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Review on application and feasibility of biodiesel in Hong Kong and how government policies can support industry efficiency?
Tam, Chee-yun, Joyce.; 談知恩. Tam, C. J. [談知恩]. (2012). Review on application and feasibility of biodiesel in Hong Kong and how government policies can support industry efficiency?. (Thesis). University of Hong Kong, Pokfulam, Hong Kong SAR. Retrieved from http://dx.doi.org/10.5353/th_b4854356 2012
http://hdl.handle.net/10722/180098
The author retains all proprietary rights, (such as patent rights) and the right to use in future works.
UNIVERISTY OF HONG KONG
Review on application and feasibility of biodiesel in Hong Kong and how government policies can support industry efficiency? ENVM8004 Dissertation
Joyce Tam H2010923420
Professor Peter Hills
University of Hong Kong
ENVM8004 Dissertation
Disclosure Statement This dissertation is submitted in partial fulfilment of the requirements for the Master of Science Degree in Environmental Management from The University of Hong Kong.
This dissertation represents the author's own work conducted for the purposes of this programme. All significant data or analysis used in this dissertation which draws extensively on others sources -- including work the author has carried-out for purposes other than for this programme -- has clearly been identified as such.
Signed: _____________________________________________________
Printed Name: ________Joyce Chee-Yun TAM ______________________
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Abstract Hong Kong is vulnerable to energy and economic security due to the heavy dependence on imported fossil fuels. Waste has also been a major environmental management problem due to the amount of rubbish produced every year but lacking the technology and capital to manage different types properly. The objective of the dissertation is to study the feasibility of the use of biofuel in Hong Kong by recycling local waste. Current government policies in Hong Kong and overseas are being investigated on the appropriateness for domestic use. Literature reviews and stakeholders’ questionnaires are accounted to analyse the adaptability and popularity of the biodiesel application.
The methodology of the dissertation is to firstly examine literature reviews regarding biodiesel’s environmental aspect, technical efficiencies, economic aspect, government incentives and tax constraints. The consensus outcome of these researches advocated high popularity of biodiesel consumption and production in Europe and U.S. due to lower environmental impact, equivalent output efficiency and strong government support. Their successful implementation is a good example to improvise biodiesel domestically in Hong Kong.
Secondly, interviews were conducted with Hong Kong’s limited stakeholders. Respondents such as Hong Kong International Airport, Hong Kong Jockey Club, Fairwood Fastfood MTR Maritime Square were interviewed as these participants have been the pioneers in Hong Kong by recycling waste into biodiesel. On the production side, two out of three bio-refineries in Hong Kong provided their business sustainability and feasibility comments to pursue a long term goal. The limitation on responses might be focused solely on a few peer groups, and not the appropriate stakeholders with proper sampling size. However, the results are concurrent that biodiesel is one of the best alternative energy in Hong Kong. The dissertation draws positive results based on the following factors. Biodiesel can diminish the tremendous cost on waste management and landfill dumping. Using ii | P a g e
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local food waste and industrial wastes from restaurants and food factories as feedstock to produce biodiesel is positive. This will also minimise the heavy reliance on imported fossil fuels to diversify energy sources. Refuelling of biodiesel fuel can be performed in any gas stations with the use of the existing infrastructure without any further requirement of new investment.
Nonetheless, in order to facilitate the use of biodiesel, incentives programmes initiated by Hong Kong Government and the biofuel producers have to coherently promote this alternative fuel. The conclusion states that Hong Kong is completely feasible to adopt the use of biodiesel in medium to heavy sized vehicles and vessels in the commercial sector. The environmental benefit of Hong Kong using biodiesel stood out compared to other form of renewable energy.
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Table of Contents
Disclosure Statement .................................................................................................... i Abstract ........................................................................................................................ ii Table of Contents ........................................................................................................ iv List of Table ................................................................................................................. vi List of Figures ..............................................................................................................vii Chapter 1: Introduction................................................................................................ 1 1.1. Air pollution and waste management .............................................................. 1 1.2 Overview of biodiesel ......................................................................................... 2 1.3 Objective of the study ........................................................................................ 3 1.4 Methodology ...................................................................................................... 3 1.5 Structure of the dissertation .............................................................................. 4 Chapter 2: Literature review on Biodiesel ................................................................... 5 2.1 Factors supporting alternative energy ............................................................... 5 2.2 Biodiesel definition, advantage, disadvantages and emissions ......................... 7 2.3 Review on the applications of Biodiesel in other regions ................................ 13 2.4 Successful cases in Brazil and aviation industry............................................... 19 2.5 Alternative ways to reduce production costs in Biodiesel............................... 23 Chapter 3: Development of renewable energy in Hong Kong’s transportation sector .................................................................................................................................... 26 3.1 Evolution of pollutants reduction in Hong Kong’s transport sector ................ 26 3.2 Electric vehicle in Hong Kong and shortcomings ............................................. 28 3.3 Hong Kong biodiesel refineries’ benefits, challenges and economic feasibility ................................................................................................................................ 30 iv | P a g e
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3.4 Government policies on biodiesel, waste recycle and requirements ............. 32 3.5 Recap of the Hong Kong situation.................................................................... 35 Chapter 4: Objectives of study and methodology ..................................................... 36 4.1 Interview with corporations who participated in waste recycle program for biodiesel ................................................................................................................. 36 4.2 Interview with Biodiesel refineries .................................................................. 38 4.3 A glance at the domestic use, production and cost in Biodiesel ..................... 41 4.4 Why biofuels are not popular .......................................................................... 44 Chapter 5: What can Hong Kong do to efficiently use Biodiesel as the alternative fuel in transportation sector ...................................................................................... 50 5.1 Transition to use Biodiesel in Hong Kong ........................................................ 50 5.2 Government policy ........................................................................................... 53 5.3 Environmental, social and economic aspects to support Biodiesel................. 59 Chapter 6: Implications, constraints and conclusions ............................................... 63 6.1 Limitations and constraints .............................................................................. 63 6.2 Conclusion ........................................................................................................ 64 Appendix: ................................................................................................................... 66 Appendix 1: Fatty acid profile ................................................................................ 66 Appendix 2: Diesel vs Biodiesel blending characteristics ...................................... 66 Appendix 3: Biodiesel emissions at a glance.......................................................... 71 Appendix 4: Europe biodiesel refineries and production ...................................... 74 Appendix 5: Hong Kong Government initiatives to reduce roadside pollutants ... 74 Appendix 6: Interview questions with stakeholders ............................................. 75 Appendix 7: Correlation of crude oil vs biodiesel, electricity and solar energy .... 78 References:................................................................................................................. 81
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List of Table Chapter 2 2.1 Relative decrease in power compare to petroleum diesel……………………….
10
2.2 Biofuel consumption for transport in European Union in 2009 thousand tons of oil equivalent (ktoe)…………………………………………………………………………….
16
Chapter 3 3.1 Global Clean Energy Market Size…………………………………………………………….
32
Chapter 4 4.1 Estimated Cellulosic Feedstock that Could Potentially Be Produced for Biofuel…………………………………………………………………………………………………....
42
4.2 Estimated Costs of Fuel Products with and without a CO2 Equivalent Price of $50/tonne.…………………………………………………………………………………….......
43
Chapter 5 5.1 WWFC suggested Biodiesel Blending Limit in 2008 as below…………………..
55
5.2 Tax Exemption on Biofuels in Selected Countries………………………………......
57
Appendix A.1 Characteristics of Diesel Fuel and Biodiesel…………………………………………….
68
A.2 Biodiesel Source Effects Percent Change in Emissions…………………………….
71
A.3 Lifecycle GHG and non-GHG Emissions for B20 Blends (grams/mile)………
71
A.4 Effect of Biodiesel on Tailpipe Emissions (g/bhp-h)…………………………………
72
A.5 Average B100 and B20 Emissions (in %) Compared to normal Diesel
72
A.6 Production capacity of the main biodiesel producers in Europe in 2009….
74
A.7 Biodiesel production in the European Union in 2008 and 2009……………….
74
A.8 Summary of Hong Kong Government GHG reduction programme on roadside vehicles…………………………………………………………………………………....
74
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List of Figures Chapter 2 2.1 Crude Oil Prices: West Texas Intermediate…………………………………………….
6
2.2 How biodiesel is formed…………………………………………………………………………
8
2.3 GHG emissions (g CO2 equivalent /km)…………………………………………………..
12
2.4 Comparison of Net CO2 Life Cycle Emissions for Petroleum Diesel and Biodiesel Blends11…………………………………………………………………………………..
13
2.5 World Biofuel Production 2011 in millions tonnes of oil equivalent……….
14
2.6 Evolution of the European Union (EU27) biofuel consumption for transport in thousand tons of oil equivalent (ktoe)………………………………………………..
15
2.7 Jet Kerosene price based on 25% markup over IEA’s crude oil forecast in
24
Energy Technology Perspectives 2010…………………………………………………… Chapter 3 3.1 Measures and effectiveness in reducing number of smoky vehicles spotted ………………………………………………………………………………………………………………
27
3.2 Use of Fuel in Hong Kong Transportation Sector……………………………………. 29 Chapter 4 4.1 Amount of waste recycled by the Airport of Authority in 2010 & 2011….
41
4.2 Crude Oil Prices: West Texas Intermediate vs MLCX………………………………
47
4.3 Crude Oil Prices: West Texas Intermediate vs Nordic Electricity Prices….
48
4.4 Crude Oil Prices: West Texas Intermediate vs World Solar Energy Index..
49
Appendix A.1 Fatty acid profile of some biodiesel feedstocks………………………………………
66
A.2 Ethanol update………………………………………………………………………………………
73
A.3 CO2 reduction on Bioethanols………………………………………………………………..
73
A.4 Correlation between Crude Oil Prices WTI vs MLCX……………………………….
78
A.5 Correlation between Crude Oil Prices WTI vs Nordic Electricity……………..
79
A.6 Correlation between Crude Oil Prices WTI vs Bloomberg Solar Energy Index ………………………………………………………………………………………………………………
80
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Chapter 1: Introduction
1.1. Air pollution and waste management
Hong Kong is vulnerable to energy and economic security due to the heavy dependence on imported fossil fuels. The combustion of fossil fuels such as coal, petrol, diesel to provide energy also causes serious air pollution and greenhouse gas emission (GHG) which is a major problem in Hong Kong and many of the developed nations. The transport sector is one of the main contributors to GHG emissions in many countries around the world (International Energy Agency, 2009) and over the past few years, the Hong Kong Special Administrative Region Government has launched various programs to lessen the impacts by vehicular emissions in order to reduce the level of toxic emissions. These policies, together with some pilot projects on low emission technologies, have gained support from the community with encouraging results. Nevertheless, many of them did not lead to any improvement of energy efficiency and reduction of fuel consumption.
Waste has also been a major environmental management problem due to the huge amount of waste produced every year but lacking the technology and capital to manage different types properly. This is leading to serious environmental impacts especially limited landfill sites. These two issues are imminent in many of the regions around the world (European Rewable Energy Council, 2010) and biodiesel may be one of a benign alternative energy that can solve the issue. This dissertation is to study the use of renewable sources in an environmentally, socially and economically sustainable manner.
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1.2 Overview of biodiesel
Biodiesel fuel can be made from new or used vegetable oils and animal fats, which are non-toxic, biodegradable, renewable resources. It offers energy diversity and reduce considerable amount of air pollutants and greenhouse gases. The biodiesel fuels have not been widely accepted in the market because they are more expensive than petroleum fuels (Rashid & Anwar, 2008). They have become more attractive recently because of their environmental benefits, recent increases in petroleum prices and uncertainties concerning petroleum availability for diesel engines (Bozbas, 2005).
Biodiesel produced from different stockfeeds are very interesting for several reasons: it can replace diesel oil in boilers and internal combustion engines without major adjustments; only a small decrease in performances is reported; almost zero emissions of sulphates; a small net contribution of carbon dioxide (CO2) when the whole life-cycle is considered (including cultivation, production of oil and conversion to biodiesel); emission of pollutants comparable to diesel oil (Carraretto, Macor, Mirandola, Stoppato, & Tonon, 2004). However, biofuel is very easy to use but not the easiest resources to locate. Unlike other forms of renewable energy (like hydrogen, solar or wind), biofuel is easy for people and businesses to transit without special apparatus or a change in vehicle or home heating infrastructure. In Europe the most important biofuel is biodiesel and is the by far biggest biofuel which represents 82% of the European Union biofuel production. Biodiesel production for 2003 in EU-25 was 1,504,000 tons (Balat, 2007). With increase technology and higher fossil fuel price, biodiesel is an important alternative fuel to be considered in Hong Kong.
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1.3 Objective of the study
The objectives are to use literature reviews and stakeholders’ questionnaires to analyse the feasibility of application and use of biodiesel in Hong Kong. Different aspects have been discussed in the paper including market, technology, policy, feedstocks, and refineries. Results drawn from literature review such as extraction and production methods, properties and qualities of biodiesel, problems and potential solutions of using vegetable oil and waste, advantages and disadvantages of biodiesel, the economic viability and finally the future of biodiesel are also discussed. After the above considerations, this dissertation concludes that Hong Kong has a potential to use biodiesel on medium to heavy size vehicles in the commercial sector. The environmental benefit of Hong Kong using biodiesel stood out compared to other form of renewable energy. Moreover, the abundance of waste will not have any social impact on a competition with agricultural crops and land. It also creates economic opportunities for refineries in Hong Kong to export this alternative fuel to closer regions in China and upon newer technologies may solve the problem on landfill sites.
The main objectives of this study are firstly, to evaluate successful international cases, and secondly, to recommend future strategies for the development in Hong Kong to achieve the targets of relieving the severe waste management problems and providing an alternative source of energy supply.
1.4 Methodology
The analysis of feasibility of biodiesel in this study was based on literature review, data collection, questionnaires and comparative studies. Information was gathered from different sources including reports from various overseas Governments’ policy addresses, articles from financial research, green groups, local and overseas journals and books. 3|P a g e
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The study focused on biodiesel feedstocks, the production of the biodiesel and their potential impacts on the environment. International Government policies has been analysed as proposals for Hong Kong Government to adopt blending, statutory guidelines in production and use, subsidy on biodiesel as well as carbon tax issues are analysed. Based on these concepts, this study further explored the viable means feasibility of the use of biodiesel in Hong Kong.
1.5 Structure of the dissertation
This dissertation contains 6 chapters. Apart from this introductory chapter, chapter 2 is the literature review on biodiesel and evolution in other countries. Chapter 3 gives a review on the development of renewable energy in Hong Kong’s transportation regarding the use of fuels in motor vehicles, air pollutants reduction programme and technological options. Chapter 4 is the detailed objectives and methodologies in this paper. Chapter 5 analyses whether Hong Kong can efficiently use biodiesel as the alternative fuel based on social, environmental and economic perspectives. Finally, chapter 6 is the conclusion of the dissertation.
