As Biomass Power Subsidies Decline, What's Next for Businesses? (AI Translation)
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文｜财新周刊 卢羽桐 范若虹
By Caixin Weekly's Lu Yutong, Fan Ruohong
“我们去年11月就停产了，没钱买原料，欠了供应商好多钱。”江苏华晟生物发电公司董事长徐荣超无奈地对财新说，尽管2024年春节前地方政府平台给了300万元支持性贷款，3月初又拿到了一笔1000多万元的财政补贴，但公司现金流很快又枯竭了。
"We ceased production last November because we didn't have the money to buy raw materials, and we owe our suppliers a lot of money," Xu Rongchao, Chairman of Jiangsu Huasheng Biomass Power Company, reluctantly told Caixin. Despite receiving a supportive loan of 3 million yuan from local government platforms before the Spring Festival of 2024 and obtaining over 10 million yuan in financial subsidies in early March, the company's cash flow quickly dried up again.
徐荣超从事的是农林生物质发电，即将秸秆、稻壳等农林废弃物收集后送至发电厂进行燃烧发电，由于具有一定民生性质，中央财政近十年来一直给予0.75元/千瓦时的上网电价补贴。目前全国与徐荣超的企业类似的农林生物质发电项目大约有500余个，其中大部分为民营企业，截至2022年底的发电装机总规模为1623万千瓦，当年发电量516亿千瓦时，大约相当于大连市一年的用电量。
Xu Rongchao is engaged in agricultural and forestry biomass power generation, which involves collecting agricultural and forestry waste such as straw and rice husks and sending them to power plants for combustion electricity generation. Due to its significance for livelihoods, the central government has provided a subsidy of 0.75 yuan per kilowatt-hour for grid electricity prices over the past decade. Currently, there are approximately 500 agricultural and forestry biomass power generation projects similar to Xu Rongchao's enterprise nationwide, most of which are privately owned. By the end of 2022, the total installed capacity of these projects reached 16.23 million kilowatts, with an annual electricity generation of 51.6 billion kilowatt-hours, roughly equivalent to the annual electricity consumption of Dalian city.
这个极度依赖政策支持发展起来的行业，从2019年起开始承压，由于风电、光伏等其他可再生能源快速发展，财政部于2019年调整了补贴发放规则，农林生物质发电不再享有先前的优先足额发放，而是与风电、光伏一同按规模等比例拨付。与风电、光伏项目动辄数十吉瓦的巨无霸体量相比，农林生物质发电项目受燃料半径的限制，普遍集中在30兆瓦（1吉瓦等于1000兆瓦）。
This industry, which heavily relies on policy support for its development, began to face pressures from 2019. With the rapid growth of other renewable energy sources such as wind and photovoltaic power, the Ministry of Finance adjusted the subsidy distribution rules in 2019. Biomass power generation from agriculture and forestry no longer enjoyed the previous priority for full subsidies but was allocated funds on a proportional basis alongside wind and photovoltaic projects according to their scale. Compared to wind and photovoltaic projects, which can reach tens of gigawatts in size, biomass power generation projects are generally limited to around 30 megawatts (1 gigawatt equals 1000 megawatts) due to fuel radius constraints.
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- Jiangsu Huasheng Biomass Power Generation Company ceased production in November last year due to financial difficulties, including inability to purchase raw materials and owing money to suppliers. Despite receiving financial support from the local government and subsidies, the company quickly ran into cash flow problems again.
- The biomass power generation industry in China, which relies on agricultural and forestry waste for electricity generation, has been under pressure since 2019 due to policy changes that reduced subsidies. This has led to significant financial strain on many companies within the industry, with a large number facing shutdowns or reduced operations.
- The future of biomass power generation in China faces challenges including high dependency on government subsidies, competition from other renewable energy sources like wind and solar power, and the need for technological innovation and diversification of business models to improve sustainability and profitability.
The agricultural and forestry biomass power generation industry in China, represented by figures like Xu Rongchao of Jiangsu Huasheng Biomass Power Company, has faced significant financial challenges despite government support. The industry, which converts agricultural waste into electricity, has been crucial for managing crop residues and reducing air pollution. However, changes in subsidy policies and competition from other renewable energy sources have put these projects at a disadvantage [para. 1][para. 2][para. 3].
The central government's adjustment of subsidy distribution rules in 2019 marked a turning point for the biomass power generation sector. Projects were no longer given priority for full subsidies but had to share available funds with wind and photovoltaic projects based on scale. This shift, coupled with the inherent limitations of biomass projects due to fuel radius constraints, has led to financial difficulties for many companies within the industry [para. 4].
