Power Producers Scour Forests as Burning Wood Gets Big

  • Success of incentives means biomass demand hard to meet
  • Wood pellet imports more than doubled to record in 2015

Showa Shell biomass power plant in Kawasaki City.

Photographer: Akio Kon/Bloomberg

With almost 70 percent of its land covered by forests, Japan is leading a drive to return to wood as a source of cleaner energy.

While projects in the U.K. and the U.S. are experimenting with biomass, Japan is giving favorable tariffs to power producers who burn leftover wood as a way to cut the country’s dependence on imported fossil fuels. 

It’s a program that’s so successful that local biomass producers already are having problems meeting demand, and researchers warn there may not be enough raw materials to feed the power stations now being planned. Some environmentalists even question whether the use of biomass is as carbon-free as advertised.

“There are already regions that have been unable to retain the same suppliers because of new projects being planned,” said Norichika Ando, an economist at the Norinchukin Research Institute Co. in Tokyo. “Some are trying so hard that they offer higher prices and seek subsidies” to transport fuel material from other regions, he said.

Even operators of coal-power plants are in on the game, seeking to mix wood pellets with the most-polluting fossil fuel to boost the environmental credentials of their facilities. The trade ministry has approved more than 2,000 megawatts of new woody biomass projects since the July 2012 introduction of incentives known as feed-in tariffs.

The approved capacity would require about 40 million cubic meters of wood material a year, according to estimates by the Biomass Industrial Society Network. That’s almost double Japan’s domestic wood production of about 23 million cubic meters annually.

japan energy wood
Wood pellets.
Photographer: Akio Kon/Bloomberg

Global Market

Biomass’s appeal isn’t restricted to Japan. In the U.K., Drax Group Plc has converted two coal units to burn wood pellets at its power plant in Selby, northern England. Global industrial wood pellet demand is expected to more than double by 2020 to about 29 million metric tons from about 13 million tons in 2015, according to Hawkins Wright Ltd., a consultant for the paper and bioenergy industries.

In the U.S., Ameren Corp., a Midwest utility, is exploring how to feed biomass into its existing coal plants. It’s working with Enginuity Worldwide, a Columbia, Missouri-based firm that can turn farm waste into a coal-like substance. “We kind of make coal out of anything,” said Nancy Heimann, the company’s founder.

In Japan, incentives to use biomass are leading to growing competition for raw supplies.

“The challenge is to secure a stable supply of wood materials,” said Makoto Yoshida, director of the wood utilization division of Japan’s Forestry Agency.

More Competition

While the overall need for wood products has seen little growth, there’s been robust demand for wood for power generation, Yoshida said. The result: more competition for wood material between power producers using biomass and the paper and plywood industries.

A 5-megawatt plant typically draws the 60,000 tons of woody biomass it requires a year from an area within a 50-kilometer radius. That limiting the number of projects in any single prefecture to as few as one to guarantee supply, Yoshida said.

The imbalance between supply and demand for woody biomass is also due to the
lack of good forest roads to ship resources efficiently, said Minoru Kumazaki,
chairman of the Japan Woody Bioenergy Association in Tokyo. “We don’t have the
infrastructure to take advantage of trees while they just grow bigger," he said.

Power Prices

Power producers receive 32 yen (26 cents) per kilowatt hour for burning timber from forest thinning for plants 2 megawatts or larger in capacity. The tariff is higher for smaller stations -- 40 yen.

Larger biomass power stations are counting on supply from abroad. According to the finance ministry, wood pellet import more than doubled last year to a record 232,425 tons.

Showa Shell Sekiyu K.K.’s 49-megawatt biomass power plant, one of the largest in Japan, uses pellets mainly from North America and palm-kernel shells from Southeast Asia.

Imports Rise

“We understand that it’d perfectly fit the purpose of the feed-in tariff to use domestic timber,” Minoru Yagyuda, an executive officer in charge of the power business for Showa Shell, said during a tour of the plant in Kanagawa prefecture near Tokyo. “Realistically speaking, there is no way for us to secure 200,000 tons of fuel at home because Japan doesn’t have that many wood pellet manufacturers.”

There’s also the issue of competition, with biomass power plant operators vying with coal plants for fuel. That’s because power producers are under pressure to cut pollution and increasingly looking at mixing biomass with coal.

Some environmentalists question if biomass should be labeled as a carbon-free source of energy.

“Most calculations claiming that bioenergy reduces greenhouse gas emissions do not include the carbon dioxide released when biomass is burned,” according to a report from the World Research Institute, a Washington-based researcher that advises on sustainability. “If those plants were going to grow anyway, diverting them to bioenergy does not remove any more carbon from the atmosphere.”

Relying on imports for fuel, co-firing at coal plants, and chopping down trees that are too good to be burned are all deviations from what woody biomass power generation is meant to be, said Hisashi Kajiyama, president of Bioenergy Research & Investment Inc., a consulting company in Japan.

“You need to take into account how to reduce carbon dioxide emissions and promote regional industries when you try to expand clean energy,” Kajiyama said. “You don’t chop down trees just for the sake of power generation.”

Before it's here, it's on the Bloomberg Terminal.