BEIJING--Lorry driver Zhang Jianwei isn't worried about cleaner fuel requirements that come into force in China next year, raising the price of motor fuels--he will just keep buying cheaper, dirtier diesel at smaller stations.
Zhang's example underscores the cautious approach the world's second largest oil consumer is taking to introducing tougher diesel and gasoline specifications, and shows why there will be little initial impact on China's fuel trade.
Motorists across China will switch to 150 parts-per-million (ppm) sulphur gasoline from January 1, 2010, from 500 ppm, and a lower content of benzene, a carcinogen, three years after the specifications were first announced.
The changes, a hard sell to motorists already facing record pump prices, won't bring China's fuel standards into line with even stricter Western market benchmarks, tempering the risk of Asia's leading gasoline seller flooding export markets with still more fuel.
"It will not allow them to break into advanced markets yet, but I don't think they aimed for that anyway," said Al Troner, managing director of AP Energy Consulting, and an expert on Asian fuel specifications.
But its start to move Chinese oil firms beyond their traditional role of being self-sufficient toward being more like aggressive exporters in South Korea and more recently, India. For example, 150-ppm gasoline will probably help boost Chinese sales into Australia, which uses a similar grade.
Also from January 1, China is launching automotive diesel with a sulphur content of 350 ppm, to differentiate from the 2,000-ppm general diesel used by its vast rural and industrial sectors. However an 18-month "transitional" period is allowed before the specification becomes mandatory.
One significant change in diesel quality is the cap on polyaromatics, a main contributor to urban smog. That requires refiners to use costly hydrocracking and hydrotreating units, instead of traditional catalytic crackers.
Oil duopoly Sinopec and PetroChina have in the past decade or so been spending heavily on units that strip sulphur and crack heavy residues into motor fuels, as China imports a growing share of sour and heavy crude oil.
The new specs mean the cost of fuel is set to rise further, a challenge for refiners like Sinopec to pass on to Chinese drivers already paying record pump prices.
"It's Sinopec's chance to showcase our strength in technology. But as it costs to build and run hydrocrackers to meet the specs, we will expect a premium price for premium quality," Sinopec's spokesman, Huang Wensheng, said.
The diesel factor
The formal introduction of automotive diesel specs highlights the oil industry's focus on meeting the rapid growth in road freight traffic in an economy that is heavy on manufacturing and as the country swiftly expands its highway networks.
China's demand for automotive diesel overtook gasoline in absolute volumes a couple of years ago, and is poised for strong growth in the coming years, analysts said.
Automotive diesel now makes up more than half of China's total diesel use of some 3 million barrels per day, against a third previously.
"The improvement in auto diesel standards in the past has been slowed in part because of China's massive use of rural diesel by tractors. Auto diesel is growing rapidly," said Lu Changjiang, Sinopec's fuel quality and efficiency chief.
China's environmental watchdog wants to fast track the more stringent standards, and Sinopec says it has the technical ability to produce Euro V motor fuels with sulphur content of 10 ppm and steeper cuts in polyaromatics.
"We're aiming to catch up with European standards (V) by around 2015/2016," said Tang Dagang, head of vehicle emissions control of the Ministry of Environmental Protection, adding that mationwide specifications for 50-ppm gasoline, already in use in Beijing and Shanghai, are expected to be announced soon.
For the country's swelling fleet of private car owners--car sales in China recently passed those in America to make it the world's top market--the mandatory shift to cleaner petrol of 150 ppm will put China in the league of clean fuel markets like Japan and Australia.
And the cut to 1 percent from 2.5 percent of benzene places China at the top of the moderately high quality ranks, said AP Energy's Troner.
But both the government and oil firms will need to gauge if users like lorry driver Zhang are going to pay up, after a doubling of prices in the past five years and a dwindling of China's exports, which has heightened competition among truckers.
