China has developed ambitious bioenergy installation targets as part of its broader goals to increase its renewable energy generating capacity and decarbonise its economy. At present its main financial incentive to support bioenergy projects is a feed-in-tariff provided to units that generate electricity with 80% or more of their feedstock energy coming from agricultural residue biomass. Although this policy has catalysed the construction of many bioenergy units, there are reports that these projects are experiencing serious financial and technical problems, leading to low operational efficiency and even closure. An alternative option for China’s agricultural residues is cofiring with coal in existing power stations. However this is currently unprofitable for power station operators, as cofiring is not eligible for financial assistance through the bioenergy feed-in-tariff. In light of China’s ambitious target to install 30GW of bioenergy generation capacity by 2020, this paper investigates the extent to which extension of the bioenergy feed-in-tariff to include cofiring could contribute towards this goal. The results suggest that there is significant co-location of China’s coal-fired powerstations and agricultural residues, with 39% of China’s straw energy resources located within 50km of a power station. Assuming cofiring ratios of up to 10% coal energy replacement, the analysis finds that an annual 89-116TWh of electricity could be generated by cofiring agricultural residues collected within 50km radii of powerstations. If China extends its bioenergy subsidies to include cofiring, we estimate that an annual 72-100TWh can be produced at an internal rate of return of 8% or more. This equates to 48-67% of the bioenergy generation that China might expect if it were to meet its target of installing 30GW of bioenergy capacity. Overall this indicates a strong case for the Chinese government to extend its existing bioenergy feed-in-tariff to include cofiring at low energy replacement ratios.
- Agricultural residues
- Energy policy