Biogas as Indispensable Part Aiming 20 Bcma by 2030
On December 4, 2019, NDRC, NEA, MOF, MNR, MOA, MEE, MOHURD, MEM, PBC and SAT jointly issued the finalized version of Guiding Opinions of Biogas Promotion and Industrialization (abbr. as the Opinion), aiming 10 bcma biogas production by 2025 and 20 bcma by 2030. China’s top energy authorities intend to develop the biogas industry as the extra resources to be supplied in the county-level and to use the biogas to replace the bulk coal burning in the villages and county centers, which is expected to help the coal-to-gas switch in the rural area.
This is the first time that the biogas is included in the national natural gas production-supply-storage-sales blueprint officially. However, the biogas industry is not something new in China’s villages, but its total annual output was only 60 mcm from the currently existing ten plants in 2018. Compared with China’s total gas output, this number was so low that few people had ever believed the biogas industry’s future as an important role in the coal-to-gas switch in China’s rural area.
Biogas is a kind of unconventional gas produced via the anaerobic fermentation of organic waste and purification. China has abundant resources of organic waste with an annual discharge of 900 mn mt straws, 2,050 mn mt animal manure and 250 mn mt kitchen waste. All these organic waste could be transformed to around 250 bcm of gas. These resources were scattered all over the countryside and could be collected, processed and consumed as the source of clean energy in local places.
China’s rural areas rely on the bulk coal heavily, and the residents there show great resistance to the coal-to-gas switch. Coal-to-gas switch, as one of the major steps of the energy structure transition and blue sky campaign, caused an extreme gas shortage in the rural area of North China in the 2017-2018 heating season. There were multiple factors that should be blamed for the gas shortage, such as the limited gas sourcing, the lack of interconnection projects and the poor gas storage. Yet the radical coal-to-gas switch was still one of the most important reasons. Local governments finished the heating equipment renovation while having no idea about where to get enough gas to fuel the heaters. Pushed up by the coal-to-gas switch, China’s gas consumption increased by 15.63% to 237.6 bcm in 2017 and by 15.82% to 275.1 bcm in 2018. The reform slowed down in 2018 to ensure the supply to the residential sector in the heating season. NOCs were instructed to import more, and the supply to some of the downstream industrial users was limited. At this time, all new natural gas resources will receive more attention, especially when it is also a renewable energy.
The biogas industry has been developed in China for many years. From 2015 to 2017, the industry was sponsored by the state subsidy for three years continuously, involving 63 projects. In April 2018, President Xi Jinping said on a central government meeting that the biogas projects could be used to deal with the animal manure and to provide gas to advance the coal-to-gas switch. So NEA and other departments followed the instruction and carried out a series of regulations to encourage the development of the biogas industry. The Opinion was the newest guideline of the industry and made a three-step plan. First, the output of the biogas industry aims 2 bcma in 2020, replacing around 3.4 mn mt of bulk coal. Then, the output will reach 10 bcm in 2025. Finally, the output reached 20 bcm in 2030. The expectations are reduced from the previous draft, but the future industry scale is still likely to exceed 1 trillion RMB.
China’s biogas industry is facing several barriers. First, the industrial base is weak. With no professional operation system nor a mature business model, China’s biogas industry is still in the stage of exploration. Second, the profits of the present biogas projects are poor. The projects are running at the low-profit level because their technologies are not advanced enough. Third, relevant policies are not perfect and enough. Forth, although the present technologies could fulfil the basic requirements of the present projects, China’s biogas technology still needs to develop. There are gaps between China’s technologies and those in foreign countries in the efficiency, stability, reliability and other aspects of the equipment. And only a small amount of capital is invested in technology research, resulting in slow development.
The biogas in the foreign sees a distinct situation. The EU is the leader in this sector. The biogas output in the EU was 2 bcm in 2017, providing resources for heating, industrial usage, power generating, vehicle fuel, etc. China exceeded Japan to be the world’s largest natural gas importer in 2018. And with a gas import dependence degree of 46%, China now places great hopes on the biogas industry. The Opinion encouraged both large energy companies and city gas companies to invest in and build biogas projects and promised that the investors and operators of biogas projects could get more quota in the trade of conventional gas with NOCs.
However, companies are still quite cautious. Beijing Gas started a biogas project in 2017 and soon quitted. Large state-owned energy companies preferred to invest in gas projects with high capital requirements, and only medium and small private companies would like to invest in biogas projects. The Opinion urged energy giants like CNOOC and China Huadian starting the biogas business. The industry is waiting for the implementation instruction with clearer information, such as the major task of the development, deadline, subjects involved in the new business, related regulations and policies, etc., and this implementation plan may be seen in the next five year plan’s guiding principle.
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