Chinese coal enterprises are eager to move beyond the traditional to more sustainable, high-margin, clean-coal product chains.

With numerous clean-energy forums and conferences each week in China, government officials and company executives are introducing companies and projects to generate greater margins and revenues by developing clean coal technology.

Coal liquification and gasification are technologies just gaining traction with the industry and investors, according to Wu Chunlai, a leading coal expert in China.

Brown coal resources are significant in China, with 120 billion tons already detected. Brown coal is high in water and dust content and low in heat, so it was considered garbage. But Wu said new technology can use gasification to generate energy from brown coal.

Achieving these gains does not come easily. Investment capital, project finance, policy incentives, resource management and sustainability are all involved, according to Han Yizhuo, a senior researcher from Shanxi Coal Chemistry Institute at the China Academy of Sciences.

“Right now in China, coal-resource areas are usually far from major cities, and these areas all have water scarcity problems,” he said. Han said development plans must include water-resource management and efficient transportation.

Li Ying, a partner at Proskauer Rose law firm and a well-known coal specialist in China, sees a growing need for foreign-China cooperation in capital, technology development and rollout, but that clarity in regulations and policy is needed to help drive this further.

“With its huge reserves of coal, low production costs and growing markets, China has attracted multinational companies with advanced coal-gasification technologies to invest in China by forging joint ventures and licensing arrangements with local Chinese coal-manufacturing or power companies. However, unlike the cleantech or renewable energy policy in general, the government’s strategies and attitudes in clean coal remain to be clarified and reinforced,” Li said.

Li points out that while equipment for clean-coal technology is explicitly included in the “encouraged category,” and no specific restriction exists on foreign participation, foreign investors are only allowed to hold a minority interest in the joint venture and the Chinese partner must control the enterprise.

“This may have shown the government’s intention to encourage the development of local coal companies and nationalization of the technologies, but it has posed serious challenges to foreign investors for the investment structure and corporate governance,” Li said.

While this situation means challenges for foreign investors, many industry players think the time is right to collaborate in developing clean coal.

Charles Manger, chairman of Zephyr Holdings Group, works closely with government officials and investors to create clean-coal technology hubs. Manger says successful collaboration means creating higher value-add products in China’s major coal reserve areas, which drives new investment, jobs and development in outlying areas.

“Clean coal is a promising area for developing new business in China. The government has a strong interest in developing its natural resource in the most efficient way possible, while mitigating the environmental and social impacts that have been a traditional part of the coal industry,” Manger said. “So companies and organizations that can boost coal productivity while reducing waste and pollution will find significant opportunities now and into the future.”

Jincheng Coal Group President Zhu Xiaoming thinks his company is on the right track: “I cannot give the revenue numbers, but the new clean-coal related product sales and profits are much higher than our traditional coal production.”

Zhu said he is dedicated to developing sustainable, higher margin coal businesses with what he calls “non-emission coal” as a main product.

by Kenny Liu, China country analyst