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Author/Source: http://www.tofuelcell.com Date: 2009-3-24 -------------------------------------------------------------------------------- The growing gap between soaring energy demands and insufficient supply is posing a serious constraint on the further development of China’s economy and society. With rapid economic growth and continuous social progress, China is facing increasingly severe challenges in the field of energy. The contradiction between soaring energy demand and insufficient supply has become more prominent, severely restricting the further development of the country’s economy and society. Against this backdrop, the development and utilization of new energy have become an effective way to address the imbalance between energy supply and demand in our country and achieve sustainable development. Among the various alternative new energy technologies, fuel cell vehicles and coal-to-oil conversion can make full use of China’s relatively abundant coal resources, which is in line with the country’s energy profile characterized by a lack of oil and gas but an abundance of coal; therefore, they have received more attention. Current Development Status Among various new energy technologies, fuel cell vehicles are highly favored for their low environmental impact and high energy efficiency. Countries around the world are increasing their financial investment in this field and strengthening their research and development efforts, employing various measures such as procurement support, tax incentives, accelerated depreciation, and promotional activities to accelerate the research, development, and commercialization of fuel cell vehicles. Our country also began research on related technologies at an early stage. During the 10th and 11th Five-Year Plans, the science and technology sector launched the **863 Electric Vehicle Major Project** and the **863 Energy-Saving and New Energy Vehicles Major Project**, with a total of over 1 billion yuan invested in research and development to date. In 1998, Tsinghua University developed China’s first fuel cell vehicle, whose fuel cells were supplied by Beijing Fuyuan Fuel Cell Company ； In 1999, Beijing Fuyuan Fuel Cell Company collaborated with Tsinghua University to develop fuel cell passenger vehicles ； In 2001, Beijing Green Energy Company, in collaboration with Tsinghua University and Beijing Institute of Technology, developed fuel-cell-powered taxis, buses, and 12-seater coaches ； In 2004, the **methanol fuel vehicle demonstration project was officially launched in Changzhi and passed the** acceptance inspection ； In 2005, the green fuel cell tour vehicle developed by Shanghai Shenli Technology Co., Ltd. was put into trial operation, covering a total distance of 12,000 kilometers with 2,000 hours of fault-free operation ； In 2006, the \"Chao Yue 3\" fuel cell sedan, developed jointly by Tongji University and other institutions, performed outstandingly in the 8th \"Bibiden Clean Energy Vehicle Challenge\", earning an \"A\" rating in all four competition categories and winning first place in two of them. This demonstrated that China’s fuel cell vehicle technology was already at an internationally advanced level. In terms of the practical application of fuel cell vehicles, China launched two phases of commercial demonstration projects for fuel cell buses in 2003 and 2007 respectively. Among them, the second-phase demonstration project for the commercialization of fuel cells in Shanghai involved the procurement, through international bidding, of 3 to 6 fuel cell buses suitable for the conditions of urban public transportation in Shanghai. These buses were to be used for a two-year demonstration period, during which they were required to cover a total distance of no less than 150,000 kilometers. Relevant data on these fuel cell buses and hydrogen refueling stations were collected throughout this period, with the aim of accumulating experience and promoting technological improvements. In the field of coal-to-oil conversion, since the 1990s, enterprises and research institutions such as the China National Coal Research Institute, Shenhua Group, the Shanxi Institute of Coal Chemistry under the Chinese Academy of Sciences, and Yankuang Group have successively developed coal-to-oil technologies. In 2002, the feasibility study report for Shenhua’s direct coal liquefaction project was approved, and it was included in the 863 Program. Four organizations, including Shenhua Group and the China National Coal Research Institute, worked together to develop a coal direct liquefaction technology with independent intellectual property rights. In 2005, Shenhua Group announced a breakthrough in its core technologies, taking a crucial step toward industrialization. However, this does not mean that China’s coal-to-oil technology is already mature; it remains in the experimental stage. In terms of practical application, coal-to-oil has faced numerous setbacks compared to the smooth