Under the background of the global energy crisis and global warming, the development of biomass energy utilization technology has very important practical and long-term significance in replacing the fossil energy and realizing the sustainable development of human beings. China’s energy security has become increasingly prominent, environmental constraints have increasingly enhanced and energy-saving and emission-reduction situation is grim. In this context, to vigorously adjust the energy structure and to develop the renewable alternative energy sources with the green, clean, low-carbon as the core have become top priorities. Biomass energy, with huge amount of resources and stable supply, can substitute coal, oil and gas in huge quantities. While effectively supplying the energy, it can significantly reduce pollution and achieve the zero emissions of CO2, complying with the idea of the sustainable development of the society. Therefore, in recent years, governments at all levels in China have continuously increased attention on biomass and introduced a series of policies and measures; at present, the basic biomass energy policy system has been formed. Basic framework of China’s biomass energy development policy takes the Renewable energy law as the basis, Medium- and long-term development plan for renewable energy as the long-term goal, each five-year plan as the short-term plan, to attract producers and users to join and participate in the development and utilization of biomass energy through the establishment of a series of effective incentive mechanism to promote the rapid development of biomass energy industry and advance the healthy and rapid development of the biomass energy industry.
Renewable Energy Law of the People’s Republic of China was issued in 2005 and was carried out formally on January 1, 2006. This is the first law on energy in China. It indicates that the Chinese government has explicated the position of the renewable energy including biomass energy in the modern energy and has given great preferential support. Chapter I of this law points out that the State encourages and supports the use of biomass energy; Chapter IV “Promotion and Application” emphasizes again that the State encourages the clean and efficient development and utilization of the biomass fuels, encourages the development of energy crops; if gas and heat produced by using the biomass resources comply with the network technology standard of city gas pipeline network and heat pipe network, enterprises operating gas pipeline network and heat pipe network shall receive its network entry.
At the end of 2009, the State revised the Renewable energy law, and the revised edition was implemented on April 1, 2010. The Amendment has established the Renewable Energy Development Fund to arrange the dispatching of the additional cost of renewable energy from a national scope by special arrangement and implemented full protection of the acquisition for renewable energy power generation.
In Medium- and long-term development plan for renewable energy issued in 2007, emphasis should be laid on the development of biomass power generation, biogas, densified biofuel and fuel and biology liquid fuel. According to the requirements of China’s economic and social development and the biomass energy utilization technology, emphasis should be laid on the development of biomass power generation, biogas, densified biofuel and fuel and biology liquid fuel. By 2010, the total installed capacity of the biomass power generation had reached 5,500,000 kw; the annual utilization rate of the densified biofuel had been up to 1,000,000 tons and that of the biogas to 19,000,000,000 cubic meters, that of the non-grain raw material fuel ethanol had been increased by 2,000,000 tons and that of the biodiesel had reached 200,000 tons. By 2020, the total installed capacity of the biomass power generation will have reached 30,000,000 kw; the annual utilization rate of the densified biofuel will have been up to 50,000,000 tons and that of the biogas to 44,000,000,000 cubic meters, that of the non-grain raw material fuel ethanol to 10,000,000 tons and that of the biodiesel to 2,000,000 tons.
Since 1995, China has brought the biomass energy into the national five-year plan system. In the 9th five-year plan (from 1996 to 2000), high efficient anaerobic technology applied in treating high-concentration organic wastewater and urban garbage were listed as key science and technology programs. During the 10th five-year plan (from 2001 to 2005), Planning of the development of agricultural biomass energy industry was introduced. Since the 11th five-year plan, each five-year plan contains the special planning for the biomass energy industry. Scheme for the comprehensive utilization and implementation of the crop straws during the 12th five-year plan issued in 2011 points out to further develop and utilize the crop straw in huge output in China, and it is planned to achieve the straw comprehensive utilization rate of over 80% and the straw energy utilization rate of 13% by 2015. “12th Five-Year Plan” for renewable energy development and “12th Five-Year Plan” for biomass energy development (2011-2015) issued in 2012 stipulates that by 2015, the annual utilization rate of the biomass energy will have exceeded 50,000,000 tons of standard coal. And when the total installed capacity of the biomass power generation reaches 13,000,000kw and the annual power generation is up to about 78,000,000,000kw, the annual biomass supply shall be up to 22,000,000,000 cubic meters, densified biofuel to 10,000,000 tons and biology liquid fuel to 5,000,000 tons. At present, planning for biomass energy in the 13th five-year plan is being developed.
