Monday, April 7, 2008

Lighting the dragon: N.E. energy companies find China receptive

By Jay Rizoli

As China prepares to open its doors to the world for the 2008 Summer Olympic Games and the 2010 Shanghai World's Fair, it's harboring a dirty little secret.

Well, it's not so much a secret -- but it is definitely dirty.

The Olympic host promised a "green Games," but the People's Republic is the world's largest producer and consumer of coal in the world, and with a burgeoning economy and a relentless demand for electricity, it gets about 75 percent of its energy from the plentiful carbon fuel. Along with that comes carbon dioxide, sulfur dioxide, nitrogen oxide, carbon monoxide and a variety of heavy metals in a pollutant cloud that has made Beijing the air-pollution capital of the world.

"You see the Olympics coming, but people don't want to run there because they can't breathe," said Roger Little, president and CEO of Spire Corp., a Bedford developer of solar energy manufacturing equipment.

And that's not lost on the Chinese, who are exploring alternative and renewable energy sources -- including solar cell technology, lithium-ion rechargeable batteries and wind power -- and finding many of them in New England.

"They need electricity to fuel (economic growth), and they have always done it with conventional technologies, like burning coal," said Jason Fredette, director of investor and media relations for Devens-based American Superconductor Corp., a relatively new player in wind turbine electrical systems with an increasing presence in China. "But the resulting pollution is becoming a health concern that's affecting the work force, so there's a global shift in mind-set toward energy, and China is on board. They still need electricity and they are still using coal, but they are exploring alternative sources, and wind power is a great way to go."

AMSC stepped into the wind market in 2002, when a Wyoming wind farm employed ASMC's D-VAR voltage regulator to correct variability problems. In 2005, AMSC began working with Sinovel Wind Corp. Ltd., its first and largest customer in China. The following year it bought Windtech International in Klagenfurt, Austria, which developed and licensed proprietary wind turbine systems, and began a strategic alliance with Shanghai Electric Cable Research Institute.

China more than doubled its wind-generated electricity, from 2.6 gigawatts to 6 gigawatts, from 2006 to 2007, and estimates put it at 100 gigawatts by 2020.

AMSC recently opened a China division and plans to start manufacturing there to address shipping as volume makes it less practical. "Also, in the wind industry the Chinese have a mandate that 70 percent of the wind market come from local providers, so there's an issue of manufacturing it elsewhere and then shipping it," Fredette said.

Local manufacturing is also at the heart of Spire's presence in China, where the company put its first factory in 1983.

"We have less of a presence there now than we did then because we've been Chinese-copied," said Spire CEO Little. But China imports several Spire products, including cell simulators, laminators and solderers, and Spire just sold a factory into China to make cells and modules. Similarly, BTU International Inc., a Billerica maker of thermal processing equipment for the alternative energy market, has opened a Center of Excellence for Photovoltaics Process Technology in Shanghai.

But China's main involvement with solar cells lies in shipping them elsewhere, Little said. While state incentives exist for wind power, that's not the case with solar cells.

"It gets down to a battle of what is an incentive and what isn't," said Michael Carboy, a clean energy equity research analyst and managing director at Signal Hill Capital Group LLC. "Let's not forget that it's still a managed, state-run economy, so what is an incentive? I know that China is under incredible pressure to clean up their power generation, so rather than import that from the first world, whether it's the United States or otherwise, what if they were to build their own?"

On the smaller side of insatiable demand is battery power in a land that uses more than its share of mobile devices. Westborough-based Boston-Power Inc. recently announced plans to expand production of its Sonata battery line through a new partnership with Chinese battery manufacturer GP Batteries. Boston-Power's lithium-ion batteries can charge quickly and last through multiple charging cycles without losing storage capacity.

"We're a very small player in a very large country," said Boston-Power founder and CEO Christina Lampe-Onnerud, whose company employs several hundred people in two factories in China. "The battery market is global, and China remains the largest part of it."

Lampe-Onnerud said her company is focused on the health and welfare of the local workers as well as environmental impact. Sonata last year became the first rechargeable lithium-ion battery to receive the Nordic Ecolabel certification and expects a similar certification from the Chinese.

So opportunity is rich, and it's growing every day. According to the U.S. Department of Energy, China will generate and use a modestly higher amount of carbon dioxide than the United States will by 2015 and 20 percent more by 2030.

"They are producing CO2 at rates that dwarf those of the United States and the rest of the world," Carboy said.

With pressure building, "I think they're more in line with the rest of the world," said AMSC's Fredette. "It's hard to go that way completely, but it's a long-term trend that's going on."

Jay Rizoli is a freelance writer in Franklin.