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Dimethyl ether (DME) from coal as a household cooking fuel in China Eric D. Larson Princeton Environmental Institute, Guyot Hall, Princeton University, Princeton, NJ 08544-1003, USA E-mail: [email protected] Huiyan Yang Atmospheric and Oceanic Sciences Program, Princeton University, Princeton, NJ, 08542-1003, USA E-mail: [email protected]

Dimethyl ether (DME) has characteristics similar to liquefied petroleum gas (LPG) as a household cooking fuel. As such, DME is an attractive fuel for clean cooking. DME can be made from any carbonaceous feedstock, including natural gas, coal, or biomass, using established technologies. Given China’s rich coal resources, the production and use of coal-derived DME as a cooking fuel in China could be attractive. This article reviews characteristics of DME and technology for making DME from coal. Conditions under which coal-derived DME in China would be cost-competitive with imported LPG in different regions of China are analyzed. 1. Introduction There were an estimated 1.06 billion people relying partially or exclusively on solid fuels for cooking and heating in China in 2001, one-quarter of these in urban areas and three-quarters in rural areas [NBS, 2002]. The considerable negative impacts of indoor pollution from cooking with solid fuels on health and on economic and social development are beginning to be well documented, as discussed briefly below and in more detail in other papers in this issue and elsewhere. In this paper, we briefly discuss possible clean gas and liquid fuels that might be substitutes for solid fuels in the future in China. This review motivates subsequent more-detailed discussion of dimethyl ether (DME) as a prospective fuel for clean cooking. We examine the technical and economic potential for producing DME from coal in China and the prospects for it to compete with imported LPG in different regions of the country. An analysis of institutional issues that would be involved in introducing a major new cooking fuel to China are not included in the scope of this paper.

illustration of the typical air quality in Chinese homes burning solid fuels, Figure 1 shows measured average peak hourly concentrations of CO and PM10 in 20 homes burning coal and biomass for heating and cooking in one village in north-eastern China. Some Canadian and United States air quality standards are shown for comparison. Household coal-burning is the largest contributor to outdoor PM at ground level in all but the most heavily industrial northern cities of China [Florig, 1997]. Coalburning also results in vaporized trace elements, including arsenic, fluorine, mercury and selenium, when such elements are present in the coal [Finkelman et al., 1999]. Several hundred million people commonly burn raw coal in unvented stoves in China [Florig, 1997; Finkelman et al., 1999]. Health damage to household members from exposure to stove emissions are substantial [WHO, 2002; Fischer, 2001; Saldiva and El Khouri Miraglia, 2004][1]. Air pollution is estimated to be responsible for more than one million premature deaths per year in China [Florig, 1997; Johnson et al., 1997], an estimated 62 % of which are attributed to indoor air pollution [Johnson et al., 1997]. Globally, 2.7 % of disability-adjusted life years (DALY, a measure that takes account of premature fatalities and morbidity effects, i.e., non-fatal health effects) are attributable to indoor smoke [WHO, 2002]. Household combustion of solid fuels also generates greenhouse gases, including, but not limited to, CO2 [e.g., Smith, 2000; Zhang et al., 2000]. Many VOCs are strong greenhouse gases, as are methane (CH4) and nitrous oxide (N2O). Black carbon (BC) is the strongest solar-radiationabsorbing atmospheric aerosol species, and it is estimated to have a global warming potential per unit mass that is two to three orders of magnitude above that of CO2 [Bond

2. Indoor air pollution and health Combustion of solid fuels such as biomass and coal in household cooking in China results in high indoor concentrations of health-damaging air pollutants. These include carbon monoxide (CO), volatile organic carbons (VOC, including formaldehyde, acetaldehyde, acetone, and others), polycyclic aromatic hydrocarbons (PAH) and particulate matter (PM, including black carbon) [Zhang and Smith, 1999; Finkelman et al., 1999]. Air pollution levels in Chinese homes often exceed Chinese and World Health Organization (WHO) limits for ambient outdoor air. Typical outdoor PM concentrations are 10 % to 100 % of indoor levels in rural areas [Sinton et al., 1995]. As an Energy for Sustainable Development

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Figure 1. Average peak hourly concentrations of carbon monoxide (CO) and particulate matter (PM10) inside homes in the village of Hechengli, Yanbian prefecture, Jilin province, China. These data are derived from minute-by-minute continuous measurements during periods lasting 24 to 48 hours in each of 20 homes during November-December 2001 made by Susan Fischer (Ph.D. candidate, Environmental Health Sciences, School of Public Health, University of California, Berkeley). Note logarithmic scale.

et al., 2004]. Globally almost one-fourth of black carbon emissions originate in China [Cooke et al., 1999]. Streets et al. [2001] estimate that over 83 % of Chinese BC emissions come from residential energy use, but that residential energy accounts for only about 29 % of all BC-emitting energy use in China, suggesting that there is considerable scope for reducing BC emissions in the residential sector.

