larsonyang china dme cooking esd 2004

8/2/2019 LarsonYang China DME Cooking ESD 2004

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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


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 anycarbonaceous feedstock, including natural gas, coal, or biomass, using established technologies.

Given Chinas 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. IntroductionThere were an estimated 1.06 billion people relying par-tially or exclusively on solid fuels for cooking and heatingin China in 2001, one-quarter of these in urban areas andthree-quarters in rural areas [NBS, 2002]. The consider-

able negative impacts of indoor pollution from cookingwith solid fuels on health and on economic and socialdevelopment are beginning to be well documented, as dis-cussed briefly below and in more detail in other papersin this issue and elsewhere. In this paper, we briefly dis-cuss possible clean gas and liquid fuels that might be sub-stitutes for solid fuels in the future in China. This reviewmotivates subsequent more-detailed discussion of di-methyl ether (DME) as a prospective fuel for clean cook-ing. We examine the technical and economic potential forproducing DME from coal in China and the prospects forit to compete with imported LPG in different regions ofthe country. An analysis of institutional issues that wouldbe involved in introducing a major new cooking fuel toChina are not included in the scope of this paper.

2. Indoor air pollution and health

Combustion of solid fuels such as biomass and coal inhousehold cooking in China results in high indoor con-centrations of health-damaging air pollutants. These in-clude carbon monoxide (CO), volatile organic carbons(VOC, including formaldehyde, acetaldehyde, acetone,and others), polycyclic aromatic hydrocarbons (PAH) andparticulate matter (PM, including black carbon) [Zhangand Smith, 1999; Finkelman et al., 1999]. Air pollution

levels in Chinese homes often exceed Chinese and WorldHealth Organization (WHO) limits for ambient outdoorair. Typical outdoor PM concentrations are 10 % to 100 %of indoor levels in rural areas [Sinton et al., 1995]. As an

illustration of the typical air quality in Chinese homesburning solid fuels, Figure 1 shows measured averagepeak hourly concentrations of CO and PM10 in 20 homesburning coal and biomass for heating and cooking in onevillage 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 heavilyindustrial northern cities of China [Florig, 1997]. Coal-burning also results in vaporized trace elements, includingarsenic, fluorine, mercury and selenium, when such ele-ments are present in the coal [Finkelman et al., 1999].Several hundred million people commonly burn raw coalin unvented stoves in China [Florig, 1997; Finkelman etal., 1999].

Health damage to household members from exposureto stove emissions are substantial [WHO, 2002; Fischer,2001; Saldiva and El Khouri Miraglia, 2004][1]. Air pol-lution is estimated to be responsible for more than onemillion premature deaths per year in China [Florig, 1997;Johnson et al., 1997], an estimated 62 % of which areattributed 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 andmorbidity effects, i.e., non-fatal health effects) are attrib-utable to indoor smoke [WHO, 2002].

Household combustion of solid fuels also generatesgreenhouse gases, including, but not limited to, CO2 [e.g.,Smith, 2000; Zhang et al., 2000]. Many VOCs are stronggreenhouse gases, as are methane (CH4) and nitrous oxide

(N2O). Black carbon (BC) is the strongest solar-radiation-absorbing atmospheric aerosol species, and it is estimatedto have a global warming potential per unit mass that istwo to three orders of magnitude above that of CO2 [Bond

Energy for Sustainable Development l Volume VIII No. 3 l September 2004

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et al., 2004]. Globally almost one-fourth of black carbonemissions originate in China [Cooke et al., 1999]. Streetset al. [2001] estimate that over 83 % of Chinese BC emis-sions come from residential energy use, but that residen-tial energy accounts for only about 29 % of allBC-emitting energy use in China, suggesting that there isconsiderable scope for reducing BC emissions in the resi-dential sector.

