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Demands for Biomass Energy in Japan

After the 2011 Fukushima incident, Japan had enough political impetus to push through an energy market reform by implementing the FIT scheme. This scheme created massive incentives for utility companies to use renewable energy and biomass fuel in particular, over a long period. This scheme is much more effective in incentivizing the development of renewable energy technology and power plants compared to the previously used Renewable Portfolio Standards, similar to the South Korean Model. One noticeable change is that the FIT scheme allows for cheap long term contracts to be signed, which encourages energy companies to invest in large scale biomass power plants to make use of the government sponsored contracts.

As Japan implemented the FIT program, a massive spike in energy generated from biomass fuel is observed, which accompanies the large amount of new, FIT-approved thermal power plants that run on biomass fuel. This naturally leads to an increase in demands for biomass feedstock, both domestically and imported. The most common biomass fuel types being used in biomass thermal power plants include: Woody biomass, wood chips, wood pellets and palm kernel shells (PKS).

While most of the woody biomass and wood chips are used from other domestic industries, wood pellets and PKS used in power plants are mostly imported. While the demand for PKS imports is the highest among all biomass fuel types at the moment, the Japanese Ministry of Environment has been aware of the environmental implications of using PKS and have elected to impose stricter sustainability requirements, which will significantly affect the demands for PKS from Malaysia and Indonesia in the future. Wood pellets will likely replace PKS as the dominant fuel type imported, due to its energy content, burning efficiency and most importantly, environmental impacts upon production.

Until 2018, Canada has been the biggest exporter of wood pellets to Japan, but was overtaken by Vietnam, a relatively new player in the global wood pellet export industry. Vietnam managed to overtake Canada as the biggest exporter in 2019, due to its closer distance to Japan which reduces the cost of wood pellets. However, as Japan imposes stricter sustainability requirements, especially the FSC certification requirements, many producers in Vietnam may be challenged.

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