China and U.S. Energy Giants Team Up for 'Clean Coal'

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In September, Duke became the first U.S. utility to link with Chinese counterparts, announcing two deals. Working with ENN Group, one of China's largest, privately held, diversified energy companies, Duke will co-develop a portfolio of energy technologies spanning biofuels, clean-coal methods, natural gas, smart grid, and carbon-capturing algae. In a second deal, China Huaneng Group—the nation's largest power producer, with 89 gigawatts of generating capacity—will join with Duke, the third-largest U.S. utility, with 35 gigawatts of capacity, to focus on cleaner ways to burn coal.

Carbon Capture

Beijing officials have tapped Huaneng to lead the country's push into low-carbon coal technologies. At its Beijing Co-Generation Power Plant, the company built China's first CO2-capturing demonstration facility. There, an Australian-designed system collects and compresses carbon dioxide from waste gases. The CO2 is then sold to a bottler that uses it to make the fizz in soft drinks. A larger-scale CO2-capturing operation is due to come on line at a coal-fired power plant in Shanghai later this year.

Duke hopes to pick up some carbon-capture tricks from its Chinese partner for use at a 630-megawatt facility that the Charlotte (N.C.) company is building in Edwardsport, Ind. Due to go online in 2012, the plant relies on a process that converts coal into a gas before combustion, so CO2 can be snared before it goes up the chimney. With backing from the Energy Dept., Duke will spend $17 million to study carbon capture at the site and has proposed spending $121 million more to learn if up to 60% of the plant's CO2 stream could be stored permanently in nearby geological formations.

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 2011. Being built in Tianjing by Huaneng and a group of other Chinese utilities, the project is planned 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.

Transport Integrated Gasification

Gasification is one area where China is eager for more advanced U.S. methods. In September, the largest U.S. utility, Southern Co., inked a deal to deploy an advanced form of the process, known as Transport Integrated Gasification, or TRIG technology, for the first time. TRIG has caught the attention of Chinese utilities because the process burns all types of coal more cleanly but can also handle the more CO2-laden, low-grade varieties. "China has an abundance of soft, dirty coal, and they're going to burn it," says CATF's Cohen. "It's critical to help develop cleaner ways for them to do so."

Invented by the Atlanta company, along with KBR (KBR), the Energy Dept., and other partners, the technology is being licensed to Beijing Guoneng Yinghui Clean Energy Engineering. It will be installed at a 120-megawatt power plant operated by Dongguan Tianming Electric Power in Guandong Province. The rollout promises to speed up Southern Co.'s green efforts back at home. Its subsidiary, Mississippi Power, has applied for regulatory approval to build a 582-megawatt plant using TRIG technology in Kemper County, Miss. The proposal includes plans to capture and sequester 65% of the plant's CO2 output.

New techniques are flowing from China to the U.S., too. San Antonio-based Valero Energy (VLO), the largest U.S. refiner, won a license in October 2008 from East China University of Science & Technology to adapt specialized gasification methods that convert petroleum coke—a by-product of oil refining—into fuel for electric power plants. The deal is the first time a Chinese company has licensed a large-scale suite of chemical technologies to the U.S., says Cohen.

Behind the scenes, U.S. utility execs admit that much as China's technology helps, the nation's crucial input may be the mountains of capital it is plowing into advanced coal plants to fund the rapid development of low-carbon technology, knowhow that in time is likely to help the U.S., too. According to market researcher New Energy Finance, if a full-scale commercial carbon-capture and storage, or CCS, coal plant were built today, costs would run around $125 per ton of CO2 stashed in the ground. Incentives outlined in the American Clean Energy & Security Act, passed by the House in June, would cut that price to around $96, estimates Milo Sjardin, head of U.S. carbon markets research at New Energy Finance. It's a good step, but that figure is still five times higher than the $20 range lawmakers are aiming for under cap-and-trade policy.

To drive the price of CCS technology lower, lawmakers should be encouraging more collaboration with the Chinese, not fighting it, adds Sjardin. As President Obama pushes for agreements that will help him in Washington and Copenhagen, coal companies, utilities, and other carbon-intensive industries may be rooting for his success.

Aston is Energy & Environment editor for BusinessWeek in New York.

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