Ambitious Energy Entrepreneurs Are Heading to China

What is the future of coal?
Nov. 21 2012 3:19 PM

Want Cleaner Coal? Go to China.

Why American entrepreneurs are testing their technology overseas.

Coal fired-power station at the center of an environmental protest where villagers have been clashing with police.
A coal-fired power station in China's Guangdong Province

Photo by Mark Ralston/AFP/Getty Images.

BEIJING—On a typical day, the air above China’s big cities is so thick it seems chewable—a hazy gray soup that gets its consistency and color from the soot belched by the biggest clump of coal-fired power plants on the planet. 

To a growing number of U.S. entrepreneurs, that gray looks like green: the color of money.

These Americans, ranging from startup inventors to big-utility chief executives, see China as a testing ground for technologies that burn coal more cleanly—technologies they hope one day to deploy around the world. They’re banking on a market for a new generation of cleaner coal-fired power plants in the United States many years from now, when a sizable chunk of the nation’s aging coal-fired power plants is likely to wear out and need replacing. But they see little appetite from U.S. investors or policymakers for the risk involved in trying to scale up these technologies today. 

So, like all ambitious peddlers of newfangled widgets, they’re going where the buyers are: in this case to China, which over the past decade has become the biggest coal burner and carbon-dioxide emitter on Earth. They’re having a wild ride. But whether they’ll clean up coal on the massive scale that would be needed to affect the global environment, international energy experts say, is far from clear.

China, industrializing a century after the United States did, now burns about half the coal consumed each year in the world. The resulting pollution literally takes the breath away. A visitor stepping off a plane after landing at the Beijing airport on a winter night is taken aback by what smells like a forest fire but turns out to be just the urban air. The visitor is lucky, of course. Many locals walking or biking along city streets strap surgical-style masks over their mouths to protect their lungs. The masks often are decorated with snazzy patterns and bright colors—fashion accessories of a society soaked in soot.

China’s leaders have concluded this state of affairs is intolerable. Their concern is only partly about the esoteric prospect of climate change. It’s largely about something more immediate: the political instability that could come from a population of 1.3 billion people who are sick and tired of coughing.

In the United States, a mature economy where electricity consumption is basically flat and domestic natural gas is newly plentiful, “clean coal” has been reduced to a political totem—a symbol to environmentalists and industrialists alike of the elusiveness of whiz-bang technological fixes for global warming. But in China, power demand is growing at double-digit annual rates, and most of that juice is projected to be squeezed from the black rock for years to come. Clean coal—or, at least, cleaner coal—is seen here as something more urgent: a necessity for the country’s physical health and thus for its continued economic power.

In late October, China’s central government issued an energy-policy white paper laying out the breadth of its coal-fired ambition. The government wants to bring cheap power to China’s masses by stamping across its territory “large open-pit and super-large coal mines” as well as a new fleet of bigger coal-fired power plants. And yet, according to the white paper, the government wants to minimize the amount of smog-causing pollution and carbon dioxide that all this new coal-burning, or “thermal,” infrastructure will belch out. “China actively promotes green thermal power generation,” the paper said with a tinge of Madison Avenue flair.

This Chinese campaign explains why Frank Alix, a 55-year-old New Hampshire engineer who spent years developing a clean-coal technology he assumed he’d roll out on his home turf, has now shifted his focus almost entirely to China. 

“We were not able to bring it to market in the U.S., because the market never materialized,” Alix says. His company, Powerspan Management Co., is one of several firms that have come up with processes they say have the potential to remove carbon dioxide from the exhaust of coal-fired power plants at prices that could make the technology competitive at the massive global scale necessary to meaningfully affect the environment.

The U.S. market has failed to take off, Alix says, largely because the country so far has decided not to slap what amounts to a tax on the emission of carbon dioxide. Such a tax—a controversial idea amid a recession—would raise the price of carbon-intensive electricity. Thus, its backers say, it would fuel a shift to cleaner formers of power.

Beijing, unlike Washington, isn’t debating the intricacies of a carbon tax. Run by a one-party government, powered by state utilities, and financed by state banks flush with cash, China is moving ahead with a clean-coal push on a scale that, Alix says, “no one else is doing.”

Powerspan has inked a joint-venture deal with one of those state utilities, China Huaneng Group. In an experiment that has run for several years, Huaneng has been capturing a tiny portion of the carbon dioxide produced from two of its coal-fired power plants in Beijing and Shanghai and selling the gas to the food industry, which uses it to fizz up beer and soft drinks, says Xu Shishen, head of Huaneng’s Clean Energy Research Institute. 

Other companies around the world have been capturing carbon dioxide and selling it for use in food and drink. So far, however, these operations are far too small to make any real dent in global greenhouse gas emissions. Alix contends that Powerspan has a more efficient technology than Huaneng’s current system, and he hopes that working with the Chinese power behemoth will give his company a chance to ramp up its stuff.

Carbon-scrubbing technologies vary in detail, but they typically intercept power-plant exhaust with a chemical that grabs the exhaust’s carbon dioxide before the greenhouse gas has a chance to escape into the air.  

