Energy and Environmental Opportunities in Shanxi Province China.

Based on a study tour by Innovation Norway,
Energy and Environmental Sector Group April 2007

Written by Vibeke Skaiaa,  April 26, 2007
Taiyuan, Shanxi Province, 2007, April 23-25th
Our Chinese Hosts
April 23-25, six of the most central persons within the energy and environmental sector in Innovation Norway visited China. Representatives were present from Tokyo, Hamburg, Oslo, Trondheim and Beijing.  The aim of the visit was to gain a better understanding of China, its culture and business opportunities. It was also discussed how Innovation Norway offices in Norway and abroad can cooperate closer in order to improve our services towards our clients within these sectors.
The Norwegian Delegation listening to Shanxi EPB

The trip was organized by IN-Beijing, and as a site visit we chose to visit, Shanxi Province one of the most polluted provinces in China.
The trip was hosted by Shanxi Environmental Protection Bureau (EPB), giving the delegation an excellent introduction to the province and its challenges.
We will here give you a short introduction to Shanxi province and the opportunities lying ahead for Norwegian Energy and Environmental Business in the region. 

Shanxi Province
Shanxi is the birth place of Chinese culture, being the capital of several of the Chinese Dynasties, and the birth place of Chinas first banking system. Most of Shanxi is located at a plateau 1000 meters above sea level.
The province had originally a beautiful and scenic environment, unfortunately excessive industrial development mainly through, metallurgy, chemical and coal has greatly destroyed the existing environment.
The provincial capital Taiyuan is known today mostly for its coal industry, and it is difficult to find any remains of the cities turbulent history. With its mountains and its river, Taiyuan was a strategic military town that has been fought over for more than 1000 years. 
The delegation on site visit, including Norwegians and Shanxi EPB
In the first few decades of communist rule, Beijing poured funds into the province to develop its raw materials base, but the transition to market –oriented economy has left it trailing behind the coastal regions, with average incomes growing at a much lower rate.
Shanxi has an area of 156,000 sq km and a population of 33.6 million, making it one of the smallest in China.
Shanxi’s GDP is Rmb bn 418, increasing 17 per cent in 2005, ranking it 16th of China’s 31 provinces.
By the end of 2005 private businesses in Shanxi employed just 6.8 per cent of the total working population compared to the national average which is above 50 per cent.  
Industry in ShanxiProvince
Shanxi is one of China’s traditional industrial bases. Its principal economic asset is coal, reserves of which account for about one fifth of the national total, and China’s third largest coal producing area.
Although the province is China’s top coal producer, accounting for about a quarter of national output, the industry is still in need of capital investment, and primitive excavation technology and lack of exploration funds have constrained productivity and profits.
In the control room of the Power Plant

Foreign investors no longer face policy barriers entering China’s coal industry, and indeed are actively encouraged if they can introduce advanced technologies for exploration and processing.
Between 2006 and 2010, Shanxi plans to spend Rmb 9 bn to develop coal bed methane industry. It has also pledged major investments to develop its coal related chemical industry.
In addition to coal, Shanxi is China’s leading producer of eight kinds of minerals, including bauxite, red bauxite, gallium, and xeolite. Other major industries include mining equipment, metallurgy, machine tools and iron and steel.
The province has pledged to invest Rmb 19 bn in pollution control projects between 2002 and 2007. Shanxi’s new slogan is “Blue Sky’s and Green Water”, which is the ultimate aim for the whole province in the next five year plan.
Recently, expenditure on environmental protection has risen to about 1.5 per cent of its GDP. One new initiative is the promotion of coal-bed methane to fuel buses and taxis. Coal bed methane is today not rationally used in Shanxi which has one third of the natural resources.
Shanxi looses 1.5 bn qm/year of water every year due to coal mining and inefficient cleaning methods. Shanxi is a province that lacks water, and it is therefore important to find ways to reutilize and clean this water.  


