The increasing momentum of producing ethanol from grain was finally checked by a circular from the Central Government at the end of last year. In this document on tightening administration over bio-fuel, the Central Government mandated that governments at all levels should suspend the sanctioning and registration of grain ethanol projects under construction or in the planning stage. The document demands that ethanol production should be based on the specific situation in various regions and should not use grain as a major raw material.
Corn is one of China's three pillar cereals and its production has accounted for over 20 percent of the total grain production for a long time. An analysis on www.jcce.cn, a website that monitors the corn market, predicted that the circular will dampen the growth in demand for industrial-use grain in the future and the price of corn will remain stable in 2007 due to a basic balance between supply and demand.
Some people are concerned that the document may slow down China's strategy of developing bio-fuel. Yue Guojun, Manager of the Bio-fuel Department of the China National Cereals, Oils and Foodstuffs Import and Export Corp. (COFCO), however, said, "On the contrary, I understand it as an active force." He noted that although corn is the key bio-fuel source for his department now, it will not be the primary raw material in the long run. "It is a very timely policy adjustment for China's burgeoning ethanol fuel industry, which will propel a new shift to bio-fuel production with non-grain material."
Even before the government's circular was issued, finding the ideal alternative source has been high on the agenda of bio-fuel companies. Other forms of biomass, such as straw, leftovers of agricultural and forestry processing, animal waste, organic industrial sewage and residue, and urban garbage, have been transformed into different kinds of energy, such as electricity and fuel in gas, solid or liquid forms.
"Our company started to nurture bio-fuel production out of non-grain material as early as three years ago and we have confidence in further diversifying our sources," said Yue.
In 2005, Wang Mengjie, a research fellow with the Chinese Renewable Energy Society, received an award from the United Nations Industrial Development Organization (UNIDO) for energy conversion technology in producing ethanol from sweet sorghum stems. UNIDO believes that sweet sorghum is an outstanding biomass source with greater tolerance for drought, water saturation, salinity and alkalinity so that the ethanol production from the product can save arable land and greatly reduce costs. The popularization of this technology has been formally incorporated into China's medium- and long-term plan on developing renewable energy.
A bio-fuel company from central Anhui Province has designed equipment that can produce 550 kg of bio-diesel fuel by processing 1,000 kg of rice chaff per hour. "This machine is equivalent to an oil well with an annual production capacity of 3,700 tons if it can get a steady supply of material," said Liu Hu, the chief designer of the equipment. He said the byproducts of inflammable gas and carbon dust are used to drive an internal-combustion engine to generate power; the final residue of plant ash is a good organic fertilizer. "We are now working on developing equipment with an hourly production capacity of one ton of bio-diesel," said Liu.
There is a huge stock of straw during the harvest season throughout the country. In some places, people bring straw home as fuel for cooking or simply burn it in the field, which causes an enormous waste of energy and serious air pollution. Actually, straw is an environmentally friendly fuel because its average sulfur content is less than 0.4 percent, much lower than the 1 percent of coal. Some regions have started to use straw as an economical fuel to generate power.
"After years of research, we have found the best raw material for bio-diesel is rapeseed," said Wang Hanzhong, Director of the Institute of Oil Crops Research under the Chinese Academy of Agricultural Sciences. He said the bottleneck for developing bio-diesel in China is finding enough cheap raw material.
For the time being, bio-diesel production in China, which is limited to less than 50,000 tons per year, faces the high expense of raw material, which accounts for 60 percent of the total cost. While soybeans and peanuts can be sources for bio-diesel, the expansion of their planting would be at the cost of major cereals in China, such as rice and corn.