That is a hugely complicated process in itself. Yet it’s only half the challenge. Capturing carbon dioxide helps mitigate climate change only if the carbon dioxide is then somehow gotten rid of. 

One popular goal is to shoot massive amounts of captured carbon dioxide underground, where, backers hope, it will stay permanently buried. But that goal brings with it a host of thorny questions, many reminiscent of the still-running debate over how to safely dispose of nuclear waste. Among them: Who’s legally liable if, centuries hence, some of that carbon dioxide burps up?

If capturing and storing carbon dioxide doesn’t work at a large scale, many energy experts say, then all the effort to curb carbon emissions through technologies such as wind turbines and solar panels may amount to so much hot air. If carbon capture and storage “is not widely deployed in the 2020s,” the International Energy Agency said last year, “an extraordinary burden would rest on other low-carbon technologies to deliver lower emissions in line with global climate objectives.”

And yet, carbon capture and storage faces “regulatory, policy, and technical barriers that make its deployment uncertain,” the agency said. “The likelihood is that there will be, at best, no more than a dozen large-scale demonstration plants in operation by 2020.” 

Together, Powerspan and Huaneng now are moving beyond China. Last year, the pair was among a handful of bidders chosen by Statoil, Norway’s national oil company, to compete for the chance to provide the carbon-capture technology for what Statoil hopes will be one of the world’s biggest carbon-capture facilities at a Norwegian oil refinery. But first, Powerspan and Huaneng must prove their technology at pilot scale. (Disclosure: Statoil sponsors the Big Questions series but has no influence over its content.)

Their hopes are resting on a warren of pipes and gauges in an open-air fabrication yard in Miyun, a county north of Beijing. “You wouldn’t call it a factory,” Alix says with a chuckle, because even that would be too grandiose. “You’d call it a small industrial job shop.”

Powerspan and Huaneng began operating the Miyun carbon-capture test in October. Finding the site, building the machinery, and getting it running took no more than six months and cost only “a couple million dollars,” Alix says. That shows, he says, “what you can do in China that you could never do in North America.”

But scaling up clean-coal technology in China raises nettlesome questions for U.S. executives. A big one is how to protect their intellectual property in a country that U.S.-based multinationals gripe has pirated everything from CDs to cars. (The U.S. critics aren’t alone; even leaders of some Chinese companies complain about insufficient intellectual property protection in their country.) For Alix, it’s a strategic concern. Like many U.S. energy entrepreneurs working in China, he says he has decided that relying on documents and lawyers to safeguard his technology isn’t enough. He is changing the way he does business when he’s in China.

He tells his Chinese business partners only as much about Powerspan’s technology as he thinks they absolutely need to know to help keep the technology running. “Even though they’re building it and testing it, they don’t know what’s in it,” he says. “It’s a black box” to them.

“We’ve written software that we don’t let them know about. We have certain trusted suppliers that are exclusive to us,” Alix explains. “My particular approach has been to have trust to a degree but to also keep stuff internal and not explain.”

Powerspan is just one of several U.S. firms racing to roll out clean-coal technology in China. Another is LP Amina, whose founder and managing director, Will Latta, is a Florida native who’s now raising his family in Beijing. He moved here in 2005, when he worked for Alstom, a French company that’s one of the world’s largest manufacturers of power-plant equipment. Two years later, he left Alstom and founded his own firm.

Today, LP Amina—“Amina” stands for America and China—is headquartered in a shiny Beijing office tower. The lobby boasts all the comforts of Latta’s home across the Pacific: a Dairy Queen, a Starbucks, and a Papa John’s. The company’s 11th-floor office affords a bird’s-eye view of Beijing’s haze. The office, a comfortable cube farm, is filled with young Chinese engineers at computer screens designing components for coal-fired power plants. “We build big things,” says a poster on the wall.

On a recent afternoon, one engineer was at his desk designing a new type of “classifier,” a device that sifts pulverized coal powder into uniformly sized particles before the powder is sent into a power plant’s furnace to be burned. Similarly sized particles burn more efficiently and completely, minimizing both smog-causing and greenhouse-gas emissions from the power plant. LP Amina installed the first of this new type of classifier about 18 months ago, and now it’s rolling them out in power plants across China, Latta says. 

A classifier designed by the firm has been installed in the United States at a power plant partially owned by Duke Energy Corp., according to officials at Duke and LP Amina. Duke, based in Charlotte, N.C., where LP Amina also has an office, is by most accounts the biggest coal burner and carbon-dioxide emitter in the United States.

Jim Rogers, Duke’s chief executive, views China as an inexpensive testing ground for the United States. Today it’s China that has to build massive numbers of new power plants to satisfy its soaring electricity demand. But in a few decades, Rogers says, it’ll be the United States, which by then will have to replace many of its aging coal-fired plants.

“If they build it first,” Rogers says of China, “it’ll be faster and cheaper for us” down the road. The United States today needs to accept a sobering new reality, he says: “We’re not made for first-mover risk.” 

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