3. Alternative fuels for clean cooking in China

What fuels could potentially meet future needs for cleancooking in China? Cooking with liquid or gas fuels isgenerally much cleaner than cooking with solid fuels (Fig-

ure 2), in addition to being more energy-efficient (Figure3) and generally more convenient. What liquid or gas fu-els might help China meet future cooking energy needs?

Among gas or liquid fuels, LPG is the one most widelyused by households in China now. LPG production inChina nearly quadrupled, from 2.4 to 9.2 million tonnes(Mt), from 1991 to 2001, while LPG consumption nearlyquintupled (from 2.5 to 14.2 Mt). Imports accounted forabout one-third of consumption in 2001. Given Chinasrelatively modest oil and natural gas resources (fromwhich LPG is derived), the gap between LPG productionand consumption is likely to continue growing, absent any

efforts to change the situation.Moreover, despite the remarkable growth rates in LPGuse in the past decade, hundreds of millions of people inChina continue to rely on highly-polluting solid fuels forcooking and heating. Is it conceivable that all of Chinas

cooking energy needs could eventually be provided byLPG?

To answer this question, consider that as of 2001 therewere an estimated 265 million people using solid fuel forcooking and heating in urban areas, and roughly threetimes this many people using solid fuels in rural areas. Ifone assumes that the amount of LPG required to meetcooking needs in China is 35 kg per capita per year, assuggested by Goldemberg et al., [2004b] then the amountof LPG needed to replace solid fuel use in both urban andrural areas for the 2001 population is (1060 million 0.035 t =) 37 Mt per year. For comparison, total residen-tial LPG consumption in China in 2001 was 14 Mt, and

total global consumption of LPG in the domestic sectorwas about 97 Mt. Global LPG production was 203 Mt in2001, up from 147 Mt ten years earlier [WLPGA, 2002].Thus, while global supplies may be sufficient to meetChinas future cooking fuel demands, it is unclear whethersupplies will be sufficient to meet Chinas demands to-gether with those of the rest of the world.

Moreover, Chinas population, and hence need for cleancooking fuel, will grow in the future. Since Chinas do-mestic LPG resources are rather limited, and overdepen-dence on imports is not desirable, it is likely that Chinawill need clean fuels other than LPG if it is to meet a

long-term goal of complete replacement of solid cookingfuels.Natural gas is a clean fuel that is starting to be used

in some households in China. China has approximately1.4 trillion cubic meters (Tm3) of proven natural gas

Figure 1. Average peak hourly concentrations of carbon monoxide (CO) and particulate matter (PM 10) 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 ineach 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.


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reserves [Ni and Sze, 1998], and the estimated total re-sources are between 47 and 62 Tm3 [as cited by Larsonet al., 2003], mostly located in remote western regions ofthe country. Domestic gas production grew about 5.8 %

per year between 1991 and 1999 [LBNL, 2001], reaching25 billion m3 (Gm3) in 1999 [NBS, 2002, Table 7.1]. Oneanalysis projects domestic natural gas production to con-tinue growing, reaching 170 Gm3 of output by 2050 [as

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].


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cited by Larson et al., 2003]. The possibility of majorimports of gas from Siberia into China is also under dis-cussion, and imports of liquefied natural gas are expectedto grow.

Could potential natural gas resources and distributioninfrastructures meet Chinas future needs for clean cook-ing fuel? If we assume that the amount of natural gasneeded to meet basic cooking needs is 71 m3 per capitaper year[2], then new natural gas supplies of 71 Gm3 peryear would be needed to provide cooking fuel to one bil-lion urban plus rural people, the number who were cook-ing with solid fuels in 2001. The amount of gas neededwould grow in the future with population. For compari-son, the domestic production of natural gas in 1998 was23.3 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 pointdemands for gas are generally needed to economically jus-tify the building of major new transmission and distribu-tion pipelines.