Opportunities for Norwegian Enterprises within environmental protection
Shanxi EPB gave the delegation a thorough introduction to the challenges and opportunities lying ahead in Shanxi. In the 11th 5 year plan the provincial governor has an environmental protection focus, and is strongly reaching for the goal of blue sky’s and green water’s. Some of the ways they will do this is by strengthening the administration and knowledge base. They will also focus strongly on environmental protection projects and has chosen 5 sectors as their main focus areas:

  1. Environmental comprehensive control and treatment projects in 11 key cities, and 32 counties
    Including: infrastructure for urban, areas, they plan to build 80 waste water treatment plants, district heating and gas supply based on natural gas
  2. Industrial control and treatment projects
    Including: Pollution treatment and improvement facilities, industrial cleaner production projects, sulphurization project and coking gas projects
  3. Environmental security projects
    Including: Protection projects for drinking water sources close to coal mines, move and rebuild enterprises, hazardous waste centralised centres, nuclear storage site and medical waste storage.
  4. Ecological Protection, Rural Environmental Protection Projects
    Including: standard construction projects, of natural conservation areas, protection areas around coal mines
  5. CDM
    The natural conditions, and the industrial structure in ShanxiProvince gives it a great potential for CDM projects, they need; capital input, technology and knowledge

Shanxi is especially interested in knowledge, technology transfer and capital from Norway. They also look strongly for opportunities of knowledge exchange.
Shanxi gave us their highest estimate of support, quality and efficiency for the development of projects with Norwegian partners in Shanxi. 

Commercial Counsellor Idun Christie 

Opportunities within Energy Conservation
The production of energy in the province is closely linked to the production of raw materials including; coal, metallurgy, power generation, chemical processing, building material and the coking industry.
The local industry is a heavy energy consumer and the potential for energy conservation is huge, examples are:
Coal Bed Methane, Natural Gas, Gas from boilers, gang rock (refusal from mining) which can be used for producing electricity and building materials.
ShanxiProvince focuses on eight sectors for energy conservation:
1. Coal
2. Metallurgy
3. Coking
4. Power Generation
5. Heavy duty equipment manufacturing
6. Coal based chemical processing
7. New types of building materials
8. Tourism

They are looking for new and advanced technologies for the above sectors, and are open for financial, as well as technical cooperation, joint business or pilot projects. 

Site Visits
The delegations main visit went to the Shanxi Coking group. We visited a coal mine 1.5 hours outside of Taiyuan, the capital of Shanxi, belonging to the Shanxi coking coal group.
Shanxi Coking Coal Group is a large and diversified enterprise. The major business is to mine mines and process coal products. The secondary, business is mineral well construction, coal mine machine manufacturing, machine electricity equipments repair, generation of electricity & power supply, chemical engineering, building installations, building materials, conveyance, import and export trade as well as various management and service professions.
The coal products are sold to more than 20 cities all over the country, and are exported to several countries including Japan, Korea, Brazil, Germany, India and Taiwan. 
In the control room of the Shanxi Coking Coal mine.
In 2004, the coal yield of Shanxi Coking Coal Group reached 55 million tons and the sales income reached 18.3 billion Rmb.
The specific mine visited produces 6 million tons of coal a year, and is selected as a model enterprise by the Chinese Government. The mine has established a waste water treatment plant to reuse the water from the coal production as well as a power plant selling electricity to the grid.
The mine does today only utilize 20 % of the coal Bed Methane, meaning there is a great potential.
Other focus areas and matters of interest are environmental management, employment management, utilisation of low content gas, solid waste utilization, the use of fly ash and sewage water treatment technologies.
The delegation also visited a coking plant in Taiyuan. Today coke in China is used mainly in the metallurgical industry 
This trip came on a very fitting time, following the Norwegian Prime Ministers visit to Beijing in the end of March with the focus on energy, climate and environment. Also as his annual speech was held on April 20th with and overwhelming focus on how Norway will become the number one country in Europe, committing to climate, and pollution control. China will probably be singled out as one of the main countries for Norway when they will start purchasing CDM credit’s in the near future.
The participants got en excellent overview of both the vast opportunities as well as challenges existing in the Chinese market. All in all a good background for further work knowledge and cooperation.
To know more about the opportunities in Shanxi, please contact Innovation Norway Beijing Office.
Participants during lunch