cooking energy needs could eventually be provided by LPG? To answer this question, consider that as of 2001 there were an estimated 265 million people using solid fuel for cooking and heating in urban areas, and roughly three times this many people using solid fuels in rural areas. If one assumes that the amount of LPG required to meet cooking needs in China is 35 kg per capita per year, as suggested by Goldemberg et al., [2004b] then the amount of LPG needed to replace solid fuel use in both urban and rural areas for the 2001 population is (1060 million × 0.035 t =) 37 Mt per year. For comparison, total residential LPG consumption in China in 2001 was 14 Mt, and total global consumption of LPG in the domestic sector was about 97 Mt. Global LPG production was 203 Mt in 2001, up from 147 Mt ten years earlier [WLPGA, 2002]. Thus, while global supplies may be sufficient to meet China’s future cooking fuel demands, it is unclear whether supplies will be sufficient to meet China’s demands together with those of the rest of the world. Moreover, China’s population, and hence need for clean cooking fuel, will grow in the future. Since China’s domestic LPG resources are rather limited, and overdependence on imports is not desirable, it is likely that China will need clean fuels other than LPG if it is to meet a long-term goal of complete replacement of solid cooking fuels. Natural gas is a clean fuel that is starting to be used in some households in China. China has approximately 1.4 trillion cubic meters (Tm3 ) of proven natural gas

3. Alternative fuels for clean cooking in China What fuels could potentially meet future needs for clean cooking in China? Cooking with liquid or gas fuels is generally much cleaner than cooking with solid fuels (Figure 2), in addition to being more energy-efficient (Figure 3) and generally more convenient. What liquid or gas fuels might help China meet future cooking energy needs? Among gas or liquid fuels, LPG is the one most widely used by households in China now. LPG production in China nearly quadrupled, from 2.4 to 9.2 million tonnes (Mt), from 1991 to 2001, while LPG consumption nearly quintupled (from 2.5 to 14.2 Mt). Imports accounted for about one-third of consumption in 2001. Given China’s relatively modest oil and natural gas resources (from which LPG is derived), the gap between LPG production and consumption is likely to continue growing, absent any efforts to change the situation. Moreover, despite the remarkable growth rates in LPG use in the past decade, hundreds of millions of people in China continue to rely on highly-polluting solid fuels for cooking and heating. Is it conceivable that all of China’s 116

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Figure 2. Products of incomplete combustion (PIC) with alternative fuel/stove combinations in simulated cooking tests in China [Zhang and Smith, 1999].

Figure 3. Energy use with different fuel/stove combinations in standardized cooking of meals [Dutt and Ravindranath, 1993].

reserves [Ni and Sze, 1998], and the estimated total resources are between 47 and 62 Tm3 [as cited by Larson et al., 2003], mostly located in remote western regions of the country. Domestic gas production grew about 5.8 % Energy for Sustainable Development

per year between 1991 and 1999 [LBNL, 2001], reaching 25 billion m3 (Gm3) in 1999 [NBS, 2002, Table 7.1]. One analysis projects domestic natural gas production to continue growing, reaching 170 Gm3 of output by 2050 [as l

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Table 1. Physical properties of DME and main constituents of LPG Property

DME

Boiling point (ºC) Vapor pressure at 20ºC (bar) 3

Propane

Butane

-24.9

-42.1

-0.5

5.1

8.4

2.1

Liquid density at 20ºC (kg/m )

668

501

610

Specific density (gas)

1.59

1.52

2.01

28.43

46.36

45.74

235-350

470

365

3.4-17

2.1-9.4

1.9-8.4

Lower heating value (MJ/kg) Auto ignition temperature at 1 atm (deg C) Flammability limits in air (vol. %) Source: International DME Association (www.aboutdme.org).

scale projects in China [Liu et al., 2001]. Producer gas has an even lower energy content than town gas, further restricting storage and distribution. Both town gas and producer gas can be burned cleanly and efficiently for cooking, but both have safety concerns associated with the large fraction of carbon monoxide (CO) they contain. CO is an odorless gas that is toxic to humans, and deaths by accidental CO poisoning are reported regularly in China. China has a long history of using biogas as a cooking fuel. In 1996, 1.74 Gm3 of biogas were produced and more than 5 million households were supplied with biogas [Gu and Duan, 1998]. Safety concerns with town gas and with producer gas, and supply limitations with biogas, will restrict these fuels to relatively minor contributions to China’s cooking fuel supplies in the future. Dimethyl ether (DME) is a fuel with physical characteristics similar to LPG in that it is a gas at ambient pressure and a liquid under mild pressure. In this regard, DME can be used for cooking much the way LPG is used. Importantly for China, DME can be made from any carbonaceous fuel, including natural gas, biomass, or coal. With coal being China’s largest domestic energy resource by far, there is the potential for coal-derived DME to become a major clean cooking fuel for China in the long term.