One major new project is the West-East pipeline [EIA,2003], which began operation this year. The capital in-vested to build this 4000-km pipeline, which is expectedultimately to deliver 12 Gm3/yr from Xinjiang provinceinto the Shanghai area, is variously reported to haveranged from US$ 5.3 billion [Fu, 2004] to US$ 15 billion[Anon., 2004b] to US$ 24 billion [Anon., 2004a]. Thegreater part of the relatively costly gas is already com-mitted to power generation or industrial use. While there

may be some residential use of the gas in the future, thiswill be limited to urban users because the economics ofdistributing gas to dispersed rural users are likely to beprohibitive. Natural gas would seem to be a partial solu-tion, at best, to meeting future needs for clean cookingfuels in China.

Other gases that are used to some extent for cookingtoday in China are town gas and producer gas derivedby gasification of coal and biomass, respectively, andbiogas from anaerobic fermentation of animal and humanwastes. In 2001, about 13.69 Gm3 of town gas were con-sumed by 43.49 million people in China [NBS, 2002, Ta-

ble 11.7]. Town gas has a relatively low volumetric energycontent (about one-third the energy content of naturalgas), which economically limits its storage and transpor-tation to relatively densely-populated urban areas. The useof producer gas is being tested in a handful of village-

scale projects in China [Liu et al., 2001]. Producer gashas an even lower energy content than town gas, furtherrestricting storage and distribution. Both town gas andproducer gas can be burned cleanly and efficiently for

cooking, but both have safety concerns associated withthe large fraction of carbon monoxide (CO) they contain.CO is an odorless gas that is toxic to humans, and deathsby accidental CO poisoning are reported regularly inChina. China has a long history of using biogas as a cook-ing fuel. In 1996, 1.74 Gm3 of biogas were produced andmore than 5 million households were supplied with biogas[Gu and Duan, 1998]. Safety concerns with town gas andwith producer gas, and supply limitations with biogas,will restrict these fuels to relatively minor contributionsto Chinas cooking fuel supplies in the future.

Dimethyl ether (DME) is a fuel with physical charac-teristics similar to LPG in that it is a gas at ambient pres-sure and a liquid under mild pressure. In this regard, DMEcan be used for cooking much the way LPG is used. Im-portantly for China, DME can be made from any carbo-naceous fuel, including natural gas, biomass, or coal. Withcoal being Chinas largest domestic energy resource byfar, there is the potential for coal-derived DME to becomea major clean cooking fuel for China in the long term.

4. DME as a cooking fuel

DME, with chemical representation (CH3)2O, is the sim-plest ether. It is a colorless gas at ambient temperatureand pressure, with a slight odor. It is used today as an

aerosol propellant in hair sprays and other personal careproducts and was formerly used as a medical anesthetic.DME is produced globally today at a rate of about150,000 t per year [Naqvi, 2002], but this production levelwill increase dramatically in the near future. Constructionof a DME plant with capacity of 110,000 t/yr will be com-pleted in early 2005 in Sichuan Province [Toyo, 2004].Natural gas will be the feedstock. In 2002, Chinas StateDevelopment Planning Commission approved plans forthe first large-scale coal-to-DME project, to be located inNingxia province [Lucas, 2002]. The first phase wouldhave a capacity of 210,000 t per year, and the second

phase would have a capacity of 630,000 t per year. Con-struction has not yet started on this plant. Other DMEprojects are also under development in China. Both theSichuan and Ningxia projects are targeting householdcooking as the primary end-use for the DME. In addition

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

Property DME Propane Butane

Boiling point (C) -24.9 -42.1 -0.5

Vapor pressure at 20C (bar) 5.1 8.4 2.1

Liquid density at 20C (kg/m3) 668 501 610

Specific density (gas) 1.59 1.52 2.01

Lower heating value (MJ/kg) 28.43 46.36 45.74

Auto ignition temperature at 1 atm (deg C) 235-350 470 365

Flammability limits in air (vol. %) 3.4-17 2.1-9.4 1.9-8.4

Source: International DME Association (www.aboutdme.org).


