Business Tianjin Magazine

On a typical night in December, Chen Lizhen sits in front of a TV in her apartment in Shanghai, fully

dressed in a thick coat and sipping a cup of hot tea.

As the weather girl on TV cheerfully reminded her audience of another cold front already on the way

from somewhere in the far north, the face of the 51-year-old former textile worker turned bleak.

"It means great discomfort in the coming week, and there is nowhere to escape (from the cold), even if

you stay indoors," said Chen, glancing at the thermostat on the wall that registered a temperature of about

8 C.

"Sometimes I envy people living in the north because their rooms are very warm in winter because of their

central heating system," said the woman, who, like hundreds of millions of residents in the south of China,

has to rely on devices such as electric heaters to keep warm in winter.

Although the heavily subsidized central heating service provided to northern families may not be a

universal solution to all living in the south, it is at least an option, she said.

The call to expand government-backed heating services to the south has never been as loud as this year,

when the coldest winter in 28 years hit the country.

The mercury has been at an average of -3.8 C around China since November, or 1.3 degrees lower than

the average for this period.

Along with the individuals who have been shivering through the cold and damp winter weather in their

southern homes, People's Daily and Xinhua News Agency have urged regional authorities to take action,

with the media outlets' calls being interpreted as a view that is supported by the central government.

The Ministry of Housing and Urban-Rural Development said on Wednesday that decentralized and

regional heating systems are encouraged in areas that have sweltering summers but cold winters.

These areas involve regions in 14 provinces or municipalities in the south with a population of about 100

million, Xinhua quoted an unidentified ministry official as saying.

In these areas, residents are more uncomfortable than those living in the north when the mercury

plummets below 5 C outdoors, and it is necessary to provide these regions with heating services, the

ministry said.

The National Development and Reform Commission, China's top economic planner, said earlier this month

that it has set up a research group to study the feasibility of a heating program in the south.

"It is the first time the issue was raised at the national level," said Lin Boqiang, head of the China Center

for Energy Economics Research at Xiamen University.

A geographical line drawn in the 1950s to divide China into southern and northern parts has long been

outdated and should be scrapped, he added.

But the question is: Where will the governments in the south find an energy source, and who will bear the

costs of putting the heating facilities in place?

The Housing and Urban-Rural Development Ministry said electricity and renewable energy-powered

heating should be promoted in the south, and the use of coal and a centralized heating system, both of

which are in the north, should be discouraged.

The annual burning of 26 million metric tons of coal — which will happen if the south copies the traditional

highly centralized heating system in the north — will discharge 73 tons of carbon dioxide, 52,000 tons of

sulfur dioxide and 12,000 tons of dust into the atmosphere, according to the ministry.

But it did not specify if there will be any subsidies from governments to help develop costly renewable

energies such as wind, hydropower, geothermal, solar and tidal.

Natural gas is another alternative and seems more practical in the south, but analysts said stronger

demand from China may rattle international energy markets and push up prices of liquefied natural gas.

Most regional authorities said they have yet to research the subject, suggesting there will not be an

immediate solution to the problem of heating in the south in the future.

Nanchang, capital of East China's Jiangxi province, is one of the handful of local governments to have

encouraged heating powered by renewable energy.

But only an area of around 1 million square meters — a tiny share of its total area in the city with 5 million

permanent residents — is heated by solar or geothermal energies.

The Qinling Mountains and the Huaihe River have long been recognized as the geographical line dividing

northern and southern China. It is also where the government drew a line to decide where they would

provide central heating when fuel of all kinds was in short supply.

But the frequency of extreme weather caused by global warming has blurred this outdated geographical

line, and prompted questions on whether it is proper to provide government-backed heating services only

in northern areas, including Beijing and Tianjin, for up to six months a year.

Also, economic prosperity has enriched regional governments and significantly raised the living standard of

a large segment of the population.

Most urban residents live in nicer homes than they previously did, and their aspiration for a better quality

of life is expected to intensify in tandem with rapid economic growth.

There's no doubt that government-backed heating services are needed in the south, experts said. But

rather than a universal solution such as a highly centralized heating system powered mainly by coal, the

heating method in the south should take into account climate characteristics, energy structure and lifestyle.

