China to subsidize and protect bioenergy sector

Earlier we reported about new elements in China's ongoing bioenergy policy development, and today the Chinese government has shed more light on them. The National Development and Reform Commission (NDRC) announced that the government has issued a package of policies, including risk reserves, subsidies and tax breaks, to encourage the development of the country's nascent bioenergy industry. The NDRC is the planning body that crafts China's Five Year Plans. Currently, it is working on the 11th edition.

Under the new policies, bioenergy enterprises should set up risk reserves, which will be used to offset their losses when the oil price is low. When the oil price is low for a sustained period, a government subsidy regime will be triggered to cover the losses of enterprises.

Note: this mechanism comes close to the 'contingency tax' proposed by Indian-American venture capitalist Vinod Khosla, a major biofuel investor. In a white paper [*.doc] from his hand, he wrote that such a tax is needed to deter deliberate and provocative oil price-cutting by the oil industry, which would destroy biofuel investments. It would come into effect at a pre-determined level – say, $40 per barrel. The tax would in effect set a floor price below which oil could not be sold, for any oil sold at lower than the floor level would have the tax added to it. The scheme would act as a windfall tax in reverse.

The Chinese government will also provide subsidies to developers of raw material supply bases for the bioenergy and bioproducts industries, particularly those using land that is currently classified as 'non-arable'. Subsidies will also be available to model projects that are resulting in significant technological innovations.

The bioenergy industry is seen as being of national importance to China's environmental protection, rural development, in addition to being a new source of growth for the economy, an NDRC official said. After years of trials in selected provinces, the government has begun pouring huge investment into the sector. Contrary to what many in the West think, the People's Republic is still very much an agrarian society, with more than 50% of all Chinese people still being employed in the agricultural sector today. In this context, it is not surprising to read that a single biofuel mega-project is projected to lift 1.1 million farmers out of poverty:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: rural development :: policies :: subsidies :: China ::

The country produced 1.02 million tons of bioethanol from corn and other raw materials in 2005. The ethanol is added to petrol at a ratio of 1:10 for use in automobiles. The government estimates that by 2010, gasoline with ethanol mixed in will account for half of China's total petrol consumption.

Large firms, such as the China National Petroleum Corporation (CNPC) and the China National Cereals, Oils and Foodstuffs Corp (COFCO), have announced ambitious plans for bioenergy investments.

CNPC has signed an agreement with the government of Sichuan Province in southwest China to develop facilities to produce 600,000 tons of automotive-grade ethanol from sweet potatoes each year and 100,000 tons bio-diesel made from the seeds of the jatropha curcas tree.

COFCO said in October it would invest one billion yuan (126 million U.S. dollars) to build a major ethanol plant in Guangxi region, also in southwest China. The plant, with a capacity of 400,000 tons, will lift 1.1 million farmers out of poverty by growing cassava as the raw material for the plant, said Yue Guojun, head of COFCO's biochemical and bioenergy division.

China's new policies were jointly issued by the NDRC, the ministries of finance and agriculture, the State Administration of Taxation, the State Forestry Administration.

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European Parliament approves new science budget: energy research gets small share

Quicknote bioenergy science
The European Parliament has approved the €54 billion (US$71.6 billion) plan to boost science research in Europe as part of the so-called Lisbon Strategy aimed at strengthening economic growth, competitiveness and employment in the Union. The Framework Programme 7 (FP7) is designed to support several priority areas of research.

Of the different research categories [interactive map], information technology gets the biggest chunk of funding, with a €9.1 billion budget, while research into climate change and energy have received a comparatively small amount of funding in the plan.

The Parliament gave the go-ahead to the plan on Thursday at its second reading. FP7 is due to be formally adopted by the EU on 5 December. The programme is due to run from 2007 to 2013.

It is difficult to analyse what this budget allocation means for the development of Europe's bioeconomy, but if the science fields that make up this broad concept are combined (energy, environment, transport and biotechnology), then the funding is considerable.