cited by Larson et al., 2003]. The possibility of major imports of gas from Siberia into China is also under discussion, and imports of liquefied natural gas are expected to grow. Could potential natural gas resources and distribution infrastructures meet China’s future needs for clean cooking fuel? If we assume that the amount of natural gas needed to meet basic cooking needs is 71 m3 per capita per year[2], then new natural gas supplies of 71 Gm3 per year would be needed to provide cooking fuel to one billion urban plus rural people, the number who were cooking with solid fuels in 2001. The amount of gas needed would grow in the future with population. For comparison, the domestic production of natural gas in 1998 was 23.3 Gm3, but 80 % of this was consumed by industry, and only about 12 % was used in the residential sector [LBNL, 2001]. This highlights the fact that large point demands for gas are generally needed to economically justify the building of major new transmission and distribution pipelines. One major new project is the West-East pipeline [EIA, 2003], which began operation this year. The capital invested to build this 4000-km pipeline, which is expected ultimately to deliver 12 Gm3/yr from Xinjiang province into the Shanghai area, is variously reported to have ranged from US$ 5.3 billion [Fu, 2004] to US$ 15 billion [Anon., 2004b] to US$ 24 billion [Anon., 2004a]. The greater part of the relatively costly gas is already committed to power generation or industrial use. While there may be some residential use of the gas in the future, this will be limited to urban users because the economics of distributing gas to dispersed rural users are likely to be prohibitive. Natural gas would seem to be a partial solution, at best, to meeting future needs for clean cooking fuels in China. Other gases that are used to some extent for cooking today in China are ‘‘town gas’’ and ‘‘producer gas’’ derived by gasification of coal and biomass, respectively, and biogas from anaerobic fermentation of animal and human wastes. In 2001, about 13.69 Gm3 of town gas were consumed by 43.49 million people in China [NBS, 2002, Table 11.7]. Town gas has a relatively low volumetric energy content (about one-third the energy content of natural gas), which economically limits its storage and transportation to relatively densely-populated urban areas. The use of producer gas is being tested in a handful of village118


4. DME as a cooking fuel DME, with chemical representation (CH3)2O, is the simplest ether. It is a colorless gas at ambient temperature and pressure, with a slight odor. It is used today as an aerosol propellant in hair sprays and other personal care products and was formerly used as a medical anesthetic. DME is produced globally today at a rate of about 150,000 t per year [Naqvi, 2002], but this production level will increase dramatically in the near future. Construction of a DME plant with capacity of 110,000 t/yr will be completed in early 2005 in Sichuan Province [Toyo, 2004]. Natural gas will be the feedstock. In 2002, China’s State Development Planning Commission approved plans for the first large-scale coal-to-DME project, to be located in Ningxia province [Lucas, 2002]. The first phase would have a capacity of 210,000 t per year, and the second phase would have a capacity of 630,000 t per year. Construction has not yet started on this plant. Other DME projects are also under development in China. Both the Sichuan and Ningxia projects are targeting household cooking as the primary end-use for the DME. In addition l

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Figure 4. One process configuration for liquid fuels production from coal [Larson and Ren, 2003]

to the Chinese projects, an 800,000 t per year DME-fromnatural gas facility will come on line in Iran in 2006 [Haldor Topsoe, 2004]. Most of the DME product from this facility will be used as an LPG substitute. DME is relatively inert, non-corrosive, non-carcinogenic, almost non-toxic, and does not form peroxides by prolonged exposure to air [Hansen et al., 1995]. It requires mild pressurization similar to that required for LPG to be stored as a liquid. It has a volumetric energy density as a liquid about 80 % of that of propane, a major constituent of LPG. Table 1 compares some physical properties of DME with those of the main constituents of LPG. DME burns with a clean blue flame over a wide range of air/fuel ratios [Fleisch et al., 1995; ICC, 2003]. Han et al. [2004] discuss emissions associated with DME cooking, and Bizzo et al. [2004] briefly discuss DME-related safety issues.

tor (using a sulfur-tolerant catalyst) to an optimum value for subsequent catalytic synthesis of DME. Synthesis of DME from syngas is similar in many respects to synthesis of methanol, an established commercial process[3]. Methanol is synthesized over a copperbased catalyst (e.g., CuO/ZnO/Al2O3), with the reaction represented in a simplified way as: CO + 2H2 ↔ CH3OH

(1)