development of fuel cell vehicles. In August 2004, the Shenhua coal direct liquefaction demonstration project was launched. To date, a production line with an annual capacity of one million tons has been built, and equipment calibration is currently in progress; it is expected to come online soon, producing 1 million tons of oil products per year. This will be the world’s first industrial project for coal direct liquefaction. However, driven by high international oil prices, some regions rushed to plan coal-to-oil projects. Concerned about this situation, in July 2006, the National Development and Reform Commission issued a notice titled \"On Strengthening the Management of Coal Chemical Industry Project Construction and Promoting the Healthy Development of the Industry,\" proposing to suspend the approval of all coal chemical projects until a development plan for such industries was finalized ； Encourage enterprises to adopt advanced technologies with independent intellectual property rights ； Coal-to-oil projects with an annual production capacity of less than 3 million tons should generally not be approved. On April 7, 2008, the medium-temperature coal tar lightening project, which features independent intellectual property rights, produced qualified oil products; it is expected to generate 465,000 tons of oil products, 29,000 tons of liquefied gas, and 70,000 tons of petroleum coke per year. On September 4, 2008, the National Development and Reform Commission issued another notice on issues related to strengthening the management of coal-to-oil projects, stating that \"coal-to-oil production in China is still in the stage of pilot project development, and it is not appropriate to rush into implementing such projects on a large scale.\" It was announced that, with the exception of Shenhua Group’s direct coal liquefaction project and its joint venture with Sasol of South Africa for indirect coal liquefaction in Ningdong, Ningxia (which may not start construction until approval is granted), all other coal-to-oil projects should be suspended. Problems existing: Fuel cell vehicle technology is already fairly mature, but due to high costs, a lack of relevant supporting facilities, and insufficient technical expertise, large-scale industrialization of fuel cell vehicles will take some time. These constraints are particularly evident in hydrogen-powered fuel cell vehicles. Firstly, due to the use of the precious metal platinum, hydrogen fuel cell vehicles are expensive; currently, the cost of each hydrogen fuel cell vehicle is generally between 1 and 2 million dollars ； Secondly, due to the special nature of the fuel used, hydrogen fuel cell vehicles require supporting facilities such as hydrogen stations; meanwhile, how to improve the safety of these hydrogen stations and reduce the costs of hydrogen production are also issues that need to be considered ； Finally, our country still lacks specialized talent in the field of battery-powered vehicles; further efforts are needed to develop technical professionals such as those who operate hydrogen stations and carry out maintenance work. Compared to fuel cell vehicles, coal-to-oil has more problems. Firstly, there are significant technical risks. Shenhua Group’s direct liquefaction technology has not yet been put into commercial operation, and its indirect liquefaction technology developed in collaboration with South African company Sasol is still in the exploratory stage. Even on the international stage, despite the advanced technology in the United States, Japan, and Germany, only the South African company Sasol has achieved large-scale commercialization. Secondly, the resource utilization rate is low. Data shows that 3 to 5 tons of coal are required to produce 1 ton of coal-to-oil. Based on the heat equivalent ratio between oil and standard coal, this means that in the process of indirect coal liquefaction for oil production, the utilization rate of coal’s thermal energy is only 28.6%; even in the case of direct coal liquefaction, the utilization rate of coal’s thermal energy is merely 47.6%. At the same time, coal-to-oil production requires a large amount of water resources; 5 to 7 tons of water are needed to produce 1 ton of oil. If we take into account the uneven distribution of coal and water resources in our country, even more resources will be consumed in coal-to-oil production, resulting in a lower efficiency in resource utilization. Another issue is the huge amount of capital required. Coal-to-oil is a project with a high degree of technical integration. Experts estimate that planning a project with an annual output of 3 million tons of coal-to-oil requires an investment of over 50 billion yuan; accordingly, a project with an annual output of 1 million tons would require at least 16 to 17 billion yuan in investment. Finally, environmental pollution is relatively severe. A large amount of waste residue, wastewater, and exhaust gas are generated during the coal-to-oil process. It is estimated