Oji Pushes Biomass Power to Tap Japan’s Renewables Subsidies

Oji Holdings Corp. (3861), the world’s largest corporate user of renewable energy, plans to sell clean power in Japan to take advantage of government subsidies and counter a sales slide in mainstay paper products.

Oji, the second-biggest paper producer by revenue, plans to spend 20 billion yen ($234 million) to build two so-called biomass power plants fuelled by wood on the northern island of Hokkaido and the southern island of Kyushu, Shoji Fujiwara, chairman of Oji Green Resources Co., said in an interview.

It plans to start selling electricity from the units in about three years as part of a 60 billion yen investment in renewable energy, including solar, geothermal and hydro. Oji joins companies such as mobile phone provider Softbank Corp. (9984) to battery maker GS Yuasa Corp. in renewable energy investment after the government incentive program started on July 1 to help cut reliance on atomic power after last year’s Fukushima nuclear disaster.

“So far renewable energy has been used internally, but we intend to aggressively promote sales from now on,” Fujiwara said in the interview. “We have a long history of biomass power generation and own the operation technology and see this as an advantage.”

Potential customers for power from the two plants would include Kyushu Electric Power Co. (9508) and Hokkaido Electric Power Co. (9509), with potential sales of 2 billion yen a year to each utility, Fujiwara said.

Bark Power

Oji, founded in 1873, began biomass power generation at its Tomakomai newsprint plant in 1910, using bark from pulped logs as fuel, according to its website and Fujiwara.

The spread of mobile devices and a shrinking population has curbed demand for paper in Japan by about 16 percent over the past five years, prompting Oji to look for new sources of revenue and to pare costs. The company last month said it would cut 2,000 jobs, or 10 percent of its domestic workforce over three years, mostly by not replacing all retirees.

Both bark and waste liquor from paper manufacturing are regarded as biomass fuel and among sources to cut dependence on fossil fuels to reduce greenhouse gas emissions. Oji has its own power generation equipment at paper plants and already sells extra electricity to utilities, Fujiwara said.

A government task force forecast in September that enough electricity could be generated to serve 4.6 million households by tapping Japan’s unused biomass, including food waste and timber from thinning out forests. That would be equivalent to 5 percent of the nation’s greenhouse gas emissions, the task force concluded.

Oji Holdings rose 14 yen, or 5 percent, to 294 yen as of 11:09 a.m. in Tokyo trading, paring its decline this year to 26 percent. The Nikkei 225 Stock Average gained as much as 1.4 percent.

Incentives

The government incentive program, known as a feed in tariff, requires utilities to pay above-market rates to companies producing power from renewable energy, with the added cost passed on to consumers as surcharges.

The tariff for power derived from unused wood for this fiscal year through March is 33.6 yen a kilowatt hour for 20 years compared with 14.59 yen industrial users paid for electricity during the 12 months ended in March 2012. The tariff for solar is 42 yen, the highest among industrialized countries. The tariff for wind is 23.1 yen and geothermal is priced as much as 42 yen for 15 years.

Oji is considering two more solar projects in Hokkaido’s Tomakomai city and Tokushima prefecture on the southwestern island of Shikoku, Fujiwara said. It plans to start a solar plant in Hokkaido’s Shiranuka town in August next year, with annual output capacity of 1.4 gigawatt hours, Oji said Nov. 22.

For hydro power, the company will renovate plants in Hokkaido to boost capacity by 20 percent to 1.2 million gigawatt hours by March 2016, Fujiwara said.

Oji said in June it’s examining the potential to produce geothermal power from its forest in Biei town of Hokkaido, together with general contractor Kajima Corp. (1812) The project would take about 10 years, Fujiwara said.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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