DME is produced by dehydrating the methanol (using a γ-alumina catalyst): 2CH3OH ↔ CH3OCH3 + H2O (-23.4 kJ/mol DME) (2) By combining some methanol and dehydration catalysts in the same reactor, reactions (1) and (2) can proceed simultaneously, resulting in direct synthesis of DME. The water-gas-shift reaction is also involved, since methanol catalyst is also an effective water-gas-shift catalyst:

5. Making DME from coal

H2O + CO ↔ H2 + CO2

DME is manufactured today in small-scale facilities by catalytic dehydration of methanol [Naqvi, 2002], with the methanol typically made from natural gas. Technologies are available for making DME more directly from carbonaceous fuels without an intermediate step of methanol production, but the small size of today’s DME markets have not justified building direct conversion facilities, which require relatively large scales to achieve attractive economics. Should large markets develop for DME as a cooking fuel in China, it is likely that large facilities would be built for DME production from coal without intermediate methanol production (as evidenced by the planned project in Ningxia province). China already has extensive commercial experience with modern coal gasification, the first step in converting coal to DME, in facilities making hydrogen from coal for ammonia production [Larson and Ren, 2003]. Gasification processes are especially suitable for high-sulfur coal, since the sulfur appears in the gasifier product at high concentration and thus can be removed relatively easily. Larson and Ren [2003] have presented detailed process designs and production costs for large-scale DME production from coal, and Celik et al. [2004] have built further on Larson and Ren’s analysis. Figure 4 illustrates the basic process arrangement for converting coal to DME. Coal is first gasified in oxygen to produce a raw synthesis gas (syngas) containing primarily hydrogen (H2) and carbon monoxide (CO). The gas is cooled and cleaned before having its H2:CO ratio adjusted in a water-gas-shift reacEnergy for Sustainable Development

(-90.7 kJ/mol)

(-40.9 kJ/mol) (3)

The single-step DME synthesis chemistry can be represented as a combination of Equations 1, 2, and 3: 3CO + 3H2 ↔ CH3OCH3 +CO2 (-246 kJ/mol DME) (4) Following the synthesis step, product DME is separated by distillation from unconverted syngas. In the process configuration shown in Figure 4, the unconverted gas is burned in a gas turbine to generate electricity, some of which is used to meet internal process needs and the balance of which is available for export. Larson and Ren [2003] refer to this design as a ‘‘once-through’’ process configuration, since the syngas passes only a single time through the synthesis reactor. They describe an alternative ‘‘recycle’’ configuration in which the unconverted gas is recycled to the synthesis reactor, thereby increasing DME output per unit of coal input while reducing electricity production. They conclude that the economics of ‘‘oncethrough’’ designs will often be more attractive than for recycle designs. The performance of a ‘‘once-through’’ facility for coproducing 600 MW of DME and 490 MW of electricity from high-sulfur coal is described in detail by Celik et al. [2004], who also present production cost estimates for such a plant if built in the United States at a city gate where the delivered coal price is $ 1/GJ (or $23.5/t), or at a mine mouth, where the coal price is $0.5/GJ. Table 2 shows Celik et al.’s results. Additionally, Table 2 shows estimated production costs for plants built in China, where l

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Table 2. Levelized production costs (in 2002 US$) for DME in ‘‘once-through’’ process configuration Plant inputs and outputs[1] DME output (MW, LHV)

600

Net electricity output (MW)

490

Coal input (MW)

2203 Mine mouth

City gate

0.50

1.0

Coal price, $/GJ (LHV) USA Value assigned to co-product electricity, ¢/kWh

[2]

China

USA

China

3.95

2.77

4.37

3.18

11.12

8.05

11.12

8.05

2.64

1.91

2.92

1.91

1.84

1.84

3.67

3.67

-8.97

-6.28

-9.92

-7.23

Total production cost ($/GJ, LHV)

6.61

5.52

7.50

6.40

Total, $/t

188

157

213

182

304

254

345

294

DME production cost ($/GJ, LHV) Capital charge[3,4] Operation and maintenance

[5]

Coal feedstock Electricity co-product (credit)

TOTAL, $/t LPG-equivalent ($/tLPGe)

[6]