To cut the bills for his 1,000-liter tank, Zhang says he may stop more often at gas stations near his mountainous hometown in Fujian, where cheaper and lower-grade fuels are popular, before hitting the 4-lane interprovincial highways dotted by petrol outlets run by state giants Sinopec and PetroChina.
"If it can save me 300 to 400 yuan ($45 to $60) per trip, I will not hesitate to refuel at the smaller stations," said Zhang.
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General Electric on Tuesday said that it has reached an agreement to deploy its coal gasification technology in China, a move the company says will advance underground storage of carbon dioxide.
The energy giant announced a set of agreements in a ceremony in Beijing, including deals for GE's high-speed rail and hybrid locomotive engines. The activity comes the same day that China and the U.S. announced a number of energy-related research initiatives in coal, electric vehicles, and smart-grid technologies.
(Credit:
General Electric)
GE and coal power plant operator Shenhua Group signed a memorandum of understanding to create a joint venture to build plants that use GE's coal gasification products. They projected that a definitive agreement would be done by the first half of next year.
Coal gasification, already used in dozens of facilities, is cleaner than the traditional coal-fired process used in power plants because pollutants can be removed during power generation, according to the Department of Energy. Gasification is a thermo-chemical process where coal or other carbon-based feedstocks are treated under high heat and pressure with steam so that they break down into what's called syngas, which contains hydrogen and carbon monoxide. That syngas is then burned to run an electricity turbine.
In the planned projects in China, GE and Shenhua expect to build integrated gasification combined cycle (IGCC) facilities in China, including a commercial-scale plant that separates out carbon dioxide for underground storage.
Because the U.S. and China rely heavily on coal for power generation, policy makers say that carbon capture and storage at coal plants is an important technology for reducing greenhouse gas emissions and other pollutants.
The U.S. Trade Development Agency will said it will fund the "initial steps" toward a plant in China based on GE technology.
The president of GE's Power and Water business, Steve Bolze, said in a statement that additional plants with coal gasification and carbon storage are needed to scale up the industry and lower costs.
First Solar has signed a memorandum of understanding with China to partner on a 2,000-megawatt power plant in Ordos City, Inner Mongolia.
If and when completed, it will be one of the largest solar power plants, perhaps the largest, in the world in terms of megawatts. In comparison to other current projects, the U.S. Army is building a 500-megawatt solar thermal farm in the Mojave Desert. First Solar, which is based in Tempe, Ariz., also has a 550-megawatt project planned in California. And Canadian Solar recently announced a 500-megawatt solar farm also planned for Inner Mongolia.
Ordos City is marked by the red bubble with an "A" inside.
(Credit: Google Maps)Construction on the first phase of the First Solar project in China, a 30-megawatt plant, is set to begin in June 2010. The second phase--at 100 megawatts--and third phase--at 870 megawatts--are scheduled to be completed in 2014. The final fourth phase, a 1,000-megawatt installation, is slated for completion by 2019.
"We are very pleased to be partnering with one of the solar industry's global technology leaders in a project of such significance to Ordos's low carbon future. Discussions with First Solar about building a factory in China demonstrates to investors in China that they can confidently invest in the most advanced technologies available," Cao Zhichen, vice mayor of Ordos City, said in a statement Tuesday.
First Solar manufactures thin-film solar cells from cadmium telluride and builds solar power plants. To accommodate the massive undertaking in China, it will "review the possibility of module and supplier manufacturing sites in Ordos, and other considerations required to support a First Solar investment."
The company also plans to look into recycling used photovoltaic modules in China, something it's already been doing in the U.S.
The Inner Mongolian government has arguably taken a keen interest lately in solar energy. Canadian Solar, a Canadian company with China-based subsidiaries, announced in August that will build a 500-megawatt power plant in Baotou, Inner Mongolia. Ordos City is about 100 miles from Baotou and about 500 miles from Beijing.
The surge in Chinese solar investment is no doubt due in large part to China's $586 billion stimulus package announced in November 2008, which included an estimated $70 billion earmarked for improving the country's electrical grid.
