(South China Morning Post)
Updated: 2007-07-23 15:17

Beijing has launched a pilot programme forcing coal-fired power generators to contract out some of their desulphurisation equipment installation and maintenance work, potentially creating a multibillion-yuan industry.

The move, aimed at improving efficiency and compliance in use of the pollution control equipment by power generators, is part of Beijing's efforts to achieve the nation's sulphur dioxide reduction target.

In a joint circular issued this month, the National Development and Reform Commission (NDRC) and the State Environmental Protection Administration unveiled the three-year trial programme for power generators to commission specialist firms to conduct desulphurisation projects, China Power News reported.

The five national power producer groups will be the main participants, with each being required to put at least two projects out for tender.

"The contracting out model will help raise project quality and equipment utilisation rate, and speed up technological progress," the circular said.

The independent contractors will be responsible for the investment, construction, operation, maintenance and daily management of the desulphurisation. They will collect the 15 yuan per megawatt-hour tariff increment sanctioned by the NDRC and enjoy other preferential policies aimed at encouraging use of the equipment.

The NDRC has said that 137,000 megawatt s of existing plants would need to be fitted with desulphurisation equipment between last year and 2010 to cut sulphur dioxide emissions at existing plants by 61.4 per cent. Installation of the equipment is mandatory for new plants. Old plants can be fitted at the discretion of generators but they must pay pollution levies if they do not.

Desulphurisation equipment for each MW of capacity costs 200,000 yuan to 250,000 yuan, according to a research report by Citigroup head of Asia-Pacific utilities research Pierre Lau.

This creates a potential market from existing plants of between 27.4 billion yuan and 34.2 billion yuan in the five-year period. With the industry's capacity forecast by monopoly distributor State Grid Corp of China to grow to 852,000MW by 2010 from 622,000MW at the end of last year, the market is even bigger.

The number of desulphurisation equipment makers had mushroomed to more than 30 from a dozen about three years ago, cutting equipment costs by half in the process, Mr Lau said.

Generating firms are notorious for not turning on the equipment all the time to save power but mandatory installation of electronic monitors this year has improved compliance.