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Chapter 2: Literature review on Biodiesel
2.1 Factors supporting alternative energy
Crude Oil Price Instability The scarcity of conventional fossil fuels, growing emissions of pollutants, and increasing costs is one encouraging factor for moving towards biodiesel. Fossil fuel has served the world with cheap supply of fuel to drive the stage of industrialisation in the past century. Crude oil supply shocks and volatile prices can be threatening to world’s economic growth as seen in Figure 2.1. An upward spike in crude oil prices was the direct cause of three of last five recessions in the United States: the Arab Oil Embargo in 1973-1975, the Iranian revolution against the Shah of Iran in 1980 Saddam Hussein’s invasion of Kuwait and the first U.S.-Iraq War in 1990-1991. Those rescissions directly caused unemployment, business failures, bankruptcies, mortgage defaults and other types of misery for citizens (Asplund, 2008).
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Figure 2.1 Crude Oil Prices: West Texas Intermediate
Sources: Bloomberg
Moreover, the crude oil prices are controlled by the Organization of the Petroleum Exporting Countries (OPEC) cartel which restricts the oil supply to maximise revenue for the major beneficiaries in OPEC states. The surge in oil prices at US$70 per barrel has not caused a world recession. OPEC therefore raised its effective target price for crude oil from US$40 to about US$60 per barrel area. On October 2006 when oil inventories were in excess which drove the oil prices to US$50 per barrel, OPEC has mobilised to cut production by 1.2 million barrels a day, equal to 4.3 percent of the group's total to stop the slide in oil prices causing oil prices to rally back up to US$60 per barrel (Mufson, 2006). The world’s oil companies are not only losing control of asset and reserves through nationalism, but are also reluctant to expand investments because oil prices may not remain high enough to provide sufficient return to develop oil fields. While the cheap and easy-to-extract oil has already been found, most of the crude oil remains deep in the earth, far below the ocean or in inhospitable and hard reach locations. There are huge oil reserves in the Wilcox formation in the Gulf of Mexico which cover 6|P a g e
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more than 34,000 mi2 territorial waters. Wilcox trend has a potential for recovering 3 to 15 billion barrels of oil from these recoveries and additional untested structures trapped in deep-water. Exploitation challenges include well depths up to 35,000 feet subsea, water depth ranging from 4,000 to 10,000 feet, and salt canopies from 7,000 to more than 20,000 feet thick. The cost is far higher than onshore oil fields compare to extract the deep-sea reserves. In order to sustain a profitable business, the oil prices must stay high to cover the higher capital (Lewis et al., 2007). Hence, high oil prices from imports become a supporting factor for using alternative energy in Hong Kong transport sector which relies largely on imported fuels.
Decarbonisation of Fossil Fuels Decarbonisation of fossil fuels is a way to increase energy consumption without increasing carbon consumption in the current environment. Removal of carbon from fossil fuels prior to use in energy production is far less costly than attempting to remove CO2 from dispersed sources. If fossil fuels are converted to hydrogen in a central facility, the collection of CO2 elemental carbon process is simpler compared to collecting CO2 from every fossil fuel-consuming vehicle on the road. Carbon neutral biomass-derived transportation fuels offer solutions to this. However, the cost of technology is still high for renewable processing of biomass or direct biological hydrogen production and requires advance research and new technologies to reduce the cost. The versatility of biomass and conversion technologies makes it suitable to either adapt to today’s fuel and vehicle infrastructure or to be a part of a new infrastructure for biodiesel fuels and efficient vehicles of the future (Chum & Overend, 2001).
2.2 Biodiesel definition, advantage, disadvantages and emissions
Definition of Biodiesel
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Biodiesel is a renewable diesel replacement fuel derived from biomass. According to this definition, biofuel includes liquid and gaseous fuels derived from agricultural products, animal wastes, organic wastes from industries, forestry and domestic sectors or other organic sources. The term biodiesel refers to long-chain fatty acid alkyl esters most commonly produced by chemically altering organic oil with methanol, by the use of a catalyst through a process called transesterification. During the transesterification process, the glycerine portion of the oil molecules is replaced by alcohol and eventually removed from the mixture in the washing and drying process where biodiesel is formed in Figure 2.2 below. Transesterification also called alcoholysis, is the displacement of alcohol from an ester by another alcohol in a process similar to hydrolysis, except that an alcohol is used instead of water. If methanol is used in the above reaction, it is termed methanolysis. The fatty acid methyl esters (known as biodiesel) are attractive as alternative diesel fuels (Atabania et al., 2012). Fatty Acid Methyl Ester (FAME) is not Biodiesel unless it meets the relevant standards.
Figure 2.2: How biodiesel is formed catalyst
Triglyceride
methanol
glycerol
Methyl Esters (3)
Source: (Atabania et al., 2012)
There is no strict technical definition for the terms first and second generation biofuels, and the distinction between the two mainly relies on the feedstock used in production (Larson, 2008). First generation biofuels are mainly based on sugars, grains, or seeds, and generally requiring relatively simple processing to produce the fuel known as bioethanol. In contrast, second generation biofuels would be generally made from non-edible lignocellulosic biomass, including residues of crops 8|P a g e
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or forestry production and whole plant biomass. Biofuels obtained from vegetable oils produced from sources that do not directly compete with crops for high-quality land, e.g., jatropha and microalgae can also be labelled as second generation biofuels (Larson, 2008). Second generation biofuel can be more efficient in terms of their overall fatty acids like some algae types that are comprised up to 40% of their overall mass by fatty acids (Becker, 1994). According to some estimates, the significant yield (per acre) of oil from algae is over 200 times the yield from the best-performing plant/vegetable oils. Approximately 46 tons of oil/hectare/year can be produced from microalgae – the fastest-growing photosynthesizing organisms (A. Demirbas, 2009).
Characteristics of biodiesel that affect performance Biodiesel can be used alone B100 (100% of biodiesel) or blended with petroleum diesel in any proportion. The most popular biodiesel blends are B5 (5% biodiesel), which can be used for Energy Policy Act of 1992 (EPAct) compliance. It is important to study the key difference between pure biodiesel replacements or blended with diesel to understand the pros and cons on biodiesel. Diesel is produced largely by distillation of a broad cut of petroleum by separation of lighter and heavier components, whereas biodiesel is produced by a chemical reaction followed by a physical separation. Biodiesel thus contain some heavy materials or materials that are subject to thermal decomposition when exposed to heat. Biodiesel typically comprises alkyl fatty acid (chain length C14–C22) esters of short-chain alcohols, primarily methanol or ethanol (see Appendix 1) which may contain a high level of unsaturated (olefinic) carbon bonds; normal crude oil contains few olefins which are unstable and may contribute to deposits and higher rates of degradation. Pure biodiesel has excellent anti-foam properties, better than petroleum diesel. Cetane number (CN) is one of the most common indicators of diesel fuel quality. The CN of biodiesel is generally between 45 and 70 as compared to 40 to 52 for typical diesel and higher the cetane number the better. For diesel, each component has its own crystallisation temperature so solidification is a gradual process, whereas B100 biodiesel tends to be a much simpler mixture so only one or two components dominate and solidification is more rapid and difficult 9|P a g e
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to control. Some biodiesel are more susceptible to oxidation than diesel and tend to produce gums and lacquers, creating potential for increase in deposits. Biodiesel and Biodiesel blends respond well to diesel dispersant additives to control deposits (Goosen, Vora, & Vona, 2007).
Basha, Gopal, and Jebaraj (2009) studied about 130 scientists who published their results between 1980 and 2008 that vegetable oils, either chemically altered or blended with diesel to prevent the engine failure. The combustion characteristics of biodiesel are similar as diesel and blends were found shorter ignition delay, higher ignition temperature, and higher ignition pressure and peak heat release. The engine power output was found to be equivalent to that of diesel fuel. The detailed characteristics comparison between diesel and biodiesel are shown in Appendix 2 (Atabania et al., 2012). Some minor problems such as injector coking, thickening of lubricants and oil deposits were recorded on extended operation of diesel engine fuelled with neat or straight vegetable oil (SVO) (Gupta, Kumar, Panesar, & Thapar, 2007) (Peterson, Cruz, Perkings, Korus, & Auld, 1990). Short-term engine performance tests were carried out on test diesel engine fuelled with Palm kernel oil (PKO) biodiesel. The diesel engine was attached to a general electric dynamometer. Torque and power delivered by the engine were monitored throughout the 24-hour test duration at 1300, 1500, 1700, 2000, 2250 and 2500 rpm. At all engine speeds tested, results showed that torque and power outputs for PKO biodiesel were slightly lower than those for petroleum diesel shown in Table 2.1 below (Alamu, Adeleke, Adekunle, & Ismaila, 2009). Therefore, biodiesel produce a slightly lower performance compare to petroleum diesel.
Table 2.1 Relative decrease in power compare to petroleum diesel Diesel engine speed (rpm)
Relative decrease in power output for PKO biodiesel (%)
1,300
5.128
1,500
6.250
1,700
5.455
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2,000
7.258
2,250
9.375
2,500
7.692
Greenhouse gas emissions on Biodiesel It is controversial on whether the adoption of biofuels is not sustainable for agriculture crops to meet demand and also the overall greenhouse gas emission is even higher than conventional fuel. Matthew Brown, an energy consultant and former energy program director at the National Conference of State Legislatures researched that replacing only five percent of the nation’s diesel consumption with biodiesel would require diverting approximately 60 percent of today’s soy crops to biodiesel production (Earth Talk, 2011). Criticisms argued that after factoring in the energy needed to grow crops and then convert them into first generation biodiesels are greater traditional fossil fuels. Pimentel, Hepperly, Hanson, Seidel, and Douds (2005) found that producing ethanol from corn required 29 percent more energy than the end product. He found similarly troubling numbers in making biodiesel from soybeans, corn and sunflower plants (Lang, 2005). However, these critics do not consider the “life-cycle” of biodiesel namely in five stages: feedstock production, feedstock transportation, fuel production, fuel distribution and, finally, vehicle use (National Biodiesel Board, 2005). The U.S. Department of Energy and the U.S. Department of Agriculture have performed life cycle study of the energy balance of biodiesel produced from soybeans. For every one unit of fossil energy used in this entire production cycle, 3.2 unit of energy are gained when the fuel is burned, or a positive energy balance of 320% (Sheehan et al., 1998a). These criticisms were mostly flawed by insufficient information to reach that conclusion; obsolete data on agriculture production causing overestimation; inaccurate inclusion of secondary inputs such as steel, cement and labour; and ignoring glycerine production.
Biodiesel does have nitrogen oxide emissions that are about 10 percent higher than petroleum diesel. Blending biodiesel into petroleum diesel can help reduce emissions. Other researches have shown similar results in Appendix 3 (Boyd et al.,
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2004). According to Well-to Wheels report, biomass in the form of waste produced the least GHG emissions in terms of feedstock shown in Figure 2.3 below.
Figure 2.3: GHG emissions (g CO2 equivalent /km)
Source: (Lonza, Hass, Maas, Reid, & Rose, 2010)
Another research studies the total life cycles of CO2 released at the tailpipe biodiesel and petroleum diesel based on the combustion of fuel in the bus. For petroleum diesel, CO2 emitted from the tailpipe represents 86.54 percent of the total CO2 emitted across the entire life cycle of the fuel. Most remaining CO2 comes from emissions at the oil refinery, which contribute 9.6 percent of the total CO2 emissions. For biodiesel, 84.43 percent of the CO2 emissions occur at the tailpipe. The remaining CO2 comes almost equally from soybean agriculture, soybean crushing, and soy oil conversion to biodiesel (Sheehan et al., 1998b). Figure 2.4 shows the effect of biodiesel blend levels on CO2 emissions. More research results are shown in Appendix 3 to demonstrate the consistency on reduction of GHG emission performed by different analysis according to feedstock and blending.
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Figure 2.4: Comparison of Net CO2 Life Cycle Emissions for Petroleum Diesel and Biodiesel Blends11
Source: (Sheehan, Camobreco, Duffield, Graboski, & Shapouri, 1998b)
2.3 Review on the applications of Biodiesel in other regions
Increased in Production of Biofuel shows higher demand World biofuels production grew by 13.8 percent in 2010; biofuels accounted for 0.5 percent of the global primary energy consumption where Europe and Eurasia are dominant producers in biodiesel (British Petroleum, 2011) as shown in Figure 2.5 below. Advanced players are sourcing different biomass to lower cost on biofuels to ensure sustainability and higher return on the investment. One of the most advanced players Choren, a German producer, which has had a pilot 14,000 tonne Biomass to liquid (BtL) plant running since 2008 and intends to build a commercially-viable 200,000 tonne production plant (EurObserv'ER, 2010). By switching from first generation to second generation biodiesel feedstock enable refineries to reduce the cost on feedstock. Vertigro, owned by US ecotechnologies developer Valcent Products, has agreed to form a joint venture to produce biodiesel
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from algae, together with SGCEnergia, the biofuels division of the SGC Group of Portugal (Bioduel News, 2007). Other major producers and countries production can be seen in Appendix 4.
Figure 2.5: World Biofuel Production 2011 in millions tonnes of oil equivalent
Source: (British Petroleum, 2011)
Europe Europe has been the leading region on alternative fuel as they produce more biodiesel compare to bioethanol which accounts for more than 80 percent of EU total biofuels production. Biofuel use in transport grew by 18.7 percent between 2008 and 2009, as against 30.3 percent between 2007 and 2008 and 41.8 percent between 2006 and 2007 in the Figure 2.6 below (EurObserv'ER, 2010).
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Figure 2.6: Evolution of the European Union (EU27) biofuel consumption for transport in thousand tons of oil equivalent (ktoe)
Source: EuroObserv’ER (for years 2008 & 2009) and Eurostat (2000 – 2007)
Besides being the leading producer, Europe is one of the biggest regions in consumption of biofuel. Table 2.2 shows total biofuel consumption amounted to 12 million tonnes of oil equivalent (mtoe), which represents a 4 percent incorporation rate across all road transport fuels estimated at 300 million tons of oil equivalent (mtoe) in 2009. In Europe most biofuel used in transport is essentially sourced from biodiesel which accounts for 79.5 percent of the total energy content, as opposed to 19.3 percent for bioethanol.
