What are the two major troubles encountered by the biomass industry in its development?
With the development of China's industrialization and agricultural modernization, the rapid consumption of non-renewable energy such as oil and coal, and the growing conflict between the waste from people's daily lives and the environment. Under enormous energy and environmental pressure, clean renewable energy made from agricultural and forestry waste and oil-bearing plants——biomass energy——is attracting more and more social attention. Especially for agriculture, developing the biomass industry can also solve the pollution of the environment caused by open-field burning of straw, livestock and poultry manure, and plastic film.
However, the biomass industry, whose prospects are widely viewed favorably by society, is now encountering difficulties in its development. In April this year, at the 9th China Energy-Saving Stove Expo and the 2015 Energy-Saving and Environmental-Protection Stoves (Boilers) and Biomass Pellet Fuel Industry Development Forum held in Langfang City, Hebei Province, this topic drew strong attention from industry experts and exhibiting companies.
“Affected by the macroeconomy, the development of the biomass industry has been impacted to a certain extent in recent years, and this is also the main reason everyone is paying relatively close attention to the future direction and prospects of the industry's development.” said Wang Zhengyuan, vice president and executive deputy secretary-general of the China Rural Energy Industry Association.
Subsidies canceled, enterprises encounter a policy bottleneck
The “impact of the macroeconomy” that Wang Zhengyuan mentioned refers to the cancellation of financial subsidies for the biomass industry. In October 2008, the Ministry of Finance issued the Interim Measures for the Management of Subsidy Funds for the Energy Utilization of Straw, and the supported targets included “enterprises engaged in the energy utilization of straw such as straw pellet fuel, straw gasification, and straw dry distillation. At the same time, some provinces and cities also issued corresponding subsidy policies. Under the incentives of these policies, China's biomass pellet fuel output increased from less than 1 million tons in 2007 to 5.5 million tons in 2012, relevant industry standards were successively formulated and issued, the biomass industry system initially took shape, and the new output value of the industrial chain related to pellet fuel reached more than 12 billion yuan.
However, rapid development also brought many problems. Wang Fei, director of the Agriculture Division of the Agricultural Ecology and Resource Protection Station of the Ministry of Agriculture, found during research that most biomass energy-related enterprises are relatively small in scale, 70% of biomass pellet fuel enterprises have an annual output of less than 10,000 tons, and 70% sell within their own province. The profits of these enterprises are generally low, so financial subsidies are crucial to their survival and development. 50% to 60% of biomass stove enterprises have received subsidies, and these subsidies account for about 70% of these enterprises' operating revenue.
⟦NL> Because they can get by relying on subsidies, some enterprises have used improper means such as fake invoices, false accounting, and fictitious sales to fraudulently obtain national financial subsidy funds. Starting in 2013, this financial subsidy was suspended by the Ministry of Finance, and there is currently no timetable for its resumption.
Somewhat reassuringly, subsidy policies in some provinces and cities did not end with the suspension of the Ministry of Finance's subsidy policy. In Hebei Province, where emission reduction tasks are extremely arduous, Li Huibin, director of the Provincial Agricultural Energy Office, said that in 2014 Hebei Province's financial subsidy funds reached 240 million yuan, and this year the subsidy intensity may continue to increase, for the promotion of clean stoves across the province, the replacement of coal burning, and the production of biomass pellet fuel.
Wang Fei believes that national subsidies are very important for cultivating the market, but subsidies are, after all, only temporary, and the long-term development of enterprises still depends on product technology research and development and market expansion. Yang Xiaoliang, general manager of Hebei Tiantai Biomass Energy Development Co., Ltd., believes that “large-scale, professionalized, and market-oriented operations are the future way out for the biomass pellet fuel industry. Only by breaking out of the traditional manufacturing model can innovative development have a future.”
Coal prices fall, biomass loses its price advantage
The severe smog hanging over many cities has accelerated the adjustment of China's energy structure, and the country's smog control policies have provided broad space for the development of biomass energy. Biomass pellet fuel is an important development direction of renewable energy in the world. China is rich in available biomass resources, and currently about 440 million tons of standard coal equivalent of biomass resources can be used as energy. In recent years, in smog control in various places, especially in the Beijing-Tianjin-Hebei region, some coal-fired boilers have been replaced by biomass boilers, and coupled with their price advantage over coal, biomass pellet fuel has ushered in an unprecedented peak sales season.
However, the good times did not last long. As coal prices continued to fall, the price advantage of biomass pellet fuel was gradually lost, and some enterprises began burning coal again in their boilers. In some enterprises, what burns in the boiler is coal, but the boiler room is piled full of biomass fuel.
It is reported that this phenomenon is common in the Beijing-Tianjin-Hebei region. “This is already an open secret in the industry.” an expert from the China Rural Energy Industry Association said. “Some biomass power plants take national electricity price subsidies while secretly burning coal.”
Criticizing these enterprises clearly lacks sufficient grounds, because the decisive factor is the market. Last year, China's coal price had already fallen below 500 yuan/ton, and this year it may fall below 400 yuan/ton, while the factory-gate price of raw material for biomass pellet fuel is 250 to 350 yuan per ton, and after processing into pellets the ex-factory price of pellet fuel is about 800 to 1,000 yuan per ton. Under such a price advantage, biomass pellet fuel naturally cannot become the first choice of enterprises.
How to solve the difficulties: both the government and enterprises must act
Some industry insiders believe that the predicament the biomass industry has encountered today is directly related to China's policy orientation. It is understood that China's current biomass energy industry is a typical industry dominated by private investment, most enterprises are relatively small in scale, lack strong financial and technical support, and have insufficient development momentum. After subsidies were implemented in 2008, China's biomass pellet fuel entered a golden period of development. However, excessive reliance on subsidies and the irregular operations of some enterprises led to difficulties in the industry's development after this subsidy was suspended.
Zhang Bailiang, deputy director of the Expert Committee of the China Rural Energy Industry Association and former president of Henan Agricultural University, believes that under the current conditions of imperfect laws and regulations and inadequate fulfillment of law enforcement responsibilities, it is normal for the subsidy policy to have some problems, but it should not be stopped, as that would be giving up eating for fear of choking. From the perspectives of the environment, ecology, and energy, developing straw biomass energy has a public-benefit nature in rural areas, and the government should support and invest in it.
Under such realistic conditions, enterprises need to transform their development methods. The implementation of the subsidy policy was meant to provide support in the early stage of development, with emphasis on helping enterprises find internal impetus and helping the industry cultivate market mechanisms. In the words of Hao Fangzhou, director of the Energy-Saving Stove Professional Committee of the China Rural Energy Industry Association, “government subsidies and market-oriented operations must be integrated.” However, many enterprises currently make business decisions based on subsidy policies and formulate production plans based on government procurement orders, lacking market research and analysis of user demand. This dependent mentality has restricted the development of enterprise innovation models and the improvement of product research and development capabilities.
On April 25, 2015, at the demonstration site of the 9th Stove Expo, although exhibitors kept their respective stoves burning brightly, they could hardly hide the trace of worry on their faces. At this time next year, they will still come to this place; may the stove fire then reflect faces beaming with spring……