Euratom, the European Atomic Energy Community (which is an institution formally distinct from the European Community), gets €2.7 billion for nuclear research, including additional funds for ITER, the fusion project.

Over the coming days we will be researching the details of the budgets as they relate to biofuels, bioenergy and international cooperation on this front [entry ends here].
bioenergy :: biofuels :: energy :: sustainability :: climate change :: bioeconomy :: Framework Programme 7 :: science budget :: Lisbon Strategy :: European Parliament :: European Union ::

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Liquefied biogas?

First, a news story: Earth Biofuels announced that it has acquired Apollo LNG from its majority shareholder. Apollo LNG, now doing business as “Earth LNG,” owns a liquefied natural gas (LNG) processing facility in Topock, Arizona that currently produces over 80,000 gallons of transportation-grade LNG per day, and has a capacity of 86,000 gallons of LNG per day. LNG produced by the plant is sold primarily to municipal fleet customers located along the west coast of California.

Liquefied natural gas is produced by cryogenically transforming natural gas into a liquid state at a temperature of minus 163 degrees Celsius. The LNG is then transported to markets, either across oceans in specialized cryogenic supertankers or overland in dedicated tanker trucks. On arrival, it is used for electricity generation or as a transportation fuel, mainly by larger vehicles in municipal fleets that utilize a centralized fueling facility.

Now comes an important detail, expressed by Denis McLaughlin, the company's CEO: “We believe the LNG industry will begin to see new plants supplied by stranded natural gas from sources such as landfills and dairy farm waste manure. By liquefying this natural gas and getting it to transportation markets, LNG can further evolve into a renewable, clean burning fuel.”

Liquefied biogas from the developing world...
The 'stranded natural gas' in question here is in fact biogas - methane captured from biogenic sources. We were hesitant to suggest that biogas can indeed be liquefied and transported across the globe, just like its fossil counterpart, LNG. But now that a biofuel company is venturing into this idea, we feel more confident to explore it further. We take it South, to the developing world. The bioenergy resources in vast parts of this world can in fact be seen as 'stranded'. Turning these biomass resources into biogas, liquefying it and shipping it out may be a pipe-dream for now, but one worth exploring:
biomass :: bioenergy :: biofuels :: energy :: sustainability :: transport :: logistics :: developing world :: infrastructure :: airship ::LNG ::biogas ::

The concept of 'stranded gas'
Let us first examine the concept of 'stranded gas' - a key term in the logistics and economics of natural gas. Despite being one of the most abundant energy sources on the planet, more than one-third of global natural gas reserves are classified as 'stranded'. The term refers to reserves that have been discovered, but have not been developed because they are uneconomic to deliver to market.

For almost a century, natural gas has been transported safely, reliably, and economically via pipeline, and pipelines were ideally suited to the supply and market conditions of the twentieth century, when large reservoirs of gas could be found in accessible locations that provided the stability and long-term security that pipeline projects demand. Now, in the 21st century, the vast majority of the large, easy, gas plays have been tapped, and attention is shifting to stranded reservoirs that were previously thought too small, too remote, or too geographically harsh to develop.

Now let us use this concept of 'stranded' reserves, and apply it to biofuels. The tropics and subtropics have a vast potential to produce renewable biomass, but often the logistical infrastructure to exploit this potential lacks. Vast zones in the South have no agricultural production because there are no roads, railroads, or waterways connecting them to markets. The prototypical example here may be the Democratic Republic of Congo, a country the size of Western Europe, with only 160 kilometres of paved roads... Because of this, only small villages can be found in the vast rural zones of these countries. They are cut off from the rest of the world and have to rely on some deplorable form of autarky to satisfy their own needs. Their biomass potential is, as it were, 'stranded'.

