China’s Growing Methanol Economy

Could methanol be the feasible path toward replacing petroleum-based fuels?

Balancing dependence on Middle East oil against increasing fuel demand continues to challenge China in its ongoing urbanization and industrialization. In an effort to adapt to such limitations, China has increased production capacity and consumption of methanol. In less than a decade, methanol use in China’s transportation sector grew from virtually zero to replacing nearly 8% of the country’s gasoline requirement.

China’s approach may prove to be profitable and strategic. Research suggests that methanol fits within existing energy infrastructure, offers a convenient solution for efficient energy storage and most importantly, certain methanol fuel blends can be used in today’s internal-combustion engines. Demand in Asia is rising as methanol is increasingly used as more than a chemical feedstock.

“Methanol is seen as a strategic fuel by the rapidly growing nation due to its clean fuel benefits, favorable economics, the ease of adopting methanol in current fueling infrastructure and the advantage of being able to use alternative feedstocks in a nation that is lacking in domestic oil reserves,” said former Deputy Governor of Shanxi Province, Peng Zhi Gui.

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In 1995, the first methanol pilot project in China was initiated by Sino-American Scientific Collaboration.  Ford Motor Co. donated a methanol engine and assisted in developing the first methanol automobile in China. Direct blending with gasoline drives the recent growth in methanol demand. In 2009, national fuel blending standards for M85 and M100 went into effect across China, and a national M15 standard is currently in the final stages of adoption. These standards, along with the domestic availability of methanol and its lower cost compared to gasoline, will increase methanol’s fuel market share. In addition, methanol-blended fuel could be 50% cheaper than regular gas for drivers at the pump, depending on blend.

Global Methanol Production

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In 2010, China’s methanol production capacity reached 38.4 million tons and will increase to 50 million tons by 2015. The M15 blended fuel is already widely used in five provinces – Shanxi, Shaanxi, Zhejiang, Guizhou and Heilongjiang, with localized standards implemented by provincial governments.

Methanol is the simplest alcohol, with the lowest carbon content and highest hydrogen content of any liquid fuel. As such, it offers a substantial improvement in toxic emissions, eliminating extremely harmful aromatics like benzene and xylene, and the particulate matter present in gasoline and diesel fuel.

China also plans to invest $382 billion in innovative energy conservation and anti-pollution projects over the next four years. Methanol is biodegradable in both aerobic and anaerobic conditions posing little long-term threat to ecosystems because it is unlikely to accumulate in the environment.

China is edging ahead by actively restructuring the contours of the system, placing a focus on the real problem (oil), and diversifying the transportation fuel market.  The country has set a target of producing and selling 500,000 energy-efficient and alternative-energy vehicles a year by 2015, and five million vehicles a year by 2020. Improved methanol production capacities would provide China with a handy alternative to petroleum-based fuels and chemicals in a post-peak-oil scenario, or as an emergency reserve in a temporary oil crisis.

It is a concern that China primarily derives its methanol from coal. As a transportation fuel, coal-based methanol has a larger carbon footprint than gasoline and could trigger higher world coal prices. Natural-gas-based methanol is also an alternative to petroleum-based products. Outside of China, methanol is primarily made from natural gas. In the United States, increased supply of shale gas and other unconventional sources is expected to keep gas prices relatively low.

California promoted methanol as an automotive fuel in the 1980s and ‘90s. In fact in the early ’90s, methanol was a more accepted automotive fuel than ethanol in the U.S. and the U.S. even helped initiate methanol fuel programs in China. Very little data is available on how and why methanol policy and programs ended in the United States.

No matter one’s individual perspective — liberal or conservative — we need a concrete solution that encourages competition and innovation, ensuring Americans an affordable and stable supply of replacement fuels for our transportation needs. Methanol can be derived from many plentiful energy resources and give the oil fuels a real run for their money.