On the evaluation of the “coal-to-gas” project in China: A life cycle cost analysis

Abstract

The “coal-to-gas” project is a key strategy to reduce air pollution in China through switching the source of residential heating energy from bulk coal to natural gas. Accurate cost accounting can facilitate household heating decisions in different regions and support the design of “coal-to-gas” subsidies. This study intends to comprehensively evaluate the life cycle cost of “coal-to-gas” project and analyze the variations in adopting two alternative heating systems. According to the results, it approximately costs a typical household adopting radiator heating 2691 yuan per year, 181 yuan lower than a radiant floor heating case. Specifically, annualized capital costs account for 52 % of the total cost of adopting radiant floor heating, while annualized operating costs account for 55 % in a radiator heating system. The results also vary across regions. Due to local conditions, the cost is the highest in Taiyuan at over 3000 yuan and lowest in Zhengzhou at below 2500 yuan. Based on the sensitivity analysis, we further find that the life cycle cost is the most sensitive to temperature changes, with an elasticity between 0.6 and 0.7. The elasticities of natural gas price and heating days with respect to total cost are both around 0.5. When the building area exceeds 100 m2, its change has limited impact on the total life cycle cost. Finally, policy implications for the “coal-to-gas” project are proposed from the perspectives of equipment cost and fuel cost.