A highly centralized heating system requires a huge investment, consumes huge amounts of energy and

generates a large amount of waste, said Jiang Yi, director of the Center for Energy Saving Studies at

Tsinghua University. In this model, about a third of the heat is wasted during the transmission process in

the pipes.

In Beijing, heating is provided for about four and a half months, and the heating plant can use the rest of

the year to check heating installations and repair pipes, he said.

However, the shorter period of cold weather in the Yangtze River Delta region and the southern areas

will mean the heating plants spend a longer time lying idle, and could lead to a high depreciation rate of

installation, he added.

Also, people in southern China like to open windows in the winter. If the heating system is applied and

residents keep this habit, the energy consumption will be massive, he said.

Coal provides the bulk of the energy in the north, but natural gas is more popular in southern areas. A

sharp rise in the use of the fuel because of heating demands will result in a major increase on the price of

liquefied natural gas on international markets, analysts said.

If authorities develop a natural gas-powered central heating system in the south, China will see a jump in

demand for LNG and push up the demand from Asia, said Wu Libo, executive director of Fudan

University's Center for Energy Economics and Strategies Studies.

"There would be a head-on competition for more imports and pricing power with countries like Japan and

South Korea," she said.

It's estimated China needs to import 49.9 billion cubic meters of gas in 2013. The world's top LNG

importer, Japan, whose nuclear industry has been crippled since the 2011 Fukushima incident, will need 72

billion cubic meters in 2013, Goldman Sachs forecast.

"If there is a rapid increase of demand for LNG from China, a great leap of the fuel's price on

international markets is expected," Wu added.

Experts have also called for more allowances from governments to develop renewable energy-backed

heating methods.

Some areas in the south have developed community-based heating systems. One of them, Anting new

township in suburban Shanghai's Jiading district, offers a peek into the pros and cons of the services

fueled with natural gas.

It is one of a handful of communities in Shanghai with in-built heating, which it has had since 2006.

When the wind was howling outside in mid-January, residents remained comfortable in 24 C rooms.

However, Li Man, general manager of the service provider Anting New Township Energy Technology

Service, said the system generates a lot of wasted energy.

The occupancy rate at the community stands at about 40 percent, she said. But as long as one household

is using the service, the boiler needs to work at full capacity.

"When the majority of the families may not want the heat, the heat is still supplied in the pipes and the cost

is the same to offer the heat to one household as it is to the entire building," she said.

The system consumes a huge amount of energy every year. The community needs about 1 million cubic

meters of natural gas for heating in winter and cooling in summer.

The fuel is transported from Northwest China's Xinjiang Uygur autonomous region under the country's

West-East natural gas transmission project.

There will be a huge demand for natural gas if the 20 million residents in Shanghai are offered a similar

service, Li added.

Environmental concerns are forcing authorities to think about a clean heating approach in populous cities

like Shanghai, Wuhan and Nanjing, especially after heavy smog and haze shrouded a large swath of China

earlier this month as air pollution hit record levels.

Environmentalists attributed the heavy concentration of PM2.5 — air particles smaller than 2.5 microns

and able to enter the lungs and even the bloodstream — to industrial emissions, car exhausts and coal

burning for winter heating.

As some provinces in the north are dismantling small heating boilers and replacing them with green

systems to reduce air pollution, the simple duplication of coal-powered heating system may bring

disastrous environmental problems to the south, experts said.

Zhou Rong, the project manager on climate and energy studies at Greenpeace, an environmental NGO,

said southern provinces will soon be enveloped in smog similar to what the north experienced earlier this

month if it develops a heavy reliance on coal as the major source of central heating.

"The murky hazes that hit the northern parts of the country, such as Beijing and Hebei province, is partly

caused by the surge of coal used in the central heating system," she said.

Studies show that PM2.5 is most prevalent in the combustion of coal, she added.

Sun Ming, Asia-Pacific representative for Clean Air Task Force, a non-governmental environmental

consulting firm based in Boston, Massachusetts, advocated for better technology to reduce emissions if

coal has to be used.

"With an increase of 10 to 15 percent on costs to improve technology, pollutants emissions from coal

burning can be greatly decreased," he said.

Compared with the harm caused by air pollution, rising costs, to some extent, are a good deal, he said,

adding that authorities should set concerns about temporary economic losses aside.

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