Biofuel Production in China Expected to Top 8 Billion Liters by 2019

According to BP, in 2014, China accounted for 23% of global energy consumption. However, overdependence on coal and oil for power generation and volatile oil prices have led to serious energy insecurity in the country

To combat this issue, the Chinese government has rolled out huge investments in the renewable sector. So far, $83 billion has been invested in renewable technology, including solar and wind power, as well as biofuels and biomass.

Overall, the production of biofuels in China is expected to reach 8.34 billion liters by 2019, growing at a cumulative average growth rate of 16.2%.

Technavio analysts have identified three key trends expected to impact the biofuels market in China over the projected period.

An increase in renewable investments

With volatile conventional oil prices due to global conditions and the diversification of feedstock to develop the next generation of biodiesels, there has been a global surge in investments by both governments and private organizations in the biofuel market.

According to the International Energy Agency, approximately $63 billion is expected to be invested in biofuels between 2014-2035 in Asia, and China’s investment in biofuels accounts for almost 42% of the $63 billion.

A slew of partnerships and agreements are going a long ways towards building the infrastructure for biofuel production in China. For instance, DuPont signed a licensing agreement with New Tianlong industry to develop China’s biggest cellulosic ethanol plant with 30 million gallons capacity, which is expected to be completed in two years. China steel announced a $64 million advanced biofuels plant with 50MT capacity, which is scalable up to 100 MT. While the government supports industries through special loans and grants, the bio fuels market is still in its nascent stage and these investments from large companies will help attract other players to this market, leading to faster market growth.

Second and third-generation fuels

First generation biofuels are produced using vegetable oil, animal fat and used cooking oil. However, feedstocks used in biofuel production are also used in food production, which is creating conflict between the food and energy sectors.

Because of this conflict, developing biofuels using feedstocks was banned in 2007, which precipitated the development of next-gen biofuels.

The second generation yielded biofuels produced using non-food crops like wood (sawdust), organic waste (corn-Stover), cassava, sweet sorghum and specific biomass plants like jatropha.

The fuels, also called advanced biofuel, are produced using specially engineered energy crops like algae as its feedstock, which provides higher yields with lower resource inputs.

The Chinese government supports farmers that grow alternative feedstock, and that use land which is not being used for production of feedstock, to eliminate the effects of food crop shortages. The development of second and third-generation fuel has led to diverse feedstock options, moving away from conventional food related feedstock and improving the overall performance of biofuels.

Increase in government support

Rising concern over climate change and air pollution in China have promoted the government to change its policies in favor of renewable sources like biodiesel. New policies passed in 2015 encourage foreign investments in the biodiesel industry, which will lead to better flow of investments into R&D, improve the quality of biodiesel, and reduce production costs.

Regional governments are also expected to pass special incentives to price biodiesel similar to conventional diesel and set targets that correspond with the national policy. 

This increased support from the government will boost the use of biodiesel in the transportation and shipping industries, and result in overall growth of the biodiesel market in China through the forecast period.