China's Surprising Clout in Cleantech

If President Barack Obama succeeds in pushing through climate legislation in 2010, U.S. electric power companies could end up having to pay around $20 for each ton of carbon dioxide their plants pump into the atmosphere. To reduce their exposure, energy companies are scrambling to perfect technology known as carbon capture and storage (CCS). The key technologies already exist, but the price could be prohibitive: A coal-burning power plant fitted with today's equipment would face recurring costs of about $125 per ton of CO2 it buried underground, predicts market analyst New Energy Finance.

To help drive down CCS costs, U.S. companies are enlisting unexpected partners—in China. Long stigmatized as an environmental laggard, the Chinese government is funneling resources into green technology, including "clean coal," both to improve its environment and to exploit green markets around the globe. In some key areas, "China is now more advanced," says Armond Cohen, executive director of the Clean Air Task Force, a Boston-based green advocacy group that has linked up a dozen Chinese and U.S. utilities to collaborate on cleaner coal processes.

China Huaneng Group, the nation's largest power producer, is leading the Chinese thrust. Its Beijing Cogeneration Power Plant showcases a system for collecting and compressing CO2 from a variety of waste gases. The CO2 is then sold to a bottler that uses it to carbonate soft drinks.

A bigger carbon-capture operation using the same approach should come on line this year in Shanghai. And this fall, Huaneng signed a technology licensing deal with Charlotte (N.C.)-based Duke Energy (DUK), which intends to use many of the techniques at a 630-megawatt facility it is building in Edwardsport, Ind. Set to start operations in 2012, the plant will convert coal into gas before burning it, snaring some CO2 before it goes up the chimney. Duke aims to bury some of the waste underground.

In a deal announced Nov. 18, America's largest coal producer, Peabody Energy (BTU), bought a 6% stake in GreenGen, a $1 billion coal-fired power plant capable of CCS due to come on line in Tianjing in 2011. Being built by Huaneng and a group of other Chinese utilities, the project is also being designed as an R&D center for carbon management technologies. GreenGen shows China can become "the world's leading clean-coal provider," said Peabody CEO Gregory H. Boyce, in a release.

Important know-how is also flowing from the U.S. to China. In September the largest U.S. utility, Southern Co. (SO), inked a deal to deploy in China an advanced process called TRIG, for Transport Integrated Gasification. It's especially good at neutralizing low-grade, CO2-laden coal. "There is a lot [of tech] to share," Cohen says.

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