Despite its potential as a zero-emission energy source over its lifecycle, the biomass energy sector faces challenges in capturing government subsidies due to regulatory complexities and emissions issues during straw combustion. These hurdles have resulted in significant subsidy arrears, with an estimated total between 70 billion to 80 billion yuan not yet disbursed to over 500 biomass power projects across China [para. 5][para. 6].
The initial development of China's biomass power generation was inspired by European models and heavily supported by subsidies. However, unlike Europe where biomass accounts for a significant portion of energy consumption due to factors like longer heating seasons and centralized agricultural practices, China's vast territory and diverse agricultural landscape present unique challenges. The reliance on subsidies masked these issues initially but left companies vulnerable once financial support began to wane [para. 7][para. 8].
Recent policy changes have further complicated the situation for biomass power companies. The "dual-network connection" requirement introduced at the end of 2020 mandates real-time environmental monitoring data sharing with local grid companies for subsidy eligibility. This policy aims to strengthen emission supervision but has led to disputes over subsidy reductions due to implementation delays [para. 9].
Industry insiders argue that while regulatory tools are now more sophisticated, allowing for better differentiation between compliant and non-compliant companies, the transition away from subsidy dependence is essential for the sector's sustainability. Proposals include focusing on non-electricity utilization models such as cogeneration of heat and power or producing methanol from biogas [para. 10][para. 11].
As China moves towards carbon neutrality, there is potential for biomass energy to play a more prominent role if it can overcome current obstacles. Policies encouraging the replacement of coal-fired heating with biomass could open new opportunities for growth within this sector [para. 12].
- Jiangsu Huasheng Biomass Power Generation Co., Ltd.
江苏华晟生物发电公司 - Summary： Jiangsu Huasheng Biomass Power Generation Co., Ltd. stopped production in November of the previous year due to financial difficulties, including an inability to purchase raw materials and owing a significant amount of money to suppliers. Despite receiving a supportive loan of 3 million yuan from the local government platform before the Spring Festival of 2024 and another fiscal subsidy of over 10 million yuan in early March, the company quickly ran into cash flow problems again.The company, led by Chairman Xu Rongchao, is involved in agricultural and forestry biomass power generation. This process involves collecting agricultural and forestry waste such as straw and rice husks and burning them for electricity generation. The central government has provided a subsidy of 0.75 yuan per kilowatt-hour for grid electricity generated from this method for nearly a decade due to its relevance to livelihoods.However, the industry has been under pressure since 2019 due to rapid developments in other renewable energy sources like wind and solar power. As a result, the Ministry of Finance adjusted subsidy distribution rules in 2019, making biomass power generation no longer enjoy priority full allocation but instead receive proportional allocations alongside wind and solar projects.Xu's enterprise has not received about 90 million yuan in expected central government subsidies over the past four years. Without subsidies, most projects lose their economic viability. For instance, Xu mentioned that his factory's production cost is about 0.5 yuan per kilowatt-hour with operational costs pushing total generation costs to 0.65 yuan per kilowatt-hour. Without subsidies, selling electricity at local coal benchmark prices (e.g., 0.391 yuan per kilowatt-hour in Jiangsu Province) would result in nearly a 40% loss per kilowatt-hour.By the end of December 2023, Jiangsu Huasheng Biomass Power Generation Co., Ltd., along with 53 other biomass power generation companies, collectively wrote to the State Grid Corporation of China reflecting on their situation where subsidies had been delayed for nearly four years involving around 14 billion yuan.The company also faced challenges due to "dual networking" requirements introduced by the Ministry of Finance and Ministry of Ecology and Environment at the end of 2020 for environmental data sharing with both environmental departments and local electric grid companies as a condition for subsidy eligibility.Despite these challenges and financial pressures including delayed subsidies which have significantly impacted many similar enterprises across China leading them into production halts or severe operational difficulties, Jiangsu Huasheng Biomass Power Generation Co., Ltd continues navigating
- China Everbright Greentech Limited
中国光大绿色环保 - Summary： China Everbright Greentech Limited is a company listed on the Hong Kong Stock Exchange (stock code: 01257.HK) that operates in the environmental protection industry, focusing on biomass and waste-to-energy projects among other green initiatives. As of the first half of 2023, the company had 55 biomass comprehensive utilization projects with an installed capacity of 1069 megawatts and a total investment of approximately RMB 17.165 billion. The company faced significant challenges due to delayed subsidies from the government for its biomass power generation projects, with receivables related to these subsidies amounting to HK$7.472 billion, of which HK$4.449 billion were overdue for more than 30 months. Despite trying to offset losses in its biomass power generation segment with revenues from other business areas, China Everbright Greentech reported a loss of HK$300 million in 2023. Consequently, its stock price fell below HK$1 per share in August 2023 and was trading at HK$0.67 per share as of April 3, 2024.
