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photo: BLOOMBERG NEWS (CHINESE FACTORY)
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Great Green Hope?
By SHAI OSTER China is at the very center of the greenhouse-gas problem. It is the world’s biggest source of carbon emissions and it produces almost all of its electricity from dirty, coal-fired power plants. But China is also becoming a source of solutions to the carbon problem. Just as its large-scale, low-cost factories have slashed the prices of consumer goods sold around the world, China’s vast market and economies of scale are now bringing down the cost of solar and wind energy, and supporting the growth of other green technologies such as electric-car batteries. That could help address the big chicken-and-egg problem that has long hampered green technologies. In order for them to be adopted widely, they need to be inexpensive. But in order to make them inexpensive, manufacturers have to be able to produce and sell them in large numbers. That’s where China has an advantage. The combination of cheap labor and capital that revolutionized manufacturing is now spreading to green technology, bringing down production costs. With its large population and industrial base, China itself offers a huge potential market for alternative energy technology. And the Chinese government is stepping in with incentives and regulations to encourage both the production and adoption of clean-energy technologies. In December, China passed a law requiring companies that distribute electricity to buy up all the power generated from renewable sources, even when it is more expensive and more complicated to use than electricity from coal-fired plants. China’s efforts could eventually reshape the economics of the green-technology business, just as China has done for everything from construction cranes to computers. FIZZ FOR SODA In the fight against global warming, some of the biggest gains are to be made in cutting carbon emissions from coal-burning power plants. So-called capture technology traps the carbon dioxide gases released by coal plants. The carbon can be stripped either before or after the coal is burned. Post-combustion capture is simpler and can be retrofitted on existing power plants. Current versions cut energy output by a fifth or more. Far more complicated is precombustion carbon capture, which involves completely redesigning plants. In this process, coal is turned into a gas, the carbon is stripped out and the rest is burned. These new plants cost billions of dollars and haven’t been developed on a commercial scale yet. But China already has a lead in turning coal into gas. It has been using the technology widely to make petrochemicals and fertilizers. Critics say current carbon capture technologies are still inefficient and unproven. Still, some analysts estimate carbon capture could account for between 15% to 55% of the world’s cumulative carbon emissions reduction by 2100. Among those leading the ramp-up is Xu Shisen. Mr. Xu and colleagues work at a government research institute partly owned by China Huaneng Group, China’s biggest utility. Huaneng produces about 10% of China’s electricity, nearly all from coal. The Beijing project, started before the 2008 Summer Olympics, traps a fraction of the carbon dioxide emitted by the plant, purifying and selling it for use in food packaging and for the fizz in sodas. Using what he’s learned in Beijing, Mr. Xu is building another capture facility in Shanghai that will be 30 times bigger. If Mr. Xu’s team can figure out how to bring the costs down—mostly by recycling energy lost in the process of scrubbing out the carbon—these units could be retrofitted to coal-fired power plants around the world. Mr. Xu is also involved in the GreenGen project, a $1 billion power plant led by Huaneng that will turn coal into a gas before burning it. The project is scheduled to go online next year. SUN AND WIND Carbon capture is still at least five to 10 years from becoming widespread, analysts say. Meanwhile, China is reshaping two big green technologies in use already—wind and solar power. In 2004, foreign firms controlled about 80% of China’s wind-turbine market. Now, Chinese companies own three-quarters of the market, thanks to local producers that make turbines one-third cheaper than European competitors. Chinese wind-turbine makers are even starting to export. In October, Shenyang Power Group struck a deal to supply 240 turbines to one of the largest wind-farm projects in the U.S., a 36,000-acre development in Texas. China already has a 30% share of the global market for photovoltaic solar panels used to generate electricity. Solar-power panel makers, including Suntech Power Holdings, Yingli Green Energy and Trina Solar, export most of their product to Europe and the U.S., contributing to a 30% drop in world solar-power prices. The new Chinese competition is forcing rivals to shift production. U.S. Evergreen Solar said it will move its assembly line from Massachusetts to China. General Electric is shutting a plant in Delaware. BP’s solar division is stopping output in Maryland and relying on Chinese suppliers. In green technology, China has figured out ways to turn excess production capacity to its advantage. Until this year, China’s solar-panel makers exported nearly all their output to countries such as Germany and Spain, where governments subsidized the purchase of solar panels. That changed this year when dozens of new Chinese producers started operating and solar-panel prices fell. Now, regulators in China are taking advantage of the low prices to push for wider solar-energy use in their home market. Executives at Trina and Yingli say increased economies of scale from making more panels for China will push costs even lower. “We could go to $1 a watt by the end of 2010,” which would be a landmark in bringing solar power in parity with conventionally produced electricity, says Yingli’s CEO, Miao Liansheng.
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