Peabody Energy announced two partnerships with Chinese energy companies to build coal mines near newly planned high-efficiency power plants in China.
The St. Louis-based coal producer timed the announcements with Chinese President Hu Jintao's final day in Washington, and the White House included the deals as part of its $45 billion U.S.-China trade and investment package.
Speaking at a luncheon yesterday sponsored by the U.S.-China Business Council, a group made up of U.S. corporations doing business in China, Hu tried to assuage concerns that China's size and growing economic might are a threat.
"We will remain committed to the path of peaceful development," Hu said at the luncheon, adding that "China will never seek to dominate or pursue an expansionist policy."
Hu also called for close U.S.-China cooperation and deeper engagement "on the basis of mutual respect."
Peabody; China Huaneng Group, the largest power generator in China; and California-based Calera Corp. agreed to develop a 1,200-megawatt high-efficiency power plant and adjacent coal mine in China's coal-rich Inner Mongolia.
Peabody, the largest privately held coal producer, would operate the surface mine. Huaneng and Calera plan to deploy Calera technology that would convert a percentage of the plant's carbon dioxide emissions into cement and other building materials (ClimateWire, Aug. 13, 2010).
Scaling up a new form of carbon capture
The deal is a foot in the door in China for Calera, which has backing from Silicon Valley investor Vinod Khosla and the U.S. Department of Energy to further develop and deploy its proprietary technology.
Calera could help pave the way for other U.S. companies to participate in the scaling up of carbon capture and storage technology at Chinese power plants. In time, it could also crystallize some of the complications that closer U.S.-China collaboration could bring in terms of the protection of intellectual property rights for cutting-edge clean energy technology.
This deal expands Peabody's reach into the Asia-Pacific region. In recent months, Peabody has enlarged its team of corporate executives and managers charged with overseeing its Asian coal business.
With coal use sloping downward in the United States, coal producers are looking toward Southeast Asia, where China and India are burning more coal to power rapidly growing cities. More than 70 percent of China's power generation comes from burning coal, the most carbon-intensive fossil fuel, and that demand is expected to increase on a tonnage basis for at least another decade.
China says it wants to use nuclear power plants, massive wind farms and carbon capture technology to eventually start cutting its contribution of industrial carbon dioxide accumulating in the atmosphere. The United States and China are the largest global emitters.
In a second project, Peabody said it will partner with Yankuang Group Co. to develop an "energy center" in the Zhundong region of Xinjiang in northwestern China.
The companies plan to develop a 20-million-ton-per-year surface coal mine to fuel a 2,000-megawatt power plant. The massive project to build both the mine and the "supercritical," high-efficiency power plant also includes a facility to convert coal to cleaner natural gas.
A Peabody spokeswoman would not say what kind of capital spending these projects might require from Peabody and the partner companies. Executives could elaborate on the plans during a fourth-quarter earnings call with investors coming up on Tuesday.
If it's built, according to Peabody, the U.S.-China power project would have good access to the giant Xinjiang electric transmission corridor and a new rail line being built. Peabody expects the Xinjiang region to nearly triple its coal production by 2015 to increase its output to 1 billion metric tons by 2020.
China's power capacity is expected to increase by 80 gigawatts in 2011. This week, Huaneng Power said its power generation in China increased 26 percent in 2010.
Peabody CEO Gregory Boyce in a press release called China the world's fastest-growing coal market, fueling "unmatched" economic growth.