Clear The Air Energy Blog Rotating Header Image

Difficulties of establishing biofuels exposes poor thinking of HK policymakers

In 2011, Eric Ng of the SCMP wrote an article about a biofuels plant in Tseung Kwan O Industrial Estate that had to suspend construction, likely due to a lack of funding. At the same time, the article shed light on the difficulties faced by current biofuels producers in Hong Kong: stiff competition on the waste oil market, import levies for feedstocks, lack of mandatory legislation to promote biofuels use, and so on.

One of the main advantages of using biofuels is that it achieves more than some 85% reduction in greenhouse gas emissions. The European Union has already mandated a policy of fuel blending: at least 5.75 per cent of all fuel sold has to be biofuel, with the percentage to increase further in the future, and other countries in Asia also have policies encouraging biofuel consumption. Hong Kong lags behind in such initiatives, and it is not difficulty to see why: Eric Ng, in a recent update on the issue, reports official Mok Wai-chuen of the Environmental Protection Department as saying in 2007 that “biodiesel did little to improve roadside air quality”, backed up by 2002 reports from the US National Biodiesel Board and the US Environmental Protection Agency that “suggested the use of biodiesel would result in a relatively modest reduction in roadside emissions”. The irrelevance of such an analysis – blending 5% biofuel into Euro V standard diesel containing 0.001% sulphur could never have meant reducing roadside pollutants – escapes officials; much of the roadside pollutants are carried by prevailing winds from shipping lanes and industries across the border.

If public policy on biofuels is to be decided on this factor alone, then the real benefits of biofuel would be ignored: once the biofuel industry is established, it can process the city’s waste and convert it to fuel; as mentioned before, biofuels hugely reduce greenhouse gas emissions; more importantly, by helping biofuel operations purchase waste cooking oil, the practice of smuggling waste cooking oil across the border to be converted into ‘gutter oil’ and re-used as cooking oil can be stemmed – which would happen to be quite the moral thing to do, given that such usage of recycled oil is carcinogenic and harmful to human health when ingested.

No smooth ride for biodiesel

Eric Ng, SCMP

Wan Po Road, or at least its English rendering – Environmental Protection Road – seems like a contradiction in terms to those living and working in the Tseung Kwan O Industrial Estate to which the road leads.

Neither will the irony of the name be lost on commuters who have to suffer intermittent whiffs from nearby landfills as they travel to and from the estate.

But the same road also leads to a genuine environmental protection industry player hoping to open for business in the estate – a company that has undertaken to turn used cooking oil into biodiesel, which is far cleaner than petroleum diesel.

Unfortunately, the plant’s construction has been suspended, with no official indication of when it will resume.

Hong Kong’s biodiesel producers, who use waste cooking oil as feedstock, say it is difficult to make a profit because of the lack of active government support for such initiatives. The Hong Kong government has set a goal to cut the city’s carbon emission intensity by up to 60 per cent by 2020, but is relying on the greater use of nuclear power to cut its carbon footprint – despite safety concerns raised in Japan after the deadly March 11 earthquake and tsunami.

According to a subcontractor for the project and security guards who declined to be identified, ASB Biodiesel (Hong Kong) has stopped work on a partially-built plant capable of churning out 100,000 tonnes of biodiesel annually.

It is not clear exactly when work stopped. A guard at the 18,000 square metre site said no work had been carried out for several months, while a guard at the entrance to a neighbouring building said it was more like a year since work ended.

No construction workers were seen during two visits to the site by the South China Morning Post on separate week days this month.

According to the final environmental impact assessment report by Environmental Resources Management for ASB in October 2008, construction on the plant was supposed to start in March 2009 and be completed in April last year. After trial runs, commercial production was slated for a June 2010 start.

When ASB chief executive Tom Uiterwaal was interviewed early last year, he said construction was expected to be completed by the end of last year. He declined to comment when asked about the delays and the company’s latest plans.

A person familiar with the company’s operation, who declined to speak on the record, claimed the project would resume construction within two months, and that biodiesel production was expected to start by the end of next year, but he would not elaborate.

He also declined to comment on talk among industry executives that construction was halted because of a lack of funding due to a deteriorating profit outlook for the biodiesel industry internationally, and tightened liquidity in the wake of the global financial crisis.

According to the Malaysian Palm Oil Board, only 10 biodiesel plants were operating last year, despite 29 having been built. A lack of overseas demand and high palm oil prices were blamed.

ASB’s project is funded mainly by the Middle East’s Al Salam Bank-Bahrain and six unidentified strategic partners.

Uiterwaal said early last year that the US$100 million plant would use technology from Austria, which enabled it to use multiple feedstocks, including waste cooking oil, grease trap waste collected from caterers, animal fat, and palm fatty acid distillate – a byproduct from the refining of crude palm oil.

ASB last year hired legislator Tommy Cheung Yu-yan, who represents the restaurant trade, as a consultant.

The European Union has led the world in policy support for the sector, requiring at least 5.75 per cent of all fuel sold to be biofuel – biodiesel or ethanol – rising to 8 per cent in 2015 and 10 per cent in 2020.

