Selling Green Technologies to China

MarketWatch recently featured an interesting article on American firms capitalizing on China's need for green technologies to reduce its environmental woes. For example, given China's dependence on coal as a power source, coal gasification may enable it to lessen emissions. There are a host of other technologies though that may help China in improving its environment. As you probably know by now, China is already the world's largest greenhouse gas emitter, or will become so this year:

Just a year before thousands of athletes and tourists descend on Beijing for the 2008 Summer Olympics, China's government recently vowed to crack down on its air pollution.

In the next three years, China aims to cut harmful sulfur dioxide emissions by 10% from their 2005 levels and rein in the heavy industrial activities that have made its cities among the smoggiest in the world.

A push to clean up its cities' notoriously grimy air -- combined with huge and growing electricity needs -- spells opportunity for the handful of international companies that make pollution control systems for the power industry.

Niche player Fuel Tech, Inc., global engineering firms Foster Wheeler Ltd. and McDermott International Inc. unit Babcock & Wilcox Co., and industrial behemoths like General Electric Co. and ABB Ltd. are all positioning themselves to sell more low-emissions electric generation parts to China.

"If you're in the air pollution control business, you go to where the need is," said John Norris, chief executive of Fuel Tech, a Batavia, Ill. company makes products to reduce plants' nitrogen oxide emissions.

"The two biggest-fossil burning entities in the world are China and the United States," he said in a recent interview.

Some 23% of Fuel Tech's $75 million in revenues last year came from international customers, with China the largest contributor. In January, it won two contracts to supply Chinese coal-fired power plants with its nitrogen oxide reduction equipment.

Norris is hopeful the government's labeling of plants using Fuel Tech gear as demonstration projects will lead to more deals. "We've got a lot of bids in there," he said.

At the other end of the spectrum, $163 billion-revenue General Electric is selling China Jenbacher engines that capture methane gas from coal mining, gas turbines that reduce nitrogen oxides, and gasification systems. The Fairfield, Conn. conglomerate is also partnering with a Chinese university to research cleaner coal generation.

"What intrigues me is going right to China and India with these technologies," said Jeff Immelt, CEO of General Electric, at a conference last month to promote the company's success selling $12 billion last year in environmentally friendly products, from cleaning systems for coal-fired boilers to wind turbines...

China's energy demand grew by a staggering 8% in 2006, nearly four times the 2.4% annual rate for the rest of the world, according to the 2007 edition of BP's Statistical Review of World Energy.

Due to its vast reserves, coal is the obvious choice for running its power plants. The country is now the world's leading coal producer, which accounts for 61% of its power generation.

"When you look at India, China, Russia -- coal is the energy source that they indigenously have, and they will use it," Steve Leer, chief executive of U.S. coal producer Arch Coal, Inc. said at an investment bank conference last week.

China is rapidly adding to its fleet of generators. Every week, the country builds the equivalent of two 500 megawatt coal-fired power plants, estimates the Massachusetts Institute of Technology. By 2030, China's coal-fired electricity generation will more than triple, say Lazard and International Energy Agency estimates. All that coal comes with a price.

Here are some of the technologies mentioned in the article sold by General Electric (GE): the Jenbacher Coal Mine Gas Engine which uses methane from coal mining operations as an energy source, the Dry Low NOx (DLN) 1+ combustion system which reduces nitrogen oxide emissions, and the Gasification Combined Cycle system which claims to reduce conventional pollutants by nearly 50%. GE now claims that its business strategy focused on green technologies called "Ecomagination" is beginning to reap tangible payoffs:

The Fairfield, Conn., conglomerate says it's already reaping benefits from a two-year push into energy-efficient equipment and technology. It reeled in $12 billion in sales last year of what it calls its "ecomagination" products, which include wind turbines, super-efficient jet engines and long-lasting lightbulbs.

"Green is green," GE Chief Executive Jeff Immelt told an audience in Los Angeles. "This is about a hard-nosed business initiative," not a soft touch to mollify critics chiding the company for its environmental policies, he added.

Faster-growing units, such as GE's energy-infrastructure practice, are hiring thousands of engineers and rolling out hundreds of new products, including the recent debut of a hybrid freight-train locomotive. Power-hungry China and India beckon.

"I think this stuff has real potential, and they're off to a good start, and that's why we continue to own the stock," said Mike McGarr, a portfolio manager and analyst for Becker Capital Management in Portland, Ore., which owns 900,000 shares of General Electric.

Selling China green technologies kills two birds with one stone. Doing so helps reduce America's trade deficit with China and China's considerable environmental problems. Becoming more energy-efficient per dollar of GDP is a goal that should be targeted not only by China but the rest of the world as well.