Notes 1. From Table 1 (VENT case) in Celik et al. [2004]. 2. These are estimated costs for generating electricity using coal integrated gasification combined cycle (IGCC) technology. The electricity co-product from a DME facility would be produced with as little pollutant emissions as from an IGCC (or less), so the cost of IGCC electricity is taken as an estimate of the value of the co-product electricity. The IGCC generating cost for a USA application is estimated using net plant efficiency and overnight capital cost given in Table 2 of Celik et al. [2004]. Further assumptions include interest during construction of 12.4 % of overnight capital cost, annual capital charge rate of 15 %, annual operating and maintenance cost of 4 % of overnight capital cost, and plant capacity factor of 80 %. The IGCC generating cost for a China site is calculated from that for the USA by multiplying the overnight IGCC capital cost by 0.664, the China location factor discussed in Note 3 below. 3. The capital investment required to build this DME-electricity co-production plant for a China location will be less than for a USA location because of lower manufacturing and construction costs. Williams and Larson indicate that the capital needed for portions of the plant related to DME production will be 0.75 times that for a USA location and for power-generation-related portions of the plant, the capital needed will be 0.664 times that for a USA location. On the basis of Celik et al. [2004], 63 % of the capital investment in the DME-electricity co-production facility considered here is for fuel-related investments and 37 % is power-related. 4. Assuming interest during construction is 12.4 % of the overnight cost, a 15 % annual capital charge rate, and 80 % capacity factor. 5. Annual non-fuel operating and maintenance costs are assumed to be 4 % of overnight installed capital cost. 6. This takes into consideration the difference in heating value between DME (28.4 MJ/kg, LHV) and LPG (46 MJ/kg, LHV).

equipment manufacturing and plant construction costs are lower than for the United States. To estimate capital costs for the Chinese plants, we use ‘‘location factors’’ from Williams and Larson [2003], as described in Note 3 of Table 2. All costs shown in Table 2 are estimated for commercially-mature (sometimes referred to as Nth plant) technology. Costs for Nth plants will be considerably below costs for the initial few units built. For example, see Goldemberg et al. [2004a] for an analysis of cost reductions observed for ethanol production from sugarcane in Brazil as that industry developed. Table 2 highlights the importance of the electricity coproduct credit to the economics of DME production. To ensure that such a credit can be garnered, an electricity policy will be needed in China that permits independent power generators to sell electricity to the grid and receive appropriate remuneration for the power. Reforms are ongoing in China toward such an electricity market [EIA, 2003]. On the basis of the performance reported in Table 2, we can estimate the amount of direct combustion of coal that could be displaced by producing DME for cooking. If cooking with DME is 60 % energy-efficient (as with 120


LPG) and if cooking directly with coal is 20 % efficient [Dutt and Ravindranath, 1993], then replacing 1 MJ of direct coal use would require converting 1.21 MJ of coal to DME[4]. In making this DME, 0.27 MJ of co-product electricity would also be produced[5]. If this electricity had been produced at a stand-alone power plant, it would have required 0.63 MJ of coal (assuming 43 % coal-to-electricity efficiency). Thus, to deliver the same amount of cooking energy services plus electricity, coal requirements would fall by about 25 %, from 1.6 MJ with direct combustion to 1.2 MJ with conversion to DME and co-product electricity. 6. Cost comparisons In evaluating the potential for using domestically-made DME as a cooking fuel in China, the most relevant cost comparison is with LPG imported into China. To facilitate comparisons, in the following discussion costs of DME are expressed in terms of equivalent LPG cost ($/tLPGe)[6], unless otherwise indicated. 6.1. Wholesale LPG prices Today, some LPG used in China is imported and some is produced domestically. The price of imported LPG l

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fluctuates with the world crude oil price. During the fiveyear period ending in mid-2002, the price for large cargo shipments of LPG delivered to Japanese ports ranged from a low of $ 150/t (in mid-1998) to a high of nearly $ 400/t in late 2000 (Figure 5). Prices for LPG delivered to ports on China’s sea coast are similar to those for Japan deliveries[7]. The plant-gate price of LPG produced in China at petroleum refineries or natural gas-processing plants is typically at or below the price at coastal terminals [CSTC, 2003]. In cases where LPG produced domestically at refineries or gas-processing plants in inland provinces is priced below coastal-terminal prices, the domestic LPG may be supplying remote markets for which imported LPG is not competing because of transport and delivery infrastructure limitations. In the future, the greater part of growth in LPG demand is likely to be met by imports, since domestic oil and gas resources in China are limited. Thus, as the volume of LPG demand rises, the price of LPG will increasingly be set by the international price. 6.2. Wholesale DME prices Increased demand for LPG-type fuel might also be met by DME. The estimated cost of producing DME from coal at the mine mouth in China is about $ 250/tLPGe (Table 2). Since most of China’s coal resources are located outside of the coastal provinces, we may say that the infrastructure for delivering LPG or DME inside China will play an important role in determining the relative cost competitiveness of coal-derived DME vis-à-vis imported LPG or imported DME. (An alternative potential source of DME is imported DME made from low-cost, ‘‘stranded’’, natural gas. Naqvi [2002] presents a detailed cost analysis for the production of DME in the Middle