Within Asia, Hong Kong lags behind countries such as Malaysia, the Philippines, Taiwan and Thailand, in policy initiatives to encourage biodiesel consumption.

Biodiesel is generally more expensive than petroleum diesel, and requires large-scale production and consumption to be economical. To be truly emission-light, local sourcing of feedstock and local consumption of biodiesel is encouraged.

In some developed nations, restaurants pay biodiesel makers to get rid of waste cooking oil, but in Hong Kong, biodiesel makers have to pay for used oil, competing with traders who sell it to mainland recyclers for reprocessing into cooking oil. Consumption of such re-used oil is known to raise the risk of heart disease and cancer.

Beijing issued a policy circular a year ago ordering local governments to step up their fight against rampant illegal trading and recycling of cooking oil.

‘Based on my estimation, over 80 per cent of Hong Kong’s used cooking oil taken away by collectors is sold to the mainland for reprocessing into cooking oil,’ said Teddy Choi Wai-hung, executive director of Champway Technology which operates a biodiesel plant in the EcoPark in Tsuen Mun that can produce 20,000 tonnes of biodiesel annually.

Since it is not illegal to export waste cooking oil out of Hong Kong, and extremely difficult to tell reprocessed oil from previously unused oil without laboratory testing, it is difficult to fight the trade, said Choi.

Furthermore the trade is lucrative since used oil costs around HK$4,500 a tonne to buy and can fetch some HK$7,500 after processing. Fresh cooking oil costs anywhere from HK$10,000 to HK$20,000 a tonne, Choi said.

Champway’s plant has only produced around 4,000 tonnes since it started operating in April last year, due to difficulties in sourcing enough affordable waste oil, according to Choi.

‘Our operation is very difficult to run, given that waste cooking oil prices have been bid up to over HK$50 per 18 litres currently from just HK$20 a year ago,’ he said, adding that it would be difficult to recoup the plant’s HK$60 million investment without more government support.

To encourage proper disposal of waste cooking oil, he said the government should implement a licensing system for collectors of used cooking oil, and restaurants that sell their oil to such authorised dealers should be given a reduction in their waste water treatment surcharge currently collected by the Water Supplies Department.

Steve Choi, an executive director of Sha Tin-based Dynamic Progress International, the first firm in Hong Kong to set up a biodiesel plant three years ago, said the government should abolish an import levy on methanol, which accounts for 11 per cent of the content of biodiesel.

The levy amounts to around 50 HK cents for each litre of biodiesel made, he said. Each litre of petroleum diesel retails for around HK$11 to HK$12.

According to the annual report of its listed parent Alltronics Holdings, Dynamic posted a net loss of HK$6 million last year, down from a HK$8.4 million loss in 2009.

Steve Choi said the government should also be more proactive in promoting biodiesel by becoming a user itself.

‘I hope the government would push for an earlier timetable for its departments in becoming biodiesel users,’ he said. ‘The commercial sector has already made some moves, it is about time the government took some baby steps to promote biodiesel usage.’

So far private sector users mainly use biodiesel out of corporate social responsibility considerations as it is more expensive than petroleum diesel.

Asia Airfreight Terminal (AAT), which runs an air cargo terminal at Hong Kong International Airport, started buying biodiesel from Dynamic last November.

‘Our company adopted biodiesel mainly for the fulfillment of our corporate social responsibilities,’ said Wilson Cheung, AAT’s general manager of support services.

The company, which has a diesel bill of around HK$1.5 million a year, has now replaced almost all of its fossil fuel diesel consumption with biodiesel, except for its stand-by power generator, which is rarely used.

The Hong Kong Jockey Club said it had provided waste oil to Dynamic and bought biodiesel for some of its water-carrying trucks and power generators.

An Environmental Protection Bureau spokesman said the bureau was consolidating views from a public consultation on how to mitigate climate change, including how to promote clean fuels, including biofuels.

The government is also planning a tender for the supply of diesel with a blend of 5 per cent biodiesel made from waste oil, for a one-year pilot scheme. A source familiar with the situation said the government aims to roll out the scheme by mid-2012.


The price, in Hong Kong dollars, traders will pay for a tonne of waste cooking oil, meaning supplies are scarce for biodiesel purposes

18 Jul 2011

Biofuel maker pushes product use in market

Eric Ng, SCMP

ASB Biodiesel seeks to jump-start market for cleaner fuel with fresh call for mandatory blending as it prepares to open plant in Tseung Kwan O

ASB Biodiesel, the developer of Hong Kong’s largest biodiesel plant, has renewed its call for the mandatory blending of biodiesel into diesel products sold in the city as a means to jump-start a market for the cleaner burning fuel.

Chief executive Anthony Dixon said Hong Kong had lagged some of its regional neighbours that had implemented mandatory blending, such as Indonesia, Malaysia, the Philippines, South Korea and Taiwan.

“Until now, biofuels have been largely absent from discussions about low-carbon transport and air quality,” Dixon said. “The start of production at our plant will raise awareness of what is possible in Hong Kong.”

