May 17, 2020

China's air pollution response threatens water

4 min
Man covers his mouth against smog
By Hua Wen, Tianyi Luo and Tien Shiao Record-setting levels of smog this weekshut down Harbin, a city of 11 million people in northeast China. Official...

By Hua Wen, Tianyi Luo and Tien Shiao

Record-setting levels of smog this week shut down Harbin, a city of 11 million people in northeast China. Officials blamed increased coal consumption during the first days of winter heating, underscoring the urgency of the China State Council’s recently announced initiative to address persistent smog in major cities.

But while the Air Pollution Control Action Plan has ambitious goals—cutting air particulates and coal consumption—it may create unintended problems for the country’s water supply.

The Plan aims to reduce particulate matter in the North China Plain by 25 percent and reduce coal’s share of the national energy mix to 65 percent by 2017. One of the plan’s key recommendations is to replace coal with cleaner natural gas, including synthetic natural gas (SNG) converted from coal. Converting coal to natural gas, however, is an extremely water-intensive process. One cubic meter of SNG requires 6 to 10 liters (1.58-2.6 gallons) of freshwater to produce. So in an attempt to control urban air pollution in the east, China might jeopardize its water supplies elsewhere.

Using WRI’s Aqueduct Water Risk Atlas, we overlaid the locations of these approved SNG plants on our water stress maps to assess the potential water risks. Many of these plants are located in water-stressed regions, and could exacerbate water scarcity. Read on for our major findings.

Chinese SNG Industry Faces High Water Risk

As of September 2013, the Chinese government approved 18 large-scale SNG plants with a total capacity of 75.1 billion cubic meters of natural gas per year (see full project list in appendix). SNG plants require water for cooling, production, and to remove contaminants post-production. China’s proposed SNG plants, most of them located in arid and semi-arid regions in Xinjiang and Inner Mongolia, together will consume a total of 500 to 700 million cubic meters of freshwater annually at full operating capacity. That’s almost 20 percent of the region’s total industrial water use in 2011. The plants would therefore significantly exacerbate stress in areas already experiencing chronic water shortages.

What Is Water Consumption?

When we refer to "consumption," we mean the portion of an area’s total water use that is not returned to the original water source. While coal production and synthetic natural gas facilities return most of the water they need to the source, a noticeable percentage of water is evaporated during the process of converting coal into natural gas—in other words, that evaporated water does not return to the source, and is therefore consumed.

Other findings include:

  • More than 76 percent of the proposed SNG capacity will face high or extremely high baseline water stress, meaning each of the locations either competes with many other users for limited available water supplies, or has very little water available at all.
  • 11 of the approved plants, eight from Xinjiang Province and three from Inner Mongolia, are located in catchments that do not have major reservoirs. They also face medium-to-high or high risk from seasonal variability. So, in the dry season, those plants may have to reduce production capacity or experience temporary outages due to the lack of resilience in water supply.
  • Under a memorandum of understanding with the Inner Mongolia Government, Beijing will become the first Chinese city powered by SNG, receiving at least 4 billion cubic meters of the fuel annually. This production would consume more than 32 billion liters of freshwater, enough to meet one million Inner Mongolians’ domestic needs for an entire year.

SNG development around the city of Ordos illustrates how these water-intensive plants can disrupt regional water security. In the middle of the Mu Us Desert, Ordos’ booming coal-to-gas bases face severe competition for water between domestic and industrial users. Our analysis found that Ordos’ five approved SNG plants will need approximately 140 million cubic meters of freshwater annually, which is around 10 percent of Ordos’ total water supply, or 40 percent of the region’s industrial water use as of 2011. Once these SNG plants are completed, they could further disrupt water supplies for farmers, herders, and other industries.

SNG’s Other Environmental Implications

While SNG emits fewer particulates into the air than burning coal, it releases significantly more greenhouse gases than mainstream fossil fuels. Peer-reviewed studies in the journal Energy Policy estimate that life-cycle CO2 emissions are 36–108 percent higher than coal when coal-based SNG is used for cooking, heating, and power generation. Rapidly deploying SNG projects might, therefore, be a step backward for China’s low-carbon energy strategy.

Seeking Solutions

China’s government will need to think carefully about whether SNG’s air pollution benefits outweigh its water and climate change costs. Additionally, since water risks will likely disrupt SNG production and new plants would further strain already stressed water resources, the national government must engage with the nation’s water authorities—in this decision, and in future energy planning. The Ministry of Water Resources and Ministry of Environmental Protection are good places to start. Meanwhile, water authorities should consider tightening caps on industrial water withdrawal and water-pollutant discharge or introducing stricter local environmental standards in high water-risk areas.

But to ensure a sustainable future, it’s important for China to prioritize energy projects that face fewer environmental risks, especially from water and greenhouse gas emissions. Only then will China more successfully manage its conflict between economic growth and resource demands and find lasting energy security.

Source:  World Resources Institute

Photo credit: TonyV3112 /

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Jul 26, 2021

Ofwat allows retailers to raise prices from April

Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

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