China is a bit of a mystery to Canadian wood pellet producers. The Canadian wood pellet industry has traditionally relied on the European electricity market and has recently penetrated Japan and South Korea. Sometimes there are potential Chinese buyers asking but not much. We believe that China’s growing population, dependence on coal and growing energy demand will eventually see the benefits of using wood pellets to reduce greenhouse gas emissions and reduce pollution.
On June 7-8, I went to Beijing to participate in a two-day co-burning seminar on biomass and promoted Canadian wood pellets.
The seminar was jointly organized by the International Energy Agency Clean Coal Center and the China Electric Power Planning and Engineering Research Institute (EPPEI). There are about 320 participants representing governments, utilities (all state-owned), universities, technology providers, consultants, and biomass energy stakeholders.
It is gratifying that the Chinese government takes pollution seriously. During the “Thirteenth Five-Year Plan” (2016 to 2020), China plans to achieve the following goals, including 20% of “non-fossil energy”, with the overall goal of generating less than 550g of CO2 per kWh of electricity. The doubters will see that their classification is non-fossil and will include everything from hydropower to nuclear energy, so the 20% goal may not be so meaningful. However, the same five-year plan will reach 50% of non-fossil energy by 2050, and this may be a long time in the future. This is a very significant figure and requires the careful use of biomass.
At present, China's power capacity is 1,650 GW, of which biomass currently accounts for 0.7% (12 GW), so there is a lot of room for development. With a 25% co-firing rate (high number), this may become 275 GW. Coal is used to supply approximately 1,100 GW of the national grid. The "Five Year Plan" also considers running about 100 biomass co-fired demonstration plants. Some of them have already started running.
Through discussions and presentations, it is clear that wood pellets are the best technology and logistics for biomass options. However, this issue is politically sensitive. The problem in China today is that they believe that most of the particulate pollution comes from farmers burning their straw. Therefore, the Chinese government is trying to co-fire these agricultural residues to kill one stone and two birds, in order to increase the non-fossil percentage in China, and at the same time solve the pollution problem of farmers. Another role of this strategy is to provide farmers with another source of income (through biomass) and the government wants to move rural people to cities. So at present, China's focus is on agricultural biomass energy. They believe that there are about one billion tons of available resources and can theoretically increase their overall electricity demand. Therefore, another political goal is to allow the country to reduce its energy dependence on imports. This percentage is already very low.
There are also logistics issues. A university study showed that if there is a 50 km collection radius around each power plant, it can ensure that enough agricultural biomass can be co-fired at the required level, albeit seasonally. However, this will require massive physical movement of biomass. It is arduous to rely solely on cutting and pulling requirements, and do not forget the storage required by any party.
Currently it is forbidden to import wood pellets (maintaining attention to domestic agricultural residues), but it seems that if the Chinese government wishes to attach importance to biomass, wood pellets cannot be banned indefinitely. It may take some time, but I hope to see changes in this policy.
The international team was invited to visit the National Institute of Clean and Low Carbon Energy (NICE), which is located at Shenhua Group, China's largest mining and energy company. Shenhua is state-owned. It started as a coal mining company, but it is now diversified into electricity and transportation. Today, it operates the largest coal-fired thermal power station in the country, with 2,000 miles of railroads and several ports. The company invested heavily in wind power and solar energy. The company employs 200,000 people and its first quarter profit is said to be between 3-4 billion US dollars. Shenhua is discussing the merger with two other large state-owned power companies, which may make it the world's largest power company.
Shenhua does not focus on co-firing of biomass. Many of its thermal power stations are located in the north (close to coal mines) and reasonably remove any biomass source. Shenhua is increasing renewable energy such as wind and solar energy, and has done a lot of work on hydrogen. The company will launch 300 hydrogen filling stations nationwide within the next five years. However, at some stage after the merger (since the scale is small), Shenhua may become the object of pressure for the government to carry out co-firing. Its proximity to agricultural residues is generally poor, which makes it an ideal choice for imported wood pellets. In addition, once the ban is lifted, Shenhua's port ownership will help to import wood pellets.
The visit was impressive. Although this statement is easy, we are wise to not ignore China's efforts. We should continue to pay attention to the Chinese biomass market.