Overcoming infrastructural problems
Building roads, railroads, canals and pipelines is a very expensive affair. And precisely because of rising energy prices it is becoming ever more expensive: over the past years, both asphalt, concrete and steel prices have risen to all-time highs (see graph), with the result that governments in the South are even more reluctant to build those infrastructures. The result is that rural communities remain cut off from markets, cannot sell any products, and ultimately sink deeper into poverty. The result: young people migrate from the country-side to the mega-cities and mega-slums, and the agricultural potential of the rural areas declines even further. A vicious circle.

Now if only this 'stranded' biofuel resource could be tapped in an efficient way, then villages that are cut off from the world market might prosper by becoming energy producers. Let us assume that governments in the South stick to a business as usual scenario and refuse to invest in transport infrastructures. Would there still be a way to bring the biofuels potential to market? Indeed, there might be.

Taking it to the skies
Agricultural logistics are highly complex and determine the economic viability of producing food in a specific region. Since biomass is an agricultural product, the same logistical challenges apply to it.

Biomass, in whatever form - wood, grass, grains, or residues -, is bulky. To get it to market in an economic way, it is often best densified or transformed locally into a fuel with a higher energy density. For example, wood chips from a forestry operation can be turned into fuel pellets, or into bio-oil in a nearby pyrolysis plant, and then transported to a refinery where it is turned into useable fuels. But such an option still requires roads, railroads or waterways.

Luckily, there is one form of bioenergy that can be moved out of its 'stranded' status without relying on road or rail transport. This form of energy is biogas, which can be literally airlifted.

The idea would be to create vast biogas producing zones in the inaccessible parts of developing countries, where vast unused land resources can be found, and where jobs and economic development are urgently needed. Biogas can be produced relatively easily and cheaply from a myriad of tropical feedstocks, with a major advantage being the fact that the high ambient temperatures in the (sub)tropics offer a considerable efficiency advantage (the fermentation of biomass into biogas becomes more efficient at higher temperatures - producers in 'cold' Europe spend a lot of primary energy on achieving these temperatures, whereas in the tropics ambient temperatures would suffice).

The gas would then be airlifted in dedicated biogas airships to terminals where it is purified, liquefied and shipped to world markets. The technologies to purify biogas to natural gas quality already exist (earlier post), and existing LNG terminals and infrastructures could be used.

Airship fantasies
In the 1970s, during the energy crisis, Royal Dutch Shell studied the feasibility of using airships to transport stranded gas to market. The research into this 'natural gas airship' pointed out that there are no real technical barriers, but that the longterm economics might be unfavorable. And indeed, when oil prices declined in the late 1980s, the plan was abandoned.

In the past few years, the idea has resurfaced. A small Bolivian company has taken the issue seriously and is looking into investing in such an airship to bring natural gas to markets that are difficult to reach (Bolivia is a mountaineous country). In a previous post, we tried to flip the idea on its head, by looking at how such an airship might be used to export 'stranded' biogas from rural communities to megacities where energy needs are increasing rapidly. With the potential to liquefy biogas, just like natural gas, the idea is not too far-fetched (whether it is economical is another matter alltogether).

Another, more serious presentation of the idea of natural gas airships was made during a recent conference called 'Airships to the Arctic', held in Canada for the third time already. NASA employee and airship historian Richard Van Treuren presented his view on the feasibility of an airship that can carry stranded (bio)gas to markets, at current energy prices.

His text is the best publicly available source on the idea, which is why we present parts of it here for future reference:

Over the years we have been looking at different motive power refinements. No one has actually built a true airship engine. We have worked on different things, external combustion, electric power, and human power. It got to the point where airplanes were being mass produced by so many different contractors that it seemed to make more sense to use airplane engines to push the gas bag around. (The first practical British anti-submarine airship was simply a wingless airplane hung under the gasbag. The US Navy just copied it, dubbing it the B-type air ship.) Zeppelin of course adapted marine motors for propulsion.

