China's "Renewable Energy Plan" for the 12th five-year plan period aims to increase ethanol production by 1.2 million metric tons (mmt) to reach 3 mmt by 2015. The propaganda coming out now indicates a push to meet that goal by stepping up non-grain ethanol production.
An article from the "industry research net" posted on several websites several days ago pronounces that it's already clear that China must "take the nongrain ethanol road." The article cited remarks by Premier Wen Jiabao at last month's China-Southeast Asia exposition which attributed recent rises in corn and wheat prices to international market influences but nevertheless called for control of corn-based processing. That presumably includes ethanol. The article then cites a foreign scientist who extols the advantages of non-grain biofuels and lists vague "breakthroughs" made recently in the four grain-based ethanol plants authorized in 2004. The Jilin Ethanol Co. has launched an ethanol project using sweet sorghum stalks which has apparently yielded promising results from experimental trials. The ethanol companies in Anhui and Henan are also said to be making progress in making ethanol from crop stalks.
Not mentioned are the joint venture sweet sorghum project that collapsed several years ago, nor the regular reports from Henan that farmers persist in illegally burning wheat and corn stalks in the fields because it is too troublesome and time-consuming to collect them.
Another news reports says the Ministry of Environmental Protection is completing the environmental assessment of a new fuel ethanol plant that will be built by PetroChina at Danshan, an island in Zhejiang Province. This project was approved by the State Council in July, and is part of a massive industrial and logistics project planned for the islands off the coast of Zhejiang Province.
The Danshan ethanol plant will cost over 3.2 billion yuan (about $500 million). It will produce 300,000 mt of ethanol--one-fourth of the planned increase in ethanol production--from imported cassava chips. By my calculation this would take nearly 1 mmt of cassava imports. Currently imports exceed 3 mmt. About 80% of China's cassava imports come from Thailand and other sources are Vietnam and Indonesia. According to the Chinese Academy of Agricultural Sciences experts consulted by the reporter, cassava is the most economic raw material for producing ethanol.
Grain-based ethanol projects came in for criticism in recent years as grain prices increased. In an interview last year Cheng Guoqiang, a policy advisor from the State Council's Development Research Center, argued that "cars eating grain" is not in accord with China's national conditions.
Ethanol production requires large subsidies. In the 2010 interview, Cheng said the subsidy was 1375 yuan per ton of ethanol and a total of 1.35 billion yuan in subsidies are paid to four ethanol producers. Ethanol producers are also exempt from taxes.
Another article from 2010 reported that the subsidy was originally set at 1880 yuan/mt in 2004. The Anhui plant's subsidy had been cut 20% from 2055 yuan/mt in 2009 to 1659 yuan/mt last year and was expected to be cut again this year. This article estimated that the corn used to produce one ton of ethanol cost 6275 yuan and the total cost of production was 8000-9000 yuan. The writer pointed out that this amount of money could buy two tons of oil. He estimated that the Anhui plant received 163 million yuan in subsidies to produce 410,000 mt of ethanol.
The article noted that the State Council had announced in 2007 that no more grain-based ethanol project would be approved. However, many are eager to build such projects given the high subsidies available.
Chinese corn prices have risen about 20% since last year, so the cost has continued to escalate, making grain-based ethanol even less cost-efficient. This may explain the urgency attached to non-grain ethanol.