Policy and industry analysts warn that if the costs of these new technologies are not commensurate with that of coal, China’s clean tech push may fizzle and fail to attract the private sector investment it needs for long term success.

“The government must gradually lift fossil fuel prices while granting incentives to non-fossil fuels to establish a long-term price signal,” said Wang Yi, deputy head of Policy and Management at the China Academy of Science.  Without changes in tariff structures, there would be little incentive for private firms to invest, analysts warn.

State-run firms would be the only ones able to operate at a loss as “they are the ones who can afford to lose money,” said Lin Boqiang, head of Center of Research on Energy Economics at Xiamen University.  “The private sector can’t afford waiting around for 5 to 10 years operating at a loss.”

China’s low-carbon energy potential is enormous.  The government is aiming for a 45% cut in carbon intensity from 2005 levels by 2020 and a 15% increase in share of renewable vs. primary energy consumption.  Certain estimates say that China is ready to build at a minimum 20 nuclear power plants over the next 5 years, each with a capacity of 2GW.

Coal, however, is the elephant in the room.  Providing 80% of all electricity for its growing economy, China is the world’s #1 coal user.  It constructs, on average, one new coal-fired power plant every week.  Switching away from such a plentiful albeit highly polluting resource will be difficult for the economic giant.

On top of that, China has been making improvements to its coal plants to make the burning process cleaner.  These generators are called supercritical plants, and they produce approximately 15% less CO2 that conventional plants at about $500-$600 per kW less than in developed OECD nations.

China has overtaken the U.S. as the world’s top emitting country, and it faces tremendous pressure from the international community to wean itself off its coal addiction and get serious about reducing its emissions levels.

Foreign firms such as nuclear Areva of France, wind power equipment producers Gamesa of Spain, U.S.-based First Solar and India-based Suzlon are just a few that will be waiting to see how China’s investment plans develop and how it meets this coal-pricing challenge.

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New coal plants are being built across swaths of the Mid-West and Southeast to take advantage of the plentiful coal resources in the United States. Utilities believe that coal is cheaper than natural gas and nuclear power, and more consistent than intermittent renewables such as solar and wind.

All together, the 16 large plants in operation and the 16 new plants under construction will generate approximately 17,900 MW of electricity. That is enough to power 15.6 million homes, or roughly the combined number of homes in California and Arizona.

The BP oil spill and the tragic coal mine accident in West Virginia have increased public awareness of the social and environmental costs of fossil fuels. However, based on this recent expansion, it appears the coal industry is not convinced that the U.S. will implement legislation to regulate carbon emissions in the near future.

“Building a coal-fired power plant today is betting that we are not going to put a serious financial cost on emitting carbon dioxide,” warned Severin Borenstein, director of the Energy Institute at UC-Berkeley. It is estimated these new 32 coal plants will emit about 125 million tons of greenhouse gases every year, the equivalent of adding 22 million vehicles to the nation’s roadways.

Despite the Obama administration’s dedication of $3.4 billion in stimulus funds to “clean coal” research, none of these new plants incorporate the experimental technology, which filters out carbon before it is emitted into the atmosphere. New investments in traditional coal plants amount to more than $35 billion.

John Grasser, a spokesman for the Department of Energy, acknowledged that these new plants were a “missed chance” to incorporate carbon-limiting technologies into construction. “This is not something that’s going to happen tomorrow,” he remarked, warning that wide-spread carbon neutralizing technologies, he warned, are at least 15-20 years away.

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The government proposed abolishing tax breaks for energy-intensive companies, but came under fire from industry groups.  If introduced, this coal tax would target €410 million in 2011 and €710 in 2012, partially making up for revenue lost by keeping the tax breaks.

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Global coal use, however, has remained steady.  In fact, as a percentage of world primary energy usage, coal has risen to levels not seen since 1971.

On the other hand, oil’s percentage of global energy usage has fallen consistently over the past decade; from 39.00% in 1999 down to 34.77% in 2009.