This “mitigated” the problem, as we are fond of saying around the space shuttle. This did allow us, over eight decades ago, to build hundreds of airships of great capability. One airship reached 22,000 feet of altitude. Another carried 30,000 pounds 4,200 miles without refueling. That was 88 years ago! 77 years ago we reached the pinnacle of the rigid airship art with the Graf Zeppelin. It was active for over 10 years, flew over a million miles, crisscrossed the Atlantic 144 times, and it was hit by lightning any number of times. It was shot at and hit any number of times. Exactly one insurance claim was filed in 10 years: bullet holes in the outer cover that occurred while they flew over a bad section of Latvia.

The secret to the Graf Zeppelin was not, as you would hear, good luck, but rather skill, proper management and one overwhelming advantage. It had a fuel that was about the same weight as air. It was a blended mix with a certain amount of hydrogen and a certain amount of propane. The upper part of the rigid air ship contained the hydrogen cells and the lower part were bags carrying fuel gas. The Graf Zeppelin lifted off from Tokyo, flew all the way across the Pacific and landed in Los Angeles with essentially the same static condition that it left. It was no accident that the Graf Zeppelin was the most successful airship of all time.

Though they built larger ones, the Hindenburg and the Graf Zeppelin II, even though they could carry more, they could not go further. The Graf Zeppelin was simply more efficient with its very high BTU quantity by weight fuel, much more so than the diesel fuel used in the later ships. This allowed the first actual attempt at building a cargo air ship. So what went wrong? Who dropped the ball? We always had the problem of propulsion, which we mitigated. However, once we adapted helium for lift and gasoline for fuel, we no longer had any control over our lift. Helium and gasoline is a marriage made in hell. The enormous weight of the motor, cars and gasoline, causes the whole bag to sag. Gasoline fuel is a problem for airship engineers and designers because the weight puts a strain on the structure, and disappears as you consume it.

Fuel gas automatically gives you a 25% advantage over liquid gasoline. C.P. Burges, the great guru who preceded Norm Meyer, had this all figured out. How they could have run on fuel gas and been much more efficient.

[...]

How do we get back to where they were 77 years ago with this magnificent, safe and efficient airship, the Graf Zeppelin? We will use modern materials that do not burn, we will update the electronics, and we will have GPS. It still will be kind of hard to get over this huge mental block whenever you say hydrogen in moving airships. Even hydrogen fuel guys do not want to talk to me, “Go away, we would rather not talk about airships.”

The 'killer' application: stranded gas
We need that poorly-called “killer” application. I believe we found it: Natural Gas. If we cannot figure out a way of moving natural gas, which is the best possible cargo for an airship because it is lighter than air, it is virtually free and can be sold for a huge profit, then I do not know what a killer application could be. It did not take too much time to find Canadian Superior Energy as one of many natural gas producers that had offshore holdings, in this case, Trinidad. How are they going to get the natural gas to market? Well, they will liquefy it and ship it on an LNG tanker. This is great if you happen to have a liquification plant, a port at both ends, and another plant to handle it, which you do not. They certainly do not want to build this infrastructure. Again, we have to look at the airship.

We can build a modern Graf Zeppelin that essentially is a fuel gas tanker. In the same way that the Graf Zeppelin had fuel gas in the bottom, we would carry fuel gas as the payload.

Just like the Bolivian company, Van Treuren looks at the Graf Zeppelin, which carried so-called 'blaugas' as fuel for its engines. In a modern gas cargo airship, helium would be used as the lifting medium, and biogas - which does not weigh more than air - would be both the cargo and the fuel for the craft's engines.