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to the Chinese projects, an 800,000 t per year DME-from-natural gas facility will come on line in Iran in 2006 [Hal-dor Topsoe, 2004]. Most of the DME product from thisfacility will be used as an LPG substitute.

DME is relatively inert, non-corrosive, non-carcino-genic, almost non-toxic, and does not form peroxides by

prolonged exposure to air [Hansen et al., 1995]. It requiresmild pressurization similar to that required for LPG to bestored as a liquid. It has a volumetric energy density asa liquid about 80 % of that of propane, a major constitu-ent of LPG. Table 1 compares some physical propertiesof DME with those of the main constituents of LPG. DMEburns with a clean blue flame over a wide range of air/fuelratios [Fleisch et al., 1995; ICC, 2003]. Han et al. [2004]discuss emissions associated with DME cooking, andBizzo et al. [2004] briefly discuss DME-related safety is-sues.

5. Making DME from coal

DME is manufactured today in small-scale facilities bycatalytic dehydration of methanol [Naqvi, 2002], with themethanol typically made from natural gas. Technologiesare available for making DME more directly from carbo-naceous fuels without an intermediate step of methanolproduction, but the small size of todays DME marketshave not justified building direct conversion facilities,which require relatively large scales to achieve attractiveeconomics. Should large markets develop for DME as acooking fuel in China, it is likely that large facilitieswould be built for DME production from coal withoutintermediate methanol production (as evidenced by the

planned project in Ningxia province). China already hasextensive commercial experience with modern coal gasi-fication, the first step in converting coal to DME, in fa-cilities making hydrogen from coal for ammoniaproduction [Larson and Ren, 2003]. Gasification proc-esses are especially suitable for high-sulfur coal, since thesulfur appears in the gasifier product at high concentrationand thus can be removed relatively easily.

Larson and Ren [2003] have presented detailed processdesigns and production costs for large-scale DME produc-tion from coal, and Celik et al. [2004] have built furtheron Larson and Rens analysis. Figure 4 illustrates the ba-

sic process arrangement for converting coal to DME. Coalis first gasified in oxygen to produce a raw synthesis gas(syngas) containing primarily hydrogen (H2) and carbonmonoxide (CO). The gas is cooled and cleaned beforehaving its H2:CO ratio adjusted in a water-gas-shift reac-

tor (using a sulfur-tolerant catalyst) to an optimum valuefor subsequent catalytic synthesis of DME.

Synthesis of DME from syngas is similar in manyrespects to synthesis of methanol, an established commer-cial process[3]. Methanol is synthesized over a copper-based catalyst (e.g., CuO/ZnO/Al2O3), with the reaction

represented in a simplified way as:CO + 2H2 CH3OH (-90.7 kJ/mol) (1)

DME is produced by dehydrating the methanol (using a

-alumina catalyst):

2CH3OH CH3OCH3 + H2O (-23.4 kJ/mol DME) (2)

By combining some methanol and dehydration catalystsin the same reactor, reactions (1) and (2) can proceed si-multaneously, resulting in direct synthesis of DME. Thewater-gas-shift reaction is also involved, since methanolcatalyst is also an effective water-gas-shift catalyst:

H2O + CO H2 + CO2 (-40.9 kJ/mol) (3)

The single-step DME synthesis chemistry can be repre-sented 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 separatedby distillation from unconverted syngas. In the processconfiguration shown in Figure 4, the unconverted gas isburned in a gas turbine to generate electricity, some ofwhich is used to meet internal process needs and the bal-ance 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 timethrough the synthesis reactor. They describe an alternativerecycle configuration in which the unconverted gas isrecycled to the synthesis reactor, thereby increasing DMEoutput per unit of coal input while reducing electricityproduction. They conclude that the economics of once-through designs will often be more attractive than forrecycle designs.