- State Grid Biomass Power Generation Group
国网生物发电集团 - Summary： State Grid Biomass Power Generation Group, referred to as "国能生物" in the article, is a subsidiary company established by State Grid Corporation of China (国家电网公司) in July 2005. It specializes in biomass power generation, focusing on converting agricultural and forestry waste into electricity. The establishment of this company was part of China's efforts to explore renewable energy sources and address environmental concerns associated with agricultural waste disposal.Initially, State Grid Biomass Power Generation Group embarked on developing biomass power projects by incorporating advanced technologies from countries like Denmark, which had successfully utilized biomass for energy production. The group aimed to leverage China's abundant agricultural and forestry residues to generate clean energy while also providing a solution for waste management.However, the article highlights several challenges faced by the biomass power industry in China, including State Grid Biomass Power Generation Group. These challenges include high operational costs due to the price of raw materials (biomass feedstock), difficulties in collecting and transporting agricultural waste due to its dispersed nature, and regulatory changes that affected subsidy support for biomass power projects.By 2023, State Grid Biomass Power Generation Group encountered financial difficulties and reported losses for consecutive years. In January 2023, part of its stock was transferred at no cost to State Power Investment Corporation (国家电力投资集团), making it the controlling shareholder with a 65.37% stake while reducing State Grid Corporation of China's share to 27.5%. This move was seen as an effort to stabilize the company amidst its financial struggles.The article also discusses broader issues within the biomass power sector in China, such as dependence on government subsidies, competition with other renewable energy sources like wind and solar power, and environmental concerns related to emissions from biomass combustion. Despite these challenges, there is potential for growth through diversification into areas like heat supply (thermal power) and exploring new business models that reduce reliance on subsidies.
- Heilongjiang Qingxiang Group
黑龙江庆翔集团 - Summary： Heilongjiang Qingxiang Group is mentioned in the context of discussing the challenges and dynamics of the biomass power generation industry in China. The chairman of Qingxiang Group, Fan Yequn, shared insights into the difficulties faced by biomass power plants, particularly in terms of sourcing raw materials like straw. He noted that farmers' enthusiasm for selling straw to power plants is low because most of the fees are taken by middlemen. As a result, farmers only receive a small portion of what the power plants pay for the straw – out of 280 yuan per ton paid by the plants, farmers might only get 30 yuan.This situation highlights one of the key operational challenges for biomass power generation companies: securing a stable and cost-effective supply of raw materials. The dispersed nature of agricultural waste like straw makes collection and transportation logistically complex and economically inefficient. This challenge is exacerbated when multiple enterprises compete for resources, driving up prices and forcing companies to source straw from increasingly distant locations.Qingxiang Group's experience reflects broader issues within China's biomass energy sector, including high operational costs related to raw material procurement and competition among enterprises for limited resources.
- Longi Group
龙基集团 - Summary： The article does not provide information about Longi Group. It focuses on the challenges and developments within China's biomass power generation industry, discussing issues such as financial subsidies, policy changes, and the comparison between biomass energy utilization in China and countries like Denmark and Sweden. If you're looking for information on Longi Group, which is known for its activities in the solar energy sector, this article does not cover it.
- 2004-2005：
- Chinese experts visit Denmark and Sweden to study biomass power generation industry.
- January 2006：
- Renewable Energy Law issued, classifying biomass energy as renewable source.
- July 2005：
- State Grid Corporation of China establishes State Grid Biomass Power Group.
- End of 2006：
- China's first national-level biomass power project starts operation in Shandong.
- 2010：
- NDRC increases subsidy for biomass power to 0.75 yuan per kWh.
- 2019：
- Subsidy rules adjusted, biomass no longer has subsidy priority.
- December 2020：
- Ministries of Finance and Ecology issue 'dual network connection' requirement for subsidies.
- 2023：
- Power grid companies start implementing 'dual network connection' requirement.
- January 2024：
- Ministries issue notice strengthening subsidy fund management.
- 2024：
- Beijing issues policy promoting biomass heating.
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