China's coal conundrum: choking on solutions

With little oil or gas, China relies on coal for 70 per cent of its energy and is working on its ways to reduce the environmental damage it causes. Photo / Thinkstock

Coal made China rich - and dirty. Now the world's biggest polluter wants to clean up.

After studying chemistry at Shanghai's Fudan University, Jane Chuan and Wang Youqi pursued doctorates in the United States. She got hers in 1998 from what is now the University of Buffalo. Wang graduated in 1994 from the California Institute of Technology.

A few years later they were cashing in stock options in Silicon Valley companies they'd co-founded. Their home in California had seven bedrooms, 11 bathrooms and 0.4ha of land.

But by 2000 Wang was convinced that the research methods he was patenting could help stave off the environmental nightmare he saw unfolding during return visits to his homeland. China, reeling from pollution, was poised to more than double coal consumption during the decade. That would choke cities with smog and worsen global warming.

Chuan, 61, remembers pounding the pavement to pitch US investors on cleaning China's coal. Only a handful of California's internet-obsessed venture capitalists bit, she says. So in 2003 the couple moved back to Shanghai, the city from which they had emigrated 18 years earlier.

By 2006 Wang had his breakthrough insight. He'd found a way to unlock a chemical stored in the coal that was poisoning his country and to put it to an unlikely use: cleaning China's air.

The catalyst he discovered speeds reactions that convert methanol extracted from coal into a substance called dimethyl carbonate. By adding dimethyl carbonate to diesel fuel, Wang now plans to cut 90 per cent of the black carbon soot from the exhaust emissions of 1800 Shanghai buses.

"We said, 'Let's go to China, where we can leverage brainpower that's cheaper and do something important for mankind'," says Wang, 55.

The couple's emissions-busting company, Yashentech Corp, is one way in which China is racing to solve its clean-energy riddle: How can a country that is hooked on coal limit the environmental damage from the dirtiest of fossil fuels?

China passed the US as the top carbon polluter in 2007; it now emits more than the US and India combined, says the US Energy Information Administration. Yet with 1.3 billion people, power-hungry industries and scant oil or natural gas, it has no immediate alternatives to coal. China gets 70 per cent of its energy from coal, and last year consumed as much as the rest of the planet combined. It even converts coal into diesel fuel and ammonia used for making fertiliser.

China can't quit coal, but it is ready to tackle its addiction, says Zhou Fengqi, senior adviser to the Energy Research Institute of the Government's National Development and Reform Commission.

"China is not like a developed country," says Zhou. "We can't simply stop using coal. If we want to use it, we have to clean it up."

The cleanup is urgent because China's air is so polluted it causes 470,000 premature deaths a year, says Zhang Junfeng, an environmental health professor at the University of Southern California in Los Angeles.

Since 2009 the US Embassy has use Twitter to isue air-quality readings on microscopic soot in Beijing, which people check before exercising or taking their children outdoors.

"You have to have a desperate need," says Chuan. "The sense of opportunity is very, very real."

Scientists say China must act now. The world has just two or three decades to avoid irreversible climate change, says Kelly Sims Gallagher, an energy professor at Tufts University in Massachusetts, and author of two books on pollution.

"If the Chinese don't dramatically reduce carbon emissions from coal there's no way we can make a dent in climate change globally in the time period that matters," Gallagher says.

In 2005 Chinese President Hu Jintao began pressing 1000 big steel mills, chemical factories, coal mines and power plants to use energy more efficiently. He ordered them to lower consumption by renovating boilers, trapping waste heat and other means.

The Government closed small-scale polluters and toughened limits on emissions. It also accelerated solar, wind, hydro, natural gas and nuclear investments.

China's growing faith in its coal-cleaning technologies is one reason why the country agreed at a United Nations meeting in Durban, South Africa, in December - after 15 years of resisting - to seek legally binding international limits on carbon by 2015, Zhao says. "We've achieved a foundation in terms of technical developments. "We can now solve some of these problems."

Efforts to tackle carbon pollution extend from labs such as Yashentech's, to a windswept hill in the northern desert, where China's biggest experiment in burying CO2 is under way.

Here, in Inner Mongolia, the world's largest coal company, Shenhua Group, is turning coal into diesel using a form of gasification called direct liquefaction. Gasification heats coal with oxygen to release gas that makes not only electricity, but also fuel, methanol and the building blocks of plastics.

