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JFE Unit’s Boiler Orders to Surge as Biomass Takes Hold in Japan

JFE Engineering Corp., a Japanese builder of power plants used to process biomass into fuel, said orders for its boilers will be twice as big as forecast in June as subsidies encourage companies to invest in clean energy.

For the 12 months ending March 31, the unit of JFE Holdings Inc. (5411) will receive 20 billion yen ($226 million) of orders for boilers using wood, sewage sludge and garbage to produce power, compared with a June forecast of 10 billion yen, Managing Director Masumi Sekiguchi said during an interview in Tokyo. The unit expects similar orders next year, he said.

“We’ve got so many inquiries that well surpassed our production capacity,” Sekiguchi said in the Jan. 15 interview. “We are unable to respond to all of them.”

The surge in orders shows burgeoning interest in biomass as an alternative source of power following the introduction of a feed-in tariff program last year that pays renewable-energy generators above-market rates for their output.

A government task force in September forecast that tapping Japan’s unused biomass -- including food waste and timber produced by thinning out forests -- could produce enough electricity to serve 4.6 million households.

JFE Engineering plans to design, construct and operate two biomass power plants in the western and eastern regions of Japan, one of which is to start operations in 2015 as part of a marketing push and as a way to add a stable revenue source by selling power, the executive said. The company set up a biomass business department in April.

Biomass Investments

Oji Holdings Corp. (3861), the world’s biggest user of renewable energy and Japan’s biggest producer of paper products, and Sumitomo Osaka Cement Co. (5232) are among Japanese companies that plan to sell clean power in Japan as domestic demand for their mainstay products stagnates. Japan introduced the feed-in tariff incentive program on July 1 to help cut the reliance on atomic power after the Fukushima nuclear disaster in March 2011.

JFE Engineering’s boilers are designed to operate using as much as 80 percent of their fuel source from unused wood and the rest from other materials such as palm shell, waste plastic and coal, according to Sekiguchi.

Japan will add 90,000 kilowatts of biomass capacity by the end of March, bringing the total to 2.19 million kilowatts or 4.3 percent more than the previous year, according to a Dec. 14 estimate by Japan’s trade ministry.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net

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

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