Canadian Solar has been granted rights to develop a 500-megawatt solar power plant in Baotou, Inner Mongolia, China, the company announced Wednesday.
Baotou is a manufacturing city on the Yellow River in Inner Mongolia with a population of over 2 million, according to the Chinese government's official Baotou Web site.
Canadian Solar's agreement is with the Administration Committee of Baotou National Rare-Earth Hi-Tech Industrial Development Zone, also known as its Chinese abbreviation "CPT." The signed agreement includes rights "to design, install, operate, and maintain" the solar power plant in Baotou.
"To have a solar project of such magnitude in Baotou demonstrates our determination to develop the PV end-user market in China, as well as our commitment to cleaner and more sustainable economic development in Baotou," Fu Ren, the committee's director, said in a statement released to the U.S. press.
Canadian Solar, while founded in Canada, has subsidiaries based in China that already manufacture both solar cells and solar panel systems among other things. The Baotou solar project, subject to regulatory approval, will develop in three stages.
Stage one will include the installation of 100 megawatts of photovoltaics between September 2009 and December 2011, followed by two more development phases, each including 200-megawatt installations.
While the installation is massive, this is not the first of its kind. In October 2008, the U.S. Army announced plans to build a 500-megawatt solar thermal power farm in Fort Irwin, Calif. in an effort to reduce its annual energy costs.
And the newly formed Solar Trust was also recently granted rights to to develop the construction and installation of two or three 242-megawatt solar power plants for California that would be operational by 2013 or 2014.
Baotou, a city in Inner Mongolia, China, is about 12 hours northwest of Beijing by train.
(Credit: MultiMap from Bing)Chinese auto company BYD plans to bring an all-electric sedan in small numbers to the U.S. next year.
The company chairman Wang Chuanfu told the Wall Street Journal that the company, which is part-owned by investor Warren Buffet, is now gearing up for a U.S. push. It plans to raise money by offering shares in the company in China to help finance the expansion.
BYD's e6, its high-end all-electric car it plans to bring to the U.S. in small numbers next year.
(Credit: BYD)BYD plans to offer a few hundred of one of its most advanced cars in the U.S., the five-seat e6, which takes seven to nine hours to fully charge and has a 250-mile range.
Initially, it will make the $40,000 car available to "government agencies, utilities and maybe some celebrities" in a specific region, Wang told the Journal during a factory tour of the BYD's lithium ion battery factory.
Part of the goal with the car introduction is to raise brand awareness of BYD with American consumers, he added.
BYD already sells plug-in hybrid sedans with a small gasoline engine that charges the batteries to fleet owners.
Although BYD is still not well known with most consumers, the company has gotten a lot of media attention, in part because of Buffet's $230 million investment. Also, BYD appears to be one of the front-runners in making electric cars for the mass market.
Other automakers betting on all-electric cars include Coda Automotive, Mitsubishi, and Nissan, which introduced the Leaf earlier this month.
If your mission is to make coal less polluting, China is a good place to start.
GreatPoint Energy, a start-up with technology to convert coal to cleaner-burning natural gas, expects to open a demonstration plant in China in three years.
The plant would cost between $100 million and $200 million and be located at a coal-fired power plant operated by Datang Huanyin Electric Power. Most of the financing for the plant will come from Datang, one of the biggest single polluters on the planet, according to GreatPoint Energy CEO Andrew Perlman.
GreatPoint Energy's pilot facility in Somerset, Mass.
(Credit: GreatPoint Energy)Although GreatPoint Energy's business is focused on fossil fuels, the company was founded by environmentalists intent on tackling climate change.
In its demonstration plant in China, GreatPoint's technology will convert 1,500 tons of coal a day into natural gas, according to Perlman.
China is rapidly constructing more domestically supplied coal plants to meet swelling electricity demand, contributing to air pollution problems and rapid growth in the country's carbon emissions.
"If we can show (Datang) that they can make more money being clean rather than dirty, then we can make a real impact," says Perlman.