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Table 2.2: Biofuel consumption for transport in European Union in 2009 thousand tons of oil equivalent (ktoe)
Source: (EurObserv'ER, 2010)
Mandatory requirement in Europe to use Biodiesel The European Union turned voluntary goals into mandatory requirements when it adopted the Renewable Energy Directive (RED) issued by the European Parliament on December 2008. A 10 percent mandate for renewable content in transportation fuels is part of the new 20-20-20 plan that calls for a 20 percent cut in GHG emissions for all energy compared with 1990 levels, a 20 percent increase in the use of renewable energy and a 20 percent cut in energy consumption through improved energy efficiency by 2020. Transportation fuels, including biofuels, electricity and hydrogen, are included in the 20 percent increase in renewable energy usage. It replaces the voluntary targets of 5.75 percent by 2010 and 10 percent by 2020, which were adopted in a 2003 policy (Kotrba, Sims, Geiver, & 16 | P a g e
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Voegele, 2010). For biofuels producers that began operation in January 2008, the requirement will take effect April 1, 2013. From 2017 onwards, the lifecycle GHG emissions of qualifying biofuels produced in existing production plants must be at least 50 percent lower than fossil fuels, while biofuels produced in new installations must achieve a lifecycle GHG reduction of at least 60 percent. The new RED requires fuel suppliers to reduce GHG emissions caused by extraction or cultivation, including land-use changes, transport and distribution, processing, and the combustion of transport fuels (Schill, 2009). The European Commission is also required to monitor the social impact of the EU's biofuel policy and if necessary propose corrective action, especially if increased biofuels production leads to rising food prices or does not comport with social sustainability criteria (Beverage and Diamond PC, 2009).
Manufacturer accommodating the use of Biodiesel The manufacturers in Europe are accommodating the switch by rejuvenating traditional hybrid cars with sports car. The Swedish company BSR, specialised in professional tuning services for a large number of European cars, has optimised a diesel-powered Saab 9-3 for the fuel E95 (95% ethanol). The result is reduced fuel consumption, high performance and minimised exhaust emissions. This conversion is carried out together with SEKAB in Ö rnsköldsvik, a producer and distributor of Bioethanol, and with the EU project BEST (Bioethanol for Sustainable Transport). The 9-3 Saab diesel engine, where combustion chamber, fuel system and engine software have been modified with max power 195 horse power, torque 410 Nm, low fuel consumption of approximately 5 litres per 100 km. The new car uses 95 percent less fossil CO2, minimal dangerous hydrocarbons and nitric oxide exhaust emission and basically complete elimination of particle emission (Linde, 2008).
Biodiesel provide business opportunity with government collaboration Sales of clean cars have grown at a record pace in Sweden compared to other European countries. In 2008, one third of all cars sold in Stockholm and a quarter of all cars sold in Sweden were alternatively fuelled vehicles. Stockholm Environment and Health Administration shows that exemption from congestion charges in 17 | P a g e
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Stockholm increased sales of clean cars in Stockholm County by about 23 percent in 2008 which becomes the important financial incentive. Lower prices for E85 and biogas have also had a similar positive impact on sales. However, free parking incentives did not influence the buyers quite as much. A national purchase rebate of SEK10,000 had some effect on sales, but rather made people choose conventional cars with low CO2 emissions. The effect on the environment was the biggest influence when purchasing a clean vehicle. Lower operating costs and exemption from congestion charges are ranked next as equally important. However, and the purchase rebate and free residential parking were stated as of relatively low importance. The overall conclusion was that incentives that reduce operating costs seem to be stronger than incentives affecting purchasing price. It is important to distinguish between this pre-market phase and the market expansion phase. It is possible for a city to influence the market spread of clean cars by working systematically and with long-term commitment. BioFuel Region suggests keeping free parking until the number of clean cars reaches 5 percent of the total amount of cars in traffic. The average in the region today is 2.6 percent (Landahl & Ericso, 2009b).
United States The United States consumes about 94.2 quads – 1 quads = 1 quadrillion British Thermal Unit (btu) = 1.055 Exajoule (EJ) – of all forms of energy self-generated or imported and 7.1 quads are renewable energy. As a primary energy source, biomass (43 percent) is just behind hydropower (51 percent) among the renewable resources. A total of 0.75 quads or 1 percent of U.S. electricity is from biomass power, and more than twice that amount of energy is generated and used within the forest products industry. Waste to energy represents another 0.5 quads. More than a thousand biomass facilities generate electricity or cogenerate for their own use. Production started in the late 1970s and capacity has increased steadily due to the Federal tax incentive and various state and local tax credits. Biodiesel production from lignocellulosic biomass is beginning to emerge due to recent advances in conversion technology. A point of cost competitiveness with the wholesale gasoline price of today will be reached based on the use of inexpensive 18 | P a g e
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residues (National Research Council Board on Biology, 1999). The United States mostly rely on first generation biofuel in transportation sector which may be less preferable.
United States domestic production The popularity and ease of producing biodiesel extends domestically. Rend Corp in Midland Texas was started up by the owner Gary Johnson in the lining of his truck business. As a side business contingent upon the oil prices surged to $130 per barrel in 2002, his orders quadrupled. Demand has been so high that he hasn’t been able to have any extra inventory. His machines use vegetable oil as feedstocks, filter it, heat it and mix in lye and methanol to produce a more carbon-neutral diesel that can power a vehicle. His technology is more advance compare to his peer group because instead of taking 24 to 48 hours, it takes eight hours to convert the vegetable oil into biodiesel. Only 11/2 hours require actual human attention and the quality is good enough to pass government and American Society for Testing and Materials standards for fuel. He just built a 1,000-gallon-a-day processor that will be used in a village in Cambodia. Instead of vegetable oil, they are using fish oil and animal fat. In addition to the processor he and his family uses, Johnson said he’s sold fewer than 10 to Midlanders throughout the years. His company provides the processor, parts and accessories except the vegetable oil (Baclso, 2008).
2.4 Successful cases in Brazil and aviation industry
Brazil Over the years, Brazil has promoted the introduction of biodiesel in the country’s energy mix through various socioeconomic, energy and environmental policies and measures. Although the discussion of the use of vegetable oils for fuel purposes in Brazil started as far back as the 1920s, only until 2002 the country did efforts to specify biodiesel obtained from oilseeds under the aegis of the Brazilian Biodiesel Network. In December 2004, the Brazilian Biodiesel Production Program 19 | P a g e
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(PNPB) was established, basically through defining targets for blending biodiesel with mineral diesel. The main reason behind the requirement was the potential to generate jobs and income in poor rural areas with the use of a wide range of oilseeds. Other reasons behind PNPB were: (i) the potential improvement in the country’s trade balance, since Brazil is a net importer of diesel; (ii) the availability of many oilseed plants suitable for biodiesel production without affecting food security; (iii) the perfect substitutability between biodiesel and regular diesel; (iv) the energy efficiency of the biodiesel production cycle; and (v) the CO2 mitigation potential associated with the use of biodiesel, as a replacement for regular diesel (Rathmann, Szklo, & Schaeffer, 2011).
Energy security has been the driving force behind the Brazilian ethanol program, which began in the 1970s. All gasoline sold in Brazil must contain between 20 and 25 percent of ethanol blended (in volume). In 2003, Flex Fuel Vehicles (FFV) was first introduced to the auto market. Such cars can run on any blend of gasoline and ethanol. It is estimated that by 2012, 46 percent of the entire light vehicle fleet will be FFVs. Ethanol represents 40 percent of the fuels consumed with a production that reached 17.4 billion litres in 2006 being the world’s second largest producer of ethanol. There are 335 bioethanol plants in Brazil and are capable of producing either sugar or ethanol using sugarcane as feedstock being the world’s leading sugar producer and exporter. In 2006, 6.45 million hectares of sugarcane were cultivated and around 3 million hectares were dedicated to ethanol production, which represents less than 1 percent of Brazil’s arable land. The Brazilian biodiesel program is still preliminary with 2 percent mandatory blend nationwide will be required beginning in 2008 and increase to 5 percent by 2013. One of the main objectives of the program is to promote social inclusion by creating jobs and increasing farm income (Jank, Kutas, Amaral, & Nassar, 2007).
Despite the tax incentives granted by the governments to set up biodiesel refineries in poverty regions, these plants have large levels of idle capacity because of the inability of family farmers to grow sufficient oilseeds to supply their needs. They mainly rely on soybeans grown by large-scale farming machineries rather than 20 | P a g e
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family farmers raising the fact that familiar agriculture is unable to compete with agribusiness to provide the supply of raw materials to the biodiesel industry (Rathmann et al., 2011). However, under the right conditions, biofuels offer important opportunities for poverty reduction by stimulating agricultural business, thus creating jobs for agricultural workers and markets for small farmers (UN-Energy, 2007).
Aviation industry Aviation industry has been most successful as there is less fuel availability compare to private cars where electricity is sustainable and has been supported by the government as an alternative. Electricity is not powerful enough for long distance freight which biodiesel durability is a major encouraging factor. Starting in January 2012, the European Union’s airline emissions cap will require all carriers flying to and within Europe to cut CO2 by two percent from 2005 levels and an additional three percent in 2013. With fuel costs accounting to about 30 percent of their operating expenses – roughly $150 billion a year – commercial airlines have compelling economic reason for the conversion due to rising petroleum prices. The International Air Transport Association, with 230 member airlines in 140 countries, estimates that 15 percent of all jet fuel is expected to be bio-derived by 2020, and 50 percent by 2040. A large number of major carriers around the world, including Lufthansa, Virgin Atlantic, Qantas, and Alaska Airlines, have launched biodiesels initiatives to run test flights. The industry is almost universally committed to second generation biodiesel. Hence, many of the leading players such as Amyris, ClearFuels, Sapphire Energy, Solazyme, and Solena Fuels, have made aviation fuel a major focus and established partnerships with airlines and manufacturers. Solena Fuels has joint-venture plans for the world’s first two commercial biodiesels refineries in the U.K. with British Airways and in Australia with Qantas will convert wood and agricultural waste to jet fuel (Pernick, Wilder, Winnie, & Sosnovec, 2011).
Virgin Atlantic became the first airline in the world on 24 February 2008 to operate a commercial aircraft on a biofuel blend in. The Boeing 747 flew a short flight from London to Amsterdam, using a 20% biofuel/80% kerosene blend in one 21 | P a g e
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of its four engines. The biofuel was used on demo flight and will be used by the industry long-term. It sets a milestone for the aviation industry to make a visible demonstration to find a sustainable alternative to traditional crude-oil based kerosene. They are able to replicate the very strict performance characteristics of normal jet fuel (e.g. a -47C freeze point so it can cope at altitude and a high energy density) using a combination of coconut oil and babassu nut oil, both sustainably cultivated crops. They expect to see a significant contribution from second generation biofuels made from feedstocks such as algae or using waste biomass like woodchips, towards aviation’s fuel needs (Virgin Atlantic Airways Ltd., 2008). Hong Kong aviation industry is already paying for the EU carbon emissions which make it essential to investigate lower carbon alternatives to existing technologies which will be discussed in Chapter 5.
China’s aviation industry is also moving towards the use of biodiesel. Aviation fuel consumption in China is likely to double over the remainder of the decade from a current 20 million tonnes to more than 40 million tonnes by 2020, with aviation biofuels expected to make up more than a half of this increase. Air China carried out the country’s first biofuel demonstration flight in October 2011 using a jatropha blend supplied by the PetroChina unit of China National Petroleum. China has the technology and the cost of producing 12 million tonnes of jet biofuel would be over 120 billion yuan which demonstrated the importance of economic partnerships in the future of biodiesel industry. PetroChina, along with Honeywell UOP, supplied around 15 tonnes of the jatropha fuel for the Air China flight of a Boeing 747 and the oil company has plans to build a refinery to produce 60,000 tonnes per year by 2014. Sinopec had successfully produced around 70 tonnes of aviation biofuel at its Hangzhou refinery plant since December 2011 and the plant was capable of supplying an annual output of 6,000 tonnes after achieving a technological breakthrough in 2011. The fuel is made from a variety of animal fat and vegetable oils using Sinopec’s hydrogenation technology, catalyst system and production procedures. They were actively seeking new raw materials to produce aviation biofuel, including waste cooking oil and seaweed (GreenAir Communication, 2012).
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2.5 Alternative ways to reduce production costs in Biodiesel
Adaption to biodiesel to compensate CO2 emission cost The cost in producing biodiesel is much more expensive compare to kerosene at the moment. Taking the aviation industry as an example, a direct cost perspective can be expected that all current technology will not be able to produce a cheaper biofuels than fossil kerosene for the aviation industry until 2020. In the case of diesel for road use, the difference between biodiesel and conventional diesel currently trades at the non-use penalty of 700 Euro per tonne. Taking this as the basis for the additional costs of aviation bio kerosene, the total surplus cost of 2 million tons of bio-kerosene would be estimated to be about 1.4 billion Euro. Thus, any intervention that results in higher costs of jet fuel in Europe compared to the rest of the world would have serious consequences for competition (Schroecker et al., 2011). EU has adopted the CO2 costs and almost all the airlines are passing the extra costs to passengers even Hong Kong based Cathay Pacific Airlines. The current price of about € 16 for an allowance to emit one tonne of CO2 would add 2-3% to jet kerosene prices, closing the gap with biofuel costs only marginally. However, the allowance prices will increase in the future and the cost of carbon is expected to double kerosene prices as indicated in the figure below, produced by the ATAG report as seen in Figure 2.7 below (Air Transport Action Group, 2011).
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Figure 2.7: Jet Kerosene price based on 25% markup over IEA’s crude oil forecast in Energy Technology Perspectives 2010
Carbon price taken from UK DECC 2010 central case forecast for traded carbon price. All are in constant (inflation adjusted) US dollars by IATA Economics Source: (Air Transport Action Group, 2011)
Efficient of land use Efficient use of land will be another factor that will affect the cost of biofuel. Bioethanol only have a few feedstocks like corn, wheat, and cassava implying that they have positive land occupation properties. When promoted and scaled, more land should be explored to cultivate these feedstocks which affected food security and land use coverage with apparent cost increase. However, when molasses or agricultural straw is selected as a feedstock, it has almost no direct competition on land use and soil productivity. Second generation biodiesel feedstocks have neutral land occupation properties. With regard to this, the Chinese government has determined the principle for development of bioenergy that it should not conflict with food security and bioenergy feedstocks should not compete with grain crops for land. Government will only allow energy crops to be derived from marginal land rather than high quality arable land. Molasses is a by-product during sugar production and is quite useful for producing bioethanol. As an abundant feedstock, agricultural straws can be applied to production of bioethanol using a lignocellulosic bioethanol processing technique (Li, Wang, & Shen, 2010). China has accelerated the R&D for this technique, which is in the demonstration phase, and further R&D is
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required to reduce the cost and increase the efficiency (International Energy Agency, 2007).