Commercial feasibility
Of course, it is highly unlikely that, at current natural gas prices, the idea of lifting biogas from inland to shore in airships, and then purifying and liquefying it to transport it in LNG tankers, is commercially viable. But some factors are in favor of it:

1. biogas can be produced in the vast inland zones of the tropics and the subtropics at prices much lower than those of biogas produced in Europe or North America; this is due to extremely low land and labor costs and very favorable agro-climatic conditions resulting in low cost biomass
2. biogas is a renewable, carbon-neutral fuel, and with projected price increases for carbon it will become ever more economical to use it on a large scale; carbon prices are expected to surge over the coming years, with an expected price range of €40-80 per metric ton, influencing electricity prices.
3. unlike natural gas, which has to be 'discovered', the production of biogas can be planned; one can point at a map, as it were, and decide to create a biogas production zone at a particular strategic location
4. the technologies to purify biogas to natural gas standards exist
5. prices of natural gas have increased sharply over the past years, with Europe now paying €250 per 1000 cubic meters and some projecting the price to go up to €300. At this level, liquefying natural gas and shipping it in tankers is feasible.

Seperately, all the elements of the above concept exist and have proved their viability. The question is whether they can be integrated into a novel, commercially viable transport and logistics concept that can unlock the immense bioenergy potential of the Global South.

More information:

Wood, J.E.R., The Shell Natural Gas Airship, and Other LTA Activities [*.pdf], Aerospace Developments, London, s.d.

Proceedings of Airships to the Arctic - Sustainable Northern Transportation [*.pdf], Third Symposium, University of Manitoba, held in Winnipeg, May 31 – June 2, 2005.

Biopact: Biogas distribution via a biogas-powered airship? - September 20, 2006

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'Biofuels Markets Africa' event kicks off

Today, the first-ever conference on the opportunities to develop biofuels in Africa kicks off in Cape Town, South Africa. The two-day Biofuels Markets Africa event has a very interesting agenda bringing together speakers from government, academia, business and civil society who will be addressing a wide range of issues crucial to the development of a viable green fuel industry in sub-Saharan Africa.

The potential for the production of bioenergy and biofuels on the continent is very large: according to research by the IEA's Bioenergy Task 40 group, which studies sustainable international bioenergy trade, sub-Saharan Africa's technical potential is projected to stand at around 317 Exajoules by 2050 under optimal conditions. This is the maximum amount of bioenergy that could be produced sustainably, without causing environmental damage and without jeopardising food supplies for growing populations. To give an idea, 317 Exajoules of energy roughly amounts to 142 million barrels of oil equivalent per day - an immense amount.

But just as the technical potential is immense, so are the challenges to transform it into real outputs (earlier post). Particularly in Africa. It is these difficulties and barriers that take center stage at the Biofuels Markets Africa event.

The global context
Day one of the conference presents an overview of biofuels developments globally and focuses on important aspects such as the link between oil prices and biofuels, longterm fossil fuel price projections and the scale of the economic opportunity in Africa for the development of a green energy industry.

Importantly, Brazil’s 30 year old success story with ethanol is presented to show the possibilities and lessons Africa's nascent biofuel industry can draw from that country's experience. The crucial question will be asked: can African countries emulate the success of the Brazilian biofuels market? Something Biopact takes to heart will be discussed as well, namely the potential for South-South cooperation in the sector. Brazilian speakers will highlight opportunities for the country to work together with Africa and to share knowledge, technology and expertise.

Europe's experience with biofuels is radically different from Brazil's - with the EU's strategies circling around fixed production targets and its emphasis on reducing greenhouse gas emissions, but with its agricultural policies mired by subsidies and trade barriers. The conference asks what Africa can learn from the EU's supranational strategies, but also how it can avoid certain European mistakes.

Finally, India is a country that has recognised biofuel development as being of strategic importance to its longterm energy security. The subcontinent is rapidly becoming a strong player when it comes to creating new technologies for the conversion of biomass into bioproducts, something the African continent can aim to replicate:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: biofuels markets :: Clean Development Mechanism :: Brazil :: India :: EU :: Africa ::

The role of governments
Day one continues with a set of sessions on regulation and policy work essential to market development in Africa. After a case-study which focuses on Ghana's policy framework and legislation, the session will address issues such as government incentives, the government’s role in the industry, ways to reducing dependency on fossil fuel imports, enhancing energy security, and ways of incorporating rural communities into the planting of various crops.

