The Renewable Energy Project for Tongwei County, Gansu Province

This project, which is really two projects folded into one co-financed project, brings renewable energy to those farmers who ordinarily could not afford the investment needed to get this technology.  Tongwei County, is an area of extreme poverty in southeastern part of  Gansu Province.

With the generous support of the French company Areva, this project has allowed PlaNet Finance to work with a local microfinance organization to bring innovative loan products to the market.  The risk profile management of the new biogas loans is unique from the kind of loan taken out for investment in immediate production purposes. The first project covered biogas loans in three villages and the work of PlaNet Finance’s microfinance experts with the Tongwei Rural Development Association, which disburses the microfinance loans.

Suez joined the project slightly later, providing the funding for the revolving fund now being used in Tongwei to finance the biogas loans.

PlaNet Finance China would here also like to acknowledge the hard work of our lawyers at the Beijing office of Baker Botts,  who on a pro-bono basis worked diligently to find the appropriate channel for us to get approval to bring this foreign debt fund into Tongwei.

As of November 2007, the project got a big boost in support when the European Commission approved a co-financing grant for the Tongwei project, enlarging the geographical scope to 8 villages,  adding financing for technical agrarian consulting from China Rural Technology Development Center (our project partner) and the Ministry of Science and Technology, and financing environmental education for the main population concentrations in Tongwei County.

Project Background:

Tongwei County is located in the southeast of Gansu Province. It has a total population of 464,400 inhabitants, of which 48.45% are female. The area suffers from severe drought and although the total land area is 2,912.7 square kilometres, only 1,220 square kilometres can be actually used for farming, most of it is on terraced hillsides, inaccessible to modern farming equipment, and therefore can only be worked by animals and farmers.  The annual average net income is RMB 1,390 (EUR126 or USD200) per capita.
Its population mainly subsists on their harvests of Chinese herbal medicine, animal husbandry, and potatoes with an average grain yield of 310 kilograms per person. The total production value of the whole county is roughly RMB 30 million per financial year. Government support, in the form of subsidies for local public services, is valued at RMB 100 million and in order to promote the use of biogas in poor rural areas, the Ministry of Agriculture and the China Economic Reform Commission have initiated a national project: the Treasury Bond Biogas System Construction Project for Rural Areas.

The applicability of Biogas
Biogas installation only works in places where:

• Water is available for the fermentation process;
• Local farmers have plenty of animals generating the necessary waste materials to fuel the biogas systems;
• There is enough space to build biogas pits in farmers’ courtyards;
• Farmers who wish to install biogas equipment promise to stay at home when necessary and work on the digging for the biogas pit;
• There is a definite need for the energy generated from the biogas system;
• Local people and, especially,  local leaders are willing to work in support of adopting this technology.

This form of renewable energy technology links local animal husbandry, agricultural practices (through the use of the composted biogas waste used as organic fertilizer) and development of economic activities that add local value to local agricultural production.  It is also hoped that the switch from burning vegetable matter to using biogas burners will have a helpful impact on the environmental landscape, which in turn could help stave off the desertification process that has already affected many other parts of Gansu province. The soil in this part of China suffers from a high evaporation rate.

Tongwei and Biogas

Tongwei County is located close to the Yellow River. In those areas of the county where there is a plentiful supply of water (i.e. near to the river or in places of lower elevation where the water table is accessible from wells), and a ready supply of animal waste, it is possible to introduce biogas technology. Biogas energy generation creates a sustainable supply of energy for the countryside, reduces the pressure on the ecological system, and saves the farmers precious cash. Tongwei was selected for inclusion in the state subsidy programme from 2006. Most of the funding comes from Treasury bond funds collected by the central government, while about 3.5% comes from the local government.

The cost of the whole biogas package per household is about RMB 3,800, which included the time and labour of the technical support staff and construction team to adapt the animal pens, the toilet and the kitchen (referred to as the 3-in-1 conversion) and direct the farmers on the building requirements for the biodigestor pit. The Biogas Project pays for the technical and labour support, estimated at RMB 1,200 per installation, but local farmers have to find the remaining RMB 1,800. With the help of Areva, PlaNet Finance China is committed to developing the use of these renewable energy technologies and enabling poor local farmers to fund the balance not subsidized by the government, through RE-micro-credits.  The Tongwei County Rural Energy Resources Office (TCRER) is in charge of the expansion of the project’s coverage and its training programs.

The Biogas Systems

Using systems designed by the Rural Energy Research Laboratory of the Northwest Agriculture University in China, the project uses the waste from toilet facilities and animal pens to generate renewable energy. This energy can then be used to heat animal pens and greenhouses, and for cooking facilities. Each household will have a ‘continuous stirred hi-efficiency’ digester with a volume of 8-10 cubic metres. The digester is made of a mix of brick, concrete and PVC pipes. Organic matter is added automatically and is then expelled from the digester and mixed with various materials for further composting and then ultimately  used as a rich fertilizer. Above the digester is a 20-25 square meter pen that is kept warm in the winter by solar heating systems. The flooring and enclosing for pig pens needs to be modified in order to make them more resistant to pressure (part of the 3-in-1 conversion) . The biogas kit includes kitchen appliances adapted for biogas, as well as underground piping with rigid cladding for transportation of the gas below the frost line to outside buildings.

