CHINA: December 14, 2007


ZOUXIAN, China - In a control room at the Zouxian power plant an electronic display reads the vital signs of two generators -- just over one gigawatt, reads one, enough to power a million homes.


The plant is China's second biggest coal-fired power station, its managers say, guzzling 10 million tonnes of the dirty burning fuel a year. But its newest generators are also among the most efficient in the world.

The gleaming units are representative of both China's massive strides towards cleaner power and systemic failures hampering progress.

Coal plant efficiency is a key issue in the fight against global warming. Coal accounted for a quarter of the world's energy supply in 2006 but it also constituted 40 percent of all carbon emissions due to the fossil fuel's high carbon content.

The Zouxian plant is no small contributor, given its massive power output. But its high-tech "ultra supercritical" new generators will contribute less per unit of power than almost any other coal-fired site in the world.

They burn powdered fuel at such high temperatures -- around 600 degrees Celsius -- that they turn water into steam without boiling, saving energy and carbon emissions.

Huadian Power International Corp Ltd spent 7 billion yuan on the generators partly because of a government push for cleaner growth, partly from a desire to master the latest technology, and partly just for simple long-term business reasons.

"This is our responsibility to society, but we also do it because things are tightening up. If we don't invest now we will have to invest more later," said operations manager Zhao Yong.

The generators took less than three years to build under a joint venture with Hitachi, formed because China lacks expertise in the high-performance steel the generators use.

This is much faster and around two or three times cheaper than a similar plant would be in the West, said Zhao, who has studied in the United States.

At present just a handful of countries can boast equally efficient generators. China looks set to hold onto a pole position with tens of new ultra super critical plants on the drawing-board nationwide. Huadian is also working on preliminary plans for two massive 1.3 GW installations.

When the technology is fully mastered by Chinese firms, the world can expect costs to fall a lot faster. Desulphurisation equipment made in China now costs just 30 to 40 percent of imported equivalents, power firms say.

"China builds coal fired generating plants faster, cheaper and better than anyone else," said Joseph Jacobelli, analyst at Merrill Lynch in Hong Kong. "Give it three to five years and they will have a reasonable mastery of ultra super critical."

Beijing is also running an aggressive campaign to shut smaller plants, forcing firms building new stations to close a portion of their older generators. The target is to take off-line 10 GW a year, or more than all of Hong Kong's power.

Already by 2006 nearly half of the country's power generators were massive units of 600 megawatts (MW) or larger -- over half a gigawatt -- and only 14 percent were under 300 MW.


EFFICIENCY WASTED

China has good reason to be concerned about energy efficiency. The Asian giant's booming growth has pushed its energy needs beyond its resources.

It became a net oil importer in the 1990s and was a net coal importer in the first half of 2007, even though it remains the world's top producer of the fuel.

Coal fired plants provide over 80 percent of China's power and worldwide attention is focused on carbon emissions soaring so fast they are set to overtake those of the US this year.

Beijing is under huge pressure to curb its contribution to global warming at international climate talks among 190 countries gathering in the Indonesian island of Bali.

Its embrace of clean coal technologies, which may do most in the near-term to curb carbon emissions, should reassure everyone.

But Beijing's reluctant embrace of market mechanisms and the remnants of a planned economy are also limiting the impact of their impressive investments.

Zhao estimates his plant can run at 46 percent efficiency compared with the 39 to 41 percent rate of the older plants.

Just a few percentage points make a huge difference in coal use, cutting it over a tenth for each kilowatt hour generated.

Yet despite central government pledges to boost efficiency, the grid has no obligation to accept the cleaner energy so at night, when demand is lower, it simply does not.

Instead, two of the country's highest tech generators run only at half capacity - a reminder of the mismatch between policy and reality that is slowing efforts to cut energy use.

This low load rate, combined with high financing costs, is undermining their profitability. The units earn the company less per unit of power generated than smaller, more fuel-hungry units. This works as an incentive for dirtier plants to stay open even as Beijing seeks to eliminate them.

But Huadian expects the situation to get better next year as legislation tightens up support for cleaner generators.

"They have started the process of giving us priority, next year we hope to run at 60 percent capacity at night," Zhao said. (Additional Reporting by Gerard Wynn; editing by Megan Goldin


Story by Emma Graham-Harrison


REUTERS NEWS SERVICE