Green Dragon: 20 Signs that 2012 is the Year of China

Why is China accelerating on industrial biotechnology, just as US pols preach unilateral disarmament on government efforts to foster commercialization?

Does the sun rise in the east as it sets in the West?

Yes, Digesterati, 2012 is supposed to bring, according to someone’s reading of a Mayan calendar, the end of the world some time in December. Fears are pretty slim on that account, but in Chinese astrology it is the Year of the Dragon – marking not the end of the world, but perhaps the end of the American Century and the beginning of the Asian Century.

The Year of the Dragon

“The Dragon is a beautiful creature, colorful and flamboyant. An extroverted bundle of energy, gifted and utterly irrepressible, everything Dragons do is on a grand scale – big ideas, ornate gestures, extreme ambitions. However, this behavior is natural and isn’t meant for show. Because they are confident, fearless in the face of challenge, they are almost inevitably successful. Dragons usually make it to the top.”

Burying one’s head in the tar sand

In America, in the past year, at least one member in the US House of Representatives has proposed to zero out just about every budget related to science, R&D, commercialization or financing of new technologies – in the naïve hope that, for the first time in American history, the US financial system will be able to stand up a key new industry without the massive assistance of the US federal government.

I mean, you can just check off the investments of the past – yep, here’s to the crazy ones.

Consider the US river, rail and highway systems. The US airline industry. The oil pipeline system. The mail. The ACH system that powers your local ATM. The power grid that lights your home and office. Development of the drugs that keep us healthy and alive. The internet. GPS technologies. The computer. Keeping the Straits of Hormuz safe for US oil imports. Heck, you can’t get a decent sports stadium built in the US without key government support

But somehow, the coming transformation of bio-based agriculture, healthcare, and energy into the biggest leviathan of an industry the world has ever seen – hmm, that’s supposed to happen because the private sector will finally fall in love with 15-year investment payback timelines and fall out of love with crushing or lionizing companies based on a recent run of good or bad quarterlies.

The policy, finance, industrial lockstep

Over in China, where there is also a big population, huge energy demand, and weak fossil reserves, you couldn’t see more on a contrast in approach. In the US, most of the leaders in US finance and corporate America are currently attempting to unseat the US federal government leadership. In China, generally speaking, finance, corporate development and policy are in lockstep.

China accelerating

It doesn’t take a casual observer very long to see the China’s activity in industrial biotechnology accelerating, as more and more technologies develop there, or transfer there via JVs or licenses. What does a win in the grand scale-up of industrial and agricultural biotechnology offer China, or any other country?

OK, let’s see. A dominating position in the future of manufacturing, a structural advantage in the cost of energy, enough food security and energy security to pursue an expansionist foreign policy.

Eventually, dominance in finance when all the capital has drained out of the EU and the US and sits in mountains of cash back in China, as it did before the Age of Navigation and the Industrial Revolution eroded China’s 2000-year dominance of world trade.

Let’s look at the 20 signs.

Next generation technologies deploying in China

Lemna. This month, Parabel (formerly known as PetroAlgae) announced that it has finalized a restated Master Framework Agreement with CECEP—Chongqing Industry, for the implementation of its technology in China as well as around the world, to include the eventual joint completion of ten 5,000-hectare commercial-scale units. The agreement provides for the construction and operation of a micro-crop scientific research program in Hainan Province, China.  After the success of the research program, build-out of ten commercial-scale units of approximately 5,000 hectares will be implemented step by step at locations to be determined around the world. The company said that its protein product could qualify as the first major new plant protein source for humans since soy entered the human diet in the 1950s, while third-party tests have confirmed the value of Parabel’s animal feed applications in aquaculture, poultry, swine, and dairy cattle diets. Parabel’s Biocrude is planned as a local feedstock for renewable “drop-in” fuels.

Cassava stalk. This month, TMO Renewables announced they have advanced to demonstration scale on cassava stalk feedstock with major Chinese fuel and food producers. TMO is now processing an initial shipment of cassava stalk delivered from China, an inexpensive, abundant feedstock underutilized in 2G bioethanol.