The performance of a once-through facility for co-producing 600 MW of DME and 490 MW of electricityfrom high-sulfur coal is described in detail by Celik etal. [2004], who also present production cost estimates for

such a plant if built in the United States at a city gatewhere the delivered coal price is $ 1/GJ (or $23.5/t), orat a mine mouth, where the coal price is $0.5/GJ. Table2 shows Celik et al.s results. Additionally, Table 2 showsestimated production costs for plants built in China, where

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


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equipment manufacturing and plant construction costs arelower than for the United States. To estimate capital costsfor the Chinese plants, we use location factors fromWilliams and Larson [2003], as described in Note 3 ofTable 2. All costs shown in Table 2 are estimated for com-mercially-mature (sometimes referred to as Nth plant)

technology. Costs for Nth plants will be considerably be-low costs for the initial few units built. For example, seeGoldemberg et al. [2004a] for an analysis of cost reduc-tions observed for ethanol production from sugarcane inBrazil as that industry developed.

Table 2 highlights the importance of the electricity co-product credit to the economics of DME production. Toensure that such a credit can be garnered, an electricitypolicy will be needed in China that permits independentpower generators to sell electricity to the grid and receiveappropriate remuneration for the power. Reforms are on-going 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 coalthat could be displaced by producing DME for cooking.If cooking with DME is 60 % energy-efficient (as with

LPG) and if cooking directly with coal is 20 % efficient[Dutt and Ravindranath, 1993], then replacing 1 MJ ofdirect coal use would require converting 1.21 MJ of coalto DME[4]. In making this DME, 0.27 MJ of co-productelectricity would also be produced[5]. If this electricity hadbeen produced at a stand-alone power plant, it would have

required 0.63 MJ of coal (assuming 43 % coal-to-electric-ity efficiency). Thus, to deliver the same amount of cook-ing energy services plus electricity, coal requirementswould fall by about 25 %, from 1.6 MJ with direct com-bustion to 1.2 MJ with conversion to DME and co-productelectricity.

6. Cost comparisons

In evaluating the potential for using domestically-madeDME as a cooking fuel in China, the most relevant costcomparison is with LPG imported into China. To facilitatecomparisons, 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 someis produced domestically. The price of imported LPG

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

Coal price, $/GJ (LHV) 0.50 1.0

USA China USA China

Value assigned to co-product electricity, /kWh[2]

3.95 2.77 4.37 3.18

DME production cost ($/GJ, LHV)

Capital charge[3,4]

11.12 8.05 11.12 8.05

Operation and maintenance[5]

2.64 1.91 2.92 1.91

Coal feedstock 1.84 1.84 3.67 3.67

Electricity co-product (credit) -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

TOTAL, $/t LPG-equivalent ($/tLPGe)[6]

304 254 345 294

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-relatedportions 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).


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fluctuates with the world crude oil price. During the five-year period ending in mid-2002, the price for large cargoshipments of LPG delivered to Japanese ports rangedfrom 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 Chinas sea coast are similar to those for Japandeliveries[7]. The plant-gate price of LPG produced inChina at petroleum refineries or natural gas-processingplants is typically at or below the price at coastal termi-nals [CSTC, 2003]. In cases where LPG produced domes-tically at refineries or gas-processing plants in inlandprovinces is priced below coastal-terminal prices, the do-mestic LPG may be supplying remote markets for whichimported LPG is not competing because of transport anddelivery infrastructure limitations. In the future, thegreater part of growth in LPG demand is likely to be metby 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 interna-tional price.6.2. Wholesale DME prices

Increased demand for LPG-type fuel might also be metby DME. The estimated cost of producing DME from coalat the mine mouth in China is about $ 250/tLPGe (Table2). Since most of Chinas coal resources are located out-side of the coastal provinces, we may say that the infra-structure for delivering LPG or DME inside China willplay an important role in determining the relative costcompetitiveness of coal-derived DME vis--vis importedLPG or imported DME. (An alternative potential source

of DME is imported DME made from low-cost,stranded, natural gas. Naqvi [2002] presents a detailedcost analysis for the production of DME in the Middle

East and shipped by tanker to the Far East. He indicatesa landed cost for DME of just under $ 300/tLPGe at coastalterminals on the east coast of China[8].)