Glycerine to support pharmaceutical industry Glycerine as a by-product to support pharmaceutical industry provided business opportunity of lowering the costs in biodiesel. The regular production of biodiesel from oils and fats implies the production of about 12-15 wt% crude glycerine as a side product. Crude glycerine (purity 50% - 90%), as it is produced during biodiesel production, unfortunately contains too many contaminants to find a useful application in chemistry or pharmacy without treatment (Hoogendoorn, 2007). However, purification cost of glycerine to be used in high-quality pharmaceutical and chemical applications is limited. Advanced players are able to participate in this segment such as Swiss group Biopetrol AG which operates two production plants at Schwarzheide and Rostock in Germany with production capacity of 350 000 tonnes of biodiesel and 30 000 tonnes of pharmaceutical- grade glycerine. It has also had a brand new plant in Rotterdam since 2009 with initial production capacity of 400 000 tonnes of biodiesel and 60 000 tonnes of glycerine (D. Bradley, Diesenreiter, Wild, & Tromborg, 2009).
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Chapter 3: Development of renewable energy in Hong Kong’s transportation sector
3.1 Evolution of pollutants reduction in Hong Kong’s transport sector
Hong Kong has been facing two air pollution issues. One is local street-level pollution and the other is regional smog problem. Diesel vehicles are the main source of street-level pollution which is one of the main contributors to GHG emissions in many countries around the world (International Energy Agency, 2009). This sector does not offer many cost-effective alternatives to reduce GHG emissions with decarbonisation of fossil fuels being too costly. Smog is caused by a combination of pollutants from motor vehicles, industry and power plants both in Hong Kong and in the Pearl River Delta region which this dissertation will not go into details. The Hong Kong Special Administrative Region Government gives high priority to control street-level air pollution by introducing a comprehensive measures include: adopt tighter fuel and vehicle emission standards; adopt cleaner alternatives to diesel where practicable; control emissions from remaining diesels with devices that trap pollutants and catalytic converters; strengthen vehicle emission inspections and enforcement against smoky vehicles; and promote better vehicle maintenance and eco-driving habits which have only tackled post-engine treatments. Government initiated programmes are summarised in Appendix 5.
Air quality in districts with heavy traffic has already improved compared with 1999, the roadside concentrations of the major air pollutant emissions from vehicles on respirable suspended particulates (RSP) and nitrogen oxides (NOx) had been reduced by 22 percent and 23 percent respectively in 2008, and the number of smoky vehicles spotted has also been reduced by about 80 percent with details in Figure 3.1 below. The Government introduced additional measures in 2007 and 2008 to incentivise early replacement of old diesel commercial vehicles with newly
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registered vehicles that comply with the prevailing statutory emission standard which is now Euro IV standard. They encourage the use of environment-friendly petrol private cars through tax concession with a concessionary duty of $0.56 for Euro V diesel. Since then, all petrol filling stations in Hong Kong are exclusively offering this fuel. Starting from 14 July 2008, the duty rate for Euro V diesel has been waived to further encourage drivers to use this more environment-friendly fuel (Environmental Protection Department, 2010b). On top of that, the statutory ban against idling vehicles came into effective on 15 December 2011 (Environmental Protection Department, 2012c) and the encouragement to use environment-friendly commercial vehicles through tax concession has helped to reduce air pollutants.
Figure 3.1: Measures and effectiveness in reducing number of smoky vehicles spotted
Source: (Environmental Protection Department, 2011c) Measures to reduce vehicle emissions Advancement of smoke testing method A(1)
Cleaner diesel
1999: Dynamometer smoke test for D(1)
2000: ULSD
light duty vehicle A(2)
2000: Dynamometer smoke test for D(2)
2007: EURO V diesel
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heavy duty vehicle One-off grant for vehicle replacement
Stringent vehicle important standard
B(1)
2000: Diesel to LPG taxi
E(1)
2001: EURO III Standard
B(2)
2002: Diesel to LPG light bus
E(2)
2006: EURO IV Standard
B(3)
2007: Replacement of pre-EURO & EURO I commercial vehicle
Retrofitting emission reduction devise C(1)
2000:
Trap/doc
retrofitting
Punishment for smoky vehicle for F
pre-EURO LDV C(2)
2000: The fine of fixed penalty ticket raised to $1,000
2003: Doc retrofitting for pre-EURO HDV
3.2 Electric vehicle in Hong Kong and shortcomings
The use of electricity in Hong Kong transportation sector is extremely low compare to other fuel products – it accounts around three percent of the total usage as seen in Figure 3.2 below.
The government together with the local
community have coherently pursued the promotion of electric vehicle as one alternative to decrease air pollution. Two power companies, 12 developers under “The Real Estates Developers Association of HK” have installed EV charging facilities in 64 sites with 179 charging spots (Hong Kong Association of Energy Engineers & China Light and Power, 2011). CLP, one of the power stations in Hong Kong launched the first EV Quick Charger in February 2010 marking a new milestone in promoting a wider adoption of EVs in the territory. The user-friendly EV Quick Charger offers a quick and convenient charging solution for time-pressed drivers. It takes about fifteen minutes to power an EV to run 60 kilometres and 120 kilometres on just half an hour charge. CLP earlier unveiled the first batch of 21 standard EV charging stations in Hong Kong, eight of which have been gradually in place since November 2009. CLP also shares the same vision with the government by promoting free chare for electric car owners at their 21 charging stations across the city from September to December 2009. After that, it will cost HK$6 per 25 28 | P a g e
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kilometres of travel – a staggering 70 percent cheaper than fuel costs for a petrol car (Wong, 2010). Hong Kong Electric has installed 8 charging station in Hong Kong which located in Central & Western district, Eastern district and Southern district with the first battery charging station commissioned at The Peak Galleria offering free service for motorists to familiarize with charging procedures which required about 6-8 hours to recharge the battery in full. On 29 October 2010, they launched a new EV quick charging station at the Company's ex-operational building at 2 Yi Nga Drive, Apleichau. This was the first EV charging station in Hong Kong to be retrofitted from an old petrol station and enables users to charge up to 80 percent of an EV in just 30 minutes (The Hong Kong Electric Company Limited, 2011).
Figure 3.2: Use of Fuel in Hong Kong Transportation Sector
Source: (Electrical and Mechanical Services Department, 2011)
However, electricity cars will require long charging time and may not be feasible for long distance travelling. The current technology will only allow heavy vehicles to travel short distance with frequent charging. KMB now begins the trial of 29 | P a g e
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the next generation “gBus²” with a higher electricity storage capacity which achieves twice the driving range of the previous generation. Even for the new gBus², after being fully charged, it can only run continuously for 8 to 10 kilometres, which is equivalent to a journey from Tsim Sha Tsui to Kwai Fong. The previous gBus, trialled in 2010 which can run continuously for 4 to 5 kilometres after being fully charged. KMB has set up a charging station at Lai Chi Kok Depot and the trial of the gBus² in Hong Kong will last for at least six months. Due to the rapid charging rate of supercapacitors, charging has to be conducted at bus stops while passengers board and alight, taking approximately 30 seconds for each kilometre of power to be stored in the gBus² (Kowloon Motor Bus, 2012).
3.3 Hong Kong biodiesel refineries’ benefits, challenges and economic feasibility
Currently, there are only three biodiesel production plants in Hong Kong. Champway Technology Ltd and Dynamic Progress (Hong Kong) Limited and ASB Biodiesel is expected to commence production in 2011 but unfortunately, the refinery plant has not been completed. The biorefinery concept is analogous to conventional oil refineries: to produce a variety of fuels and other products from a certain feedstock. The economic competitiveness of the operation is based on the production of high-value, low-volume co-products in addition to comparably low-value biofuels. Two main categories can be defined: energy-driven biorefineries, which include biofuel plants, and product-driven biorefineries, which focus on producing food, feed, chemicals and other materials and might create power or heat as a co-product (Jong & Ree, 2009). Biorefineries can potentially make use of a broader variety of biomass feedstock and allow for a more efficient use of resources than current biofuel production units, and reduce competition among different uses of biomass. Several innovative biorefinery concepts are currently being developed. They also have the potential to reduce conflicts and competition over land and feedstock (International Energy Agency, 2011). 30 | P a g e
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Glycerine as a by-product to support pharmaceutical industry As discussed in Chapter 2.5, the glycerine is increasingly produced in crude form, for instance as a fuel in cement kilns or exported to China to be used there as a fuel in coal fired power plants, waste combustion installations and cement kilns. Hong Kong refineries have geographical advantage to sell this by-product as another source of income to meet return. The refined glycerine market is strong with new feed and new chemical applications while the crude glycerine market is described as weak. The combination of high fossil oil prices and historically low glycerine prices have resulted in the increased application of glycerine as an ideal platform chemical in the chemical and pharmaceutical industry (Hoogendoorn, 2007) which is applicable to Hong Kong.
Increase in biofuel demand Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached US$56.4 billion in 2010 and are projected to grow to US$112.8 billion by 2020. In 2010, the biofuels market consisted of more than 27.2 billion gallons of ethanol and biodiesel production worldwide, up from 23.6 billion gallons the prior year (Pernick et al., 2011) in Table 3.1 below. China provided a total of RMB 780 million (US$ 115 million) in biofuel subsidies in 2006 and total support is expected to reach approximately RMB 8 billion (US$ 1.2 billion) by 2020 (Global Subsidies Initiative, 2008) which will account more than one percent global demand solely on subsidy. This provides a huge economic incentive for biodiesel refineries in Hong Kong to export second generation biofuel to these markets.
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Table 3.1: Global Clean Energy Market Size
Source: Clean Edge Inc., 2011
However, potential investors in cellulosic biofuels face a number of uncertainties that deter investment which includes: market, technology and government policy which will be discussed in later chapter.
3.4 Government policies on biodiesel, waste recycle and requirements
Hong Kong Biodiesel The Hong Kong Government promotes the use of biodiesel as motor vehicle fuel, motor vehicle biodiesel is duty-free (Environmental Protection Department, 2011e). This enhances the use in an economic and environmental angle. Diesel commercial vehicles are the most polluting and according to the comparison between Euro IV vehicles, Euro II models emit seven times more respirable suspended particulates and twice as much nitrogen oxides
(Environmental
Protection Department, 2010a).
Unlike electricity, blending and concentration of biodiesel requires longer research and consultation to be effective. Moreover, there is no huge infrastructure for users to switch. All petrol stations in Hong Kong carried either ultra low sulphur diesel (ULSD) or Euro V diesel. The Legislative Council approved the Air Pollution 32 | P a g e
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Control (Motor Vehicle Fuel) (Amendment) Regulation 2009 in January 2010 (Environmental Protection Department, 2011a). The regulatory control on motor vehicle biodiesel is set out in the recent amendments to Air Pollution Control (Motor Vehicle Fuel) Regulation, Cap. 311L on the specifications of motor vehicle biodiesel and the labelling requirement on selling of motor vehicle biodiesel with biodiesel content over 5 percent. This creates a distinct encouragement and better incentive for local corporations to switch their car to use biodiesel in the future. Motor vehicle biodiesel includes pure biodiesel and biodiesel blends that are blended from pure biodiesel and motor vehicle diesel and their respective specifications are below: (i)
pure biodiesel that is supplied or sold for motor vehicle use has to comply with the specifications as stipulated in Schedule 3 of the Regulation. The specifications are in general comparable with European Union standard EN14214; and
(ii) biodiesel blends that are supplied or sold for motor vehicle use must be blended from pure biodiesel and motor vehicle diesel, the specification of which is stipulated in Schedule 1 of the Regulation (i.e. Euro V standard for motor vehicle diesel) (Environmental Protection Department, 2011e).
Municipal waste charge and recycling Waste management has been gaining importance over the decades in Hong Kong. Since the enactment of the Waste Disposal Ordinance (WDO) in 1980 which aimed at providing statutory powers over waste collection and disposal, various waste management policies and programmes came into implementation. One of the milestones was the statutory Waste Disposal Plan published under the WDO in 1989 (Environmental Protection Department, 1980) was a 10-year plan for phasing out old waste management facilities, and developing new and cost-effective facilities with higher environmental standards. At present, about 5 million tonnes of waste are disposed of each year in our three strategic landfills namely, the West New Territories (WENT) Landfill at Tuen Mun, the North-east New Territories (NENT) Landfill at Ta Kwu Ling, and the South-east New Territories (SENT) Landfill at Tseung 33 | P a g e
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Kwan O (Environmental Protection Department, 2011f). Hong Kong is running out of landfill and existing sites will be filled up in mid to late 2010s if waste levels continue to increase at current levels. Solutions are required immediately, to solve the crisis of thousands of tonnes of waste in the next decade (Environmental Protection Department, 2011c). As landfill is the most common option for waste disposal, much of the land resources are occupied and altered for waste dumping. Methane-containing biogas generated from landfills is a source of air pollutant which enhances the global warming effect. Landfill also produces leachate which contaminates groundwater and thus pollutes water bodies (Kjeldsen et al., 2002). These forms of resources will be a potential for second generation biofuel feedstock in Hong Kong as most of the refineries are now under research and development on this matter to be constructed together with existing recycling plants.
Moreover, Radio Television Hong Kong has run a TV program (鏗鏘集) in 1998 to explore the problem of food surplus in restaurants, hotels, as well as markets. A surplus of 2,000 tonnes of food is created as garbage which is dumped into landfills daily. Radio Television Hong Kong ran the same program in 2010 and daily disposal of kitchen waste, increased to 3,000 tonnes. Government estimate to use over HK$2 million daily to deal with kitchen waste (Lee, 2010). Hong Kong Outlying Islands Women’s Association and Environmental Conservation Fund provided volunteer recycling program to convert kitchen waste into fertilisers (Chan, 2012). Mui Woo Island is the first community to recycle kitchen waste and they collect about 80kg daily for decomposition. It has been effective according to interviewers that kitchen waste under this voluntary program has reduced by 3 times per household (Television Broadcasts Limited, 2012). According to the EPD’s waste disposal statistics for 2010, the per capita domestic waste disposal amount was 0.87kg, so a family of four’s waste disposal amount should have been 3.48kg/day (Environmental Protection Department, 2011b). The costs of landfill operations, waste collection and transfer amounted to about HK$1.3 billion in 2004 (Liao, 2005) and the municipal solid waste disposal amount was 3.4 million tonnes in that year. Based on this data, the waste treatment cost for a kilogram of waste should be $0.38 (Au, 2012). Hong Kong has just completed the public consultation on 34 | P a g e
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municipal waste charge (Environmental Bureau & Environmental Protection Department, 2012) and implementing this will promote people to be more willing to recover recyclables and to engage recyclers and use the cost to subsidise the promotion of biofuel.
3.5 Recap of the Hong Kong situation
Advance technologies in Europe and United States have increased number of biodiesel producers and consumers with the help of government policies. Higher conventional fuel prices and stricter regulations on carbon emissions provide huge potential on the use of biodiesel.