Improved efficiencies at TMO’s 12,000 sq. ft. demonstration facility are projected to produce ethanol for less than two dollars per gallon, marking a crucial step toward commercialization.  Utilizing cassava stalk, TMO’s conversion process will yield 70 to 80 gallons of 2G ethanol per ton of feedstock.

In May, China New Energy has struck a deal with Jilin Tianshun Biochemical Development Co to upgrade Jilin’s existing facility into a commercial-scale cellulosic ethanol and butanol distillery that will produce 50,000 metric tons annually. The conversion should be completed by the end of 2013 and cost around $31.8 million.

Corncobs. In April, Shengquan Group announced it will start commercial production of cellulosic ethanol for solvents and biochemicals in June 2012 utilizing enabling technology from Novozymes.

Using Novozymes enzymes, Shengquan will now convert corncob residues from furfural production into fermentable sugars and then into ethanol for solvents and other purposes. Shengquan’s cost model shows that its current production cost of cellulosic ethanol is cost-competitive with conventional ethanol as the feedstock is a by-product of their current production.

Overall, the Chinese government plans for the country to consume 5 million tons of ethanol between 2011 and 2015—known as the 12th five-year plan—which is nearly double that used during the previous five year period. The government plans to make biofuels a priority, with previous efforts restrained by a lack of raw materials.

Pulp mill black liquor. In April, Chemrec signed with China Tianchen Engineering Corporation, TCC, to provide an integrated offering of Chemrec plants on a global lump-sum turn-key basis and co-market the Chemrec black liquor gasification technology – a route to 2nd generation biofuels or green power. The prime ministers of China, Wen Jiabao, and of Sweden, Fredrik Reinfeldt were on hand for the Stockholm signing.

Chemrec and TCC will develop an offering to provide industry standard design, engineering, procurement and construction (EPC) services as well as overall performance guarantees to support project financing for black liquor gasification plants. TCC will also assist in procuring plant financing.

Potato starch residue. In March, Sojitz and Hitachi Zosen have launched a project for production of ethanol from potato starch residue in the Keshan State Farm in Harbin City, in China’s Heilongjiang Province. The project is scheduled to run until March 2014, producing ethanol for fuel use and DDG to verify the profitability for commercialization.  The ethanol will be blended with gasoline for an E10 vehicle fuel.

Algae. In January, Australia’s Algae.Tec signed a binding MOU for a 50/50 equity joint venture in China with Chinese company the Shandong Kerui Group Holding Ltd. The first project under the JV will be for the construction of a 250-module algae biofuels facility in China to be equally funded by both parties.

Integrated biorefineries

In March, Celanese Corporation has received the government approvals necessary to modify and enhance its existing integrated acetyl facility at the Nanjing Chemical Industrial Park. The unit, based on Celanese TCX ethanol process technology, is expected to startup in mid-2013.

The new ethanol production is expected to increase the overall profitability of the facility by enhancing the mix of products manufactured with the current capacity of certain critical raw materials available at the site. Total investment for the project is expected to be a fraction of the required capital for a greenfield facility.

Demand for food crops, oils on rise, affecting world prices

In April, some commodity analysts are saying that this year’s corn crop will be so large, that increased ethanol use, a drought in Argentina and increased demand from China won’t be enough to clean up the surplus, meaning that corn prices will fall later this year once the US harvest comes in.

In February, a result of the country’s decision to reduce corn-based ethanol production for the next five years, it will instead have to boost its imports of animal feed due to a decline in DDGS production. Imports could jump to 6 million tonnes in the next four years, double that of 3.1 million tons imported during 2009/10. Of the total, research from Shanghai JC Intelligence Co. on behalf of the US Grains Council shows that as much as 42% of imports could come from the US.

In March, palm oil futures have risen on the back of increased demand from China. China’s imports of palm oil for cooking rose 16% during the first half of February, partially boosting the price. Palm oil prices are also supported by increased petroleum prices, which boost interest in vegetable oil use for biodiesel.

