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U.S. defense contractor Lockheed Martin announced plans to build a green energy power plant that will use variations in ocean water temperature to generate electricity, taking a big step toward making the 130-year-old concept commercially viable.

Lockheed signed an agreement in Beijing with the privately held Reignwood Group to build the 10-megawatt offshore plant that will provide energy for a new luxury resort on Hainan island in southern China. It will use what is known as ocean thermal energy conversion technology, or OTEC.

A 10-megawatt plant, able to power several thousand homes, would be a major advance in the use of OTEC and experts say it would be a stepping stone toward building 100 megawatt plants capable of powering small cities.

The OTEC process uses warm tropical waters to power a steam-driven turbine. Cold water is pumped from the depths of the sea to condense the steam back into liquid.

Closed-system plants like the one Lockheed plans to build use a liquid such as ammonia that has a low boiling point to create the steam.

Warmer surface waters pass by a heat exchanger, causing the ammonia in the closed system to boil and create the steam that drives the turbine. Cold deep-sea water is pumped by another heat exchanger to condense the ammonia back to a liquid.

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