By Lou Baolong, Hebei PetroChina Kunlun Gas Co., Ltd., Lou Xing, Baoding PetroChina Kunlun Gas Co., Ltd.

In 2011, National Development and Reform Commission (NDRC) issued the “Guidelines on Developing Natural Gas Distributed Energy”, with an aim to improve energy efficiency, promote structural adjustment, energy conservation and emission reduction and enhance the orderly development of natural gas distributed energy. According to the Guidelines, natural gas distributed energy is a kind of energy resource using natural gas as fuel and can achieve over 70% of energy efficiency through cascade utilization of energy, such as combined cooling heating and power (CCHP).   

   Promoting the development of natural gas distributed energy is of great practical and strategic significance. China’s increasing natural gas supply and accelerating construction of smart grid provide the right conditions for the large-scale development of natural gas distributed energy. The “Guidelines” encourages the construction of regional distributed energy systems and building-type distributed energy systems in energy load centers. Comprehensive utilization of renewable energy, such as solar energy, wind energy and ground source heat pumps in urban industrial parks, tourist service areas, ecological parks, large-scale commercial facilities, etc., where conditions permit.

   The “Guidelines” even sets out the main tasks and objectives, including the launch of a number of natural gas distributed energy demonstration projects during the early stage of the “12th Five-Year Plan” period, the construction of around 1 000 natural gas distributed energy projects during the “12th Five-Year Plan” period and the proposed construction of 10 distributed energy demonstration areas with typical characteristics. In the next five to 10 years, substantial breakthroughs were expected to be made in the core competencies of distributed energy equipment, product development and application and a distributed energy equipment industry system with independent intellectual property rights was initially formed. By 2020, distributed energy systems will be promoted in cities above designated size in China, with an installed capacity totalling 50 million kilowatts (KW), and distributed energy equipment industrialization will be initially realised.

Concerns behind the boom

   Natural gas distributed energy enjoys the advantages of high efficiency and environmental protection. However, increasing natural gas consumption to some extent has been posing challenges to the development of natural gas distributed energy projects. According to the BP Statistical Review of World Energy 2018, China’s natural gas consumption increased by 31 billion m3 in 2017, with the growth pace hitting a record high since 2011 at 15.1%. 

   China's insufficient basic research on gas generator sets makes R&D and manufacturing lag behind demand. At present, over 90% of gas generator sets are imported from overseas countries to cover the domestic supply gap. Although China’s State Grid Corporation introduced such documents as technical regulations for connecting distributed power into the grid, but there is no supporting measures for the connection of natural gas distributed energy projects into the grid. In addition, using natural gas distributed energy for power generation is not economical. 

Positive news comes out in succession

   In recent years, the contradictions between domestic natural gas supply and demand are prominent. Underground gas storage reservoirs, known as the most effective peak-shaving facilities, are indispensable to natural gas industry chain. China has built 13 gas storage reservoirs (clusters), of which, 10 are constructed and operated by China National Petroleum Corporation (CNPC). During the period lasting from the winter of 2018 to the spring of 2019, China’s planned gas production volume will exceed 8 billion m3, up by over 10% year on year.  

   On January 9, 2019, during the conference held by CNPC in Beijing, on the planning and deployment for the construction of underground gas storage reservoirs in 2019-2030, CNPC signed project construction responsibility documents with relevant oil and gas fields to expand 10 gas storage reservoirs (clusters) in service and build 23 new gas storage reservoirs in next 10 years. By then, CNPC’s gas storage capacity will be greatly elevated.   

   At the end of 2018, the National Energy Administration (NEA) issued a document to incorporate bio-natural gas into its energy development strategy and natural gas production, supply and marketing system. In order to promote the industrialization of bio-natural gas, the development and reform commissions (energy bureaus) of the provinces (autonomous regions and municipalities directly under the central government) and relevant central enterprises shall draw up medium- and long-term plans for the development of bio-natural gas.

   According to the China Distributed Energy Industry Development Research 2018 (hereinafter referred to as the “Report”) issued by the China Energy Research Society (CERS) Distributed Energy Committee and China Energy NetCom Research Center, from 2016 to June 2018, the number of newly approved natural gas distributed energy projects and projects already signed contracts reached 102, with a combined installed capacity of 5.78 million KWs, and the installed capacity of natural gas distributed energy projects in China (including already built, in construction and in planning phase) currently exceeds 16.9 million KWs. However, the Report pointed out that the number of regional natural gas distributed energy projects (total installed capacity of over 50 000 KWs) remains large and the situation will likely change in the future.  

   Natural gas distributed energy projects shall respond to changing circumstances pro-actively. As for new projects, large-scale regional distributed energy projects will be harder to get approval, while relatively small-sized projects closer to customers’ needs may become major new growth points. The existing projects shall shift from merely energy supply to providing integrated energy services. They shall make full use of the flexibility and heat supply advantages of natural gas distributed energy projects, and shall adjust to local conditions to develop in combination with distributed renewable energy projects.