As oil production becomes more difficult and expensive, coal is increasingly being employed as a source of transportation fuels.  Nations like South Africa and China have been expanding their coal-to-liquid (CTL) programs, and China reportedly has six major CTL projects under development.

CTL processes may present an alternative way to generate liquid fuel, but it comes at a price.  CTL produces nearly double the greenhouse gas emissions of conventional fuel production from oil, and many climate and environmental advocates worry that if CTL programs become more widespread the world would experience increased emissions levels.

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Although China is rich in domestic coal resources, the energy-hungry nation has been reaching beyond its borders to secure future supplies for its rapidly industrializing population.  In December 2009, total Chinese coal imports reached a record monthly high of 16.38 million tons, jumping up 29.5% from November 2009.  Analysts say these high import levels were the result of insufficient supply in the domestic market, and are likely to remain high until March of 2010.

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The Obama administration has implemented tougher regulations on mountain-top removal mining practices, and is increasing scrutiny on existing plants.  The administration may also place new limitations on emissions of mercury, soot and smog from coal mining and combustion.

Coal enjoyed a “rush” of new activity beginning in 2001, when more than 150 new plant proposals were announced.  Since then, it appears public favor of the resource is decreasing as pollution concerns grow.  A recent Washington Post survey discovered that nearly 2/3 of Americans approve of federal regulations to limit greenhouse gas pollution from coal plants.

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The “hidden costs” associated with energy production in the United States are much more significant than anyone realizes, says a new report from the National Research Council (NRC).  Applying a price tag to the far-reaching side effects of energy production, such as the effect of air pollution from dirty power plants on human health, the NRC estimates that energy production cost us $120 billion in 2005.  The true figure is likely a lot higher, as the report did not include environmental damage as a result of climate change, threats to national security or the effects of certain pollutants such as mercury.

If these externalities were included into the baseline price of the energy sources we rely upon, like coal or oil, the market price would increase dramatically.  Because of this, many consumers and governments “may not realize the full impact of their choices.”  When “market failures” like this occur, the report deems that “a case can be made for government interventions – such as regulations, taxes or tradable permits – to address these external costs.”

Coal plants are the “single largest source of greenhouse gas emissions in the United States” and supply the nation with approximately half its electricity needs.  According to the NRC, total annual external damages from coal amounted to $62 billion.  These damages would add on average about 3.2 cents for every kilowatt-hour (kwH) of coal- produced energy.  The external costs from natural gas-burning plants were lower than coal-burning ones.  This resource resulted in $740 million in total annual external damages in 2005, which would amount to a 0.16 cent increase per kwh.  The life cycle damages of wind power are markedly lower than either coal or natural gas, as are nuclear power plants, concluded the NRC report.

Nobuo Tanaka, the head of the International Energy Agency (IEA), says the world needs to make progress on carbon capture and storage (CCS) projects.  One hundred major projects are needed by 2020, he said at a recent CCS conference, and “thousands more” will be required by 2050 in order to help fight the effects of climate change by burying carbon dioxide emissions from fossil fuel-fired power plants underground.  Securing funding for large scale CCS projects needs to be a priority at the Copenhagen climate talks this December, Tanaka stated.  At a minimum, building the amount of CCS plants suggested by the IEA will cost $56 billion by 2020.  From 2021 to 2030, that number will skyrocket to nearly $646 billion.  CCS technology must “quickly expand in the developing world where we see the vast majority of emissions growth,” Tanaka said, echoing IEA estimates that say 65% of new CCS projects need to be built in non-OECD nations.  British Energy Secretary Ed Miliband concurred with Tanaka’s statements.  “The world’s biggest coal-using nations recognize we cannot continue with business as usual on coal.  I think we are sending a very clear signal to the Copenhagen talks that coal and carbon capture and storage need to be a very important part of the final agreement.”