Strong demands in Hong Kong due to severe air pollution and limited landfill sites have forced the Government to study alternative energy besides Electric Vehicle. One way in which biodiesel can be promoted is by finding ways to pay for the environmental service it can provide, such as landfill avoidance. Another way is the alternative fuel standard, which ensures a minimum level of renewables in the transport sector in implementing jurisdictions.
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Chapter 4: Objectives of study and methodology
4.1 Interview with corporations who participated in waste recycle program for biodiesel The objectives are to use literature review which was discussed in the previous chapters and stakeholders’ questionnaires to analyse the feasibility of application and use of biodiesel in Hong Kong. Due to the limited refineries and consumers of biodiesel, the following interviews on Hong Kong major stakeholders and the questionnaire is in Appendix 6.
The “Food Waste Recycling Partnership Scheme” (FWRPS) was initiated by the government to promote good food waste management practice and to gain experience on food waste source separation and recycling (Environmental Protection Department, 2012a). A Working Group comprising representatives from the Government and the C&I sectors has been set up in Dec 2009 to plan and manage the operation of the Scheme. Although the scheme was mainly focusing on recycling waste into fertilisers, some of the participants have acquainted with refineries in Hong Kong to recycle waste oil into biodiesel on top of this programme which will be discussed in details.
MTR Maritime Square Maritime Square is a commercial sector to be invited by Environmental Protection Department to join this partnership pilot scheme for the period from 1 September 2010 to 30 November 2010. Two food and beverage tenants in Maritime Square, namely McDonald’s and Café de Coral participated in the scheme since 1 September 2010. Later, Tao Heung Restaurant also joined the scheme on 18 September 2010. After joining the scheme, all these three participating restaurants had to sort their recycling food waste at their kitchen’s area and deposited the same to the designated collection bins arranged by Environmental Protection 36 | P a g e
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Department on a daily basis. Mall’s cleaners would arrange these sorted recyclable food waste collection bins to designate refuse collection chamber by 1 to 3 times per tenant per day. Every night, logistic truck arranged by Environmental Protection Department would come to collect the recyclable food residue for further treatment. However, the FWRPS programme ended with no follow up with the government and terminated in three months.
Fairwood Fastfood Fairwood Fastfood principally engaged in operating a chain of fast food restaurants in Hong Kong which make productive use of waste material for biodiesel production to benefit the environment. They engaged in food recycling mainly due to reasonable financial return; a brand recognised as supporting better environment and raise positive corporate social responsibility image. Although they do not have expertise in operating a refinery, they achieved recycling through selling their used cooking oil to ASB Biodiesel and convert to biodiesel. In general, there is a lack of awareness in understanding any government partnership scheme. They are opened to understand more from the Government and how they can support further in helping the environment and reckoned recycling is a form of resources pooling. They would prefer the Government to attain higher flexibility and efficiency; quicker response time; set clearer objectives for the program.
Hong Kong Jockey Club Hong Kong Jockey Club is a non-profit organisation with one of the largest catering clubhouse in Hong Kong. Their recycling programme was early initiated with being an EPD model member in waste Source separation in 2009. Instead of dumping into landfill sites, their sustainability team separated different waste and use grease trap for foodwaste and sent to ASB biodiesel for refinery. The FWPRS programme was not helpful to them and terminated after two months of trial. They have their own expertise and a Hitachi 100kg foodwaste decomposer at Happy Valley racecourse.
They preferred to discuss with Face of Earth for further
enhancement. Other implementations include:
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(1) Kowloon Biotechnology Limited contractors to receive foodwatse and send to Yuen long for biofeed. (2) Sourcing onsite recycling. (3) Discussing with EPD Ngau Tau Mei animal feed plant. Upgrade to 40tonnes per day with horse manure becomes organic fertiliser or feedstock for biofuel. Self-operation is quite impossible due to the scale of the decomposer and refinery and the Government should ensure stability for feedstock to ensure the viability of use for biofuel.
Hong Kong International Airport Hong Kong International Airport strives to achieve high environmental standards by minimising pollution, using energy and other resources efficiently, recycling and reusing wherever possible, and continually improving our environmental performance. They facilitate a recycler to collect used cooking oil from food and beverage outlets in airport terminal buildings to recycle into biodiesel. This facilitates local recycling of used cooking oil, and transforms them into biodiesel and to be consumed within Hong Kong. To support local recycling industry and reduce carbon footprint, the Airport Authority has used B5 (5% biodiesel) in all its diesel vehicles since 2009. Although they do not operate recycling facilities to recycle used cooking oil. They provide an area for temporary storage of used cooking oil to reduce the transportation frequency of the recycler and hence reduce carbon footprint.
4.2 Interview with Biodiesel refineries
As mentioned earlier, there are only three biodiesel refineries in Hong Kong for consumers to source biodiesel and/or blended fuel: Champway, ASB biodiesel and Dynamic Progress. Interview was only able to perform with two refineries.
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ASB Biodiesel They have very few domestic users in Hong Kong market and they focus on exports to Europe which account about 60 to 65 percent of their production which has to meet the requirement from Renewable Energy Directive (RED). They roughly produce 60,000 tonnes of B5 per year based on their US$160million biodiesel plant which has no partnership. They mainly focus on waste feedstock because first generation biofuel will produce carbon footprint. Local refineries have constraints on competition on feedstock which will affect the price and availability. They also face challenges from collecting from different point sources.
On a business perspective, they have concerns over the lack of category for commercial gas emission costs and the lack of education on the general public. General Motors provides a non-standard warranty in Europe run engine B10 less efficiency. There is no filter in Hong Kong which allows a one off sediment cleaning if changing from diesel to biodiesel. He strongly suggests that Government should enforce mandatory use of biodiesel to solve landfill problem, air quality problem and illegal food oil to China to recycle to food. Worse air quality will also reduce international competitiveness of Hong Kong city.
Champway Technology Limited: Champway is the only company who process an ‘Environmental Permit’ to recycle waste cooking oil in Hong Kong. They aim to conduct a sustainable business which may have reasonable return to investors and contribute to the environment at the same time. They strongly promote waste resources as renewable energy and biodiesel is a promising alternative to reduce the demand of petroleum diesel. Recycling of waste lipids into renewable energy is a mean of better utilization of all resources.
Refineries in Hong Kong and themselves faced similar challenges. They have to compete with participants who collect waste lipids for edible purpose. These competitors offer very high collection price which does not allow their business to sustain. Government support is limited with only offering premise for recycling 39 | P a g e
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industries with economic rent without providing them enough feedstocks for their production.
Lack of government legislation in regulating and controlling the
export of waste lipids is also a major obstacle. Local diesel users are not aware of biodiesel except the larger corporations and usually reluctant in using “new” fuel and will only consider if the price is lower than petroleum diesel. In 2010, EcoPark has launched “Friends of EcoPark” to encourage and facilitate us in collecting waste oil from various caterers. In 2012, EcoPark and Champway are planning to launch the partnership program with selected Eco-organisation.
It would be an important
element of corporations’ social responsibility. Similar to ASB Biodiesel, they strongly urged government’s involvement. At the moment, Environmental Protection Department are willing to support on limited activities: (1) Understand the true picture of local recycling business. i.e. which sector needs more support or more resources and need what kind of supports. If she doesn’t know, every effort spent would be wasted. (2) Provides more incentives, such as subsidization and tax reductions, which are useful for local recyclers, to boost their recycling business.
Dynamic Progress – unable to perform interview Dynamic Progress is the first licensed biodiesel plant in Hong Kong. The US-based company started its Hong Kong operation in 2008 which they saw a definite potential in Hong Kong where there were 10,000 restaurants in the city with no local business to recycle all that used oil. The company had around US$3.2 million investment at 2008 on the plant that can produce 60,000 litres of biodiesel but has the capacity to process up to 60,000 tonnes. More restaurants have to be lined up to recycle their used oil in order to meet demand. The company currently has around 500 clients, including restaurants at hotels such as The Peninsula Hong Kong, Regal Hotels International, Holiday Inn Hong Kong, as well as restaurant groups such as Lan Kwai Fong Entertainments, Maxim's Group, Café de Coral and Pokka Café taking part. It is also in talks with fast-food chains McDonald's and KFC to collect their used cooking oil (Dynamic Progess International Limited, 2011).
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4.3 A glance at the domestic use, production and cost in Biodiesel
Local corporations have given a benchmark on the extensive consumption of biodiesel. Hong Kong Jockey Club has recycled around 5,000 litres waste oil per year in the past 5 years. And in the year of 2010/2011, standby generator has consumed 49,081 litres of biodiesel and tractors and other vehicles have consumed 92,291 litres. Hong Kong International Airport Hong Kong International Airport has recycled 115 tonnes of food waste 2010/2011 and 95,000 litres of biodiesel was used in 2008 in Figure 4.1 below
Figure 4.1: Amount of waste recycled by the Airport of Authority in 2010 and 2011
Source: (Hong Kong International Airport, 2011)
Insufficient information in Hong Kong are available to derive the actual cost of production therefore, other research findings are used as a glance on the cost for production. One major component of the price will be feedstocks. Biodiesel production requires three inputs: oil or fat, alcohol, and sodium hydroxide. Approximately 80 percent by volume of the feed stock of biodiesel is vegetable oil (and/or animal fats) and about 20 percent is methanol. Besides the initial cost of the processing equipment, biodiesel production costs include the cost of the chemicals used in the reaction, gas or electricity expenses, and labour. In United 41 | P a g e
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States, feed stocks can range from new food-grade cooking oil (US$2.30 or more per gallon) to animal fat renderings specific to the location. Waste oil from restaurants may cost as much as US$0.15 per pound (or about US$1.20 per gallon), or community group may bear the cost to collect from local restaurants. Near pure methanol costs about $2.36 per gallon in bulk (Ryan, 2004). If the cellulosic biofuel were available commercially, it likely would cost $4.00/gallon or more (equivalent to HK$ 8.25 per litre) excluding carbon tax. So blenders would have the choice of purchasing and blending $4.00 biofuel with $2.70 gasoline (equivalent to HK$5.57per litre) (Committee on Economic and Environmental Impacts of Increasing Biofuels Production, Board on Agriculture and Natural Resources Division on Earth Science, National Research Council, & Commission on Life Sciences, 2011).
Hong Kong’s will not have a huge feedstock problem as the city has over 10,000 restaurants. However, the support from the Government to transfer them to the biorefineries will be another issue. Feedstock cost will be significantly reduced for refineries if they can enhance a way to collect and recycle. An example in the United States is that approximately 550 million tons per year of cellulosic biomass could be produced by 2020 without any major impact on food production or the environment as see in Table 4.1. The below costs should already been included in the HK$8.25 per litre.
Table 4.1: Estimated Cellulosic Feedstock that Could Potentially Be Produced for Biofuel (National Academy of Science, National Academy of Engineering, & National Research Council of the National Academies, 2009) Fuel Product
Current Technologies
Available by 2020
(millions of tons) Corn Stover
76
112
Wheat and grass straw
15
18
Hay
15
18
Dedicated fuel crops
104
164
Woody biomass
110
124
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Animal manure Municipal solid waste Total
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6
12
90
100
416
548
The Department of Energy in the United States maintained a target of US$30/dry ton delivered as its feedstock cost target (Tyner, 2010). However, it is widely recognized that feedstock costs will be substantially higher than this level. A recent National Academy of Science study produced baseline feedstock costs ranging between US$70 and US$151/dry ton depending on the source of the feedstock. While most of the literature yields cost estimates considerably below this range (generally US$45–90), feedstock cost today is believed to be considerably higher than early estimates, except for some waste supply.
Hong Kong currently has no charge on greenhouse gas emissions but this will likely to change following the trend in the World. In order to correctly calculate the real cost of biofuel, this category must be investigated. In United States, the production of alternative liquid transportation fuels from coal and biomass with technology and carbon policy is considered. The estimated costs of cellulosic ethanol, coal-to-liquid fuels with and without geologic carbon dioxide storage, and biomass-to-liquid fuels with and without geologic carbon dioxide storage using a consistent set of assumptions in Table 4.2 below. Although the estimates do not represent predictions of prices, they allow comparisons of fuel costs relative to each other. The costs of cellulosic ethanol and biomass-to liquid fuels with carbon dioxide storage become more attractive if a carbon dioxide emission price of US$50 per tonne is included which amounts about US$20 more expensive pre tonne. Table 4.2: Estimated Costs1 of Fuel Products with and without a CO2 Equivalent Price of $50/tonnea Fuel Product
Cost without CO2
Cost with CO2
Equivalent Price
Equivalent Price of $50/tonne
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Gasoline at crude-oil price of $60/bbl
75
95
Gasoline at crude-oil price of $100/bbl
115
135
Cellulosic ethanol
115
105
Biomass-to-liquid fuels without carbon
140
130
150
115
65
110
carbon
70
90
fuels
95
120
110
100
capture and storage Biomass-to-liquid fuels with carbon capture and storage Coal-to-liquid fuels without carbon capture and storage Coal-to-liquid
fuels
with
capture and storage Coal-and-biomass-to-liquid
without carbon capture and storage Coal-and-biomass-to-liquid fuels with carbon capture and storage 1
These costs are estimates intended as a basis for comparing gasoline with the different alternative
liquid fuels. a
Numbers in table are rounded to nearest $5.
Source: (National Academy of Science et al., 2009)
4.4 Why biofuels are not popular
Electric Car in private sector maybe more feasible Hong Kong Government has expensed a huge amount of resources and effort on Electric Vehicles. First, the registration tax for them is waived. More new car models will become available soon with more charging points being points being constructed in the community. All these efforts to encourage private ownership of electric vehicles (EVs) and to improve air quality will be in vain if the government doesn’t also insist upon their use in public transportation. In regions other than Hong Kong, it is difficult to model willingness to buy electric cars because it may be
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an energy-efficient technology but not really comparable to current standard cars. Technological change is exogenous due to the fact cost and performance are independent of how much they are used (Grahn, Azar, Lindgren, Berndesa, & Gielen, 2007). This may not necessarily applicable to Hong Kong.
Joanne Ooi, Chief Executive Officer of the Clean Air Network mentioned that private cars make up a tiny percentage of overall roadside emissions and the government has put excessive emphasis on private cars (Tsoi, 2011). Moreover, distance ranges on Electric Vehicles are not a concern for Hong Kong based on the current technology. One charge the batteries of electric cars can last long enough to travel 100 to 150 kilometres and driving around Hong Kong Island is less than 50 kilometres. The government should apply more effort, energy and time to commercial diesel vehicles like buses and trucks which can improve air quality more effectively. Most of the support currently is only focusing on post engine treatment; hence, biodiesel can be the renewable energy used for public transport. Biodiesel fuels are attracting increasing attention worldwide as a blending component or a direct replacement for diesel fuel in vehicle engines (A. Demirbas, 2009). Biodiesel can power trains, trucks, cars, heavy machinery of all types, tractors, pump sets for lift irrigation, and a wide array of other engines. A “flex-fuel” model in the engine that can run on either gasoline or biodiesel will be an ease to users. This easiness makes it practical for Hong Kong to apply in all commercial vehicles.
