Duke Energy, China’s top utility ink deal to hunt for cleantech investments

Charlotte, N.C.-based Duke Energy (NYSE:DUK) isn't active in China, but that’s changing with an announcement made today in Beijing.

The third-largest U.S. utility said it entered into a memorandum of understanding with China’s biggest electric utility China Huaneng Group to explore renewable and other clean technologies.

Duke Energy spokesman Dave Scanzoni told the Cleantech Group it started with Duke’s CEO Jim Rogers taking a vacation to China last year. The trip sparked the executive’s interest in the country and the impact it was having on the world in terms of energy and its commitment to developing clean energy technologies. 

“We want to be actively engaged in what China is doing in terms of the technology front,” Scanzoni said.

Duke Energy isn't interested in building facilities in China, but Scanzoni said there could be some cooperative projects between Duke and China Huaneng going forward.

State-owned China Huaneng produces more than 10 percent of the country's electricity demand.

Rogers wasn't available to comment today because he is traveling in China. But Scanzoni said under the agreement, the two companies plan to talk and share information in the coming months related to initiatives that could reduce coal plant emissions and produce other renewable sources of electricity.

“We’re looking at ways we can benefit from each other's knowledge and experience,” Scanzoni said.

One primary interest is expected to be in cleaner coal technologies including carbon capture, carbon sequestration and coal gasification, he said. There isn’t a financial exchange in today’s memorandum, but Scanzoni said the companies are looking for potential investment opportunities.

The partnership makes sense because both companies are already engaged in developing renewable and clean technologies, he said.

China Huaneng built China’s first carbon dioxide capturing demonstration facility at the Huaneng Beijing Cogeneration Power Plant in Beijing. The company also has a carbon dioxide capturing facility under construction at one of Huaneng’s coal-fired power plants in Shanghai, scheduled to be up and running by the end of the year.

China Huaneng is also building a 250-megawatt integrated gasification combined cycle demonstration power plant in Tianjin, called the GreenGen project, planned to be operational in 2011. It is expected to be China’s cleanest and most environmentally friendly coal-fired power plant.

China Huaneng has also indicated its interest in working with U.S. companies. In April, it signed an agreement to export its two-stage pulverized coal pressure gasification technology to a 150-MW power plant in Pennsylvania (see China Huaneng plans clean-coal export to U.S.).

Duke Energy is building one of the world’s cleanest, largest and most advanced coal gasification power plants—a 630-MW facility in Edwardsport, Ind., scheduled to be operational in 2012. The $2.35 billion facility, which broke ground in 2008, is about 20 percent complete, Scanzoni said. He added that it’s being designed to accommodate carbon capture.

Duke has announced plans to spend $17 million to study carbon capture at the site. The company has also proposed spending $121 million to study the trapping and permanent underground storage of up to 60 percent of the plant’s carbon dioxide emissions.

Scanzoni said the company is awaiting approval from the Indiana Utility Regulatory Commission to move forward with a geological study of the area.

The $121 million Edwardsport investment is expected to be used for a characterization of storage sites, including the drilling of multiple wells. The project involves looking into sequestration in deep saline aquifers as well as use in enhanced oil recovery and storage in depleted oil or gas fields. In enhanced oil recovery, carbon dioxide helps stimulate oil and gas production below ground.

The three-year site characterization would cause a 1 percent average customer rate increase, phased in between 2010 and 2013. Duke serves about 4 million customers in North and South Carolina, Indiana, Ohio and Kentucky. If the study is a success, Duke plans to ask utility regulators for the OK to implement carbon capture and storage.

Duke has met roadblocks in the past when implementing renewable projects. In May, Duke received the go-ahead from the North Carolina Public Utilities Commission for a $50 million, 10 MW distributed solar project to start in the fourth quarter of 2009. The program is half of what the utility originally proposed, but the project faced criticism because of its cost (see Utility commission rejects Duke Energy's funding plan for solar project). 

Duke Energy is building an advanced 825-MW pulverized coal plant in Cliffside, N.C., and retiring 1,000 MW of older, less-efficient coal plants.        

China is also focused on reducing the emissions from its coal plants by replacing old plants with newer, more efficient models. Those upgrades have reduced the coal needed to produce a kilowatt-hour of electricity from 370 grams in 2005 to 349 grams in 2008 (see China to close 31GW of coal power plants).

Duke Energy had another announcement today for a $15.8 million long-term agreement with San Jose, Calif.-based Echelon for the networking company's Networked Energy Services system (see Duke Energy puts $15.8M into Echelon's smart metering). Echelon’s NES System provides utilities with an advanced metering infrastructure that delivers services such as automated meter readings, outage detection, and accurate data collection.