ENN Group’s Wang Yusuo at Clinton Global Initiative 2009

At the Clinton Global Initiative, Duke Energy (NYSE: DUK) and ENN Group announced a partnership to collaborate on clean energy development.  At this point, the deal appears to be an agreement to share information and a statement of intent to partner in various areas, including:

• joint tech development in coal-based clean energy
• biofuels
• natural gas
• smart grid
• energy efficiency
• carbon-capturing algae

China and the US: largest greenhouse gas emitters are also coal addicted

China and the US together generate 40% of the world’s greenhouse gases (source: SFGate).  Both countries are also net energy importers but have high reserves of coal.  According to the IEA (via CleanerGreenerChina), 64% of China’s primary energy supply and 80% of electricity generation is via coal.  Twenty-three percent of the United States’ primary energy supply and 49% is via coal.  But the jury is out whether or not coal is an energy source that can be made to support global goals to reduce greenhouse gas emissions.  “Clean coal” is considered by some to be a hoax and a mirage.

Chart:  Coal in China today – International Energy Agency

Counter to conventional wisdom, China is making progress in coal technology

According to Julian Wong of Green Leap Forward (see tag Clean Coal), the conventional wisdom of environmentalists is that China’s coal is burning dirty low-quality coal in inefficient coal plants without any real policy-making/regulatory direction away from the current status quo.  He quotes an MIT report that characterized this conventional wisdom as “China builds crap, it burns crap, and it doesn’t give a crap.”

Against conventional wisdom, the MIT findings are that:

• new larger scale, more efficient plants are coming on line.
• there is major adoption of new, expensive technologies, such as Fluidized bed combustion (FBC) in smaller plants and pulverized coal combustion (PCC) in large scale facilities. (I have no idea what any of this is: go to the original post for more info!)
• adoption of post-combustion “scrubbing” has picked up
• price reform has moved away from subsidized coal to market-driven pricing
• plants are buying higher quality coal, which suggests that regulatory bodies have some teeth
• a substantial amount of coal is burned locally instead of being transported long distances

ENN Group: from natural gas transmission to diversified energy technology company

ENN Group is one of the largest privately held vertically integrated supplier of energy, includes generation,transmission and distribution.  While the business started with natural gas distribution, which continues at its subsidiary XinAo Gas (listed 2688.HK), the ENN Group is focusing on what they call “zero emission coal-based power” and new carbon capture technologies.  The company also looks to develop “carbon bio-absorption technology” which uses algae with high photosynthetic efficiency to absorb CO2 and even create bio-diesel in the process.

In a July 2008 interview with McKinsey Quarterly, Wang Yusuo shared his three-pronged approach toward developing clean-energy business in China:

We have focused on three areas. First, through our subsidiary XinAo Gas, we distribute the clean energy produced by others. Second, we are involved in producing clean energy ourselves by building production bases for methanol in various parts of the country, usually close to coal-mining regions, and by rolling out dimethyl ether plants, which use methanol as the raw material. In addition, ENN established the world’s first commercial dimethyl ether filling station for buses, in Shanghai, in 2007. We’re also increasing our investment in solar energy. We imported a photovoltaic-module production line from the United States and expect to launch a new-generation product within two to three years.
Finally, we are aggressively pushing for the greater use of clean energy. In response to the Chinese government’s environmental policies, we’ve proposed an energy-saving and emission-reduction plan in an attempt to be the nation’s clean-energy service provider. This plan integrates biomass, solar, geothermal, and methane into a package for a given city’s households and businesses. The idea is that the city could benefit environmentally through the use of multiple energy sources.

Partnership based on enlightened self-interest, and high hopes

The partnership between Duke Energy and ENN Group is between two energy companies heavily dependent on making coal work in the post-Copenhagen world, and from countries that are largely coal-addicted.  Perhaps private partnerships between US and China energy companies can help diffuse best practices and technology so that companies are ready as the regulatory and policy frameworks are still evolving.

At Clinton Global Initiative, President Clinton spoke passionately about the need for Senate support for the Obama Administration prior to the Copenhagen conference on greenhouse gas emissions.  Clinton highlighted China’s efforts at setting targets for reduced greenhouse gas emissions and stated that “the road to Copenhagen goes through the U.S. Senate.”

We all know the track record of Western-Chinese partnerships and joint-ventures.  But the best partnerships are based on enlightened self interest.  ENN’s stated goal of becoming a Fortune 500 company by 2020 with global operations can only be served by partnering with a leading US company like Duke Energy.  Not sure what Duke Energy is getting out of the deal.  Please add comments as this is not a subject that I usually cover.

Resources:

• McKinsey Quarterly interview with Wang Yusuo
• Press Release on Duke Energy and ENN Group Agreement
• Orville Schell at e360 – Different Perspectives going into Copenhagen
• EastAsia Forum: Making China’s Coal Clean
• Greenpeace Report on China’s “True Cost of Coal” via Cleaner Greener China
• ENN Group corporate site
• Duke Energy corporate site
• Green Leap Forward (tag: Clean Coal)
• Cleaner Greener China
• China Dialogue
• New Energy & Environment Digest
• TreeHugger interview with  Bill Clinton at Clinton Global Initiative