Biodiesel costs compare to petroleum The normal biodiesel price is higher than petroleum diesel in foreign countries but it has been very popular since last few decades. United Kingdom has the seventh highest petrol price in Europe and the second highest diesel price, unleaded prices as of April 2012 is 142.5p per litre – equivalent to HK$17.82 per litre – and diesel prices have was 147.9p per litre – equivalent to HK$18.50 per litre (The AA, 2012). Compare to B10 biodiesel costs about 78p per litre – equivalent to HK$9.75 – is significantly lower with a small decrease in engine performance as studied in Chapter 2 (GAMA Motorsports, 2012). The lack of education in Hong
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Kong has driven commercial sector to ignore the possibility of use in biodiesel as an alternative.
Invalid Warranty in cars At the moment in the United States, users will not warrant damage caused by using biodiesel blends greater than B5, unless such use is sanctioned by a manufacturer (Chambers, 2009). In Europe, a survey was conducted with 49 car manufacturers and almost all of them accept a low blending of 5 % biodiesel under standard (EN 590). Besides that, only two manufacturers (Peugeot and Subaru) accept higher blends than 5% with full warranty for new sold vehicles (Eriksson, Yagci, & Rehnlund, 2008). Hong Kong currently has no policy to ensure users have warranty on their cars for any blending of biodiesel. This will be further discussed in next chapter.
Biodiesel prices rise together with crude oil Rising crude oil prices have supported more global regulation in favour of solar, hydropower and wind energy compare to biodiesel. Ethanol stocks are good proxy to study the relevance on first generation biodiesel. The ethanol and biodiesel industries have expanded rapidly putting upward pressure on agricultural commodity prices. Unfortunately, the liquidity of financial instruments directly linked to biofuels is fairly low. Merrill Lynch Biofuel Indices (MLCX) has been constructed as a transparent, liquid and efficient set of indices to measure the biofuel prices using a broad range of commodities that are either biofuels themselves or feedstock commonly used in the production of biofuels (Blanch, Soares, Schels, & Hynes, 2007). The rolling 5-day day correlation between WTI and MLCX in Figure 4.2 has been fairly stable for a 5 year period from April 2007 to April 2012 is around 0.769. During period May 2010 to April 2012, the 5-day rolling correlation is 0.761. See Appendix 7 for details.
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Figure 4.2: Crude Oil Prices: West Texas Intermediate vs MLCX
Sources: Bloomberg
The correlation does not exist in other form of energy sectors as seen in Figure 4.3. The correlation between crude oil and electricity prices using Nordic electricity futures traded in the Nordic Power Exchange (Nord Pool) – the first multinational exchange for electricity trading, has existed since January 1996 –
demonstrated
the correlation is much lower 0.055 for a rolling 5-day day correlation between April 2007 and April 2012.
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Figure 4.3: Crude Oil Prices: West Texas Intermediate vs Nordic Electricity Prices
Source: Bloomberg
Similarly, the correlation is low around 0.306 between crude oil and Bloomberg solar index – which is comprised of the major solar energy stocks across the world as seen in Figure 4.4. Therefore, sharply lower crude oil prices will be bearish for biodiesel stocks and the R&D the use of advanced biodiesel as user will be reluctant for a change.
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Figure 4.4: Crude Oil Prices: West Texas Intermediate vs World Solar Energy Index
Source: Bloomberg
Asplund (2008) also demonstrated similar research findings using Melvin Clean Energy IndexTM. A sharp drop in crude oil prices would not have sustained negative impact on the solar, wind, and power efficiency subsectors because lower oil prices would not make electricity any cheaper and would not halt the other strong catalysts for renewable and efficient power stemming from the need to curb greenhouse gas emissions and improve energy security (Asplund, 2008). However, the correlation study has relied on companies in the market which used first generation feedstock contingent upon agricultural food prices. Nevertheless, if the major costs of feedstock can be overcome by waste or biomasss, the stability of second generation biodiesel will be the best alternative for the future use.
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Chapter 5: What can Hong Kong do to efficiently use Biodiesel as the alternative fuel in transportation sector
5.1 Transition to use Biodiesel in Hong Kong
There are three hurdles at present which make it difficult to deploy second generation biofuels commercially in Hong Kong: the lack of policy incentives, the lack of adequate financial instruments in constructing the plants and the lack of long term agreements between the biofuel producers.
Financial factors All refineries in Hong Kong are privately owned either local or foreign investor. Unlike infrastructures such as West Harbour tunnel where the Government supported participation of the private sector through the Build-Operate-Transfer (BOT) mode (Hong kong Special Administrative Region, 2002), there is no plan for the Government to subsidise biodiesel. The current share of biofuels in the global energy mix for transportation is only around 2 percent on energy equivalence basis. One reason for this low market penetration (Timilsina & Shrestha, 2010) and the lack of price competition between fossil fuels and biofuels is because the price of fossil fuels does not include its negative external costs (e.g., environmental damage) to society. Significant progress has been made in developing the new technologies but they remain to be proven at the commercial scale. Like in the United States, even Renewable Fuel Standard (RFS) guarantees a market for the cellulosic biofuels produced at costs considerably higher than fossil fuels, uncertainties in enforcement and implementation of RFS mandate levels affect investors’ confidence and discourage investment. At the moment, biofuel production is contingent on subsidies and similar policies (Committee on Economic and Environmental Impacts of Increasing Biofuels Production et al., 2011). This creates a
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huge barrier to new entrants as the production cost on cellulosic biofuels compared to petroleum-based fuels are higher and uncertainties in future biofuel markets.
Government can raise incentives in the form of carbon tax on emissions, tax exemption, low interest loans and direct subsidies through support to technology development and capacity building.
Tax reliefs - Hong Kong Government can use a form of tax reliefs for investors. Kedco operates biomass electricity and heat generation plants in the UK and Ireland using two tried and tested technologies gasification of wood and wood waste and anaerobic digestion of either food or agricultural waste. Their joint venture Newry Biomass Limited, has received assurance from HM Revenue and Customs, authorising it to issue shares under the Enterprise Investment Scheme. It is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies (Barr, 2012). Joint ventures – Besides BOT that was used in Western Harbour Tunnel, Hong Kong can follow China by introducing foreign investors to develop biorefineries. The Yangzhou Municipal Government Financial Affairs Office, a forefront city in China’s clean energy industry and Hudson Clean Energy Partners, a leading U.S.-based private equity firm invests exclusively in clean energy, have jointly establish a RMB Fund to invest in China’s rapidly growing clean energy markets in 2011 (Robinson-Leon, 2011). This is a benchmark for Hong Kong Government to follow to attract foreign investors whom have expertise to develop clean energy locally.
Government guarantee low interest rate loans – Hong Kong can follow United States Department of Energy which they introduced a US$4 billion federally guaranteed business loan in 2009. Under the American Reinvestment and Recovery Act, the stimulus program meant to assist in the economic recovery together with promotion on renewable energy (Streissguth, 2010). The federal government also has programs for guaranteed loans for cellulosic conversion facilities and most of them have been used for pilot and demonstration facilities. The government will 51 | P a g e
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cancel the mandate if the production capacity does not exist which means that investment is required before the mandate becomes binding (Tyner, 2010).
Carbon tax, biodiesel subsidies and other policies will be discussed in the next section. Financial incentives become powerful tools in market expansion, but they are of little use if there is insufficient vehicle supply and fuel infrastructure on the market. However, financial incentives must have a time schedule to be phased out; permanent incentive is a clear demonstration that the biofuel alternative in question is not economically sustainable and will not have a good long-term perspective.
Marketing: Long term agreements between biofuel and stakeholders Another hurdle is what incentive needs to be installed in order to reach what target group. It will be difficult wholesale societal shift from gasoline to biofuels, given the number of gas-only cars already on the road and the lack of ethanol or biodiesel pumps at existing filling stations. Hong Kong Government should rejuvenate existing petroleum stations to carry biodiesel on setting up the infrastructure. Like the EV case, all petrol stations in Hong Kong carried either ultra low sulphur diesel (ULSD) or Euro V diesel and the ULSD pump can be replaced by biodiesel.
Moreover, warranty on cars will be a huge obstacle to attract buyers. The Motor Services Association (MTA), an international trade organisation on selling renewable energy vehicles has emphasised several times that they would not accept any blend of biodiesel without principals’ authorization and those vehicles using biodiesel would have their warranty voided.
Although these mainly affect
those newer vehicles, the issue of warranty needs to be tackled as this will affect the confidence of biodiesel users. One solution is that biodiesel suppliers can provide additional insurance to biodiesel users to increase their confidence of using the fuel. It is recognized that warranty policy of engine manufacturers did not match with alternative/clean fuel policy of some overseas governments.
There are
still a number of vehicle manufacturers not fully endorse its usage, though this 52 | P a g e
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number is decreasing. It has also been recommended by some members during the Monitoring Committee meeting that the government should impose legislative measure so that all new imported diesel vehicles be biodiesel compatible. This can be a proactive movement of the government for encouraging use of biofuels in Hong Kong to demonstrate its commitment to protect the environment (Leung, 2003).
Waste recycling program Waste materials which arise in association with diverse human activities are a major threat to the sustainable utilization of natural resource. Many of these waste materials can be reused, and thus they can become a resource for industrial production or energy generation, if managed properly (M. F. Demirbas, Balat, & Balat, 2011). In Hong Kong about 5,300 tonnes of household waste is collected including 1,060 tonnes from Hong Kong Island, 1,630 tonnes from Kowloon and 2,610 tonnes from New Territories and on outlying islands every day (Environmental Protection Department, 2011b). Hong Kong Waste Management Association and Kowloon Biotechnology has been collecting food wastes from the city and process them into animal feed (Chartered Institution of Water and Environmental Management Hong Kong, 2011). If Hong Kong can further utilise the foodwaste recyclers besides the 3 refineries – Fullyace Limited Biotech, Hong Kong Organic Waste Recycling Centre Limited, Hong Kong Recycle Oil Co. Ltd., Kowloon Biotechnology,
WayLung
Waste
Services
Limited
and
Nu-Food
Limited
(Environmental Protection Department, 2012b) – and support collection points, it will be beneficial for refineries and restaurants to a win-win situation.
5.2 Government policy
Biofuel policies in general are enacted to achieve multiple objectives, such as reduce oil imports, improve the balance of trade, provide a stimulus to the rural
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economy, encourage innovation in biodiesel and reduce GHG emissions. Hong Kong can adopt a number of policies to promote the use of biodiesel.
Target use of biofuel and mandatory requirement Hong Kong can follow China and Europe to firstly set a target for transport fuels such as bioethanol and other biofuels and latter adopting a mandatory requirement on medium to heavy sized commercial vehicles. In China, the "Twelfth Fifth Year Plan" of the State indicated that the proportion of the consumption of non-fossil energy sources to primary energy consumption will increase to 11.4 percent by 2015 (China Power International Development Limited, 2012). The European Union’s Directive on Renewable Energy Sources (RED) turned voluntary goals into mandatory requirements. They set a mandatory 10 percent goal for biofuels until 2020 in the transport sector. The mandatory goal replaces a voluntary 5.75 percent target by 2010, which was established in 2003 (Landahl & Ericso, 2009b). The RED offers incentives for more sustainable biofuels by allowing second-generation biofuels to be double-credited in the 10 percent target (Schill, 2009). Hong Kong should start actively analysing the use of biodiesel after the duty rate waive for Euro V diesel. The easiest way for the Hong Kong government is to provide subsidy on commercial vehicle in purchasing the filter which allows a one off sediment cleaning if changing from diesel to biodiesel. This will be a replication of the existing plan on subsidising particulate reduction devices such as catalytic converters in the programme to reduce air pollutants. After that, Hong Kong can follow Europe or China’s timeline on a similar model of voluntary switching to biodiesel vehicles.
Hong Kong can replicate European EN14214 as statutory guidelines All biodiesel sold in Hong Kong has to comply with the European Standard EN14214 under Air Pollution Control (Motor Vehicle Fuel) Regulation, Cap. 311L which is only applicable for fatty acid methyl esters (FAME). At present, it allows biodiesel to be blended at up to and including 5 percent by volume. Some national standards in EU countries allow biodiesel to be distributed as a stand-alone fuel, notably in Germany, for specially adapted vehicles. The Comité Européen de 54 | P a g e
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Normalisation (CEN) is presently studying a revised EN 590 specification for diesel fuel that will permit up to and including 7 percent of biodiesel blend. At the same time the European Commission has mandated CEN to revise the EN 590 specification for diesel fuel up to 10% of biodiesel blend (Cabral, Cahill, & Howell, 2007).
The Worldwide Fuel Charter recommendation is particularly relevant in Hong Kong where diesel engine technology comes entirely from overseas sources (Zhou & Thomson, 2009) as seen in Table 5.1 below.
Table 5.1: WWFC suggested Biodiesel Blending Limit in 2008 as below Blend
Country
1%
Philippines
2%
Brazil, Bolivia
5%
Europe, Republic of Ireland, Scandinavia, USA, Canada, Ecuador, Chile, Argentina, South Africa, Japan, Thailand, New Zealand.
10%
Indonesia
20%
Mexico, Paraguay
With proper fuel tank maintenance and fuel blending, biodiesel blends of B20 or lower can be used in any diesel engine—including those with advanced fuel injection systems—without reducing reliability or durability. This provides an incentive for many of the commercial vehicles in Hong Kong to simply switch in using B20 or below biodiesel. User feedback suggests that maintenance requirements for diesel engines operating on biodiesel blends of B20 or less are identical to those operating on standard diesel (Energy Efficiency and Renewable Energy Office of Weatherization and Intergovernmental Programs, 2005). This blending will set statutory guidelines for manufacturers and users to follow.
Carbon Tax
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The Hong Kong government has ignored imposition of carbon tax but with globalisation and Europe’s mandatory imposition this year caused the general public to reimburse the real external cost of carbon emission. From 1 January 2012, all airlines flying to or from the European Union will have to buy permits from the EU Emission Trading System at a cost of 15 percent of the carbon emissions their flights generate. Cathay Pacific Airways have to pass the additional cost to passengers with each single ticket to the EU bloc at about HK$50 and may become more expensive (Cao, 2011). The new European Directive legislation also includes biofuel sustainability criteria under regulation (2007/0297 COD) that sets targets on CO2 emissions from cars. It states that the fleet average to be achieved by all cars registered in the EU is 130g CO2/km by 2015. The car manufacturer will have to pay penalties if their fleet exceeds the emissions limit value. Heavier cars are allowed higher emissions than lighter cars while preserving the overall fleet average (Landahl & Ericso, 2009b). Most of the cars in Hong Kong are imported and this is simplest way for the Government impose penalties on all imported cars.