Shenhua is trying to find the best and cheapest way to dispose of the resulting waste carbon. It captures and buries some of it and is studying whether to pump it into oil wells to boost output.

Meanwhile, in a fish-smelling lab in Langfang, a city just south of Beijing, ENN Energy Holdings feeds carbon dioxide to microalgae. The company plans to get the organisms' CO2 breakfast from its Inner Mongolia coal-to-methanol plant. In return, the algae yield oil for biofuels and omega-3 fatty acids that people can take to guard against heart disease.

"The Chinese are deploying some of these decarbonising technologies more aggressively than anyone," says Chris Hartshorn, vice-president of Boston-based Lux Research, which has studied China's technology priorities. "They have the money, and their system for investing simultaneously in research, technology and market adoption should be the envy of the world."

But environmentalists say efforts to improve coal power are shortsighted because they divert attention and money from renewable energy.

"Electricity from coal plants that are designed to avoid filthy and uncontrolled pollution is two to three times more expensive than alternatives like wind and solar," says Bruce Nilles, deputy conservation director of environmental advocacy group Sierra Club. "Coal is the biggest part of our carbon problem and we're fighting to keep it underground."

A visit to a pollution-enveloped open-pit mine in Shizuishan on the banks of the Yellow River shows the ground China must cover in its race to tame coal's poisons.

North of town, the cooling towers of a power plant are barely visible through grey smog. Coal buyer Wang Peng says the air is so foul that he and 80 per cent of his co-workers have sent their parents to live in nearby Yinchuan. His 16-year-old daughter is studying in New York for the same reason.

"When we were kids, we used to drink from the rivers," he says, gesturing toward the bleak landscape. "Now, we can't."

Shizuishan's miners brave conditions that would be unimaginable in the West.

Two dozen men, none of whom wear masks, steer front-end loaders and steam shovels to pile coal into a parade of red trucks that back into spaces just inches apart. The trucks never stop for more than a few minutes, adding diesel fumes to coal dust. After a few minutes, visitors' handkerchiefs turn black when they blow their noses.

Some 1600km southeast of Shizuishan, researcher Wang Hao explains how Shanghai Electric is producing turbines that require less coal from China's 15,000 mines.

In a spotless work area he shows off turbine blades 3.7m in diameter. These turbines need 270 grams of coal for each kilowatt-hour of electricity, down from 400 grams a decade ago.

Shanghai Electric built this complex at Lingang in 2007 in a joint venture with Siemens AG, gaining access to technology from the Munich-based company. A decade ago Shanghai Electric produced 15 steam turbines a year. Now it makes 60 that can each produce up to three times as much energy.

Zhao says that in addition to looking for efficiency, China is hunting breakthroughs in capturing coal's pollutants - and using them in new ways. "Carbon capture is an important direction we want to take."

Huaneng's technique for trapping pollution from its Shidongkou plant on the Yangtze River shows how capturing has already gained a foothold.

Scientist Liu Lianbo, of Huaneng's Clean Energy Research Institute, says Huaneng traps the carbon from the plant's chimney and sends it through ammonia-derived chemicals called amines. The process isolates and concentrates the waste, removes heat and recycles the amines. Huaneng sells the carbon to makers of carbonated drinks and dry ice.

The cost to capture the carbon last year was US$39 ($48) a tonne. That's about a third of the cost for most capture experiments in the US, says David Mohler, chief technology officer of Duke Energy Corp.

In one sign of China's emerging technological leadership, the US Government is studying Huaneng's approach.

China's Government is pressing to capture a million tonnes of carbon a year in a demonstration that will begin by 2015. Oil companies are interested, too, because blasting CO2 into oil wells can boost production.

In his lab outside Beijing, ENN Energy vice-president Zhu Zhenqi is betting on carbon for a different kind of oil - omega-3 fatty acids.

Zhu feeds CO2 to microalgae to harvest them for biofuel and food supplements. The green, single-cell organisms are so voracious they double in size every 24 hours.

ENN believes it can turn carbon-gorging algae into a business. It is possible to grow 20 times more algae a hectare than soybeans, Zhu says, eliminating coal's waste as the organisms gobble up CO2.

