How Should China Develop Biomass Power Industry?      

Wuhai Kaidi Power Investment Co., Ltd. (SZ: 000939) plans to invest RMB1.8 billion in biomass power, which has raised people's expectation for the biomass business. Looking at the development paths of the several renewable energy businesses in China, wind energy and solar energy are used for power generation, but the purpose for biomass energy remains to be seen. Biomass energy could be used to generate electricity to meet power demand in the vast rural areas, and also to produce liquid fuels to serve the industrial sector.
   Biomass energy can be developed and utilized at three forms of solid, gaseous and liquid fuel. Such diversity of biomass energy prompts people to carefully weigh on how to develop the source so that its value could be maximized.
   One key feature of biomass energy is that its nurturing and development can not be separated from land and water, both of that are scarce resources for China. This situation determined that biomass energy in China could not be developed at the expense of losing grain output and land. At least, such "luxury" ways of using soybeans and corn to produce ethanol fuel seen in many European and American countries are not feasible for China.
    "As China has a huge rural population and the rural areas have a lot of land, it's a good idea to have biomass energy play a key role in such rural areas to meet farmers' daily energy demand. In rural areas, the daily electricity need could be met by biogas power generation, which would help reduce the use of high-cost energy sources such as coal and petroleum," said Meng Xiangan, vice president of the Chinese Renewable Energy Society.
   Considering China's actual situations, the development of biomass energy should be first focused on meeting farmers' energy need, and then the needs of the industrial sector, like using biomass to produce bio-diesel or ethanol fuels. But environmental protection should be the premise, which means the use of food crops as manufacturing feedstock should be avoided. It is necessary to look for more non-grain crop raw materials such as straw and wood cellulose.
   Once the direction gets clear, policy support should follow up. At present, China has an on-grid tariff subsidy system in place for biomass power, but more related policies are needed to bring in investors. In addition, the government should increase the willingness of grid firms to connect to biomass power. Therefore, a systematic management system and policy incentives by the government are necessary to guide the construction of regional biogas comprehensive utilization bases.
   The development of biomass is also inseparable from technical support. At present, most of the biomass power generation machineries in China are imported and a bottleneck in technology could become a stumbling block for the domestic industry in a short term. More R & D efforts should be made in the future for technological breakthroughs to power the development of the industry. The biomass power sector should get rid of government subsidies at the end of the day, and realize healthy operation through free competition.