Biofuel investment on the rise


Hepeng Jia/ Beijing, China 

For Lin Binhua, a sapling dealer in Tengxian county of southern China's Guangxi autonomous region, business is booming. 'Recently, sales of my jatropha saplings grew by several times, and most of the buyers are local forestry departments and big plantation owners,' Lin told Chemistry World  excitedly.  

Jatropha is an oil-rich tree that grows in warm areas, and it has become the star of the burgeoning biodiesel business in China. Thanks to the country's growing thirst for energy, millions of dollars have been invested in hundreds of mushrooming projects across China. 

Biofuel

Oil-rich jatropha trees are a promising source of biodiesel fuel

In early March, the State Forestry Administration announced that it would develop 13 million hectares of oil-rich trees - like jatropha or huanglianmu (Pistacia chinensis  Bunge) - for biomass energy production in the coming decade. Two months earlier, the State-owned China National Petroleum Corporation (CNPC) and the forestry administration signed a framework cooperation agreement to exploit forestry-based biofuels. CNPC plans that by 2010, it will attain annual production capacities of two million tones of fuel ethanol and of 200,000 tonnes of biodiesel. And international companies are also showing interest in the trees - in February 2006, BP announced that it was investing $9.4 m in India to assess the biofuel credentials of jatropha. 

Multiple momentum  

Biofuel investments have increased since China's growing economy led to record oil imports, reaching 181.6 million tonnes last year. Zhu Ming, president of the Chinese Academy of Agricultural Engineering, estimates that the country's farming plants could be used to produce biofuel equal to 150 million tonnes of petroleum, with farming residues such as stalks and straw potentially offering an additional 590 million tonnes biofuel each year. Yet Zhu admits that China's limited land resources, as compared with its huge population, have made policymakers very cautious of developing grain-based biofuels.  

China's ethanol fuel production has grown from 2003's 70,000 tonnes to 100,000 tonnes in 2006, thanks to trial programmes to add 10 per cent ethanol to auto gasoline in some provinces. The rise in biofuel production has caused a surge in not only corn price but also wheat price, despite last year's bumper harvest, as more farmers shift to corn plantation.In December, the National Development and Reform Commission (NDRC), China's investment and energy watchdog, asked to suspend all new grain-based biofuel projects except a long planned, cassava-based ethanol plant in Guangxi. 

NDRC's ban does not cover the investments in biodiesel, which makes oil-based trees a more attractive option. Yet Zhang Jian'an, an associate professor of chemistry at Tsinghua University, pointed out that most current biodiesel facilities are based on wasted edible oils and by-products of edible oil producers. 'So far, these materials cannot produce high-quality diesel, but since there is no biodiesel standard in China, and since there is no strict environmental requirement in rural areas, wasted oil-based biodiesel producers are still profitable despite the poor qualities of their products,' Zhang told Chemistry World

Zhu said many investors expect that the government will eventually subsidise biofuel production, so they are pouring their money into facilities in anticipation. So far, China has given subsidies of up to 1300 yuan (US$163) per tonne to four State-owned, corn-based ethanol producers in Jilin, Hebei, Anhui and Henan provinces, but no subsidies are given to biodiesel production. 

Growing challenges  

Although waste edible oils can support current biodiesel producers, they are not enough to meet growing demand, said Kong Linghe, president of Hebei Zhenghe Biodiesel Co Ltd. Kong points out that the industry cannot rely on oil-rich trees that have not yet been planted, and since 2003, the price of waste oils has tripled to 3,000 yuan (US$375) per tonne. 

Xiao Hua, an official with Yunnan Provincial Biofuel Office, which plans to plant 670,000 hectares of jatropha for biodiesel by 2015, admits that at the current price of jatropha seeds each tonne of biodiesel will make a loss of 5 yuan (US$0.63). But she says when the large scale plantation is created, the market price for jatropha seeds is expected to decline dramatically.  

For ethanol fuel, the Chinese government has encouraged researchers and producers to tap non-grain plants and farming residue stalks and straws. But Zhang admits that there is so far no technological breakthrough in efficiently transforming fibrin in stalks and straws to sugar compounds. With the current equipment, the production cost for stalks-based ethanol is 2000 yuan (US$250) per tonne more expensive than fossil fuel-based ethanol in China, despite the cheap material price. Zhang added that more research is needed to evaluate the energy consumption and environmental effect of biofuel production in China. 'In China, biofuels should not be taken simply as a fuel. Its production combines scientific research, industry progress and agricultural development, and therefore, a rational and integrated approach is always needed,' said Zhu.