Special Report
Gutter Oil
Fuel not Food
Gutter oil intended for reprocessing into industrial biofuels is finding its way onto China’s dinner tables. Could government restrictions on biofuels be to blame?
Zhao Huichuan, head of a licensed oil processing company in Hebei, complains about his failure to collect sufficient gutter oil due to high prices. Photo by CFP
“Apart from what is used in the chemical industry or is processed into animal feed, about 1-1.5 million tons of gutter oil finds its way onto people’s dinner tables each year.”
Rich in carcinogens, gutter oil, according to Wang Jinfu, a clean energy professor at Tsinghua University, will never meet the quality standards of edible oil despite extensive filtering and purification. Waste cooking oil is invaluable to the chemical industry, where it can be turned into biofuels. However, rather than capitalizing on a potentially limitless source of clean energy, criminals are simply selling waste oil back to consumers for use in their kitchens. Why can’t China find a better use for its gutter oil?
The Japanese government, for example, purchases gutter oil at a price higher than that offered by private companies, and reprocesses it into biofuels to power the nation’s garbage trucks. The US, Britain and New Zealand have all launched recycling initiatives which purchase waste oil from the food industry and use it to produce biodiesel, chemicals or organic fertilizer. Even Brazil, a developing country, powers recycling trucks with reprocessed cooking oil.
Even more astonishingly, in June this year, SkyNRG, a company affiliated to KLM Royal Dutch Airlines announced a new kitchen waste processing technology capable of turning one ton of gutter oil into 0.95 tons of “bio-jet fuel.” Despite a price tag three times higher than ordinary aircraft fuel, KLM has already begun to use a 50-50 mixture of bio-and fossil fuels in the company’s commercial jets.
“The best solution to the gutter oil problem is to turn it into biodiesel, a clean fuel which can replace regular diesel,” Lu Xinuo, technical director of Beijing Qingyanlihua Petro & Chemistry Co., Ltd, told NewsChina. “With low sulfide emissions and 98 percent biodegradability, a rate double that of ordinary fuel, it is environmentally sound.”
According to Lu Xinuo’s calculation, about 15 percent of the edible oil consumed in China is salvageable as waste oil. Given that the population consumes 21-23 million tons of edible oil each year, at least 3 million tons of it will end up as gutter oil. However, “only one-third of China’s gutter oil eventually is turned into clean energy,” Lu said. “Apart from what is used in the chemical industry or is processed into animal feed, about 1-1.5 million tons of gutter oil finds its way onto people’s dinner tables each year.”
So why can’t crude-thirsty China tap this potential source of clean energy, and protect consumers from carcinogenic cooking oil in the process?
Hard to Collect
For Lu Xinuo, the primary obstacle to the development of biodiesel in China lies in the difficulty the country’s few biodiesel businesses encounter when trying to collect and purchase gutter oil. The country has not yet introduced unified nation-wide criteria for the qualification of waste oil collectors, resulting in a very limited number of companies. “Licensed enterprises only collect 20 percent of the total waste oil at most, with the rest collected by unlicensed individual collectors riding worn-out motor tricycles loaded with grease-caked oil drums,” said Lu.
“We are caught in a dilemma,” he continued. “I have no clear idea if we are violating the law when we directly buy waste oil from unlicensed collectors. If we only buy it from licensed collectors, we cannot afford the price. They purchase waste oil from unlicensed collectors for 4,000 yuan (US$588) per ton and then resell it to us at 5,500 yuan (US$735).’”
Zheng Dewen, manager of a biotechnology company based in Qingdao, Shandong Province, told NewsChina that illegal edible oil processing companies will pay 5,200 yuan (US$765) for a ton of waste oil, while his company can only afford to pay 4,200 yuan (US$618) per ton. In Beijing, illegal edible oil processors are even more competitive, offering to pay 6,000-7,000 (US$940-1,100) yuan per ton, way beyond the price range of the city’s handful of licensed processing companies.
Another obstacle to profitable biofuel processing is sales tax, said Lu. This tax is not levied on gutter oil collection and sales, only on refineries. “If a biodiesel producer purchases a ton of gutter oil for 5,500 yuan (US$735), it has to pay 17 percent sales tax on the transaction,” explained Lu. “Adding this to the cost of processing, we pay 7,000 yuan (US$1,029) for every ton of biodiesel we produce, and can sell our product for a maximum of 7,500 yuan (US$1,100), a very narrow profit margin.”
“With gutter oil diverted to more profitable enterprises, biodiesel producers have to use the lowest-quality waste oils, requiring more complex refining procedures,” Wang Jinfu told our reporters. “Gutter oil of better quality has a much higher fuel yield, but biodiesel producers can’t afford it.”
Cold Shoulder
Gelin Company, caught processing and selling gutter oil as edible oil, started out as a biodiesel refinery. “I did not know much about gutter oil until I opened my biodiesel business,” said Liu Liguo, the company’s owner. He told our reporters that the company had made huge profits in its first two years of operation, but with the price of biodiesel declining and market demand shrinking, his company then teetered on the verge of bankruptcy.
“Who could I sell my biodiesel to, if even the big players CNPC (China National Petroleum Corporation) and Sinopec (China Petroleum & Chemical Corporation) refused to buy?” asked Liu.
China did not publish trading standards for biodiesel until 2007. However, without specifying a standard blending ratio of biodiesel to ordinary diesel for the optimum mix, the 2007 standards made it impossible for biodiesel to be traded on the open market. It was not until last year that the government issued a new standard allowing the open trading of biofuels in China.
Despite the move, Lu Xinuo remained pessimistic. “The government does not state in the document that CNPC and Sinopec have to consume biodiesel,” he told our reporter. “As a result, they’re failing to provide biodiesel businesses with regular and reliable sales channels. This is bound to cause sharp fluctuations in sales. In the face of rising costs, biodiesel businesses only see market uncertainties ahead.”
Although the prices of the raw materials for making biodiesel, including gutter oil, have gone up by nearly 50 percent in a few years, the price of biodiesel is still artificially held at 5,100 yuan (US$799) per ton by government statutes on fuel pricing, forcing many biodiesel producers to suspend operations or switch to more profitable industries.
Unlike countries such as the US and South Korea where the government requires that 2 percent of biodiesel be mixed with ordinary diesel, China has so far neither established preferential policies to support its use, nor instructed State-owned enterprises to utilize or, in the case of the country’s gasoline giants, sell biofuels to consumers. According to media reports, China produced about 300,000 tons of biodiesel in 2007, only one-eighth of US output in the same year.
“Most biodiesel producers in China are of small scale with an annual output of less than 50,000 tons, using waste oil as raw material. The quality of their products varies widely and the price is held hostage by many factors, particularly the immaturity of the industry in China,” head of the Guangzhou branch of the Energy Institute under the Chinese Academy of Sciences Wu Chuangzhi told NewsChina.
Yet, Yue Xin, a car-fuel emissions researcher at the Chinese Research Academy of Environmental Sciences, sees a future for Chinese-made biodiesel. “Many Chinese biodiesel products have been exported to Europe, proving that they meet stringent European standards,” he argued. “The problem is not that the Chinese citizens don’t want to use biodiesel, but that they have nowhere to get it.”
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Sep 2011 | Submitted by Brian Snelson
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