Considering that the development and utilization of biomass energy has the remarkable comprehensive benefit for the traditional energy replacement and the protection of the ecological environment, but its development and utilization cost is temporarily unable to compete with the traditional energy, so the Chinese government has adopted a series of incentive measures to share the cost which is higher than that of the development and utilization of the traditional energy with the community, or the finance departments at all levels commit huge sums of money to grant subsidies for the development and utilization of biomass energy to encourage enterprises and users to participate in the development of biomass energy. Main incentive means include front-end incentive for encouraging the biomass energy industry production chain, and market back-end incentive to stimulate the sales and use, as well as some indirect incentive measures to promote the development of the whole industry.
1) Subsidies for feedstock
Feedstock base subsidies: Forestry raw materials base subsidy criterion is 30 yuan/are; the amount of subsidy is checked and ratified by the Ministry of Finance according to this criterion and the raw materials base implementation plan verified. In principle, agricultural raw materials base subsidy is verified as 27yuan/are; the specific criterion is approved according to saline-alkali soil, thar and other different types of land. The amount of subsidy is appraised and decided by the Ministry of Finance according to the specific criterion and the raw materials base implementation plan verified.
Straw subsidy: For the enterprise with the registered capital of more than 10 million yuan, whose straw energy utilization complies with the local straw comprehensive utilization planning and the amount of annual consumption of straw exceeds 10,000 tons (including 10,000 tons) and straw energy products have been on sale and which has stable users, the subsidy of about 140 yuan will be granted for the straw per ton in energy utilization to the enterprise according to the types and quantities of straw energy products which are actually sold every year, as well as types and quantities of straw for converting the consumption. But straw grid-connected power generation project does not enjoy the special subsidy.
Fuel ethanol subsidy: For the production of the denatured fuel ethanol and losses incurred during the process of allocation and sales of the denatured fuel ethanol, the state finance sets quotas for subsidies to the production enterprises; in 2012, the amounts of subsidy for the grain ethanol and non-grain ethanol are respectively 500 yuan/ton and 750 yuan/ton.
2) Project funding
Rural household biogas project : In 2003, China listed the rural biogas construction into the scope of national debt fund support; during the period of 2003 to 2013, China has invested more than billions in supporting rural household biogas, biogas service system and the construction of breeding aquatics village and co-peasant household biogas in average every year.
Green Energy Countyproject: The highest subsidy granted by the central finance to each green energy county is about 25 million yuan; the construction contents include biogas centralized gas supply engineering, biomass gasification engineering, biomass briquette fuel engineering and other renewable energy development and utilization engineering.
Urban heating engineeringproject: Notice on developing the construction of the biomass briquette boiler heating demonstration project issued in 2014 stipulates that it is planned to build 120 biomass briquette boiler heating demonstration projects on a national scale during the period from 2014 to 2015, especially in Beijing, Tianjin, Hebei and Shandong, Yangtze River Delta region, Pearl River Delta region and other areas with serious atmospheric pollution prevention and control situation and heavier tasks in reducing coal consumption, andthe total investment is about 5 billion yuan.
3) Low-interest loan
For the renewable energy development and utilization project which is listed in the national renewable energy industry development guidance catalogue and which meets the credit conditions, discount interest funds may be arranged under the premises that bank loans are in place and project contracting unit or individual has paid the interest. Discount interest fund is determined according to the actual bank loans in place, contract rate of interest and the actual amount rate of interest paid; the discount period is 1-3 years and the maximum annual discount rate does not exceed 3%.
4) Tax relief
Value added tax (VAT) relief: The tax authorities implement the measures for the refund upon collection of VAT for the self-produced comprehensive utilization of products (see Appendix for the product catalogue) sold by taxpayers with the 4 kinds of agricultural and forestry residues as the raw materials, such as: three residues (logging residues, bucking residues and processing residues), small firewood, crop straw and bagasse. The specific proportion of tax rebates are respectively 100% in 2009 and 80% in 2010.
Income tax relief: 90% tax of the income of the enterprise from producing products which are not restricted and forbidden by the state and which comply with the relevant national and industry standards and whose main raw materials are resources specified in Catalogue of Resources for Comprehensive Utilization Entitling Enterprises to Income Tax Preferences is reduced and included in the total income.
