Clean-Coal Technology Makes A Move – to China
Colorado-based Evergreen Energy Inc. (NYSEArca:EEE) may have found a way to turn coal into a clean fuel. And so it has embarked on a pioneering joint venture – in the country that needs that technology most.
Teaming up with Beijing Gang Jing Hong Ren Technology (BGJHR), Evergreen has invested more than simply its $500,000 commitment (BGJHR has contributed the same amount) into the venture. There’s far more at stake than even the $2 million or so needed to complete the work in China.
The joint venture, or JV, is intended to be a pilot test of Evergreen’s breakthrough new clean-coal technology.
And the company’s ability to survive rides in the balance.
Betting on K-Fuel
The “China package” is the set of technical documents to include detailed engineering design information for certain key components of K-Fuel technology. It will become the basis for a broad application to Chinese power and chemical facilities.
BGJHR has said that the design work for the technical specs should be ready as early as the end of September. That would then allow the JV to finalize negotiations and conclude a commercial agreement with an as-yet-unnamed Chinese utility/chemical combine for the construction of a K-Fuel facility there.
Other Chinese utilities are interested, too.
The market for this is huge – the entire Chinese power production and much of the chemical industry infrastructure. But it is going to be a tough sell, even for a large entity (which Evergreen certainly is not).
Evergreen is putting most of what eggs it has left into this basket. It has closed its only other possible test facility in Ohio, and has just announced a 1 for 12 reverse stock split to keep its shares listed. Those shares are trading at less than $0.20. The company needed to attract outside funding to come up with its portion of the JV expenses.
Evergreen came to China because of the country’s commitment to wean itself off of the high-sulfur-content coal it relies on to generate the bulk of its electricity (around 70%). Beijing is serious about this, and the need is acute, well recognized by anybody who has traveled there.
And Chinese authorities have been impressed enough with the K-Fuel approach to allow the JV.
The real question is whether the technology is commercially viable.
While it is being introduced internationally, Evergreen utilizes a licensing approach through the creation of JVs. Progress here has been slow, and the Chinese venture, along with a few statements of interest in the U.S., amount to the extent of the application.
Yet K-Fuel could be the next big thing. Here’s why.
Refining Coal… Before It Is Burned
Evergreen says that the K-Fuel process enhances the British Thermal Unit (Btu) level of low-grade coal – in some cases by 200% – allowing for its improved utilization and sale.
It works best with very low-grade coal (lignite and sub-bituminous feed stocks) – the hallmark of Chinese coal reserves. That means the project currently underway there should be a perfect test of how well the technology works. Evergreen is also keen to introduce the K-Fuel approach at mining locations, as well as to all kinds of coal-fired facilities and throughout the coal supply grid infrastructure.
K-Fuel is touted as a reduced-cost alternative to expensive pollution control systems, which carry the further disadvantages of having a large footprint and being used only post-combustion. It can be applied to new power plants or retrofitted onto existing ones.
Essentially, the Evergeen process refines coal before it is burned. That differentiates K-Fuel from most other clean coal technologies currently in the market – they apply processes only after the coal has been ignited.
With its early introduction into the coal usage cycle, the process also provides some significant and positive environmental results. K-Fuel reduces mercury content by about 80%. That, in turn, allows coal-fired boilers to have lower nitrogen oxide and chloride emissions. Other emissions noticeably reduced include sulfur oxides and carbon dioxide.
Increasing the heat content, while at the same time lowering the impurities from the use of inferior coal, has an enormous potential impact in many parts of the world. The China test, therefore, may lead the way for K-Fuel in other countries where low-grade coal comprises the primary source of heat and power.
Evergreen is certainly not the only company experimenting with clean-coal solutions.
Other providers range from small niche companies, such as Arch Coal Inc. (NYSE:ACI) or Foundation Coal Holdings Inc. (NYSE:FCL), to majors like Consol Energy Inc. (NYSE:CNX). But what may make the difference for Evergreen is the Btu performance enhancement through the continuing use of low-grade coal.
The bottom line, for a technology in this sector to succeed, is the consistent ability to improve the performance of inexpensive coal stock. The positive environmental results are also nice (and, in this age of impending carbon caps and taxation, may end up being much more than just “nice”). Yet companies using coal will not adopt technical change, even if it is inexpensive to apply, unless there is an enhancement of the end-product – power and heat.
In that respect, the Evergreen Chinese JV is no different. It will be the Btu upgrade that will signal success. The environmental advantage merely sweetens the pot.
Still, a licensing arrangement that provides both, in tandem, may be too good for Beijing to resist…