Biofuels: learning from Obama

The US president’s directive on advanced biofuels – and its implementation by government departments – sends an important message to China’s energy planners, write Zhang Jinyuan and Xu Dingming.

[Produced in association with Rutgers Climate and Social Policy Initiative]

On May 5, 2009, United States president Barack Obama signed a presidential directive on developing advanced biofuels. The US department of energy (DOE), department of agriculture (DOA) and the environmental protection agency (EPA) then followed suit with plans and measures to implement this directive. These moves – described by some commentators as historic – have been watched closely. Analysing the directive and the departmental plans that followed could inform China’s own energy stimulus package and its energy policies.

The directive supports advanced biofuels: cellulosic ethanol, green biodiesel and other new, low-carbon biofuels – which are different from starch- or sugar-based ethanol and not simple replacements for traditional liquid fuels. According to DOE figures, traditional ethanol production provides only 26% more energy than is required in its production, as opposed to 80% more for cellulosic ethanol. Meanwhile, greenhouse-gas emissions reduction is between 10% and 20% for traditional ethanol, but between 80% and 100% for cellulosic ethanol.

With the right standards in place, the entire production process for cellulosic ethanol could be made carbon neutral, since the energy crops consume carbon dioxide while they are growing. Non-cellulosic ethanol can also provide heat during production, making the process self-sufficient in terms of energy. Data from the DOA show that planting biomass crops, such as willow and miscanthus – a common genus of grass in Asia – on land that is not used for traditional crops, can reduce soil erosion by 90%. Herbaceous crops also increase the organic carbon content of poor soil, removing carbon dioxide from the atmosphere and mitigating climate change.

According to a 2005 survey from the DOA and DOE, the 1.3 billion tonnes of cellulosic biomass that is produced by the United States could replace 37% of that country’s crude oil consumption, with no major impact on the agriculture and forestry sectors.

In the same year, a report from the energy bureau at the National Development and Reform Commission (NDRC), China’s top economic planners, found that China could collect between 800 million and one billion tonnes of biomass from regular agricultural and forestry activities: cutting back bushes, thinning forests and pruning fruit trees, as well as waste from the lumber industry. Aside from this, China has 460,000 square kilometres of land suitable for forestry, and a further 10,000 square kilometres that is unsuitable for agriculture – all of which could be used to plant energy crops. By 2020, China would be able to reap an annual estimated harvest of two billion tonnes of biomass. Using this to produce advanced biofuels would not only replace a significant proportion of crude oil consumption, but also slash carbon dioxide emissions and energy use in the process of fuel manufacturing. However, the completion of such a huge project would require cross-departmental cooperation from China’s energy bureau, ministry of agriculture, ministry of environmental protection and forestry bureau.

The US plans from the DOA, DOE and EPA all focus on commercialising mature or nearly-mature technologies. In 2007, the DOE funded six cellulosic ethanol plants at a cost of US$385 million. New plans will see a further US$480 million provided to between 10 and 20 pilot and demonstration bio-refineries. In response to the financial crisis, US$175 million of follow-up funding will be given to at least two of the projects funded in 2007, which brings government funding for these projects to 60% or more of the total cost. The DOA, meanwhile, has been instructed to use the 2008 farm bill to provide loan guarantees or funding for demonstration projects currently under construction.

China already has the foundation it needs to commercialise cellulosic ethanol production. China was previously a world leader in acid and enzyme hydrolysis. At the end of 2006, the China National Cereals, Oils and Foodstuffs Corporation (COFCO) built a pilot cellulosic ethanol plant in Heilongjiang province, northeast China, with annual production capacity of 500 tonnes. Over two years of operation, the majority of working techniques were optimised. A feasibility study for a larger plant producing 10,000 tonnes a year was completed and found that the production costs would be 6,500 yuan (US$951) per tonne of ethanol. Taking into account initial stage subsidies for corn ethanol of 1,800 yuan (US$263) per tonne, the fuel would break even when the retail cost of petrol (excluding fuel tax) is 4.10 yuan (US$0.60) per litre. However, the economic outlook – and uncertainties about policies that favour cellulosic ethanol – caused COFCO to push back the start of construction on the larger plant to 2011, with its completion planned in 2012. Jilin Fuel Ethanol Co. made a similar decision.

New industries are always risky; it is no surprise that businesses that need to turn a profit are wary about this field. This is why the US government, despite the financial crisis and the budget deficit, is providing such strong support to demonstration projects. In China, commercial biofuel production would receive a significant boost if the government would provide half of the funding for the two projects mentioned above – around 160 million yuan (US$23.4 million) – less than the maximum US DOE funding for a single pilot project – and issue preferential policies as a matter of urgency.

In accelerating the development of biofuel energy, China must coordinate on a national level and concentrate on two aspects.
First, while commercialising mature technology as soon as possible, China should also strengthen basic research in key fields. The US DOE plans to invest US$110 million (751.5 million yuan) in conversion technologies, including more effective catalysts, microbes and feedstocks. A typical example of this type of research is the partnership between the National Renewable Energy Laboratory and the Danish firms Genencor International and Novozymes to research cellulosic enzymes such as the cellobiohydrolase family, which have reduced the cost of enzymes to one twentieth of the cost in 2002, making acid enzyme hydrolysis technology commercially viable. This new spending on catalysts will do the same for thermo-chemical methods. Meanwhile, research on algae will push forward a new generation of biofuels and help to realise a true green energy revolution.

China has a good foundation in biofuels research, but there is a lack of clear direction and low-level research is being reduplicated. In particular, research into commercialisation is weak. At the moment support is needed in proprietary brand micro-organism preparations,such as cellulosic enzymes and semi-cellulosic yeasts, catalysts for thermal decomposition and quality large-scale feedstock crops. These would reduce the cost of biofuels and thus increase their commercial viability.

Second, while supporting commercial demonstration projects, industry need to coordinate development of upstream production, such as large-scale sustainable feedstock, and downstream issues, such as transport and sales infrastructure and the optimisation of vehicles for use with E85 alcohol fuel mixture. Legislation, such as standards for environmentally friendly vehicles and low-carbon fuels, must be put in place. This will ensure the materials, the market and the regulations that are needed to meet our targets.

China can do more to support advanced biofuels. Policymakers see the commercialisation of biofuels as an alternative source of energy, but they should also be aware about the strategic significance of addressing climate change and protecting the environment, land resources and water. Zhang Guobao, deputy chair of the NDRC and director of the energy bureau, said that China should learn from painful experiences developing certain industries in the past. If we do not adopt a higher-level view of the development of new energy sources, in 10 years we may find we have been left behind again.

An ancient peasant saying goes: “Waste a minute of the land’s time, and it will waste a year of yours.” The opportunity will not wait for China; that is the message of Obama’s new biofuels strategy.

Xu Dingming is an adviser to the State Council. He has been deputy chair of the office of the national energy leading group and director of the NDRC’s energy bureau, where he oversaw China’s first mid- to long-term energy plan. Since 2003, he has overseen mid- to long-term national planning for electricity, coal, natural gas, renewable energy and oil reserves.

Zhang Jinyuan is president of Pacitec, Inc. He has worked as an engineer and general manager for the China region at Halliburton Energy Services, as well as deputy chief engineer at Shanghai Marine Geology Bureau. He was previously a research student in electromechanical engineering at the University of Houston, Texas.

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