The role of Planet Finance China in the Joint Project:

Planet Finance China has six overall objectives in this project:

• To improve the living conditions of rural households in Tongwei County: such improvements include extended access to energy (cooking heat and, in some cases, lighting), greater diversification of agricultural products and therefore of households’ alimentation, boosted crop productivity leading to a surplus that would contribute to an increase in earnings, or greater food security in years of drought;
• To increase energy self-sufficiency in some of the more remote rural areas of Tongwei County: 400 households will become more self-sufficient and reduce their expenditure on grid-provided electricity.
• To promote entrepreneurial activities facilitated by low-cost energy sources: offering support for local market development to matching market demand and to create new product outlets. The female heads-of-households, who maintain the wellbeing of their families with scarce resources, will save the time formerly allocated for the daily collection of firewood. This time will be used more creatively once energy becomes readily available in the house.
• To slow down the environmental degradation of the target area: households will obtain more energy from biogas digesters and less from coal, kerosene, and firewood, therefore reducing CO2 emissions and increasing CO2 absorption through the recovery of trees and bushes. (The methane gas will be neutralized by burning.)
• To contribute to the success of a governmental-sponsored project to promote the use of biogas in poor areas: the Government Project Office in Tongwei will provide the cash required to buy the bio-digester system to the candidates of the government subsidy programme. This will lead to acceleration in the adoption of RE technology in the county and the project will meet its objectives.
• To create awareness about collective and individual responsibility for environmental conservation and the growing waste management and disposal.

The three-year PlaNet Finance/ArevaEC  project provides capacity building for Tongwei Rural Development Association, and creates a model for financing alternative energy technologies in poor rural areas through micro-credit.  As of the summer of 2007, it had been that TWRDA’s needs were as follow:

• To standardize its loan offerings and design products to better complement its clients’ needs;
• To review its operational procedures and methods, in order to minimize financial risks and losses;
• To provide more training sessions on microfinance to the staff and to reinforce the training of the new staff for the new village areas;
• To more completely computerize its financial and information management in order to improve the quality of loans and the overall efficiency of its operations.

In order to solve these issues, Planet Finance has designed a Technical Support Project under which PlaNet Finance’s international and domestic experts have carefully studied the project and made recommendations to improve TW Association’s loan-granting process, recommendations which, for the most part, have now been adopted. They include the development and editing of improved and updated operations manuals, the organization and exposure of staff to different kinds of training in different formats, and the improvement of the management of data.

Over the remaining life of the project, the following will be delivered to TWRDA:

• The delivery of 4-5 participatory-style training sessions, with content focusing on accounting, management, and the improved use of technology;
• Improved documentation in support of the micro-credit operations: loan methodology and operational procedures, financial systems, loan-tracking forms and accounting reports, manuals for human resources management, policy guidelines for risk management, and reports on impact evaluation;
• A proposal for fund-raising written with the Association in order to eventually find the funding needed for the expansion of capital;
• A dual Chinese/English language website to promote the Association and its activities; One to three translated international microfinance case studies.
   

Areva, world energy expert, offers its customers technological solutions for highly reliable nuclear power generation and electricity transmission and distribution.  65,000 employees are committed to continuous improvement on a daily basis, making sustainable development the focal point of the group’s industrial strategy.
Suez, an international industrial and services Group, designs sustainable and innovative solutions for the management of public utilities as a partner of public authorities, businesses and individuals. The Group aims to answer essential needs in electricity, natural gas, energy services, water and waste management.
Baker Botts : from its strategically placed Asian base in Hong Kong, Baker Botts is positioned to guide its clients through Asia's rapid economic development and increased demand for energy, resources and finance. China continues to dominate Asia's meteoric rise and the firm's Hong Kong and Beijing offices have built a strong and diverse practice that delivers sophisticated and time sensitive expertise on resource intensive transactions in China.
The European Commission co-financed the Tongwei project extension under its NGO-Co-financing line of funding.  The main aim of the NGO Co-financing line of funding  is to reduce poverty through support to disadvantaged in developing countries designed to meet their basic needs, to improve the quality of their lives, and to reinforce their own development capabilities.

In 2006, inspired by PlaNet Finance Japan, PlaNet Finance China applied for a Japanese Government line of funding related to environmental projects.  Much to our surprise, we were honoured to receive USD86,194 via the Japanese Embassy for Tongwei County. The point of the funding under the project title 甘肃省通渭县中日友好沼气池建设项目的赠款 or “Gansu Province Tongwei County Sino-Japanese Friendship Biogas Digestor Construction Donation  Program”  was to reach 170 of the poorest households that wanted to have a biogas installation, but could not afford to take out a loan.  Such installations were donated to households in villages where no subsidy existed, and where the microfinance operations of the Tongwei Rural Development Association have not yet reached.

The “Gansu Province Tongwei County Sino-Japanese Friendship Biogas Digestor Construction Donation  Program” is part of the larger Japanese program called 利民工程项目or “Benefit the People Engineering Program”, which includes both environmental and education programs in underserved areas of China.  Above is a picture of Gabrielle Harris, Executive Director of PlaNet Finance China, signing the Tongwei agreement with Mr. Isa Shinichi, first secretary of the Economic Section of the Japanese Embassy, in the Gansu province capital of Lanzhou
 

Biogas Loan Client Testimony

Wang Shoulian, Local Microentrepreneur
Si He Village, Jichuan Township
July 2008
"The technical people came to my house to train me on how to use the biogas. They address safety issues in the trainings. After the training we were able to manage it ourselves. I was able to get the biogas because I got support from the State Treasury Subsidy Program and I was able to take out a loan. As part of the program, we also have women’s small loan groups that we hold meetings at the new loan centers and have trainings there.

Biogas has brought a lot of good things. We can save on the cost of coal and electricity; the less coal we burn, the more money we save. What’s more, we can use the biogas residue as fertilizer so we save more money on fertilizer. And then the other thing is that when we come back from working in the fields, we can make our meals right away. The house is cleaner and healthier."