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Business
Print Edition> Business
UPDATED: August 1, 2011 NO. 31 AUGUST 4, 2011
Launching Plan B: Biomass Energy
China's first biomass electricity company focuses on helping farmers as it strives to expand
By LIU XINLIAN
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RAGS TO RICHES: A crane moves straw at NBE's plant in Wangkui County of northeastern Heilongjiang Province. NBE's biomass power plant turns unwanted straw into money for farmers (COURTESY OF NBE)

More than two decades of working and living overseas allowed Jiang to learn about biomass energy and its profitability.

"Twelve percent of Danish energy consumption is covered by the use of residual products such as straw, wood chips and slurry. Denmark's farming area is only 5 percent of that of China. If China develops its biomass energy, you cannot imagine how big the industry will be," said Jiang.

Jiang founded NBE's parent company Dragon Power in Beijing in 2004 and obtained a license for using its technology from world's leading biomass boiler manufacturer Bioener of Denmark. In December 2006, NBE's first straw biomass-powered plant was set up in Shandong Province, the first of its kind in China.

So far, with 26 power plants in operation mainly in northeast China and 10 under construction, NBE is expected to have a generation capacity of 1,000 mw by 2014. By the end of 2009, NBE had provided 5.2 billion kwh of green power and reduced CO2 emissions by 4.36 million tons.

In a bid to lower production costs and localize the imported technology, Dragon Power decided to stretch its business upward to boiler manufacturing and research. In the past, NBE needed to pay Bioener a technology transfer fee of $500,000 a power plant for using its technology. In September 2009, Dragon Power acquired Bioener, making it one of the world's largest suppliers of biomass-fired boilers.

"The acquisition has allowed NBE to use Bioener's technology for free and localize the international advanced technology, making the plants burn a variety of crop stalks and forestry waste to improve the adaptability of biomass fuels. This made our combustion efficiency 30 percent higher than that of our domestic counterparts," Jiang said.

In addition, Dragon Power acquired its boiler maker Jinan Boiler Factory in Shandong. "The acquisition cut the construction costs of a 30-mw power plant from 330 million yuan ($50.9 million) to 250 million yuan ($38.6 million)," Jiang said.

As the call for combating global warming becomes louder and louder, incentives for cutting greenhouse gas emissions will surely benefit from the shift in political climate.

In October 2006, the trading arm of Electricité de France (EDF), one of the world's largest energy firms, signed a letter of intent with China NBE to purchase carbon credits from three of its biomass power projects, equivalent to 1.5 million tons of CO2 under the Kyoto Protocol's carbon-trading scheme, known as the Clean Development Mechanism (CDM). The CDM allows industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries. It is considered an alternative to more expensive emission reductions in industrialized countries.

Although NBE has not received a cent from the carbon credit trade, Jiang feels optimistic about the prospects.

"The carbon credit trade is an irresistible trend and I believe NBE, as a green power creator, will benefit from the trend," said Jiang.

As China comes under increasing international pressure to help curb greenhouse gas emissions, the prospects look much brighter for Jiang.

China will start a pilot carbon emissions trading project and gradually set up a market for carbon emissions trading, said Xie Zhenhua, Vice Minister of the National Development and Reform Commission, on July 16 at the 2011 Eco-Forum Global held in Guiyang, capital of Guizhou Province.

Less than favorable market

Today Dragon Power is the only company in the world to incorporate the entire biomass energy production chain, from equipment manufacturing to power plant operation to providing a whole range of proprietary technology.

Despite the ambitious and rapid expansion in recent years, the huge investment has not yet put Jiang's company in the black. Jiang said, some of the 12-mw power plants suffer losses because of limited installed capacity. "The years of experience proved the 30-mw power plant is most investment efficient and profitable," said Jiang.

A lack of capital has always haunted Jiang.

"Biomass energy is a totally new industry in China and we still cannot produce ideal financial numbers. Getting loans is still pretty difficult," he said.

NBE will introduce some large enterprises as strategic partners and start preparing for an initial public offering in the domestic A-share market, Jiang said.

But the low-margin biomass power generation still could not cover the high financial cost, such as lending interests.

When asked if NBE will lower the straw procuring price to make a profit, Jiang said "no."

"We will never lower the procuring price to discourage the farmers. My company will be the country's biggest support network for farmers," said Jiang.

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