that a project with an annual production capacity of 1 million tons will generate 500,000 tons of waste residue each year, 20–30 million tons of wastewater from production and daily activities, as well as large amounts of sulfur-containing industrial exhaust gases. If these waste residues, wastewater, and exhaust gases are not properly disposed of, they will cause serious damage to the local ecological environment. Investment prospects: Currently, oil shortages have become a major challenge facing the economic development of various **countries. For our country, the oil shortage problem is even more severe. Since becoming a net oil importer in 1993, China’s oil imports have grown rapidly, exceeding 100 million tons in 2003 and 200 million tons in 2007. China has become the world’s second-largest energy consumer. According to projections by the International Energy Agency (IEA), by 2030, 80% of China’s oil consumption (11.66,0.09,0.78%) will need to be met through imports. The huge gap between oil supply and demand in our country creates the possibility for the development of fuel cell vehicles and coal-to-oil technologies. Due to their relatively mature technology, high energy efficiency, and low environmental impact, the possibility of large-scale development of fuel cell vehicles in China is more likely to become a reality. At the same time, a series of policies introduced have provided important support for the industrialization and commercialization of fuel cell vehicles, helping to regulate this industry and promote its sustainable and healthy development. In March 2006, preliminary discussions on the development of standards for fuel cell vehicles were launched; two fundamental standards, namely \"Terminology for Fuel Cell Vehicles\" and \"Safety Requirements for Fuel Cell Vehicles\", are set to be completed this year. In November 2007, the **National Development and Reform Commission issued the ‘Rules for the Administration of Access to New Energy Vehicle Production’, providing guidelines for granting access to the production of new energy vehicles, including fuel cell vehicles. The 2008 Beijing Olympics and the 2010 Shanghai World Expo provided valuable opportunities for the development of fuel cell vehicles. It is reported that at the Beijing Olympics, which concluded not long ago, 595 new energy vehicles were part of the Olympic fleet, including 20 fuel cell cars; meanwhile, 5 fuel cell buses were used for demonstration purposes. Shanghai plans to provide thousands of hydrogen fuel cell vehicles for the 2010 World Expo, aiming to achieve zero emissions in public transportation within the expo site; this will present unprecedented opportunities for the development of fuel cell vehicles in China. In terms of specific location selection, the Shandong region in North China is considered the best area for developing methanol fuel cell vehicles. This is because, first of all, this region has a large population and convenient transportation, with many roads and highways ； Secondly, the region has 4 million vehicles in use and 600,000 new vehicles added each year, accounting for about 30% of the national total; these figures are likely to rise to around 7 million and 1 million respectively over the next 5 years, making it the area with the highest concentration of vehicle usage in the country ； Finally, Shanxi and Shandong are important methanol production bases, and among the currently established methanol synthesis methods, the resources required for the three most cost-effective ones can almost all be found in Shanxi. In addition, Shanxi Province has also formulated a series of industrial policies to promote the use of methanol fuel as well as the industrialization and commercialization of methanol-powered vehicles. Compared to fuel cell vehicles, the practicality of achieving large-scale industrial development for coal-to-oil in China’s context of oil shortage is much lower. As mentioned above, coal-to-oil production faces issues such as high technical risks, low resource utilization efficiency, substantial capital investment requirements, and severe environmental pollution. Further looking at it, coal-to-oil conversion is merely a process of transforming one scarce resource, coal, into another scarce resource, oil. Moreover, China’s abundant coal resources are only relative to those of oil; in terms of per capita proven reserves, China’s level is only 70% of the world average. Even the economic viability, which is often discussed at length (oil production from coal becomes profitable when international oil prices exceed $40 per barrel), is full of uncertainty due to rising coal prices and sharp fluctuations in international oil prices. Therefore, coal-to-oil cannot directly and effectively address the energy shortage issue in the short term; it is more suitable as a strategic reserve, and its prospects for large-scale industrialization still need further evaluation. (Institute of Finance and Trade Economics, Chinese Academy of Social Sciences)