6.3. Bulk storage, transportation, and distribution costs

For either LPG or DME, there are three main infrastruc-

ture cost components relating to storage and delivery tousers: (1) bulk storage at a coastal terminal or productionsite, (2) transportation in bulk to a bottling facility, and(3) bottling and bottle distribution to retailers. The grossmargin[9] associated with bulk storage at a coastal terminalin China is $ 10-15/tLPG [Cui, 2004]. The gross marginfor bottling plus retailing of 15-kg or 50-kg cylinders is$ 60-100/tLPG [Cui, 2004]. This latter cost includes retaildistribution within 50-70 km of the bottling facility.

The cost of bulk transportation depends on whether thetransportation 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 theleast costly option. For shorter distances, rail transportwould likely be less costly than truck transport, but trucktransport will be the mode of choice where rail is notavailable. The cost per tonne for truck transport of LPG inChina for distances less than 1000 km is estimated to be

Ctruck = 9.83 + (0.051D) (5)

where Ctruck is in $/t and D is the transportation distancein km[10]. Equation 5 predicts transporting LPG a distanceof 1000 km by truck would entail a cost of $ 60.8/t or$ 0.061/t-km. For comparison, the levelized cost for de-livering 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 areused 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 $/tLPG),

expressed in constant 2002 US$, is given by PLPG = 94.4e(0.0463Poil)

.


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6.4. Cost comparisons

Figure 6 shows DME costs to users (in $/t) by cost com-ponent for mine-mouth production and for city-gate pro-duction. Production accounts for the largest share,followed by bottling/retailing. Bulk storage is a relatively

small cost component, and transport cost depends on dis-tance[12]. Costs are shown for three transport distances.DME made at the mine mouth and trucked 500 km to acity would cost slightly more than DME that is made atthe city gate and not subjected to bulk transportation.

Figure 7 shows the cost to users of imported LPG andof coal-derived DME as a function of the world crude oilprice and the assumed transportation distance and trans-portation mode. Several observations are noted.1. In coastal cities, imported LPG will be preferred to

coal-derived DME transported 1000 km by truck fromcoal-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 rela-tively low oil prices with imported LPG, which wouldneed to be transported a considerable distance. For ex-ample, assuming LPG is transported 1000 km by truck,local coal-derived DME would be competitive for oilprices below $ 20/bbl if no long-distance bulk trans-portation of the DME were required (B).

3. For inland areas more distant from coal resources,DME from coal transported by truck 1000 km from acoal-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 transportfor sufficient volumes. (In the short term, for shortertransport distances, and/or smaller volumes, pipelines

will be more difficult to implement and/or morecostly.) If imported LPG were to be transported 1000km by pipeline, it would compete with DME madelocally from coal at an inland location when the oilprice is below $ 23/bbl (D). Similarly, if DME weretransported 1000 km from an inland site by pipelineto a coastal city, it would compete with imported LPGwhen the world oil price is above $ 26/bbl (E).

7. Coal and income distributions in China

The above cost estimates for imported LPG and domesticcoal-derived DME can be considered in the context of the

distribution of coal resources and per-capita income of therural areas of the provinces of China. Rural areas arewhere the majority of the 1.06 billion people live whorely today on biomass or coal to meet cooking energyneeds, and thus where greater access to clean fuels is mostneeded.

Figure 8 shows that nearly all of the coal-rich provincesare located away from the coast, so that imported LPGentails transportation costs to reach those provinces. Thus,for most of the coal-rich provinces, the cost analysis inthe previous section suggests that DME will be cost-com-petitive with imported LPG when the world oil price ishigher 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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rural incomes are the richest in coal resources (Figure 9).The prospective competitiveness of coal-derived DMEwith imported LPG provides an opportunity for theseprovinces to add value to their coal by producing DMEboth for local consumption and for export to other prov-inces. The income and related economic activity thatwould be generated in this fashion are potentially fargreater than what could be generated by simply exportingthe energy raw material (coal in this case) out of the prov-ince. The West-East pipeline mentioned in Section 3 is anexample of exporting the raw material (natural gas) with-

out adding much value. Thus, the export of DME madefrom coal would be consistent with the objectives of theChinese governments Western Region Development Pro-gram (see www.chinawest.gov.cn).