GreatPoint's hydromethanization process, being used in pilot facilities in Massachusetts and Illinois, passes coal or other carbon-heavy feedstock through a chute where it is treated with a metal catalyst and steam.
The material is then gasified in a chamber, which creates carbon dioxide and methane, the main ingredient in natural gas. The methane is then cleaned and the catalyst recuperated for use again. The process can work with petroleum coke, a byproduct of oil extraction from tar sands, or plant biomass.
The end product--natural gas--is a lot cleaner to burn than coal and can be transported through existing pipelines. Other chemicals in the coal, including nitrogen and sulfur, can be separated and sold for industrial use, according to Perlman.
But GreatPoint Energy's process also creates carbon dioxide, a heat-trapping greenhouse gas. To keep carbon dioxide out of the atmosphere, the company plans to build its plants in places where it can be pumped underground to get more oil out of existing wells, a technique already done in the oil and gas industry.
Overall, GreatPoint's process can produce natural gas at between $4 and $5 per million British thermal units (MMBtu), which is in the range of today's prices but a lot lower than natural gas prices before the global recession hit.
Cleaner fossil fuels?
Many entrepreneurs interested in green technologies have gravitated toward solar power, which still garners the most venture capital compared to other segments, or IT-related fields like smart-grid tech.
But Perlman argues that renewable energy sources, which represent less than 3 percent of power generation in the U.S., cannot be ramped up fast enough to make a significant impact on cleaning up power generation.
"The problem with renewables is that realistically they may not get us to where we need to go. Coal has to realistically be in the mix and realistically be a big part of the mix," he said at last month's AlwaysOn GoingGreen East conference, where GreatPoint Energy was picked as the top green business.
The company is pursuing other coal plants in China and the U.S. Following its demonstration facility with Datang, it hopes to build a full-scale plant, which would cost $1 billion, Perlman said.
"China is tremendously short on natural gas. They are going to have to use more natural gas if they are going to clean the environment and address their air problems," he said.
GreatPoint Energy CEO Andrew Perlman at GoingGreen East conference in Boston.
(Credit: Martin LaMonica/CNET)When 60 Minutes correspondent Scott Pelley and his crew went to China to record the black market dismantling of electronic waste, or e-waste, the experience was almost as hazardous for the 60 Minutes team as working with the toxic material is for poor Chinese workers.
Jumped by a gang of men overseeing the e-waste operations who tried to take the CBS team's cameras, Pelley's crew managed to escape and bring back footage of the hazardous activities. Pelley's investigation will be broadcast this Sunday, Nov. 9, at 7 p.m. ET/PT.
The Chinese attackers were trying to protect a lucrative business of mining the e-waste -- junked computers, televisions and other old electronic products -- for valuable components, including gold. "They're afraid of being found out. This is smuggling. This is illegal," says Jim Puckett, founder of the Basel Action Network, a group working to stop the dumping of toxic materials in poor countries that certifies ethical e-waste recyclers in the United States. "A lot of people are turning a blind eye here. And if somebody makes enough noise, they're afraid this is all going to dry up."
E-waste workers in Guiyu, China, where Pelley's team videotaped, put up with the dangerous conditions for the $8 a day the job pays. They use caustic chemicals and burn the plastic parts to get at the valuable components, often releasing toxins that they not only inhale, but release into the air, the ground and the water. Potable water must now be trucked into Guiyu and scientists have discovered that the city has the highest levels of cancer-causing dioxins in the world. Pregnancies in Guiyu are six times more likely to result in miscarriages, and seven out of 10 children there have too much lead in their blood.
... Read moreEven with turmoil in the financial markets, venture capital is still flowing to energy-tech ventures.
Here are the latest such investments: • Intel Capital has made its first clean-tech investment in China, the company said Tuesday.
The venture-capital arm of the chip giant put $20 million into Trony Solar Holdings, a Chinese solar thin-film cell developer. It also invested an undisclosed sum in NP Holdings, which makes large-scale energy storage systems for renewable energy and energy efficiency.