Aviation biofuels

In March, the Commercial Aircraft Corp and Boeing have signed a collaboration agreement.  The Boeing-COMAC Aviation Energy Conservation and Emissions Reductions Technology Center will be located at COMAC’s Beijing Civil Aircraft Technology Research Center.
The companies will collaborate with China-based universities and research institutions to expand knowledge of technologies – such as sustainable aviation biofuels, aviation connectivity infrastructure and other areas – that improve commercial aviation’s energy efficiency or reduce the industry’s carbon emissions. The companies will jointly select and fund each research project.

In March, Sinopec indicated its hopes to produce commercial scale aviation biofuels and has sought permission to do so from the country’s national aviation regulator. The company expects it could produce a third of the national aviation fuel demand, 12 million metric tons, from biofuels by 2020.
Sinopec produces about three-quarters of fossil aviation fuel used in China annually. PetroChina plans to build a refinery for aviation biofuels by 2014 that would produce 60,000 tons annually.

New ventures planned

In March, Bloomberg reports that DSM CEO Feike Sijbesma is looking to establish ventures in Europe, China and Brazil that are similar to the agreement established with Poet last month.  In an interview conducted in London, Sijbesma is quoted as saying, “…We can expand this to other regions of the world with other materials. We can go to Brazil, we can go to China, we can go to Europe.”  The article notes that Sijbesma commented further, that DSM could gain as much as $1 billion in revenues by 2020 from 2nd generation ethanol production.

In January, Green Biologics Limited  announced the merger between GBL and butylfuel Inc., a US-based renewable chemicals and biofuels company. The new company will operate under the Green Biologics name and continue to be head-quartered in Abingdon, UK with a strong operational presence and commercial focus in the US contributed by butylfuel Inc., which will become Green Biologics, Inc.

“Biobutanol is the place to be,” Green Biologics CEO Sean Sutcliffe told the Digest. “We are combining GBL’s acknowledged technology leadership and commercialization expertise in China, India and Brazil with the scale up, operational process experience, and North American business building capabilities of butylfuel. With China, India, Brazil and the US, you’ve got the four key markets.”

R&D

In February, researchers from China Agricultural University and the Swedish University of Agricultural Sciences said they are moving into the experimental phase of their joint research to develop cassava and switchgrass for biofuel production. Crop trials have taken place in southwest China and north China with the Swedish scientists using their technology to process the feedstock.

Feedstocks

In February, Beijing’s municipal government has stated that by 2015 they will have a system to handle disposal of waste fat and edible oils for all restaurants as part of an effort to end the use of illegally recycled oil, called gutter oil.  The work of collection and transportation will contracted out to companies.
Beijing is focusing on getting waste and transportation companies to work with both biodiesel and chemical companies to work together to assure regular disposal of the gutter oil.

Renewable chemicals and Materials

In April, Zhangjiagang Huamei Biomaterial said they expected to launch their 1,3-propanediol products this month.  Huamei was established by Zhangjiagang Meijingrong Chemical and SB China Venture Capital Limited, who together invested about US$24 million to build a PDO production line with a reported capacity of 65,000t per year.

In January, Zhejiang Hisun Biomaterials announced plans to expand their polylactic acid capacity 10 fold from 5,000t/year to 50,000t/year by 2013.  Additionally, Zhejiang Hisun is looking at the use of cassava, rather than corn. This possible shift in feedstock reflects both the Chinese government’s suggestion that feedstock not compete with food, but according to the article reflects that in November 2011, corn costs US$354/t versus cassava at US$78/t.

Expansion to Africa

In January, Bloomberg and several local outlets reported that the Nigerian government has signed a $2.55 billion development deal with Global Biofuels, to construct 15 integrated biorefineries throughout the West African nation. According to reports, the first pilot plant will be completed in Ilemeso, in Ekiti State by Q4 2012, and projects thereafter will be completed in Ondo, Osun, Kwara, Kogi,Benue,  Gombe, Bauchi, Zamfara, Kano, Kaduna, Nasarawa and  Plateau states.  Project cost for the initial pilot plant is $108M, while full-scale plants are expected to cost $183 million each.