On the basis of the analysis in this paper, coal-derivedDME will likely be competitive with imported LPG, evenwhen world oil prices are relatively modest. However, un-til a large DME market develops, imported LPG is likelyto set the market price for clean cooking fuel. Thus, whenthe world oil price is sufficiently high, there will be alarge difference between LPG price and DME cost (Figure7), resulting in potential windfall profits for DME sup-

pliers. Since clean cooking fuel (whether DME or LPG)may be unaffordable for many low-income households, awindfall-profits tax might be introduced on DME suppli-ers, with the tax revenue used to subsidize clean-fuel pur-chases by the poorest households.

8. ConclusionsAs the demand for clean cooking fuel grows in the futurein China, the fraction of LPG that China imports will alsogrow, because Chinas domestic oil and natural gas re-sources are limited. Imported LPG prices track interna-tional oil prices, so, as oil prices rise in the future,importing LPG will become an increasingly expensiveproposition for China. Moreover, as Chinese LPG demandgrows, global competition for available supplies of LPGwill intensify, ultimately contributing to higher interna-tional LPG prices. High LPG prices will limit the extent

to which imported LPG can meet Chinas domestic needs,especially the needs of inland provinces where addedtransportation costs are involved.

DME has properties very similar to LPG as a cookingfuel, and DME is potentially much more widely availablethan LPG in China because it can be manufactured fromcoal. The analysis in this paper suggests that coal-derivedDME in China could be competitive in many regions ofChina with imported LPG even at relatively modest worldoil prices.

For coal-derived DME to become a viable commercialhousehold fuel in China will require successful demon-

strations of the production, distribution, and utilization ofDME. Planning for at least one major coal-DME produc-tion facility is at an advanced stage in China, and somesignificant testing of DME as a household fuel has alreadytaken place there. The most economical approach to

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 areassumed 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.


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making DME from coal will be at facilities using once-through process designs that produce DME and an elec-tricity co-product. The ability of such facilities to sell theelectricity at appropriately remunerative prices is a re-quirement for the most attractive economics. Thus, na-tional policies that ensure that independent powerproducers will be able to sell electricity to the grid wouldfacilitate the growth of a coal-DME industry in China.With co-production of DME and electricity, there wouldbe significant savings (about 25 %) in primary coalneeded to meet a given demand for cooking energy serv-ices plus electricity.

Notes

1. Epidemiological studies suggest that acute respiratory infections (ARI), chronic obstruc-

tive pulmonary disease (COPD) and lung cancer (especially from coal smoke) are re-

lated 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,

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 pollut-

ants), 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].

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. FromTable 2, making 0.33 MJ of DME would require 0.33/(600/2203) = 1.21 MJ coal.

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).

Figure 8. The provinces of China, with coal-rich and low-income provinces highlighted. (Original map from Perry-Castaeda Library Map Collection,

University of Texas, Austin.)


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7. We do not have time-series data for the landed price of LPG at Chinas 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.

8. For a plant with the capacity to produce 1.3 Mt/year of DME (1183 MWDME,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/tDME, and non-

fuel 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/tDME, or $ 297/tLPGe.

9. The gross margin associated with bulk storage is the difference between the wholesaleprice 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.

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.

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 2500.12/(2.50.91246) = $ 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 pipe-

line, the O&M cost for it would be $ 2500.035/(2.50.91246) = $ 0.003/t-km. Thetotal cost for pipeline transport in this case is, therefore, $ 0.014/t-km.

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

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).

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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

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Suggestions should be sent to:

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