3.2 Back-end incentives
1) Quota system
Under the Renewable energy law, National Development and Reform Commission and other relevant departments have developed the targets for the overall medium- and long-term development of biomass energy and introduced quota system policy in the fields of biomass power generation and biology liquid fuel to request that power companies and oil companies should have a certain portion of the energy from the biomass energy in the supply of electricity and fuel, thus turning the policies completely rely on government financial support in the past to the market mechanism under the control of the government to create conditions for the large-scale development of biomass energy. At present, the main quota policy is carried out on the closed measures to promote fuel ethanol; 5 provinces and 27 cities in China have forced to promote E10 gasoline. In addition, the design idea about renewable energy power quota system has been formed, and the policy on the biomass green power quota will soon be implemented.
2) Pricing mechanism
Fixed feed-in tariff: Since 2010, the new agricultural and forestry biomass power generation projects have uniformly implemented the benchmark feed-in tariff of 0.75 yuan per kilowatt hour (including tax). But the mixed fuel power generation projects of which conventional energy exceeds 20% in the power generation heat consumed, as the conventional energy power generation projects implement the benchmark feed-in tariff of the local coal-fired power plants and do not enjoy the subsidiary feed-in tariff.
Fuel ethanol price: Fuel ethanol sales channels uniformly take the result from 90# gasoline price over the same period published by the National Development and Reform Committee multiplying the equivalent coefficient of 0.9111 of the sales cost of vehicle ethanol gasoline deployment as the domestic sales settlement price of fuel ethanol, providing price protection for the fuel ethanol production enterprises.
3.3 Other auxiliary incentive measures
1) Environmental protection measures: Among the environmental protection measures of local governments at all levels, instructions for the ban on burning coal, restrictions on automobile exhaust and air pollutants emissions promote the development of biomass briquette fuel and fuel ethanol in another way. Meanwhile, environmental protection indexes for the ban on burning straw guarantee the adequate supply of biomass.
2) Development of the standards: Biogas Standardization Technical Committee has developed the biogas industry standards to regulate the development of the industry. Fuel ethanol E10 and biodiesel B5 standards have been widely accepted by the industry. And product standard of the biomass briquette fuel, standard equipment, engineering and service system are being developed.
4 Problems in the implementation of biomass energy policy
Imperfect policy system
Although China has promulgated and issued a series of regulations and policies for the development of biomass energy, there is a big gap between the mutual supporting. For example, at present the necessary subsidies policy and effective means of promotion are in insufficiency for the biodiesel; meanwhile, the whole biomass energy industry lacks effective investment and financing policies, so that a lot of private capital cannot enter into the development of biomass energy.
Unfair subsidy policy
Although the price index has been rising continuously in recent years, the government has not adjusted the feed-in tariffs of the biomass power generation since 2010; and at present, straw raw material subsidy of 140 yuan/ton cannot maintain the briquette fuels industry. Meanwhile, resources, technology and market conditions vary from place to place; a unified subsidy policy sometimes plays the wrong guiding role.
Weak enforceability of policy implementation
Although China’s biomass policy framework has been into a system, the specific policy guidance is in insufficiency at the micro level: the lack of specific operational approach for the single policy; the lack of sustainability in the formulation and implementation of industrial incentive policy and market finance and taxation policy; and the lack of effective management rules in the aspects of standard system, market supervision and sales channels. Meanwhile, the management system is in insufficiency and execution mechanism is not clear; the strengths of promoting the biomass briquette fuel of the regional executive agencies are inconsistent, resulting in the slow development in some places.
China’s biomass energy policy system has been basically formed and has been playing an important incentive role in promoting the construction and development of biomass energy. Although there are some problems in the implementation of biomass energy policies, these are inevitable problems in the process of development and can be solved and improved in the development. Future policy is expected to appear in the large-scale biogas engineering; especially the high-quality vehicle gas engineering will get the financial support and tax preferences. The quota system for biomass power generation will be implemented, environmental protection property of the biomass briquette fuel recognized and the support increased. Grain ethanol subsidies will decline further, research and development efforts in cellulose ethanol fuel will be increased and the subsidies on products implemented. And biodiesel will be included into the national oil consumption channels. China’s biomass energy potential is enormous. In the near future, China’s biomass energy industry will experience greater development under the encouragement and support of the relevant policies.
This post was written by Jie Xu and Zhenhong Yuan, Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences, Guangzhou China.