September 09, 2015

China Expected to Expand Use of Automotive Methanol Blends

Stratas Advisors

This is condensed from a recent report from our Global Alternative Fuels service. Members have access to the complete report, including a policy and market overview, price comparisons and recent developments related to methanol use.

China is the world’s largest user of automotive methanol fuel. While M15 is the main methanol blend available in select cities and provinces, M25, M30, M85 and M100 are also on the market. Methanol is commonly blended with RON 93 gasoline, although other grades such as RON 90 and RON 97 are available. 

In China, methanol is mainly produced from coal. As such, M15 is sold commercially mainly in the coal-producing provinces such as Shanxi and Shaanxi while pilot programs continue to run in other provinces including Zhejiang and Guizhou. 

Chinese Provinces and Cities with Methanol Blend Pilot Programs

 Provinces  Cities  Pilot Program  Available Blends  Planned Blends
 Shanxi Taiyuan, Yangquan, Linfen, Pucheng, Datong, Shuozhuo, Xinzhou, Puzhong, Changzhi, Yuncheng, Luliang  Implemented  M15, M30, M85(1), M100(1)   -
Shaanxi  Xi'an, Baoji, Hanzhong  Implemented   M15, M25, M85(1), M100(1) 
 Zhejiang Quzhou, Hangzhou, Huzhou, Jiaxing, Taizhou, Jinhua   Implemented M15, M30 
Guizhou  Guiyang, Qiannan, Qianxi and Tongren  Implemented  M15,  M85(1), M100(1) 
Gansu  Pingliang, Lanzhou   Implemented M85(1), M100(1) 
Hebei Tangshan Yet to start  - M15 
Jiangsu  Wuxi Yet to start -  M30
 Ningxia Yinchuan   Yet to start  -  M15

Note: (1) ongoing trials

Source: Stratas Advisors, January 2015

Only companies approved by the provincial governments are allowed to blend methanol with gasoline. Except in Shanxi province, where almost all RON 93 is M15, methanol blends can only be found at selected stations in other provinces. Since 2002, Shanxi province has had the most comprehensive experience in blending methanol as M15 (RON 93).

The use of methanol blends in China is expected to expand in the near future. The Shanxi government set a target for new energy vehicles (including methanol-fueled vehicles) to account for a minimum of 40% of Taiyuan’s government agencies and public institutions’ purchases in 2014-2016. New energy vehicles should account for a minimum of 30% of new purchases by government agencies and public institutions in Datong, Changzi and Yuncheng cities with other cities at a minimum of 10%. These new energy vehicles include passenger cars, buses, taxis, garbage trucks, goods vehicles, airport ground transport, police patrol cars and other urban transport and public service vehicles. 

According to the statistics from pilot cities, operating a methanol-fueled car costs CNY0.4 (US$0.07) per km while operating a gasoline car costs CNY0.7 (US$0.11) per km. As such, Stratas Advisors expects more cities to join the methanol vehicles pilot projects in the near term.

As with other alternative fuels, the expansion of methanol fuel neat or in high blends faces challenges. Even though methanol’s refueling time is almost the same as that of gasoline, diesel and biofuels, investors have been put off by the capital investment needed to build new infrastructure and the small fleet size. Unless governments provide support, such as mandating the use of methanol fuel or giving subsidies to build filling stations, the use of methanol fuel is unlikely to significantly reduce the consumption of gasoline and diesel. 

In addition, methanol fuel faces stiff competition from ethanol and natural gas. While ethanol is categorized as renewable because of its bio-based feedstock, most methanol is produced from coal or natural gas. Another obstacle is the hesitation of auto manufacturers to allow high blends of methanol in their vehicles because of their perception of methanol as a corrosive fuel component.

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