East and shipped by tanker to the Far East. He indicates a landed cost for DME of just under $ 300/tLPGe at coastal terminals on the east coast of China[8].) 6.3. Bulk storage, transportation, and distribution costs For either LPG or DME, there are three main infrastructure cost components relating to storage and delivery to users: (1) bulk storage at a coastal terminal or production site, (2) transportation in bulk to a bottling facility, and (3) bottling and bottle distribution to retailers. The gross margin[9] associated with bulk storage at a coastal terminal in China is $ 10-15/tLPG [Cui, 2004]. The gross margin for bottling plus retailing of 15-kg or 50-kg cylinders is $ 60-100/tLPG [Cui, 2004]. This latter cost includes retail distribution within 50-70 km of the bottling facility. The cost of bulk transportation depends on whether the transportation is by tanker truck, rail tanker, or pipeline. For long distance transport ( 500 km) of sufficiently large volumes of LPG or DME, a pipeline is likely to be the least costly option. For shorter distances, rail transport would likely be less costly than truck transport, but truck transport will be the mode of choice where rail is not available. The cost per tonne for truck transport of LPG in China for distances less than 1000 km is estimated to be Ctruck = 9.83 + (0.051×D)

(5)

where Ctruck is in $/t and D is the transportation distance in km[10]. Equation 5 predicts transporting LPG a distance of 1000 km by truck would entail a cost of $ 60.8/t or $ 0.061/t-km. For comparison, the levelized cost for delivering LPG through the 1246-km Kandla-Loni pipeline (running between the states of Gujarat and Uttar Pradesh, India, and commissioned in 2001), is an estimated $ 0.014/t-km[11].

Figure 5. Quarterly-averaged spot price for propane landed at Japanese port [WLPGA, 2002] and quarterly-averaged international crude oil price [EIA, 2004]. Original data in current US$ values have been converted to constant 2002 US$ using the US GDP deflator [JEC, 2004]. Propane prices are used in our analysis as a surrogate for LPG prices. The main components of LPG, butane and propane, have comparable prices and heat content per tonne. Based on these data, the correlation (R2 = 0.79) between world oil price, Poil (in $/bbl, bbl: barrel), and Japan spot propane price (in $/t LPG), expressed in constant 2002 US$, is given by PLPG = 94.4e(0.0463×Poil). Energy for Sustainable Development

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6.4. Cost comparisons Figure 6 shows DME costs to users (in $/t) by cost component for mine-mouth production and for city-gate production. Production accounts for the largest share, followed by bottling/retailing. Bulk storage is a relatively small cost component, and transport cost depends on distance[12]. Costs are shown for three transport distances. DME made at the mine mouth and trucked 500 km to a city would cost slightly more than DME that is made at the city gate and not subjected to bulk transportation. Figure 7 shows the cost to users of imported LPG and of coal-derived DME as a function of the world crude oil price and the assumed transportation distance and transportation mode. Several observations are noted. 1. In coastal cities, imported LPG will be preferred to coal-derived DME transported 1000 km by truck from coal-rich inland provinces when the oil price is under $ 30/bbl (as indicated by the point A in Figure 7). (1 bbl or barrel of oil = 0.1364 t) 2. For coal-rich provinces, which are principally inland provinces, DME made locally would compete at relatively low oil prices with imported LPG, which would need to be transported a considerable distance. For example, assuming LPG is transported 1000 km by truck, local coal-derived DME would be competitive for oil prices below $ 20/bbl if no long-distance bulk transportation of the DME were required (B). 3. For inland areas more distant from coal resources, DME from coal transported by truck 1000 km from a coal-rich area would be preferred to imported LPG transported by truck 1000 km from the coast when the

oil price is above $ 26/bbl (C). 4. For long-distance transport of LPG or DME in the long term, pipeline would be less costly than truck transport for sufficient volumes. (In the short term, for shorter transport distances, and/or smaller volumes, pipelines will be more difficult to implement and/or more costly.) If imported LPG were to be transported 1000 km by pipeline, it would compete with DME made locally from coal at an inland location when the oil price is below $ 23/bbl (D). Similarly, if DME were transported 1000 km from an inland site by pipeline to a coastal city, it would compete with imported LPG when the world oil price is above $ 26/bbl (E). 7. Coal and income distributions in China The above cost estimates for imported LPG and domestic coal-derived DME can be considered in the context of the distribution of coal resources and per-capita income of the rural areas of the provinces of China. Rural areas are where the majority of the 1.06 billion people live who rely today on biomass or coal to meet cooking energy needs, and thus where greater access to clean fuels is most needed. Figure 8 shows that nearly all of the coal-rich provinces are located away from the coast, so that imported LPG entails transportation costs to reach those provinces. Thus, for most of the coal-rich provinces, the cost analysis in the previous section suggests that DME will be cost-competitive with imported LPG when the world oil price is higher than $ 20/bbl to $ 26/bbl. Also, the provinces with the lowest average per-capita

Figure 6. Estimated cost from coal of DME delivered to retail consumer in China. The cost is per tonne of DME. Multiply by 1.62 to convert to cost per tonne of LPG equivalent

