ADB signs $250 million loan deal for China geothermal heating

SHANGHAI (Reuters) - Asia Development Bank (ADB) said on Thursday it would provide a $250 million loan to Sinopec Green Energy Geothermal Co (SGE) and Iceland’s Arctic Green Energy Corp (AGE) to develop clean geothermal heat in smog-prone northern China.

SGE is a joint venture set up by China’s state-owned oil giant Sinopec and AGE. The project will focus on the Beijing-Tianjin-Hebei region, but SGE chairman Liu Shiliang said the partners plan to “replicate their successful collaboration across Asia.”

Geothermal energy, mainly derived from hot underground springs, generates a quarter of Iceland’s electricity. China had planned to develop geothermal energy in the Beijing-Tianjin-Hebei belt as part of its anti-smog campaign, the country said in guidelines published in January.

A 2015 survey by the Ministry of Land and Resources cited that shallow- and medium-depth geothermal resources in 336 Chinese cities were equivalent to around 1.9 billion tonnes of standard coal per year.

The levels of utilized geothermal resources amounted to around 21 million tonnes of standard coal last year, delegates to China’s parliament said.

Coal-fired winter heating has been a major source of air pollution in the region, and an ambitious program to convert more than 5.5 million households from coal to cleaner-burning natural gas ran into difficulties late last year as a result of gas shortages and infrastructure failures.

Issues with the conversion program had left a small number of households without heat amid frigid weather conditions, China’s environment minister Li Ganjie admitted on the sidelines of China’s latest annual parliamentary session in Beijing earlier this week.

China has been looking at other alternative sources of heating in the region and is hoping to make use of nuclear power, with plans to deploy small-scale “district heating reactors” soon.

Reporting by David Stanway, Editing by Sherry Jacob-Phillips