MARCH 2016 ABOUT THE AUTHOR DIANJUN ZHANG Gaining Wealth from a Neighbor’s Waste: is the Operations Officer and Se- nior Technical Specialist for IFC’s CHUEE Finance Program. He Synergy for Sustainable Development joined the program in 2006 and has 25 years of experience work- What if one company’s waste can be another’s treasure? Read and learn ing on energy efficiency and re- how the IFC China Energy Efficiency Program helps Chinese companies form newable energy projects in many countries, including Ban- mutually beneficial partnerships for efficiency improvements and better gladesh, China, England, Fin- land, Mongolia, Pacific Islands, waste management. Vietnam, and other frontier re- gions. He also has provided cross-technical services to IFC’s BACKGROUND of discharging these resources! The strat- Infrastructure and Natural Re- egy converts waste into something more sources Department, to IFC’s Since 2006, the IFC China Energy Effi- useful, such as production materials or en- Manufacturing, Agribusiness, and Services Department, as ciency Program (CHUEE) has been part- ergy. This presents a triple win: good for well as to IBRD. nering with banks to help increase their the company, its neighbor, and the envi- APPROVING MANAGER loan portfolios for energy efficiency (EE) ronment. For instance, blast-furnace slag, Rachel Freeman, Manager, Financial Institutions Group and renewable energy (RE) investments a byproduct of iron and steel production, Advisory Services. through capacity building of bank staff can be used by a cement factory to pro- and providing technical assessment sup- duce high-quality concrete. port. To date, CHUEE has helped Chinese banks evaluate over 222 companies and Below are descriptions of three real has lent over $900 million to fund EE CHUEE projects where companies part- and RE projects. This translates to 45.3 nered with each other to maximize ef- terawatt hours of energy savings and a ficiencies and minimize waste. Each one reduction of 20 million tons of green- includes concepts and approaches that house gas (GHG) emissions annually. can be replicated in other circumstances. A typical technical assessment means an LESSONS/EXAMPLES evaluation of a company and its own op- erations for EE or RE investment poten- Example 1: Use exhaust gas from tial. Through the years, CHUEE and its a power plant to dry sludge partner banks have seen value in “look- of a neighboring wastewater ing over the fence” and helping iden- treatment plant. tify synergistic opportunities between neighboring companies. Such partner- A municipal wastewater (MWW) treat- ships could result in more savings, in- ment plant in Shenzhen produces 400 creased operational efficiencies, and im- tons of sludge per day during its initial proved waste management. treatment phase. This sludge needs to be dried before it can be used for other The mutually beneficial partnership works purposes, such as landfill. Sludge treat- this way: One company uses a neighboring ment accounts for one-third of construc- company’s wastes as input for production tion and operating costs of the whole or other activities, which results in savings wastewater treatment plant, and con- and a reduction of its carbon footprint. In sumes 5 million cubic meters of natural turn, this saves the neighbor the burden gas a year. (See Figure 1.) SMARTLESSONS — MARCH 2016 1 Figure 1: Process of Sludge Drying plant for its flue gas waste en- ergy use. Aside from the cost savings, the project helps the planet by avoiding 13,750 tons of GHG emissions and prevent- ing groundwater and soil pollu- tion by drying 140,000 tons of sludge. Example 2: Waste heat from sulfuric acid production produces steam for a neighboring tire factory. An industrial plant needs to subject imported sulfur to an extremely hot reaction process to produce sulfuric acid. The high-temperature gases must be cooled either by a seawa- ter cooling system, which has a negative impact on the ocean ecology, or through installation Next to the MWW plant is a combined heat power of heat-recovery boilers to re- (CHP) plant with a 4 x 180 megawatt natural gas-fu- cover waste energy for steam generation. The indus- eled power-generation capacity. Flue (exhaust) gas of trial plant, B1 Industrial, invested in the waste-heat one unit of CHP is enough to be used to dry sludge recovery project to increase its production capacity without deteriorating its organic and avoid seawater pollution. ingredients. The two companies talked and ar- ranged for the CHP plant