends that a new 600 MW Combined Cycle Gas-Fired power plant be built at Chongqing, to upgrade a coal-fired plant there which is already in operation, and allow the coal burning capacity to be closed down. This new gas plant would need 0.5-0.6 billion m3/year of natural gas, which is well within the planned expansion of production and pipeline capacity already under way.

　　An alternative to the replacement of coal capacity would be a greenfield new-build or say 1000 MW of gas powered Combined Cycle plant. The full benefit to the air quality and increased energy efficiency would, however, only come about if the poorly performing coal capacity were shut down.

　　4.3 Nuclear Energy

　　The WG has further examined, in it May 1995 meeting, the question of the development of nuclear energy in China on the basis of the comments made by the Council in its 1994 meeting.

　　Nuclear energy must be considered as a possible alternative to coal stations for producing baseload electricity, especially in the fast growing, energy starved coastal regions.

　　There are two nuclear power stations presently operating in China: the Qinshan N PP (two units of 300 MW each) and the Daya Bay NPP (two units of 900 MW each). Both stations use pressurized water reactors (PWRs), but while the first is based on Chinese technology, the second uses French technology.

　　The comparison of unclear energy versus other options for generating electricity and, in particular, with that of coal, is affected by large uncertainties, deriving firstly from the high sensitivity of the comparison to the discount rate assumed, and secondly, from the difficulty of predicting the cost of nuclear power plants in China, where the experience level is still very limited.

　　As concerns the first problem, it can be confidently stated that low discount rates favor nuclear energy, which is more capital intensive than coal, while high rates and the scarcity of available capital make nuclear energy less attractive. It is too soon to say at what value of discount rate the break-even point is re ached (for a given price of delivered coal), but this value may be expected to b e somewhat lower than 6%. The WG has decided to carry out, by its next meeting ( November 6-8th 1995), a cost evaluation of nuclear energy in comparison with oth er electricity generation options for specific locations in China. International values cannot be used directly since the various elements of the cost structure have different weights in China than elsewhere. This will allow a more precise identification of the discount rate under present circumstances, below which the nuclear option becomes more economically attractive than that of coal.

　　As concerns the second problem, the costs of construction will be lower if a large part, or all of the plant, is produced domestically, and it will decrease as a consequence of the learning process. However, nuclear plants are very large units, and it will take a certain time and a substantial number of plants before t he benefits of this process become apparent. These considerations lead to two conclusions: a large-scale, long term nuclear power programme has a greater probability of becoming economically attractive than a smaller programme; and, in order to take most advantage of the learning process, the nuclear programme should b e strongly unified and based on a restricted range of technologies.

　　There is a certain dilemma concerning the role of central authorities in a nuclear programme. The general trend towards decentralization and privatization, which is essential in reducing costs and stimulating initiatives in all fields, including energy, has some drawbacks as regards nuclear energy. First of all, there are public responsibilities for safety analysis and controls, licensing, health protection to name several, which are best assured if there is properly exercised strict central coordination. Second, the advantages of scale can only be obtained if there is a certain degree of standardization, and if industrial producers and plant managers exchange as much information as possibly. Thirdly, the need for large capital investments with long payback times generally requires public intervention.

　　The WG therefore, recommends that, if China has decided to rely on nuclear energy, the Government should establish a well defined nuclear development programme, setting up the appropriate conditions in terms os regulation, norms, and standards, and financing so that there is space for competitive activity and market forces. In particular, it may be wise to choose one particular nuclear technology, within limits which are broad enough to allow for competition (specifically with respect to foreign suppliers), but within a framework requiring a certain degree of standardization, which itself will help speed up the learning process. The choice of pressurized water reactors seems to respond to these specifications and is in line with the experience so far accumulated in China.

　　For the longer term, it is useful to follow the development of the international situation and to keep abreast of the opportunities offered by new technologies. In particular, the development of reactors with increased passive safety featur es is of great potential interest and should monitored as a priority.

　　If nuclear fission is going to develop in the whole world at a much greater pace than today and to persist for a long time, closing the nuclear cycle and developing breeder reactors to make the best use of available uranium (and possibly, thorium) will be a necessity. As fuel scarcity is not yet an issue for the time being, the matter properly rests in the domain of research and in experimental facilities, as presently foreseen in China.

　　5. Transportation in China and Energy Use

　　Transportation has been a bottleneck of economic development. CCICED originally intended to establish a Working Group dedicated to address this problem, but because of budgetary limits this intention was not realized. It was decided that the WG on Energy Strategies and Technologies should take on the large scale transportation issue, while the WG on environmental Accounting should take on Urban Transportation. At the WG meeting in November 1994, it was decided that a preliminary overview study should be conducted. This work began in late February, and after two and a half months a first (rough) draft was accomplished.

　　The preliminary study reveals the following points:

　　1)In the past 40 years the transport industry has been growing at the annual rate of 9.2%. In the period before the reform, the elasticity of transport with respect to GNP was higher than 1, and post-reform, it has dropped to 0.85.

　　2)The mode mix of transportation has experienced a remarkable change characterized by a rapid increase in road and a decrease in railway use. This change has lead to an increase in energy consumption. The average distance of freight and passenger transport has also increased by a large margin.

　　3)Energy consumed by the transport sector amounts to only 5% of the total for the country, which is a lower figure than most other countries, developed or developing, for which 20-30% is typical.

　　4)Since the start of economic reform, competition has been encouraged, both with in and between different modes of transport. Efficiency has been raised, but the railway system still remains as a traditional monopoly. The railway tariff levels have moreover been set too low for the economic health of the railway industry, and this also introduces economic distortion into the business performance of its main users.

　　5)High speed railway is under consideration. There is evidence that there will be benefits to the large population situated along the proposed track of the system.

　　6)Inland waterway transport has steadily declined, partly because of the locks and dams built along the rivers, and partly also because the maintenance budgets have been kept too low.

　　7)An econometric model has been built to estimate the growth in transport demand and the impact on the economy as a whole is taken into account.

　　8)International comparisons were made including intensity of transport in GNP, elasticities, mode mix, and specific energy consumption of transport.

　　9)Finally, some policy considerations are presented, which include, adjustment of railway tariffs, more allocation of funds for waterway maintenance, adjustments to the level and direction of investments in the transport sector, and the restructuring of the transport network to meet the import of energy.

　　The WG considers that this work merits continuation, and has asked for a additional focus upon policy implications. A free-ranging symposium is to be organized for the Spring meeting of the WG in 1996.

　　6. Next Steps for the Working Group

　　It was agreed to hold the Seventh Meeting of the WG November 6-10, 1995 in Beijing. The first three days will be devoted to two 1 1/2 day workshops on new energy-efficient commercial buildings, and large-scale wind energy with storage and long-distance transmission, followed by two days of intensive WG meetings.

　　It was agreed to hold the Eighth Meeting of the WG May 6-17, 1996, in Beijing.

　　Preliminary organization of the May 1996 meeting (pending confirmation that the time is off-season for the Sugar Cane industry):

　　May 6-9 Symposium on the role of Government in sustainable energy

　　May 10-13 Workshop on Cogeneration in the Sugar Cane industry (with field visits planned for the weekend)

　　May 14 Brainstorming based on result form the IRP work for China (1/2 day)and on the results from the transportation study(1/2 day)

　　May 15-17 WG meeting

　　Acknowledgements

　　The WG would like to acknowledge financial and in kind support from CCICED, ENEA, the International Energy Initiative, the Rockefeller Foundation, and Sarec.