Without policy support, ASB, one of three biodiesel producers in Hong Kong, will see its output consumed mostly in Europe – where the bulk of the world’s biodiesel is consumed, thanks to mandatory consumption requirements – after it is sold to international oil firms. Shipping biodiesel to Europe also generates pollutants in addition to the freight costs.

ASB’s plant in Tseung Kwan O is expected to start production soon, with used cooking oil as the biofuel source.

Biodiesel was 5 to 10 per cent more expensive than motor vehicle diesel now available in Hong Kong, the findings of a pilot scheme for government vehicles to test biodiesel use showed.

Noting that the government had focused on cutting roadside pollution by providing incentives for owners of old commercial diesel vehicles to swap them for cleaner models, Dixon said biodiesel also had a role to play. “There is no question from the scientific point of view that biodiesel contributes to the reduction in roadside pollution. It should be part of the solution.”

Mok Wai-chuen, an assistant director (air policy) at the Environmental Protection Department, said in 2007 that biodiesel did little to improve roadside air quality and the government had been taking other more effective measures such as giving grants to encourage early replacement of old diesel commercial vehicles.

Earlier this year, the government proposed providing more than HK$10 billion of subsidies for the phasing out of more than 80,000 pre-Euro IV commercial diesel vehicles by 2020. Hong Kong implemented the Euro V emission standards last year.

A diesel vehicle compliant with Euro V emits about 95 per cent less particulates and 78 per cent less nitrogen oxide than a pre-Euro vehicle manufactured before 1995.

Data cited by Dixon from the US National Biodiesel Board and the US Environmental Protection Agency collected in 2002 suggested the use of biodiesel would result in a relatively modest reduction in roadside emissions. Blending 20 per cent of biodiesel into fossil fuel diesel would cut carbon monoxide and particulate matter emissions by about 12 per cent, with no reduction in nitrogen oxide emission, the data showed.

Where biodiesel makes a bigger difference is in greenhouse gas emissions, data cited by Dixon from the European Union suggested biodiesel produced from recycled cooking oil emitted at least 85 per cent less greenhouse gases than fossil fuel diesel. Biodiesel made from plant oil results in a reduction of only about 40 per cent.

Dixon said Hong Kong’s neighbours that had imposed mandatory biodiesel blending required the addition of 1 to 5 per cent of biodiesel and blending rates ranged between 2.5 and 7 per cent in the EU.

He added that he was optimistic that all of ASB’s output would be consumed in Hong Kong in three years as the government was expected to step up efforts to tackle greenhouse gas emission.

Besides cutting pollution, domestic consumption of biodiesel would also help reduce smuggling of Hong Kong’s used cooking oil into the mainland for the production of so-called recycled “gutter” oil, which is known to contain cancer-causing substances.

Legislator Paul Tse Wai-chun told the Legislative Council in March that government figures showed about 10 million litres of Hong Kong’s 22.8 million litres of used cooking oil were exported annually, with the whereabouts of the remaining 12.8 million litres unknown. He said some of that oil was likely to be smuggled to the mainland badged as a “second-hand product” to escape regulations under the Waste Disposal Ordinance.

Under Hong Kong’s pilot scheme, 5 per cent of biodiesel is blended into diesel used by government vehicles. The vehicles involved accounted for about 8 per cent of the Euro V diesel consumption by the government.

A spokesman for the Environmental Protection Department said the two-year second phase of the scheme had been rolled out, with the addition of the Leisure and Cultural Services Department and the Government Logistics Department as biodiesel users.

Dixon said he hoped the government would require all departments to adopt a 5 per cent mandatory biodiesel blending policy by the middle of next year.

Undersecretary for the Environment Christine Loh Kung-wai said she had recently met the bosses of all three biodiesel makers from used oil.

“Hong Kong is fortunate to already have three biodiesel producers,” Loh said. “We are actively discussing with the producers and other stakeholders to join up all the pieces in a new policy as part of the work of the government’s steering committee on recycling. A new policy can be expected in the foreseeable future.”

Loh would not comment on whether it would include mandatory biodiesel consumption.

ASB chose Hong Kong for its plant due to the high density of restaurants in a relatively small land mass, which lowers the logistics costs for collecting the waste cooking oil. Dixon said that even if Hong Kong did not implement mandatory diesel blending, ASB’s plant would still be profitable selling to Europe.

The company, 75 per cent owned by Bahrain-based Al Salam Bank and other Middle Eastern investors pulled in by the bank, is looking to build a biodiesel plant in another Asian city.

The Tseung Kwan O plant, with the capacity to churn out 100,000 tonnes of biodiesel a year, cost US$165 million to build, compared with an original budget of US$100 million. It was originally slated to come on stream in mid-2011. Construction was halted for a year due to cost overruns and funding shortages.

ASB aims to source 30 to 40 per cent of its feedstock from Hong Kong within two years, with the rest from Southeast Asian countries such as Singapore and Malaysia.

28 Oct 2013

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>