to use the flue gas to dry the sludge of the MWW plant. Four units of rotary dryers were designed and installed, with an investment cost of 149 mil- lion Chinese renminbi (about $22.8 million). The project was financed in 2008 by Industrial Bank, a CHUEE partner bank. The project enables the MWW plant to save millions of cubic me- ters of natural gas, which trans- lates to 19 million renminbi in fuel cost savings. The CHP plant ben- efits from the annual 5.12 million Waste energy recovery system. renminbi income from the MWW 2 SMARTLESSONS — MARCH 2016 A neighboring tire company needs 80 tons of steam also saves 3 million renminbi a year by purchasing the per hour to meet its production targets. All steam surplus nitrogen from the industrial gases producer— needed by the company used to be supplied by a which in turn gives the latter a potential income of coal-fired power plant, priced at 200 renminbi per up to 1.3 million renminbi per year. ton. Now the tire company purchases steam for its rubber production from B1 Industrial for 130 renmin- Moreover, the project avoids flaring of excess BFG bi per ton. and venting of nitrogen into the atmosphere. Over- all, the project is expected to avoid 28,420 tons of Industrial Bank financed the project, leading to mul- greenhouse gas emissions. The project was financed tiple wins for the stakeholders. The industrial plant by the Bank of Rizhao in December 2015. now enjoys more efficient processes with a lesser negative impact to the environment, while earning 15 million renminbi annually from the sale of steam. The tire company now has a cheaper and more reli- able supply of steam. Most importantly, seawater thermal pollution is avoided, and the project is able to reduce at least 40,000 tons of GHG emissions by producing steam from waste heat and not from coal. Example 3: A chemical factory puts its neighbors’ waste steam and nitrogen to good use. A chemical factory uses steam, water, nitrogen, and compressed air to produce its main product. Before the project, this factory produced these services with- in its operations. Steam was produced by a coal-fired steam boiler, while nitrogen was produced through a power-intensive process that consumed over 1,000 megawatt hours per year. A neighboring iron and steel company, RZ Iron & Steel, has an abundant supply of surplus blast furnace gas (BFG), which could provide fuel for a new steam boiler for the chemical factory. Also within RZ Iron & Steel is an industrial gas pro- ducer that produces surplus nitrogen as a byproduct of its oxygen production for steel processing. If not used, this nitrogen is considered waste and is vented into the atmosphere. Coal-fired boiler to be closed. With technical support from the CHUEE team and the Bank of Rizhao, the stakeholders were able to un- CONCLUSION derstand the benefits of synergizing to improve effi- ciency and minimize waste. Using BFG from RZ Iron & Conventional efficiency assessments cover only one Steel for steam production saves the chemical factory company’s operations and generate recommenda- 100 renminbi per ton of steam and avoids consump- tions that would benefit that company. The project tion of over 12,000 tons of coal. The chemical factory examples presented here showcase success stories of SMARTLESSONS — MARCH 2016 3 companies that went beyond their walls to seek innovative solutions—solutions that generate maximum benefits for the stakeholders and enable a bigger contri- bution to climate change mitigation. This approach to client identification would help expand the partner banks’ green portfolios, therefore enhancing the value that IFC climate finance products bring to financial institution clients. By working with financial institutions, IFC plays a leading role in promoting sustainable development among indus- tries in developing countries. For over nine years, the CHUEE team has helped partner banks in China do more for their clients by helping identify energy and resource efficiency investment oppor- tunities that help improve businesses through better operations, maximized profits, and reduced negative impact on the environment. DISCLAIMER SmartLessons is an awards program to share lessons learned The author visiting a plant. in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions Photos in this SmartLesson are by the au- expressed in this paper are those of the author(s) and do not thor. necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the program at smartlessons@ifc.org. 4 SMARTLESSONS — MARCH 2016