China's Huaneng pushes carbon capture but costs bite

BEIJING, May 25 (Reuters) - Chinese power giant Huaneng will launch its second pilot carbon capture project in Shanghai at the end of this year, but high costs are holding back further progress, an executive with the company said.

"It is very, very expensive," said Jiang Minhua, director general of Huaneng's science and technology department.

China's coal-dominated power generation capacity has been soaring by 70 gigawatts a year and its CO2 emissions are now thought to be the highest in the world. Finding the technology to burn coal more cleanly has become a priority.

By 2050, capturing CO2 before it is released into the atmosphere could provide 15 percent of the cuts required to stop global warming, the International Energy Agency estimated this year, but despite a number of pilot projects across the world, the technology is far from mature.

"Carbon capture costs around 200 yuan ($29.31) per tonne using current technology. And actually handling it, processing it so it can be used industrially, will cost another 150 yuan ($21.98) per tonne," Jiang said.

Last month, Brian Ricketts, coal analyst with the IEA, said each CCS installation would cost "a billion euros" and funding was the biggest challenge.

Huaneng's Shanghai project aims to sequester 10,000 tonnes of CO2 per annum from one of Huaneng's power plants, and is the "next step to industrialising the process," Jiang said, but it is only a small fraction of the plant's total emissions.

Huaneng's first facility -- launched last year at the Gaobeidian power plant on the outskirts of Beijing -- was even smaller, capturing just 3,000 tonnes of carbon dioxide per year, which is then processed and used by local drinks manufacturers. The CO2 collected from the Shanghai facility will be sold to local industry, Jiang said.

"We've done a survey into the market capacity for CO2 in Shanghai. We believe that selling 100,000 tonnes a year in the Shanghai market will not be a problem, and that doesn't include something else we are looking into -- using the CO2 (to boost extraction rates) in nearby oilfields."