An interesting presentation on cultivating jatropha throughout Africa, with case-studies from South Africa, Madagascar, Zambia and Swaziland, will be given by a company which is also looking at using biofuels in mining operations - something we have focused on here at the Biopact (earlier post).

Food and fuel
The all important "food versus fuel or food and fuel" debate is highlighted as well by a speaker from the FAO. The potential competition for production factors between food, fibre and fuel will be analysed as will the question of whether there is an impact on agricultural commodity markets when biofuels are produced on a large scale. The FAO analyst will look at strategies for creating synergies between sectors and how they might work in sub-Saharan Africa in particular.

The Clean Development Mechanism and African biofuels
Finally, the conference looks at the UN's Clean Development Mechanism and how it applies to the African context. As we reported earlier, the African continent is lagging behind winning CDM-projects and efforts to change this situation are urgently needed. Speakers will be looking specifically at CDM in industry/emissions reduction and at what factors are holding companies back to implement such projects. Ways as to how the CDM can add a revenue stream, will be presented alongside a case-study from a successful project in Kwa Zulu Natal.

Tomorrow we present an overview of day two of this important event, and we will be reporting back on the sessions as soon as they are available online.

More information:
Biofuels Markets Africa: program of the conference [*.pdf]
The organiser of the event is GreenPowerConferences, whose website can be found here.

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South African biofuels strategy aimed at reviving agriculture

In the coming months, the South African government is expected to publish its long-awaited bioenergy policy. The country is looking to develop biofuels to give new life to farming and see the sector through recent hard times, according to an official involved in drawing up the proposal.

Biofuels could restore thousands of lost jobs, Sizwe Mkhize, a Sustainable Resource Use and Management official in the department of agriculture, said, predicting that 100,000 jobs would be created over the long term if the biofuels industry took off.

"We believe it will create alternative markets for farmers (and) jobs in rural areas. We are very much positive about it," Mkhize, a chief director at the department, told Alternet. "The people that will be employed will be in almost everything you can think of - tractor operators, farm managers ... and marketing as well as administrators," he said.

South African agriculture is under pressure as it comes to grips with post-apartheid liberalisation and faces rising global competition. And new jobs are needed in a country with unemployment of around 25 percent.

The agriculture sector shrank by 12.9 percent in the third quarter of this year and 27.5 pct in the second quarter, according to latest gross domestic product (GDP) data:
ethanol :: biodiesel :: bioenergy :: biofuels :: energy :: sustainability :: agriculture :: poverty :: poverty alleviation :: rural development :: South Africa ::


South Africa produces surpluses of crops used to make bio-ethanol - sugar and maize - and sees great scope for exports, Mkhize said.

It hopes to emulate the success of agricultural giants like Brazil, where many cars already run on bio-ethanol.

Plants have also sprung up in the United States and in Europe as countries look for cheaper and more environmentally friendly alternatives to conventional fuels.

In a sign that local businesses are also confident about the prospects for Africa's biggest economy, at least two firms have said they would invest over one billion rand (105 million / US$ 138 million) in total in setting up biofuel plants as early as next year.

Sasol, the world's biggest synthetic fuel maker from coal and South Africa's second biggest corporate by revenue, said earlier this month it would decide by year-end whether to build a biodiesel plant to produce about 125 million litres a year. Mkhize said policy-makers had agreed on a blend of between 8 and 10 percent and 3-5 percent for bioethanol and biodiesel with conventional fuel, respectively, in line with the pattern in developed countries.

That should, in the case of bioethanol, be compatible with current car models and ensure a smooth transition from mineral fuels.

Mkhize, who was closely involved in discussions on biofuels policy with other departments, said a document should be with the cabinet and available for public comment in the first half of next year.

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