The era of alcohol-based gasoline: Can coal-derived ethanol take advantage of this trend?

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The era of ethanol-blended gasoline: Can coal-based ethanol ride the wave? Author/Source: Date: 2017-09-21 Clicks: 25 On September 13, fifteen ministries and commissions including the National Development and Reform Commission, the Energy Administration, and the Ministry of Finance jointly issued the \"Implementation Plan for Expanding the Production of Biofuel Ethanol and Promoting the Use of Ethanol-based Gasoline in Vehicles.\" According to this plan, by 2020, ethanol-based gasoline will be available throughout the country. Upon hearing this news, coal chemical industries, in particular those involved in coal-to-ethanol production, were quite enthusiastic. So, just how much opportunity can the new policy on ethanol-blended gasoline bring to the coal chemical industry? The author conducted observations and interviews on this topic. “Ethanol-blended gasoline is returning to the market, driven primarily by environmental concerns and the need to reduce inventory levels. ”Tang Hongqing, an industry expert and technical advisor for synthetic oil solutions at China Science Academy, said in an interview with a reporter from China Chemical Industry News that the re-emergence of ethanol-blended gasoline in policy discussions is driven not only by environmental considerations but also by the need to consume excess inventory of grains such as corn. Tang Hongqing believes that, without a doubt, **the promotion of ethanol-blended gasoline is driven first and foremost by environmental considerations. Zhang Kesong, a Ph.D. in Thermal Energy and Power Engineering, also said that ethanol-blended gasoline is an oxygen-containing fuel; its use is beneficial for the emission performance of vehicles, especially in terms of reducing particulate matter. The particulate matter generated upon the combustion of ethanol is less than that produced by conventional gasoline. By using 10% ethanol, 10% less gasoline is required; from an energy-saving perspective, this is also a measure with significant benefits. “Another reason is to use up the excess inventory of grains such as corn that has been stored for too long. ”Tang Hongqing told reporters that grain production has been abundant year after year in recent times; it is estimated that the inventory of corn alone amounts to 250 million tons, accounting for over 85% of the world’s total corn inventory. The cost alone of storing this amount of corn is 62.5 billion yuan. Using stockpiled corn to produce bioethanol serves two purposes at once: it deals with the surplus grain, which is also the underlying context for the promotion of ethanol-blended gasoline in our country. Meanwhile, the large amount of straw in rural areas of our country leads farmers to burn it, resulting in energy waste and significant environmental damage. Converting this biomass into bioethanol for use in vehicles represents an ideal approach that has been explored in our country for many years. 　 Tang Hongqing believes that the \"Implementation Plan on Expanding the Production of Biofuel Ethanol and Promoting the Use of Ethanol-Based Gasoline in Vehicles\" issued by 15 ministries and commissions makes it clear that the goal is to \"expand the production of biofuel ethanol and promote the use of ethanol-based gasoline in vehicles.\" Coal-derived ethanol clearly falls outside this scope; therefore, companies involved in the production of coal-derived ethanol should not have overly high expectations regarding this new policy. “This policy is aimed at biofuel ethanol; it’s clear that there’s no such thing as ethanol produced from coal. ”Cui Jun, a senior analyst at Zhongxun Chemical Information, believes that **this time support was given only to ethanol produced from biomass, not to that produced from coal.** **Planning itself is a guiding and driving policy. In this new era of **streamlining regulations and bringing products to the market, whether ethanol gasoline can truly achieve nationwide coverage depends on market demand. Why is it said this way? The environmental benefits of ethanol-blended gasoline for vehicles are recognized worldwide, but its main drawback is the lack of power. Many consumers believe that ethanol-blended gasoline has a lower calorie content; therefore, with a full tank of such gasoline, the vehicle can travel less distance and consumes more fuel. Some consumers believe that after using it, the performance of vehicles powered by ethanol gasoline declines, acceleration time increases, and the driving range decreases; moreover, since its price is the same as that of regular gasoline, they consider it unsuitable. Cui Jun pointed out that, according to **the regulations**, the pricing of biofuel ethanol is calculated as the price of gasoline of the same grade multiplied by 0.9111. Gasoline prices vary from province to province, and accordingly, the prices of fuel ethanol also differ significantly. This price is not very attractive to consumers, nor is it very attractive to Sinopec and CNPC. Let’s take a look at gasoline prices first. Taking Shaanxi as an example, during the period of low oil prices in recent years, the prevailing tax-inclusive price of fuel ethanol in that region was between 5,000 and 6,000 yuan per ton. Based on a 17% value-added tax rate, the corresponding tax-exclusive price was between 4,274 and 5,128 yuan per ton. The cost of coal-based ethanol is around 5,000 yuan per ton, offering no cost advantage over biomass ethanol. Tang Hongqing believes that if the consumption of ethanol-blended gasoline does not reach the desired levels after 2020, **priority will certainly be given to promoting the use of biofuel ethanol. According to statistics, China’s gasoline production in 2016 was 129.32 million tons. Based on the requirement of a 10% addition, the demand for fuel ethanol was 12.932 million tons. Considering the production volume of bioethanol, as well as the rapid expansion of production capacity resulting from policies supporting bioethanol production, it is still difficult to determine the scale of the market for coal-based ethanol at present.