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DE RUEHBJ #2125/01 2072318
ZNR UUUUU ZZH
P 262318Z JUL 09 ZDK
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 5361
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 03 BEIJING 002125 
 
STATE FOR EAP/CM-HABJAN, EAP/CM, EAP/PD-STOLTZ 
STATE FOR OES DAS MIOTKE, OES/EGC, OES/ENV, AND OES/PCI 
STATE FOR S/SECC-STERN, S/P-GREEN, EEB, AND ECA 
STATE PASS TO CEQ SUTLEY 
USDOE FOR INTERNATIONAL 
USDOC FOR MAC AND MAS 
USDOC PASS USPTO FOR WU 
EPA FOR INTERNATIONAL/MKASMAN/GIANNINI-SPOHN 
NSC FOR LOI, SHRIER 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: OVIP PREL PGOV ECON PARM MARR SENV ENRG KGHG CH
 
SUBJECT: DOE SECRETARY CHU DISCUSSES CLEAN COAL TECHNOLOGY AND 
FUTUREGEN COOPERATION WITH CHINA'S LARGEST POWER PRODUCER 
 
REF: BEIJING 
 
BEIJING 00002125  001.2 OF 003 
 
 
(U) Sensitive but unclassified.  Please handle accordingly. 
 
Summary 
------- 
¶1.   (SBU) On July 16, Secretary Chu met with CAO Peixi the 
president of Huaneng Group, China's largest power producer.  The two 
met at Huaneng's Gaobeidian showcase cogeneration power plant in 
Beijing to discuss the energy giant's effort to reduce sulfur and 
nitrogen oxide (SOx and NOx) and carbon dioxide (CO2) emissions 
while improving overall efficiency at the company's coal-burning 
plants.  The two also discussed how power producers can increase 
installed renewable energy capacity and lessen the firm's reliance 
on coal.  Finally, Secretary Chu asked Cao to reconsider Huaneng's 
recent decision to pull out of the U.S. FutureGen project, which is 
intended to demonstrate large-scale coal gasification and carbon 
capture and sequestration (CCS) technologies.  Huaneng executives 
explained their motivations for pulling out of the project, but said 
that they would now reconsider their decision given FutureGen's 
revised direction under the new U.S. Administration.  END SUMMARY. 
 
Huaneng's Clean Energy and Carbon Capture Efforts 
--------------------------------------------- ---- 
¶2.  (SBU) Cao provided an overall profile of the Huaneng Group, 
noting that the state owned enterprise is China's largest power 
producer, accounting for nearly 11% of the country's total power 
output.  Coal is the firm's primary source of energy, accounting for 
83 percent of Huaneng's power output, while hydro makes up 16 
percent, and the remaining 1 percent comes from other sources. 
According to Cao, Huaneng's strategic goal is to increase total 
installed capacity due to renewable energy sources from today's 16 
percent to 25 percent by 2015 and 35 percent by 2020.  They are 
doing this by investing in large-scale wind and solar plants, 
including a planned 160 MW solar plant and China's first 10 MW solar 
photovoltaic plant, which will soon commence operation. 
 
¶3.  (SBU) The Huaneng president emphasized the firm's efforts to 
implement strict environmental regulations and to close down several 
small inefficient coal generating units.  Cao also said that 85 
percent of Huaneng's coal-fired power-generating units are equipped 
with desulfurization equipment and that the firm is in the process 
of retrofitting all of its facilities for NOx capture as well.  In 
response to Secretary Chu's question regarding reports of Chinese 
power plant operators disabling SO2 scrubbers and sensors to sell 
more energy, Cao said that Huaneng has implemented a program to 
enhance environmental awareness among its managers and employees and 
has taken concrete steps to link salary and compensation to 
environmental performance.  Cao also said that Ministry of 
Environmental Protection has greatly improved its remote monitoring 
capabilities and he feels that the issue of illegal disabling of 
 
BEIJING 00002125  002.3 OF 003 
 
 
scrubber equipment has changed dramatically in the last two years 
and is no longer the significant problem that it once was. 
 
¶4.  (SBU) In explaining Huaneng's efforts to develop CCS technology, 
Cao said that the Gaobeidian plant, which supplies power to 
approximately 30% of Beijing's population, is the first commercial 
coal-fired plant in China to install carbon capture equipment; 
however, the volume of CO2 captured is relatively small at 3,000 
tons per year and it is not sequestered underground.  The CO2 
captured from the power plant's exhaust gases is sold to local 
industry for use in carbonating soft drinks.  Cao said that Huaneng, 
in partnership with Shanghai Electric, is using knowledge gained 
from the Gaobeidian facility to design a much larger facility in 
Shanghai that will capture 100,000 tons of CO2 per year and will be 
operational in time for the Shanghai Expo in 2010.  Cao also 
detailed Huaneng's role as the lead partner in the Greengen Company, 
noting that the first phase of the Greengen plant near Tianjin is 
already under construction with the phase one operation expected to 
begin in 2011.  The initial phase one 250-megawatt plant--later 
expanding to 650-megawatts--will demonstrate integrated gasification 
combined cycle (IGCC) technology on a commercial scale and will also 
include a major carbon capture demonstration project designed to 
provide enhanced oil recovery. 
 
Huaneng Reconsidering Decision to Abandon FutureGen 
--------------------------------------------- ------ 
¶5.  (SBU) Secretary Chu raised Huaneng's recent decision to pull out 
of the Futuregen alliance and asked company executives, who were 
present at the meeting, to reconsider their position.  [NOTE: The 
Futuregen project--which is analogous to China's Greengen 
project--was intended to demonstrate advanced coal-gasification 
plant and zero emissions technology in the United States by 
combining electricity and hydrogen production with the near 
elimination of harmful emissions through the sequestration of CO2 
underground. Since the inception of the project it has experienced 
several setbacks due to rising costs and changing priorities.  In 
June, two of the largest Futuregen alliance partners, both major 
U.S. coal-burning utilities, pulled out, with Huaneng following suit 
in early July.  END NOTE.]  Huaneng officials explained that the 
decision to withdraw from Futuregen was driven by the following 
three reasons: in July 2008, the U.S. Department of Energy informed 
Huaneng that it was no longer supporting the Futuregen program; 
Futuregen project costs had nearly doubled between 2003 and 2009; 
and finally the two largest U.S. partner firms had pulled out in 
June signaling the collapse of the project. 
 
¶6.  (SBU) Secretary Chu said that he is reversing the decision on 
Futuregen, noting that U.S. DOE now strongly supports the program 
but with a revised direction that will strive for a more pragmatic, 
cost-effective approach to the technology demonstration project.  He 
also noted that DOE is looking for new utility partners and that the 
 
BEIJING 00002125  003.3 OF 003 
 
 
U.S. president believes it is important to demonstrate full-scale 
gasification and CCS technology.  Cao said that he will reconsider 
the decision to withdraw from Futuregen and get back to the 
Secretary in a reasonable amount of time, adding that he will order 
relevant departments at Huaneng to review the impact of rejoining 
Futuregen, factoring in the revised course under new U.S. 
leadership.  Secretary Chu offered to provide Cao with revised cost 
estimates and details of efforts to revitalize the project and also 
encouraged him to visit the U.S. to see CO2 sequestration sites 
first-hand.  Cao said he would very much like to visit these sites 
and to discuss CCS with experts at the U.S. national laboratories. 
 
¶7.  (U) Secretary Chu did not have an opportunity to review this 
report before departing Beijing. 
 
GOLDBERG