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Figure 7. Estimated costs for DME and imported LPG as a function of world oil price and for different truck transportation distances to market. ‘‘Imported LPG, coastal city’’ and ‘‘DME local’’ include no bulk transportation cost. DME prices are shown unvarying with world oil price, as DME prices are assumed to reflect production costs, which will not change significantly with oil price since the price of the feedstock coal is unlikely to vary significantly with oil price.

rural incomes are the richest in coal resources (Figure 9). The prospective competitiveness of coal-derived DME with imported LPG provides an opportunity for these provinces to add value to their coal by producing DME both for local consumption and for export to other provinces. The income and related economic activity that would be generated in this fashion are potentially far greater than what could be generated by simply exporting the energy raw material (coal in this case) out of the province. The West-East pipeline mentioned in Section 3 is an example of exporting the raw material (natural gas) without adding much value. Thus, the export of DME made from coal would be consistent with the objectives of the Chinese government’s Western Region Development Program (see www.chinawest.gov.cn). On the basis of the analysis in this paper, coal-derived DME will likely be competitive with imported LPG, even when world oil prices are relatively modest. However, until a large DME market develops, imported LPG is likely to set the market price for clean cooking fuel. Thus, when the world oil price is sufficiently high, there will be a large difference between LPG price and DME cost (Figure 7), resulting in potential ‘‘windfall’’ profits for DME suppliers. Since clean cooking fuel (whether DME or LPG) may be unaffordable for many low-income households, a windfall-profits tax might be introduced on DME suppliers, with the tax revenue used to subsidize clean-fuel purchases by the poorest households. Energy for Sustainable Development

8. Conclusions As the demand for clean cooking fuel grows in the future in China, the fraction of LPG that China imports will also grow, because China’s domestic oil and natural gas resources are limited. Imported LPG prices track international oil prices, so, as oil prices rise in the future, importing LPG will become an increasingly expensive proposition for China. Moreover, as Chinese LPG demand grows, global competition for available supplies of LPG will intensify, ultimately contributing to higher international LPG prices. High LPG prices will limit the extent to which imported LPG can meet China’s domestic needs, especially the needs of inland provinces where added transportation costs are involved. DME has properties very similar to LPG as a cooking fuel, and DME is potentially much more widely available than LPG in China because it can be manufactured from coal. The analysis in this paper suggests that coal-derived DME in China could be competitive in many regions of China with imported LPG even at relatively modest world oil prices. For coal-derived DME to become a viable commercial household fuel in China will require successful demonstrations of the production, distribution, and utilization of DME. Planning for at least one major coal-DME production facility is at an advanced stage in China, and some significant testing of DME as a household fuel has already taken place there. The most economical approach to l

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Figure 8. The provinces of China, with coal-rich and low-income provinces highlighted. (Original map from Perry-Castañeda Library Map Collection, University of Texas, Austin.) 22 % of COPD and about 1.5 % of lung cancers [WHO, 2002]. Other symptoms, such as otitis media (middle ear infection -- the middle ear is connected to and often affected by upper respiratory infections), nasopharyngeal and laryngeal cancer (the pharynx and the larynx are parts of the upper respiratory system and are affected by inhaled pollutants), asthma, and tuberculosis are also related to coal- and biomass-burning [Ezzati and Kammen, 2002], but have not been studied as intensely as the first three types. Perinatal conditions and low birth-weight, diseases of the eye (such as cataract and blindness), and heart diseases are loosely related [Smith, 2000; Ezzati and Kammen, 2002].

making DME from coal will be at facilities using ‘‘oncethrough’’ process designs that produce DME and an electricity co-product. The ability of such facilities to sell the electricity at appropriately remunerative prices is a requirement for the most attractive economics. Thus, national policies that ensure that independent power producers will be able to sell electricity to the grid would facilitate the growth of a coal-DME industry in China. With co-production of DME and electricity, there would be significant savings (about 25 %) in primary coal needed to meet a given demand for cooking energy services plus electricity.

2. To provide useful cooking energy of 50 W/capita [Goldemberg et al., 2004b] from natural gas, and assuming a stove efficiency of 0.6 and a natural gas heating value of 37 MJ/m3, the gas requirement would be 71 m3/capita/yr. 3. Globally, most methanol is produced today from natural gas, but China produces most of its methanol (3.3 Mt used in 2001) from coal [Larson and Ren, 2003]. 4. 1 MJ of direct coal in cooking produces 0.2 MJ useful cooking energy. To provide 0.2 MJ of useful cooking energy from DME would require 0.2/0.6 = 0.33 MJ of DME. From Table 2, making 0.33 MJ of DME would require 0.33/(600/2203) = 1.21 MJ coal.

