By James Wellstead – Exclusive to Coal Investing News
As the world’s largest coal consumer, China is striving to balance its growing energy demand with its environmental priorities. Through recent expansion of clean coal technologies, China is becoming a testing ground for large-scale clean coal facilities.
In 2011, China inked two significant deals to bring foreign clean coal technologies into its midst. The first was Seamwell International‘s $1.5 billion deal in June to develop an electric power plant using synthesis gas extracted from gasifying coal deposits via underground coal gasification (UCG) in collaboration with the China Energy Conservation and Environmental Protection Group. Once operational, the 1,000 megawatt power plant will burn 6 million tonnes of coal annually, and will reduce CO2 emissions by 20 percent compared to a traditional power plant.
In November, Georgia-based CoalTek announced that its 50-50 joint venture deal with Yijian Group Co., Ltd received final approval to build a clean coal processing facility in Inner Mongolia from the Chinese authorities. Transforming 10 million metric tonnes of low-grade brown coal into high-thermal value coal, the facility created by the US $350 million deal will burn coal more efficiently and produce lower emissions. The deal also represented the first Sino-US clean coal joint venture from the 2009 bilateral Strategic Partnership Agreement between Chinese President Hu Jintao and US President Barack Obama.
Deals like these will likely become more prevalent in the coming years as industry in China responds to policy levers put in place to clean up the coal sector. Following the Chinese government’s 12th Five-Year Plan, introduced in March 2011, energy production and environmental protection are set to become integrated priorities.
According to Chinese energy expert Wenran Jiang, by 2015 China aims to discard its “exploration first, cleanup second” mentality to stressing the coordination of energy extraction and environment protection.
While technological fixes will be a big component of the transition to cleaner forms of coal, more immediate actions involve blending higher quality imported coals to reduce particulate and emissions (including sulphur dioxide, nitrogen oxides, mercury, and CO2).
Each individual coal power plant boiler requires “compliant coal,” which specifies a calorific content, moisture level, and volatile matter component. However, challenges in procuring compliant coal domestically have led Chinese power plants to acquire greater levels of imported thermal coal to blend with high sulphur and dusty domestic coal. The end result is a cleaner unit of coal-fired energy.
Is clean coal really a priority?
While the necessary environmental focus of China’s 12th Five-Year Plan is a major step toward cleaning up its energy industry, simply acquiring more energy appears to take precedence over the cleaner options.
In recent negotiations with the Canadian government, China completed negotiations on a historic Foreign Investment Promotion and Protection Agreement (FIPA) with Canadian Prime Minister Stephen Harper, which included some CDN $3 billion in resource, financial, and transportation deals between the two nations. However, the agreements made no mention of clean coal projects or initiatives.
After 18 years of negotiations, the agreement—along with talk of a free-trade agreement and MOUs between Natural Resources Canada and the Chinese Academy of Sciences on issues around CO2 emissions, clean energy technologies, and solutions—does open the doors to a slate of investments in sustainable development of natural resources in Canada and China.
But despite Chinese Premier Wen Jaibao’s recent comment that “China is ready to expand imports of energy and resource products from Canada and enhance cooperation in clean and renewable energy, energy-saving, environmental protection, and the peaceful use of nuclear energy,” the clean coal initiatives progressed in bilateral agreements with the UK and US governments were not duplicated with Canada.
While Canada possesses a range of clean coal technologies for the leading global coal consumer, China does not appear ready to prioritize clean coal in its dealings with the energy-abundant Canadian economy. Despite the inevitable role coal will play in the future for the Chinese economy, clean coal appears to remain an idealistic side project rather than an action plan ready for the big time.
Securities Disclosure: I, James Wellstead, hold no positions in any of the companies mentioned in this article.