One way to create a level playing field for biofuels against fossil fuels, particularly in the context of climate change mitigation could be carbon tax imposition. A carbon tax cum biofuel subsidy policy, where a carbon tax is introduced to fossil fuels and part of the tax revenue is used to finance the biofuel subsidy, would significantly help stimulate market penetration of biofuels. (Timilsina, Csordás, & Mevel, 2011). It is controversial about the small impact on biofuel penetration by imposing carbon tax case since it causes a contraction of economic activities which leads to less energy demand. Although the carbon tax causes substitution of fossil fuels with biofuels on the supply side, the increase in biofuels demand would be partially offset by reduction in energy demand from the carbon tax. Therefore, carbon tax will usually impose with biofuel subsidy making the incremental loss relatively small.
Biodiesel subsidy Hong Kong’s concessionary duty on Euro V diesel programme at HK$0.56 before 2008 and the duty rate waive on Euro V diesel helped to convert many of the 56 | P a g e
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old medium and large size vehicles to the switch. This is further supported by a high diesel tax at $2.89 per litre to encourage the change (Environmental Protection Department, 2011d). It is very easy for the government adopt their existing policy and focus on biodiesel.
The production of biofuels in the EU and the U.S. is heavily subsidized because the production costs of biofuels are much higher than those of fossil fuels. Both regions provide two main types of subsidies to support the biofuels industry and foster consumption: tax exemptions on biofuels and subsidies to agricultural producers. In Hong Kong’s case, we will just focus on tax exemptions on biofuel itself. Taxation on biofuels compared to excise taxes applied to fossil fuels varies from zero to 45 percent. Table 5.2 shows that Spain and Sweden exclude biofuels from excise taxes. Germany used to have the same policy; however, since the introduction of mandatory quotas as of January 1, 2007, tax relief is only granted on the amount of biofuels sold in excess of the quota amount. France, Ireland, Italy, and the Netherlands only grant tax relief for restricted quantities of biofuels. Different feedstocks for biofuels production also receive support (Kenber, Haugen, & Cobb, 2009). A US federal subsidy of US$1.01/gallon of cellulose biofuels is set to expire in 2012 and what action Congress might take on an extension is unknown. The biofuel subsidy in Europe on biodiesel averages about HK$3.4 per litre where Hong Kong’s subsidy is extremely low even on Euro V diesel with being Asia one of the most expensive regions in fuel (P. Bradley, 2011). The government should consider increasing subsidy to avoid of the potential cost in environmental damage caused by GHG emissions from fossil fuels.
Table 5.2: Tax Exemption on Biofuels in Selected Countries (Jank et al., 2007) Ethanol United State (US$/litre)
Biodiesel
0.135
European Union (€/litre) [US$/litre equivalent] France
0.380 [0.490]
0.330 [0.428]
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Germany
0.380 [0.490]
0.380 [0.490]
Italy
0.320 [0.413]
0.400 [0.516]
Netherlands
0.510 [0.658]
0.310 [0.400]
Spain
0.400 [0.516]
0.270 [0.348]
Sweden
0.530 [0.684]
0.360 [0.464]
United Kingdom
0.330 [0.426]
0.330 [0.426]
However, encouraging the use of bioethanol may not be consistent with the reduction of greenhouse gas emissions, if that is the case, the subsidy can be thought of as a way to contribute to the mitigation of a probable cause of global warming (Organisation for Economic Co-operation and Development, 2008). The key policy issue is whether action is to be taken on mitigation of greenhouse gas emissions. If so, then a calibrated biofuels policy will be an integral part of that strategy. If not, the case for bioethanol is weakened and the environmental benefits is debatable (Josling, 2011).
Most important of all, incentives must have a time schedule to be phased out. Hong Kong government can follow previous air pollutant reduction programmes or replicate overseas timeline. US Congress has always placed a term limit on the subsidy usually with a limit between 5–8 years. That time limit means that potential investors can be assured of having the subsidy only for a short period of time during the production life of the plant, since these plants will require 2–3 years for construction (Tyner, 2010).
Government policy uncertainty Hong Kong Government has to ensure the stability of polices to avoid the negative effect on manufacturers and consumers. Germany’s biofuel policy change of reducing the production quotas from 6.25 percent to 5.25 percent and taxation increase on B100 in 2008 has caused German counterparts to suffer. Biopetrol AG managed to contain its losses to 9.367 million euros in 2009 as against 22.365 million in 2008 through its restructuring scheme started in 2008. The group had to
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find ways of achieving economies of scale and extending its value chain to safeguard Biopetrol’s future competitiveness and consolidate its position in the European market. Biopetrol is maintaining its course for growth and will in 2008 as one of the largest biodiesel producers in Europe have an annual capacity of 750,000 tonnes in which the proportion of sales in Germany and reliance on the German market is to be reduced to 40% by 2008 (ENERS Energy Concept, 2010).
5.3 Environmental, social and economic aspects to support Biodiesel In order to support the feasibility of biodiesel in Hong Kong transportation sector, the environmental, social and economic aspects have to reviewed carefully to the pursue the switch.
Environmental Aspect Hong Kong waste recycling cooking oil is a good type of second generation biodiesel which can ensure sustainability come before GHG reduction target. With the severe landfill problems in Hong Kong, different form of waste can be recycled to biofuel. The actual carbon savings of biofuels vary on the type of feedstock, agricultural practices, the production pathway, and the effects of land use change. Renewable energy such as solar, hydropower and wind power still requires certain amount of electricity power to run the plant. This form of energy increases in price due to high fuel prices, increasing labour costs and higher administrative expenses to run the power plant (Federal Energy Regulatory Commission, 2008). On the other hand, these types of renewable energy may require a huge amount of land use which may not be applicable in Hong Kong. The initial investment on these power plants plus Installation costs will also be a huge factor. The rapid growth in turbine size has also impacted wind turbine prices on a US$/kW basis. The capital cost of turbines increase with size is regarded as balance of plant costs and higher levels of energy production which outweigh those turbine price increases (Bolinger & Wiser, 2011). Wind turbines must be situated nearby existing transmission lines or else costs escalate. Weather is also an external factor for the efficiency of these 59 | P a g e
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renewables. Take wind power as an example, it must blow between 16mph and 60mph for power generation and at present wind energy cannot be easily stored (Thresher, 1996). From these factors, Hong Kong has limited land use and weather condition to adopt these types of renewable resources and biodiesel will be the best alternative among all.
Social Aspect Hong Kong is medium-income countries at the national level which cannot rely on agricultural feedstocks to generate biofuel. First generation biofuel production creates competition for resources with food and other agricultural products. A recent report by the Food and Agriculture Organization and the Organisation for Economic Co-operation and Development predicted global food-price increases during the next decade in the region of 20 per cent to 50 per cent, compared to recent years, citing biofuels as one of the main drivers (Organisation for Economic Co-operation & Development and the Food and Agriculture Organization of the United Nations, 2007). Second generation biofuel reduce controversial issues such as abandoning food resources in regions with poverty (International Food and Agricultural Trade Policy Council, 2007). At poor household level with limited capacity to take advantage of the first generation biofuels market and associated livelihood opportunities are at risk of increased food insecurity (Oxfam International, 2007). Moreover, the subsidisation of bioethanol is contributing to the rise in food prices, with the consequence of exacerbating poverty and hunger in the world. Corn prices on world markets are influenced by the use of corn for ethanol in the USA with 40 percent of the corn crop in 2011 are turned into biofuels (US Department of Agriculture, 2011). Waste as a feedstock can overcome this problem without causing poverty to low-income nations.
However, current estimates of costs show that second generation feedstock are 30 percent to 70 percent Biomass to Liquid (btl) more expensive than respective production of first generation fuels under present conditions. Second generation feedstock yield significantly higher energy per hectare – energy yields per hectare of cereals would increase by 30 percent to 40 percent if the straw and the grain would 60 | P a g e
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be used. One of the highest yielding energy crops is maize if the whole plant is used; hence less area is needed to produce the same amount of energy. Moreover, non agricultural land could be used as well, as well as non-land based sources such as animal waste and slaughtering residuals (European Commission, 2007) to overcome such concerns.
Economic Aspects Hong Kong has become increasingly a springboard for Mainland companies out to global markets and a location where multinational companies perform global functions. Mainland companies have increasingly recognised Hong Kong's strategic role as the springboard to expand regionally and globally. From 2002 to 2008, Mainland clients increased from none to account for almost 20 per cent of their completed investment projects. These new opportunities would make Hong Kong even more attractive to the foreign direct investors which were indicated by the these successful projects. InvestHK assisted 148 overseas and Mainland companies to invest or expand in Hong Kong, achieving more than half of its annual target of 250 clients in 2008. These companies came from a variety of sectors, including Hong Kong's pillar industries such as business and professional services and financial services, as well as transportation and technology. Dynamic Progress was one of them and was successfully set up Hong Kong's first bio-diesel plant in Tuen Mun. The plant has a capacity of 120 tonnes of oil per day and licensed to process up to 60,000 tonnes. The plant is helping to improve Hong Kong's air pollution by cutting greenhouse gas emissions and mitigating climate change (Hong Kong Special Administrative Region, 2008).
Hong Kong is a region rich in biomass resources could become net exporters of biofuels to regions with fewer opportunities for biofuel production, which would increase the Union’s total use of biomass energy. Inter-regional and international biofuel trade is also a likely consequence of the growing use of biomass energy. Traditionally biofuels have been used mainly in the region where they are produced. This pattern changed in Northern Europe during the 1990s with the introduction of biofuels in district heating. Sweden and Denmark are the largest importers of 61 | P a g e
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biofuels in Europe. Both countries import biofuels from the Baltic countries, Finland and Canada. Sweden also imports used wood and solid recovered fuels from Germany and the Netherlands (Ericsson & Nilsson, 2004). The use of biomass will help to promote sustainable economic growth and alleviate environmental pollution and GHG emissions. The development of the emerging biofuel industry will promote industrial upgrading in China (Shi, Li, & Yuan, 2011). International biofuel trade generally implies relatively long transportation distances. The economic feasibility and energy economy of transporting biofuels are greatly influenced by the mode of transport and the order and choice of pre-treatment operations. Various studies have indicated that inter-continental trade could be economically feasible and need not lead to discouraging transport energy losses (Suurs, 2002).
Hong Kong’s biofuel producers will have better visibility on feedstock supply chain as their sources will rely mainly on waste. There are new entrants on top of the existing biorefineries, Dragon Green Power Associated Limited whom they are developing an evolutionary refinery on recycling plastic into syngas known Plastic-to-Oil (PTO). They are in negotiation with New Territories villages for setting up refinery in Yuen Long for managing scrap plastics / rubber tyres have which may serve as a viable end of life option for scrap plastics. Their technologies rely on the processes of depolymerisation and pyrolysis for plastic as well as traditional cooking oil recyclers to biofuel. They are finalising their sixth phase refinery to able to turn landfill sites into their biorefinery by utilising on the waste originally from the feedstock. However, information is not available due to commercial confidentially at this stage but this is encouraging that the high cost in production has not discouraged new investors.
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Chapter 6: Implications, constraints and conclusions
6.1 Limitations and constraints
Public Engagement Due to limited stakeholders in Hong Kong, this survey was only able to conduct interviews with very few respondents and therefore the response results might be focused on few peer groups, and not the appropriate stakeholders with proper sampling size.
Commercial Confidentiality The production of biodiesel refineries in Hong Kong and the air pollutants emissions have not been investigated thoroughly on the technicality; the results from interviews were analysed with similar researches and applicable to Euro standards. Both investigation draw consistent result that Hong Kong is completely feasible to adopt the use of biodiesel in medium to heavy sized vehicles and vessels.
Efficiency of diesel compare to petroleum It is widely accepted that diesel performance is more efficient than petroleum. A diesel engine gets more miles-per-gallon than an equivalent gasoline engine because diesel fuel is heavier, oilier, and evaporates much more slowly than gasoline. But the shortcomings in their preference for diesel were still noisy and dirty. Diesel fuel requires less refining than gasoline and is similar to kerosene, jet fuel, and heating oil (Siuru, 2007). This dissertation did not draw any thorough investigation on comparing these two energies.
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6.2 Conclusion
Hong Kong is highly dependent on fossil fuels and biodiesel is one of the feasible alternatives. Large corporations in Hong Kong such as Hong Kong International Airport (Hong Kong International Airport, 2011), Hong Kong Jockey club, Hong Kong Electric and Kadoorie Farm & Botanic Garden Corporation etc. (Dynamic Progess International Limited, 2011) are using biodiesel for their diesel vehicles, but the general public may not be able to access due strict compliance of emission standards of diesel vehicle – even on imported diesel vehicles (Hong Kong Special Administrative Region, 2012). Tax incentives on biodiesel should be implemented on the use of biodiesel and the government should initiate programmes of switching commercial vehicles using Euro V diesel vehicles to biodiesel shortly in the future. With long charging time for electric vehicles, Hong Kong government should consider mutually promoting electric vehicle for the private cars and biodiesel on the medium-to-heavy sized vehicles due to the durability of power.
Biodiesel can diminish the tremendous cost on waste management and landfill dumping. Using local food waste and industrial wastes from restaurants and food factories as feedstock to produce biodiesel is positive. This will also minimise the heavy reliance on imported fossil fuels to diversify energy sources. Refuelling of biodiesel fuel can be performed in any gas stations with the use of the existing infrastructure without any further requirement of new investment. All these positive factors provide a huge opportunity for Hong Kong to expand the use of biodiesel. Biodiesel sustainability is in a broad sense - environmentally which has lower life cycle carbon emissions and does not cause deforestation; socially as it does not compete with staple food crops and economically to be available in viable quantities. Using a sustainable biofuel blend can help to reduce carbon emissions in the short to medium term.
However, what remains certain, is that if we continue on the energy pathway of the last few decades with the lack of engagement in alternative energy, climate 64 | P a g e
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change will have a more and more unpredictable and disastrous impact on our lives, our energy import dependency will rise, and fossil fuels will become scarcer and concentrated in a few countries around the world (European Rewable Energy Council, 2010).
