China Clean Energy: Biodiesel Done Right

In the wake of the looming food crisis, biofuels are becoming more and more suspect as a sustainable long term substitute for oil, and in fact, are viewed as one of the chief culprits in the soaring prices of corn, soybean and other agricultural commodities that are feedstock to biofuels production. The diverted demand of such agro commodities to biofuel production has so interfered with agro production for food that the Chinese government enacted a ban on the production of grain-based biofuels.

China Clean Energy or CCC (OTCBB: CCGY), a producer of biodiesel (which is the focus of this post) and specialty chemicals (green chemistry is a ripe topic for a future post!) based in the city of Fuqing in the southeastern province of Fujian, seeks to produce biofuels in a smarter way. Embracing the concepts of “waste-equals-food“, “cradle-to-cradle“, and the “circular economy“, CCC is collecting waste vegetable oil, specifically cottonseed and rapeseed oil and turning them into biodiesel. These feedstock are much more inexpensive than their non-waste versions (i.e. raw cottonseed and rapeseed) because they are not perceived as useful inputs.

Gary Zhao, the CFO of CCC, explained how waste rapeseed oil is used in an exclusive interview with The Green Leap Forward:

Rapeseed oil is typically produced by pressing the fibers of the rapeseed. After the rapeseed has been pressed, there is still some oil left in the residual fibers that are typically discarded In fact some 10% of the oil is still left and it is rich in fatty acid. Through a chemical process, we are able to extract this remaining oil and convert it to biodiesel. As for the leftover fibers, that can further process it to be used as boiler fuel or animal feed.

By using “waste” feedstock instead of raw grains, CCC is able to indirectly continue to use waste grain feedstock which is otherwise prohibited and at much reduced prices as the raw grains (see story on soaring grain prices here), but more importantly, harness a previously untapped source of energy that would otherwise be discarded as waste.

CCC currently has a biodiesel production capacity of 11,000 tons per year, but it has just received US$15 million in financing for a significant expansion that will bring production to 100,000 tons per year by the beginning of 2009. CCC’s biodiesel market is distinctively local in nature. Zhao explained: “Unlike the US or Europe, there is no mandate for biofuel production in China, so the costs of transporting the fuel over long distances do not make [economic] sense.”

Transportation doesn’t make ecological sense either. In fact, one of the biggest criticisms of biodiesel (and other biofuels) is whether the net energy balance of biodiesel is positive or not. In other words, critics have charged that the amount of energy produced by biodiesel is less than, or barely exceeds the amount of energy needed to make biodiesel (including an accounting of the energy needed to harvest the grain through mechanized farm tools and transportation of such grain at various stages of its production cycle).

Biofuel production has also been heavily criticised for diverting away valuable food resources. Such criticisms target the conventional raw grain-based mechanized harvesting biofuel production seen in the US or Europe. The CCC process is distinctive for relying on non-food fuel sources and by focusing on local markets, both in terms of it supply of feedstock and its biodiesel end-customers, thereby substantially reducing energy needs and improving the energy payoff of its products.

Using waste as inputs also contributes to a dramatic improvement in the economics of biofuels production. One of the key insights (see #3 in link) gained by an venture capitalist, Michael Butler of Cascadia Capital, is that:

Waste or waste byproducts are the most sensible alternative-fuel inputs: There’s far less pricing pressure associated with sludge or algae versus corn as long as proven technologies are harnessed. And we’ve also seen that efficiencies soar off the charts if the right waste products are used as feedstock.

Perhaps, then it should come as no surprise that CCC is already operating profitably after only a two years of being in the biodiesel game.

CCC’s medium to long term plans to build biodiesel processing plants in Xinjiang and Hebei are again driven by its business model of “localization”; those two provinces happen to be the top producers of cottonseed in China. Being close to the source of cottonseed leavings will limit transportation and energy needs and also create new markets for its products outside of Fujian.

Zhao thoughtfully addressed concerns of limited availability of feedstock. Taking waste vegetable oil as an example, he explained:

The average Chinese consumes 16 kg/year of vegetable oil. That is roughly 20 million tons/year for all of China. If only 10% of such “ditch” [waste] oil can be recycled, we are looking at an availability of 2 million tons/year. Right now, we only produce 11,000 tons/year of biodiesel.

Zhao pointed out further that CCC entertains the possibility of diversifying further to other waste feedstock, thereby increasing its potential supply base.

“China is already the world’s largest importer of grain based products,” Zhao accounted, “and as the standard of living of China increases, consumption of pork, beef and chicken will increase… all these animals require grain.”

“We will never use food-based feedstock. We don’t believe in it.”

(This article is contributed by our guest writer, Julian Wong, and was first published in The Green Leap Forward.)

Alpha Synovate Pte Ltd

Alpha Synovate is a Singapore company that specializes in producing Biodiesel from recycled feedstock (i.e waste vegetable oil) using our in-house technology that we developed and improved since 2006. In April, we will be launching a “Waste Oil for Fuel” program. Visit us at www.alphasynovate.com for more information about us and latest update.

Address: Technopreneurship Incubation Center, C/o School of Business, ITE College East, 10 Simei Avenue, Singapore 586047

Telephone: +65 6260 2082

Fax: +65 6260 2082

Email: Karen@alphasynovate.com

Website: www.alphasynovate.com

Biodiesel and diesel cars

Channel NewsAsia reported the revision in the special tax on Euro-IV diesel cars announced in the Singapore Budget speech, making it cheaper to own diesel cars. Car owners can save from 32% to 56% on the special tax depending on the car’s engine capacity. This could attract more motorists to use diesel cars instead of petrol cars.

Diesel cars tend to be more fuel efficient than petrol cars and diesel is currently cheaper than petrol. But the Straits Times reported the National Environment Agency (NEA) “saying even Euro IV diesel cars emit more soot and nitrogen oxide – another pollutant – than their petrol equivalents”. We think that diesel cars with the use of biodiesel could be more environmentally friendly. The use of biodiesel gives cleaner emissions and less particulate matter, and recycles waste cooking oil.

Alpha Synovate Pte Ltd is a local company involved in the production, research and development of biodiesel and biofuel processors. The company is producing Alpha Biodiesel BD100, a biodiesel fuel made from 100% waste vegetable oil. The biodiesel can be blended with normal petroleum diesel or used solely in diesel cars. Visit Alpha Synovate’s website for more info.

If you want to know more about biodiesel in the US, check out the documentary film, Fields of Fuel, by biodiesel expert Josh Tickell. Watch the film’s promotional video at Youtube.

Source: Channel NewsAsia; Straits Times via Wildsingapore; Alpha Synovate Pte Ltd. Photo credit: Alpha Synovate Pte Ltd.