Overview Many cities in the People’s Republic of China (PRC) that have large power needs for heating in the cold winter months suffer from poor air quality because of heavy reliance on coal-fired energy generation. A project in Qingdao, a city in the northeastern part of the country where winter temperatures drop to as low as –17°C, is demonstrating cutting-edge heating and cooling supply solutions that do not use coal and have the potential to lower energy intensity and carbon intensity substantially. This supports the PRC’s climate goals of early “carbon peaking” by 2030 and carbon neutrality by 2060. Supported by the Asian Development Bank, the project is establishing a smart, distributed district energy system in the city, including real-time demand response and controls. Its design responds directly to the urgent national, provincial, and municipal government priorities to develop low-carbon cities and reduce urban air pollution. The key feature of the project is multi-energy complementary systems for district heating, which is combined with a smart demand response dispatching system. When the project is completed, the design can be replicated in other major cities to bring their systems in line with international best practices for achieving energy efficiency. This case study is adapted from project documents. Project Information 48003-002 : Qingdao Smart Low-Carbon District Energy Project in the People’s Republic of China Project Snapshot Dates 9 December 2015 : Approval date 8 December 2023 : Closing date Cost $263.60 million : Total project cost $130 million : ADB loan Institutions / Stakeholders Financing : Asian Development Bank Financing : Qingdao Municipal Government Implementing agency : Qingdao Energy Group Challenges Coal has been the dominant heat source for district heating because it is readily available and economical. However, coal-based heating is a major cause of rising levels of outdoor and indoor air pollution during the winter months. The bad air quality affects the sick, children, older persons, and the poor the most. The risk of respiratory and heart diseases is growing. Shandong province is the PRC’s largest coal consumer. It has poor air quality with pollution becoming worse in the winter when coal use is at its highest. Before the project, the average annual fine particulate matter (PM) concentration in Qingdao was 84 micrograms per cubic meter (µg/m3) in 2014, more than eight times the level recommended by the World Health Organization. The city’s demand for heating grew along with urbanization at an average rate of 11% a year between 2011 and 2014. One-third of carbon dioxide emissions came from residences and the heating industry, many of which still used coal-based systems (such as household stoves and small boilers) and centralized high-loss heating networks. Coal-fired district heating systems in the PRC tend to heat buildings to temperatures exceeding comfortable or safe levels. This happens because heat suppliers are not able to adjust heat supply to customer demand in real time. Overheating leads to substantial energy loss. Context In June 2013, the Government of the PRC issued a policy on 10 air pollution prevention and control measures, which included the reduction of coal use and greater use of natural gas and renewable energy. In the succeeding month, the Qingdao municipal government developed a comprehensive policy for urban air pollution reduction, which included a ban on the use of coal in district energy systems for new and additional heating areas. In January 2014, the PRC set new targets for provinces to reduce air pollution by 5% to 25% during 2015–2020. To reduce carbon dioxide emissions, Qingdao needed to replace boilers and centralized district heating networks running on coal with decentralized systems using natural gas and renewable sources. The ADB project was expected to serve as a catalyst for the city’s system-wide decarbonization. Solutions While preparing the project, ADB facilitated knowledge sharing between the Qingdao District Heating Association and the Swedish Council for District Heating and District Cooling, an international leader in low-carbon, energy-efficient heating and cooling technologies, as well as energy policy and regulatory setting. This was to help the city develop district energy policies and regulations and learn about district energy technologies and new applications and best practices. The North–South knowledge exchange helped shape the design of the project. Qingdao adopted a noncoal-based energy system and low-temperature heat distribution network, which was coupled with a smart demand response district heating dispatching system. Instead of coal, the city used natural gas, solar, thermal, shallow ground geothermal, and waste heat recovered from industrial plants to power district heating, cooling, and power production and distribution systems. The project installed small natural gas boilers, a waste heat recovery system from sewage plants and industries, heat pump systems, a solar heating system, a heat storage system, and low-temperature pipelines in selected locations across the city. The smart energy management system helped optimize energy supply by responding to real-time demand. From left: Heat exchanger for district heating and cooling and heat water supply pump. Photo credit: ADB. A subproject piloted the multi-energy complementary system in the Qingdao Olympic Sailing Boat Center, which demonstrated how clean energy resources may be used to recycle waste energy resources and increase energy supply. It used seawater-source heat pump, solar photovoltaic (PV), wind power, air pump, water-source heat pump, and industry waste heat to distribute community-level heating and cooling supply. It used an intelligent district heating demand response system that enables the quick adjustment of the heating and cooling supply to deliver comfortable temperature levels and conserve energy. The project also utilized new materials, such as PERT (polyethylene of raised temperature resistance) II pipes, which can be used for both hot and cold water. These new pipes are recyclable and have anti-corrosive features, extending the pipe lifespan. Results The project is helping meet the increasing load demand for heating and cooling and improved energy efficiency and air quality of Qingdao. The PM 2.5 and PM 10 concentration levels in 2021 improved by 56.7% and 47.7% in comparison with that in 2013. The cumulative annual emissions reduction from the project reached more than 1 million tons of standard coal consumption by the end of 2022. It is expected that the emissions reduction from 2024 onwards will include (i) annual coal reduction of more than 387,000 tons; and (ii) annual carbon dioxide reduction of more than 1 million tons. These achievements are due to the project’s efforts accelerated by the municipal government’s low-carbon goals. The subproject on multi-energy complementarity earned recognition from Ministry of Housing and Urban-Rural Development in 2022 for creating the “first zero carbon community.” This is considered as the first attempt to introduce such technology in the northern part of the PRC. Through the deployment of the PERT II-type heat pipe, the heat load transmission capacity was increased by at least 18%, and the heat loss avoided is more than 50%. Lessons International cooperation was important in advancing this decarbonization demonstration project. The information-sharing platform established by ADB allowed Qingdao to tap the knowledge and experiences of the Swedish Council for District Heating and District Cooling. The project supported workshops and site visits to expand knowledge of advanced low-carbon district heating technology, new material applications, and real time-based demand response from northern European countries. These knowledge exchanges helped determine the applicability and viability of applying similar technologies and methods in Qingdao. The project’s design, smart distributed clean energy technology, and new application of environmentally friendly materials showed how innovative solutions can enhance carbon dioxide emissions reduction. The project also tested the potential of using multiple clean energy resources to make a major contribution to climate mitigation. The resulting reduction in emissions can also be credited under the Emissions Trading Scheme and/or the China Certified Emission Reduction market in the future. Lessons from the project will be widely shared across the country as well as other ADB developing member countries to promote South–South cooperation. Resources Asian Development Bank (ADB). Qingdao Smart Low-Carbon District Energy Project in the People’s Republic of China. ADB. 2015. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People’s Republic of China for the Qingdao Smart Low- Carbon District Energy Project. Manila. ADB. 2015. ADB to Help PRC’s Qingdao Cut Coal, Create Smart Energy Use Model. News release. 10 December. Ask the Experts Lanlan Lu Senior Project Officer, East Asia Department, Asian Development Bank Lanlan Lu specializes in climate change and energy at ADB’s resident mission in the People’s Republic of China. Her work includes climate financing-related technical assistance and projects in energy efficiency, renewable energy, and low-carbon district heating. She has conducted research on the optimal pathway for low-carbon transition of the greater Beijing, Hebei, and Tianjin region. She is an honorary senior research fellow at University College London and holds a PhD in Management Science and Engineering at Tsinghua University. Asian Development Bank (ADB) The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 69 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.