NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Biofuels have become a fashionable and controversial topic of late (just yesterday, the New York Times reported on resistance to ethanol in Iowa). Debates range from lauding the benefits of renewable energy sources to questioning whether biofuels will raise prices of staple comestibles, leaving millions to starve, or replace food-crop cultivation altogether. Concerns have also arisen about the cost and scalability of the technologies and the mass implementation of apparatuses required for replacing daily uses of fossil fuels on the large scale.

Yet one company recently added to the New Ventures China Portfolio seems to be escaping these conundrums, and providing reason to believe that biomass fuel, even in one of the most polluting developing countries on the planet, can be environmentally and socially and financially sustainable.Beijing Shengchang Bioenergy S&T Co. Ltd. is not only developing and marketing advanced biomass fuel technologies, but it is doing so with a business model that stands to benefit low-income groups as both suppliers and as a significant portion of its potential customer base.

Shengchang Bioenergy produces biomass fuel out of agriculture and forestry waste, made by compressing and refining saw dust, straw, and peanut shells sourced from local farmers. With special technology and equipment, Shenchang Bioenergy produces a fuel that is easily transported, easily stored, has a high degree of combustibility, and can even be used for biomass cogeneration. (Derek Newberry has also written more on Shenchang Bioenergy’s technologies in an article for New Ventures)

While expanding into the market on the fuel-supply side, Shengchang Bioenergy is aiming to build demand for its advanced combustion products currently under development: special, high-efficiency household heating and cooking stoves, industrial boilers, and biomass thermoelectric generators. This is where the BOP comes in, not just as raw materials supplier, but as the end-user and beneficiary of better technology.

There are currently 177 million households in China using wood and coal-fired stoves, which are inefficient in their use of heat energy, highly polluting, and are also major health hazards, especially for low-income families that use them within highly confined spaces. Studies cited in a report by the US National Academy of Sciences on the health impacts of domestic coal use in China reveal that coal stoves and small coal boilers alone provide more than 50% of the energy for urban households in China, and an additional 22% of rural households rely on coal. One report estimates that since about 70 percent of the Chinese population lives in rural areas, this means that roughly 400 million people in China are relying on coal for their domestic energy needs.

The company is currently designing various series of stoves to specifically meet the heating and cooking needs of different populations in China, spanning broad geographic and economic ranges – including rural, suburban, and urban low-income households. By combining advanced technology with specific knowledge about local use and practical design, Shengchang Bioenergy’s objective will be to tailor an environmentally-friendly concept to the needs and common usage patterns of multiple income groups. If it succeeds, it will prove that green technologies are not out of reach for developing countries, and in fact can be driving forces in creating greater economic opportunity and improving quality of life for the poor on a mass scale.