The United States Wants to Clear the Air in China

Utilities around the world are looking for ways to become more environmentally friendly, China's GreenGen project is just one example.

Jan 25, 2014 at 12:33PM

Peabody Energy (NYSE:BTU) has partnered with China on that country's GreenGen project. The facility is a combination of a research hub and an advanced coal-fired utility using coal gasification, combined cycle technology, and carbon capture. As countries around the world look for energy alternatives, GreenGen and similar initiatives show that there's still a future for "dirty" carbon fuels.

Working on the future now
China is the largest consumer of coal in the world. The vast size of the country and its quick economic ascent create a huge need for power and, thus, coal. Although the country is also investing in natural gas and nuclear utilities, coal is set to play a key role in China's future.

However, pollution concerns have made coal something of a problem in the country. But that doesn't mean China is giving up on the relatively cheap and abundant fuel—it's just taking a more deliberate approach. A key part of that is GreenGen, a test plant using cutting edge technologies.

The interesting thing about China is that the technology doesn't need to be all that profitable for the authoritarian government to mandate its use. And Peabody, the only non-Chinese partner in the project, is clearly setting itself up to benefit from coal demand in the country. That includes the thermal coal supply deal it just inked with Shenhua Group.

Not the only one...
China isn't alone in this effort. U.S. utility Southern Company (NYSE:SO)

Duke Energy's (NYSE:DUK) Edwardsport power plant comes closest using coal gasification and combined cycle technologies (essentially, this means making use of the excess heat from the plant). It proves that piece of the puzzle; Southern is taking it to the next level by adding carbon capture. Although the technology in all of this is fascinating, don't forget that Duke now has a 600 megawatt coal-fired plant providing reliable base-load power. And it's one of the cleanest coal plants in the country.

Once Southern is done with Kemper it will be able to boast a similar claim. Interestingly, Southern is part owner of the technology it is using, along with partner KBR (NYSE:KBR). The two are taking a big risk with this project, but the payoff could be huge. And China's efforts with GreenGen prove there is a big market for clean coal technology.

So do efforts to clean up carbon based fuels in other countries like India and the United Kingdom—note that carbon capture has applications beyond coal. Although royalties from Kemper technology sales would be icing on the cake for Southern, KBR really stands to benefit. Having a fully functioning power plant using its suite of clean coal technologies could make this engineering and construction company a go-to player in the utility space.

While that may not be so exciting in the U.S. market, which is awash in cheap natural gas, growing countries around the world still need to spend heavily on energy infrastructure. And Southern and KBR are quick to point out that natural gas isn't nearly as cheap overseas. China and India are two large and important markets, but they aren't the only ones that KBR could target. Fast growing Indonesia, for example, has plenty of low-quality coal that KBR's technologies could turn into clean power.


If you build it they will come
Technology improves over time and costs come down. Duke and Southern took on the risks and costs of being first movers. With other countries around the world, like China, working toward the same goal, it shouldn't be long before clean coal technology is a reality. Watch this space—and if you don't want to own a coal company or a utility, consider industrial technology players like KBR, General Electric (NYSE:GE), and Siemens (NASDAQOTH:SIEGY).

Or how about automakers than can also profit from Chinese demand?

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Southern Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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