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Appendix:
Appendix 1: Fatty acid profile
Figure A.1 Fatty acid profile of some biodiesel feedstocks
Source: (Atabania et al., 2012)
Appendix 2: Diesel vs Biodiesel blending characteristics Any diesel engine can operate on these blends with few or no modifications. When used in low-level blends of 5% biodiesel (B5) or below, biodiesel is transparent to the user. When biodiesel is used as B20, the user may experience a 1%-2% decrease in power, torque, and fuel economy; however these changes are usually not noticeable (Energy Efficiency and Renewable Energy Office of Weatherization and Intergovernmental Programs, 2005). Biodiesel may be less stable than conventional diesel fuel, so precautions are needed to avoid problems linked to the presence of oxidation products in the fuel. Fuel injection equipment data suggest that problems may be exacerbated when biodiesel is blended with ultra-low sulphur diesel fuels.
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Biodiesel requires special care at low temperatures to avoid an excessive rise in viscosity and loss of fluidity. Additives may be required to alleviate these problems. Being hygroscopic, biodiesel fuels require special handling to prevent high water content and the consequent risk of corrosion and microbial growth. Deposit formation in the fuel injection system may be higher with biodiesel blends than with conventional diesel fuel, so detergent additive treatments are advised. Biodiesel may negatively impact natural and nitrile rubber seals in fuel systems and also oxidize metals such as brass, bronze, copper, lead and zinc creating sediments. Transitioning from conventional diesel fuel to biodiesel blends may significantly increase tank sediments due to biodiesel’s higher polarity, and these sediments may plug fuel filters. This is due to the solvent properties in biodiesel that may cause the release of accumulated deposits inside the fuel tank and fuel lines from years of petro diesel use. These deposits can flow down the fuel line and may plug the fuel filter (Jose, Manas, Jeevanand, & Lijo, 2008). When first using Biodiesel it is recommended to replace the fuel filter on your engine. Biodiesel fuel that comes into contact with the vehicle’s shell may dissolve the paint coatings used to protect external surfaces. Pure (100%) biodiesel fuel and high concentration biodiesel blends result in increased NOx emission levels (European Automobile Manufacturers Association, Alliance of Automobile Manufacturers, Engine Manufacturers Association, & Japan Automobile Manufacturers Association, 2006).
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Table A.1: Characteristics of Diesel Fuel and Biodiesel (Atabania et al., 2012)
Fuel Properties
o
3
Density 15 C (kg/m ) o
Viscosity at 40 C (cSt)
Diesel fuel
Biodiesel
Characteristics
ASTM D975
ASTM D6715
EN 14214
850
880
860-900
2.6
1.9-6.0
3.5-5.0
Density is the weight per unit volume. Oils that are denser contain more energy Viscosity is the most important property of any fuel as it indicates the ability of a material to flow. It therefore affects the some operation of the fuel injection equipment and spray atomization, particularly at low temperatures when the increase in viscosity affects the fluidity of the fuel. This particularly happens at low temperatures biodiesel can becomes very viscous or even solidified because of the high molecular mass.
Cetane Number
40-55
Min. 47
Min. 51
The cetane number (CN) is the indication of ignition characteristics or ability of fuel to auto-ignite quickly after being injected. Better ignition quality of the fuel is always associated with higher CN value
Calorific value(MJ/kg)
42-46
35
Heating value, heat of combustion is the amount of heating energy released by the combustion of a unit value of fuels.
Acid (neutralization)
0.062
Max 0.50
Max 0.50
value (mg KOH/g)
Acid number or neutralization number is a measure of free fatty acids contained in a fresh fuel sample. Free fatty acids (FFAs) are the saturated or unsaturated monocarboxylic acids that occur naturally in fats, oils or greases but are not attached to glycerol backbones.
Pour point
o
-35 C
o
-15 to-16 C
Pour point is the temperature at which the amount of wax out of solution is sufficient to gel the fuel, thus it is the lowest temperature at which the fuel can flow.
Flash point Cloud point
o
60-80 C o
-20 C
Min. 100-170 o
-3 to -12 C
Flash point of a fuel is the temperature at which it will ignite when exposed to a flame or a spark. o
Max. 5 C
Biodiesel at low temperature is an important quality criterion. This is because partial or full solidification of the fuel may cause blockage of the fuel lines and filters, leading to fuel starvation, problems of starting, driving and engine
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Cold filter plugging
o
-25 C
o
19 C
o
Max. 5 C
point
(CFPP) refers to the temperature at which the test filter starts to plug due to fuel components that have started to gel or crystallize. It is a commonly used as indicator of low temperature operability of fuels and reflects their cold weather performance.
Copper strip
1
Max. 3
84-87
77
Min. 1
corrosion (3h at o
50 C) Carbon (wt%)
The chemical composition of biodiesel fuels makes it more susceptible to oxidative degradation than fossil diesel fuel
Hydrogen (wt%)
12-16
12
Oxygen (wt%)
0-0.31
11
0.05
Max. 0.05
Water and sediment content (vol%)
Max.
Water and sediment contamination are basically housekeeping issues for biodiesel. Water can present in two
500mg/kg
forms, either as dissolved water or as suspended water droplets. While biodiesel is generally considered to be insoluble in water, it actually takes up considerably more water than diesel fuel. Sediment may consist of suspended rust and dirt particles or it may originate from the fuel as insoluble compounds formed during fuel oxidation. Water in the fuel generally causes two problems. First, it can cause corrosion of engine fuel system components. The most direct form of corrosion is rust, but water can become acidic with time and the resulting acid corrosion can attack fuel storage tanks. Water contamination can contribute to microbial growth.
Ash content % (w/w)
0.01
0.02
Sulphur % (m/m)
0.05
Max 0.05
10 mg/kg
Max 0.02
Max 0.02
Sulphated ash
The ash content describes the amount of inorganic contaminants such as abrasive solids, catalyst residues and the concentration of soluble metal soaps contained in a fuel sample.
Phosphorous content
Max 0.001
10 mg/kg
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Oxidation stability (h,
3min
110C)
6min
The oxidation of biodiesel fuel is one of the major factors that helps assess the quality of biodiesel. Oxidation stability is an indication of the degree of oxidation, potential reactivity with air, and can determine the need for antioxidants.
Lubricity (HFRR; μm)
685
314
Lubrication properties of the biodiesel are better than diesel, which can help to increase the engine life. Fatty acid alkyl esters (biodiesel) have improved lubrication characteristics, but they can contribute to the formation of deposits, plugging of filters, depending mainly on degradability, glycerol
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Appendix 3: Biodiesel emissions at a glance
From Boyd et al. (2004) Animal fats have the biggest decrease in GHG emissions compared to Soy Oil and Rapseed oil but tiny increase from NOx from the Table A.2 and Table A.3 below.
Table A.2: Biodiesel Source Effects Percent Change in Emissions
Sources: (Boyd et al., 2004)
Table A.3: Lifecycle GHG and non-GHG Emissions for B20 Blends (grams/mile)
Sources: (Boyd, Murray-Hill, & Schaddelee, 2004)
Sheehan et al. (1998b) demonstrated with different blending of biodiesel, it reduced all other GHG pollutants except NOx below in Table A.3.
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Table A.4: Effect of Biodiesel on Tailpipe Emissions (g/bhp-h)
Source: (Sheehan, Camobreco, Duffield, Graboski, & Shapouri, 1998a)
Goering et al. (1982) demonstrated also a higher blending in biodiesel will further reduce GHG emissions in Table A.5 below.
Table A.5: Average B100 and B20 Emissions (in %) Compared to normal Diesel
Source: (Goering, Schwab, Dangherty, Pryde, & Heakin, 1982)
International Energy Agency demonstrated that greenhouse gas (GHG) emissions savings from corn ethanol production and use have more than doubled between 1995 and the projected level in 2015. The report said that GHG reductions have grown from approximately 26% in 1995 to over 39% today while projected GHG reductions from ethanol will reach nearly 55% in 2015 with the advent of new technology, process efficiencies and improved yields (International Energy Agency, 2009). Cellulosic bioimass have GHG reduction by almost 86% compare to gasoline as seen in Figure A.2 below.
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Figure A.2: Ethanol update: The good and the bad (Guzman, 2009)
Source: (Wang, Wu, & Huo, 2007)
Landahl and Ericso (2009a) has demonstrated on their study that among different feedstocks, sugar cane ethanol has the biggest CO2 reduction compare to gasoline as shown in Figure A.3 below.
Figure A.3: CO2 reduction on Bioethanols
Source: (Landahl & Ericso, 2009a)
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Appendix 4: Europe biodiesel refineries and production
EurObserv'ER (2010) has studied the production of biodiesel in Europe for the past decades and the capacity of the top ten biodiesel producer is enough to cover EU27’s consumption in 2009 shown in Table A.6 and Table A.7. Table A.6: Production capacity of the main biodiesel producers in Europe in 2009 (in tons)
Table A.7: Biodiesel production in the European Union in 2008 and 2009 (in thousands of tonnes)
Source: EuroObserv’ER (for years 2008 & 2009) and Eurostat (2000 – 2007)
Appendix 5: Hong Kong Government initiatives to reduce roadside pollutants
Table A.8: Summary of Hong Kong Government GHG reduction programme on roadside vehicles Taxis
The programme started in August 2000 and was completed at the end of 2003. Nearly all (about 99.9%) taxis had switched from diesel to LPG with a one-off gran of $40,000.
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The programme started in August 2002 and was completed at the end of 2005. Right now, about 60% of the registered public light buses are LPG by the one-off grant of $60,000 or $80,000 and the exemption of first registration tax..
Light diesel
The programme was completed in 2001 and more than 80% of
vehicles
the fleet, or 24,000 light diesel vehicles, were fitted with particulate traps or catalytic converters under the retrofit programme which can reduce emissions by 30%. From December 2003, a regulation requiring all pre-Euro diesel light vehicles up to 4 tonnes to be installed with suitable particulate reduction devices has been implemented.
Medium and
The programme completed by 2004 retrofit their vehicles with
heavy diesel
catalytic converters and 96% of the fleet, or 34,000 heavy diesel
vehicles
vehicles were fitted with this device under the retrofit programme. This can cut emissions by about 25% to 35%. From April 2006, a regulation requiring all these pre-Euro heavy diesel vehicles to be installed with suitable particulate reduction devices has been implemented.
Long idling
The programme complete by 2005 retrofit their vehicles with
heavy diesel
catalytic converters About 95% of the fleet, or 2,500 long idling
vehicles
pre-Euro heavy diesel vehicles, were fitted with catalytic converters under the retrofit programme. From April 2007, a regulation requiring all these long idling pre-Euro heavy diesel vehicles to be installed with suitable particulate reduction devices has been implemented. (Environmental Protection Department, 2011a)
Appendix 6: Interview questions with stakeholders Biodiesel refineries interviewees include: ASB Biodiesel’s CEO Anthony Dixon and Champway Technology Limited’s Kenji Wong. 75 | P a g e
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Company
How much is the biodiesel plant built and the overhead cost in running
profile and
this plant? Will there be further expansion in using biofuels ?
background How much waste oil and/or other animal oil are recycled is targeted to collect in the next 5 years? How much biodiesel is targeted to be generated in the next 5 years? Drives and
From a fuel recycler’s perspective, what are the reasons for initiating
barriers
waste recycling into biodiesel? What are the benefits? (e.g. to solve environmental problem, corporate social responsibility, raise competitiveness, risk management, economic benefit) What are the challenges? (e.g. new comers in the industry to reduce profit, insufficient resources i.e. land, transportation, support from the government) What are the difficulties in operating your recycling facilities? (e.g. high cost, space demanding, lack of support from tenants, inconvenience to daily operation and customers)
Partnership
From the view of ASB Biodiesel, what do you think about the factors
with the
hindering firms to participate in the partnership scheme with the
government
government and the NGOs? Like the “Food Waste Recycling Partnership Scheme” or other community campaign. (e.g. different goals with the government and NGOs, imbalance of power and resources allocation, time-consuming, long-term commitment) What are the factors encouraging firms to participate in the partnership scheme with the government and the NGOs or other community program? (e.g. resources pooling, reputation, networking) What does your organisation think about the advantages of self-operating recycling system and other community program without government involvement over partnership? (e.g. higher efficiency, flexibility) What is your recommendation for the government in terms of programme design and operation for a recycling “partnership scheme” or community program? (e.g. whether there is a need for partnership? Incentives needed? Better resources allocation? 76 | P a g e
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Mechanism for communication? Publicity?)
Biodiesel consumer interviewees include: Hong Kong International Airport’s Sohpia Lau, MTR Maritime Square Mr Lo, Hong Kong Jockey Club’s Annie Cheng and Fairwood Fastfood’s Peggy Lee.
Drives and
From a top tier organisation’s perspective, what are the reasons for
barriers
initiating waste recycling into biodiesel? What are the benefits? (e.g. to solve environmental problem, corporate social responsibility, raise competitiveness, risk management, economic benefit) What are the difficulties in operating recycling facilities? (e.g. high cost, space demanding, lack of support from tenants, inconvenience to daily operation and customers)
Partnership
From the view of MTR Mall (Maritime Square), what do you think about
with the
the factors hindering firms to participate in the partnership scheme
government
with the government and the NGOs? Like the “Food Waste Recycling Partnership Scheme” or other community campaign. (e.g. different goals with the government and NGOs, imbalance of power and resources allocation, time-consuming, long-term commitment) What are the factors encouraging firms to participate in the partnership scheme with the government and the NGOs or other community program? (e.g. resources pooling, reputation, networking) What does your organisation think about the advantages of self-operating recycling system and other community program without government involvement over partnership? (e.g. higher efficiency, flexibility) What is your recommendation for the government in terms of programme design and operation for a recycling “partnership scheme” or community program?
(e.g. whether there is a need for
partnership? Incentives needed? Better resources allocation? Mechanism for communication? Publicity?)
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Appendix 7: Correlation of crude oil vs biodiesel, electricity and solar energy
The correlation between WTI vs MLCX index, WTI vs Nordic Electricity and WTI vs Bloomberg Solar index are show in Figure A.4, Figure A.5 and Figure A.6 respectively. Figure A.4 Correlation between Crude Oil Prices: West Texas Intermediate vs MLCX
Sources: Bloomberg
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Figure A.5: Correlation between Crude Oil Prices: West Texas Intermediate vs Nordic Electricity
Sources: Bloomberg
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Figure A.6: Correlation between Crude Oil Prices: West Texas Intermediate vs Bloomberg Solar Energy Index
Sources: Bloomberg
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http://www.proactiveinvestors.com.au/companies/news/27407/kedco-joint -venture-receives-government-scheme-boost-27407.html Basha, S. A., Gopal, K. R., & Jebaraj, S. (2009). A review on biodiesel production, combustion, emissions and performance. Renewable and Sustainable Energy Reviews, 13, 1628-1634. Becker, E. (1994). Microalgae: biotechnology and microbiology. Cambridge University Press. Beverage and Diamond PC. (2009, 7 January). Renewable Fuel Standard Program Update: EPA Misses December 2008 Deadline, While EU Approves New
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