Intel Capital set up a $500 million fund for tech deals in China earlier this year, according to Reuters.
"We think innovation is the way to help companies out of this financial crisis," Cadol Cheung, head of Intel Capital in Asia Pacific told reporters Tuesday. "We have no plan of slowing down our investment pace."
• Ice Energy said Tuesday it has raised $33 million in a second round of funding. The round, led by Energy Capital Partners, also provides up to $150 million in project development financing.
Ice Energy makes rooftop air conditioners that use ice to help lower the cost of operating them.
Ice Energy's rooftop ice-cooled air conditioner.
(Credit: Ice Energy)During off-peak hours, such as the middle of the night, the machines freeze water. During the day, the ice cools the refrigerant to run the air conditioner, cutting down on the electricity it would otherwise need.
The ice storage can shift the demand to off-peak times by as much as 40 percent, according to the company. For that reason, the company is marketing its products to utilities looking for ways to reduce peak demand to avoid construction of new power plants.
• Blue Source said Monday that Goldman Sachs will take an equity stake in the company and finance carbon offset projects.
Blue Source identifies and runs projects that reduce greenhouse gases, such as methane capture at landfills, and carbon capture and storage at oil wells.
Goldman Sachs will market and trade the offsets from Blue Source projects in carbon emissions trading markets, according to the companies.
• General Electric said last week it is investing $30 million in lithium-ion battery maker A123 Systems, part of a planned $102 million series E round.
GE is now the largest investor in the company with a 9 percent stake after having put in $55 million. The two companies are working on various projects, including integrating A123 Systems' batteries in the Think all-electric town car and a hybrid bus platform.
Both GE and A123 Systems are pursuing the market for power grid storage as well.
In a rare independent study of China's energy sector, researchers at the Massachusetts Institute of Technology have found that the problem with China's coal power generation is not that its power plants lack cleaner technology.
The emissions are definitely higher than they could be, the report found, but the culprit is usually low-quality coal rather than low-tech plants. As an MIT statement explains:
Lower-grade coal, which produces high levels of sulfur emissions, can be obtained locally, whereas the highest-grade anthracite comes mostly from China's northwest and must travel long distances to the plants, adding greatly to its cost.
The researchers gathered their own data instead of relying on Chinese government statistics, which can be unreliable. This may not sound like a big deal, but even large international organizations often, or even primarily, depend on government numbers.
"The kinds of technology currently being adopted in China are not cheap," lead researcher Edward S. Steinfeld said in the statement. "They're not buying junk, and in some cases, the plants are employing state-of-the-art technology."
There could be room for improvement in technology, however. A pilot power plant capable of using carbon-capture technology opened in China in July, and widespread efforts on energy continue. But this MIT report underlines the challenge of cleaning up power generation when the fuel is dirtier than usual.
The full report is available in PDF.
One-third of China's carbon emissions come from manufacturing electronics and other goods that are then exported worldwide, according to a July report in the journal Energy Policy.
The findings come from researchers led by Christopher Weber, a professor of civil and environmental engineering at Carnegie Mellon University.
Researchers measured 1.7 billion metric tons of carbon dioxide resulting from China's exporting industries in 2005. That rose from 760 million tons in 2002 and from 230 million tons in 1987, based on an analysis of economic and emissions reports from China.
In that time, carbon emissions from making electronics for export rose from 13 percent to 22 percent, according to a New Scientist report about the study.
China's contribution to climate change has been in the spotlight this summer for its attempts to clean up pollution in Beijing before next month's Olympic Games.
In June, the Netherlands Environmental Assessment Agency found that China beat the United States in 2007 for the first time as the world's largest emitter of carbon dioxide. Reports often blame China's booming economic growth and reliance on coal-fired power plants for its increased emissions.
However, the Chinese government has argued that nations importing its products are also responsible for global warming that may result from manufacturing the goods.