After feeding algae 110 tonnes of CO2 a year, ENN gets 20 tonnes of biodiesel fuel and five tonnes of protein. Zhu plans to expand to 20,000 tonnes of CO2 annually by 2013, using the waste carbon from ENN's Inner Mongolia plant. ENN will turn the protein from the algae into fatty acids and spirulina, a protein-rich supplement so popular that it sells for a higher price for its weight than crude oil.

Shenhua is exploring the possibility of ridding the planet of carbon pollution by burying coal's poisons underground. On a stretch of desert in Inner Mongolia, 1800 workers at a US$2.4 billion plant are turning coal into one million tonnes of diesel, naphtha and liquefied petroleum gas each year. Before Shenhua opened the plant in 2008, nobody had attempted a project this big to make fuel from coal using direct liquefaction, chief engineer Shu Geping proudly says.

Workers heat and pressurise coal and capture the escaping chemicals in liquid form in a sealed vat. Then they blast them with hydrogen to make the fuel they seek, leaving liquid CO2 as a byproduct.

Trucks deliver 100,000 tonnes of the liquid each year to a hillside 16km west of the plant. Shenhua stores the CO2 until it's ready to inject it through a wellhead to as deep as 2400m.

Right now, trapping and burying CO2 costs US$50 a tonne, says Shu. That may drop to US$14 a tonne if he gets approval to bury more. But even after Shenhua captures 100,000 tonnes of CO2 a year, another 3.5 million tonnes escape at Erdos. Li Yan, head of climate campaigns for Greenpeace in East Asia, says that's unacceptable.

China needs more renewable energy for generating electricity, not more coal, Li says. "A green transition is something every country will face," Li says. "Letting it happen faster will benefit China in every possible way."

China's biggest effort to reduce the impact of using coal to make electricity is taking shape in Tianjin, 110km southeast of downtown Beijing. The final touches are being put on the US$1 billion GreenGen plant for its planned midyear opening.

GreenGen uses a process called integrated gasification combined cycle, or IGCC. It heats coal to form a chemical mix called syngas and sends that to a gas turbine to make electricity. Leftover heat goes to a steam turbine in a second step.

Electricity from early IGCC plants is expensive, at US$175 per megawatt-hour, says Kieron Stopforth, a Bloomberg New Energy Finance analyst in London. That compares with US$139 at traditional coal-fired plants that capture carbon and US$72 at conventional plants that release carbon. Costs will drop as IGCC technology matures, Stopforth says.

Shanghai Electric, which built GreenGen's steam turbines, plans to make gas turbines for 24 new IGCC facilities each year.

Duke Energy is keeping tabs on GreenGen as the US struggles to maintain coal as a viable electricity source.

Duke has almost completed a 618-megawatt IGCC plant in Edwardsport, Indiana, using gasifiers designed by General Electric and built in China by Hangzhou Boiler Group.

"Most regulations that are current or pending make it harder to use coal," says plant manager Jack Stultz. "If we can't do it here, coal's life expectancy gets pretty short."

Yashentech's Chuan and Wang say China will need to burn coal far into the future, creating opportunities for their company and others focused on cleaning it up.

During the 2008 financial crisis the couple took pay cuts and pledged their California home as collateral for loans to keep the company afloat. Today there's more interest. San Francisco-based Nth Power is providing startup investments, following an original backer, California's Firelake Capital Management.

"In China we get lots of support from the people, politicians and moneymakers," Chuan says.

Wang, explaining the science behind his soot-reducing discovery, says the dimethyl carbonate his catalyst extracts from coal is important because it's rich in oxygen. That makes combustion more efficient and reduces carbon.

Wang hopes that in 10 years vehicles across China will run on sootless diesel, trimming carbon emissions by 3 per cent. That alone won't stop global warming but Wang says it will lift the hearts of pollution-weary Chinese whenever they step behind a bus and don't get blasted by foul air.

China's paucity of oil and natural gas and the slow commercialisation of renewable energy mean the country may never kick its coal habit.

But with entrepreneurs such as Chuan and Wang, companies that are focused on curbing pollution and the Government making it imperative to do so, China is stepping forward in the race to tame a dirty fuel the world still can't live without.

- BLOOMBERG