Notes 1. Epidemiological studies suggest that acute respiratory infections (ARI), chronic obstructive pulmonary disease (COPD) and lung cancer (especially from coal smoke) are related closely to household solid fuel use (see, e.g., [Smith, 2000]). Globally, indoor smoke from solid fuels is estimated to cause about 36 % of lower respiratory infections,

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5. The fraction of coal energy converted to electricity (from Table 2) is 0.222. 6. The cost of DME in $/t is converted to an LPG-equivalent cost by multiplying by 1.62, the ratio of the lower heating values of LPG (46 GJ/t) and DME (28.4 GJ/t).

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Figure 9. Estimated total recoverable coal resources by province [LBNL, 2001] and annual average rural per-capita income for each province [NBS, 2002] 7. We do not have time-series data for the landed price of LPG at China’s coast, but Cui [2003] indicated that in April 2003, spot prices per tonne for propane landed in Japan, Korea, Taiwan, East China, and South China were all within $ 2 of each other.

transportation in $/tLPG, we multiply the original $/tLPG by Rdensity and by Rhv, where Rdensity is the ratio of the volumetric density of LPG liquid (0.577 t/m3) to that of DME liquid (0.668 t/m3) and Rhv is the ratio of the lower heating value of LPG (46 GJ/t) to that of DME (28.4 GJ/t).

8. For a plant with the capacity to produce 1.3 Mt/year of DME (1183 MW DME,LHV) from natural gas at a Middle East or Persian Gulf location, Naqvi indicates a total installed capital cost of $ 386.5/tDME -year, natural gas consumption of 42.85 GJ/t DME , and nonfuel O&M costs of $ 40.8/tDME. For a gas price of $ 0.47/GJ ($ 0.5 per million BTU) and a 15 % annual capital charge rate, this gives a total levelized production cost of $ 119/tDME . Naqvi indicates shipping 12000 km (round-trip) will cost $ 64.3/tDME, giving a total delivered cost of $ 183.3/t DME , or $ 297/tLPGe.

References Anonymous, 2004a. ‘‘West-east pipeline starts commercial operation’’, Alexander’s Oil and Gas Connections, 9(3), 10 February. Anonymous, 2004b. ‘‘In the pipeline’’, The Economist, April 29. Bizzo, W.A., de Calan, B., Myers, R., and Hannecart, T., 2004. ‘‘Safety issues for clean liquid and gaseous fuels for cooking in the scope of sustainable development’’, 2004. Energy for Sustainable Development, VIII(3), September (this issue).

9. The ‘‘gross margin’’ associated with bulk storage is the difference between the wholesale price for LPG leaving the storage facility and the price paid for the LPG when it was received by the facility. Likewise, the gross margin on bottling/retailing is the difference between the retail price for the LPG and the price paid for the LPG when it was received at the bottling facility.

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10. This relationship is derived from trucking cost estimates per t-km (including loading and unloading of the truck) provided by Feng [2003]: RMB 0.8 to 1.0 for distances below 200 km; RMB 0.6 to 0.8 for distances between 200 and 500 km; and RMB 0.5 to 0.6 for distances over 500 km. A conversion factor of 8.2 yuan RMB to US$ has been applied.

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11. The capital investment for this pipeline was an estimated 12.3 billion rupees (about US$ 250 million) for a capacity of 2.5 million t/yr [MoP&NG, 2004]. Assuming 90 % capacity utilization and a 12 %/yr capital charge rate, the levelized capital cost for this pipeline is 250×0.12/(2.5×0.9×1246) = $ 0.011/t-km. Kler et al. [2000] estimate annual operating and maintenance (O&M) costs for a pressurized (5.4 MPa) methanol pipeline to be 3.5 % of capital investment. Assuming this percentage for the Kandla-Loni pipeline, the O&M cost for it would be $ 250×0.035/(2.5×0.9×1246) = $ 0.003/t-km. The total cost for pipeline transport in this case is, therefore, $ 0.014/t-km.

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12. In calculating coastal storage costs, bulk transportation costs, and bottling/retailing costs we assume capacity is limited by liquid volume (of LPG or DME). Thus, to calculate the cost for DME storage or transportation in $/tLPGe from a cost for LPG storage or


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As regular readers are aware, Energy for Sustainable Development has published special issues on several subjects during 2000-2003. Some more special issues are being considered and planned. In addition, we have in the recent past received useful suggestions for special issues, especially based on conferences or collaborative projects, from our friends in the energy community. We welcome ideas for special issues from readers. Such suggestions should contain details of the likely papers that could go into the issue and of the probable guest editor(s). Suggestions should be sent to: Amulya K.N. Reddy Publisher and Editor, Special Issues, Energy for Sustainable Development 25/5, Borebank Road, Benson Town, Bangalore-560 046, India. E-mail: [email protected]

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