Wood Pellet Market Projection Until 2025 And Indonesia Opportunities

Making of market projection will be needed for all parties involved in the wood pellet business, especially the producers of wood pellets itself. Increasing or reducing production even stopping production could be done if the situation and conditions support it. A projection capable of presenting accurate data will facilitate the decision making. The level of accuracy of precise data and sharp analysis and presented in an informative and attractive make a projection so valuable and made a major reference for all parties involved in this business. Below we try to present the projection of wood pellet market until 2025 which is collected from various sources and personal experience. May be a useful projection for the reader.

Wood pellet market is generally grouped into two, namely industry and heating. The industrial sector is electricity generation, while the heating sector is heating and boiler. The quality of industrial wood pellets is lower than the premium wood pellet. The need for wood pellets for industries is usually very large even the delivery or transportation using bulk shipment while for heating needs smaller amount usually packed in jumbo bag and then arranged in containers. Another difference is that the wood pellets of the marketing industry are heavily influenced by the policy of the country concerned (policy driven) while the wood pellet for heating is strongly influenced by the price of other fuels, such as petroleum and gas. The above things underlying the characteristics of the wood pellet market.

The last few years the global wood pellet market (both industrial and heating sectors) does not seem to be exhilarating and there are even excesses in some places. Why does this happen? Firstly, because a number of policies for the use of wood pellets have not been effectively implemented because the power plants have not yet been completed or in the development stage, and some power plants are still in the co-firing test phase with wood pellets. Second, the price of cheap competitor fuel, especially petroleum which even reached its price of 30 dollars per barrel that is in early 2016. This condition even to shift the position of wood pellet as the cheapest fuel for the heating sector. When oil prices more than 63 dollars per barrel it is predicted the wood pellet market will improve. And thirdly, due to climate change, the winters in Europe are not in recent years warmer or less cold than before. Of course this condition also reduces the consumption of wood pellets. Logically when the above conditions can turn out otherwise the wood pellet market will improve.

Different regions and countries have their own market characteristics. Europeans generally use wood pellets for both industry and heating, and in particular Italy uses wood pellets mostly forheating. The wood pellet stove there can even be operated with applications on smartphones or gadgets. While the market in Asia the use of wood pellets a lot for heating especially for boilers, drying and cooking but very rarely for the use of space heaters. In the future, the use of wood pellets in Asia will be dominated for the industrial sector, ie power plants when power plants in Japan and Korea and even China use wood pellets for fuel. As for the American market, especially the United States and Canada the use of wood pellets mostly for the industrial sector even in the next few years there is a tendency to be improved. What about the conditions in Australia and Africa? So far there has been no clear policy related to biomass fuel especially wood pellet in both continents. Its use is limited to heating and the portion is still small and smaller for the industrial sector at power plants.

The year 2020 is an important year for the wood pellet market because that year most of the power plants built are already in operation including a number of policies can be effective as they are supported by these generating facilities. The year 2020 also means when massive wood pellets start, because the need for wood pellets has increased significantly. FutureMetrics estimates for wood pellet demand in 2025 will be 30 million tons, while RISI writes its 50 million ton estimated by 2024 and Viridis Energy says the value of this business will reach 9 billion US dollarsby 2020. Futuremetrics in more detail also provides market analysis in Canada and Japan. Several other indications add to the accuracy of the analysis that Korea invested $ 11.6 billion in 2016 for alternative energy and according to the Korea Forest Biomass Association it will increase its import wood pellet from 1.5 million tons in 2015 to 8.5 million tons in 2022. To be able to capture these opportunities certainly need preparation from this moment, especially for the producers of wood pellets.

Where and who is the largest wood pellet user today? Britain is currently the largest wood pellet user with three power plants, Lynemouth, MGT and Drax. The policies of each country are more unique and specific to the conditions of the country , although it usually refers to more macro policies, such as occurs in EU countries. In European bioeconomy policy they have a target for 21% of electricity and 20% of heating comes from renewable energy, then each country has its own policy that refers to the collective agreement. The Netherlands with its co-firing program will also increase the demand for wood pellets, although it remains unclear, but if it does this will increase demand for wood pellets by 3.5 million tonnes / year. Likewise co-firing at Langerlo in Belgium will also increase the demand for wood pellets as well. Japan and South Korea that declared the decrease of CO2 emission have regulation related to usage of biomass fuel especially wood pellet.

European pellets production in 2015 is 14.1 million tons, while consumption reaches 20.3 million tons meaning less 6.2 million tons. Use for the heating sector reached 10.3 million tonnes, or 51% of total consumption or beat the use of pellets for industries such as power plants such as Drax. If every home in Europe consumes 2.5 tons of pellets per year, then there are about 4 million consumers. While the six largest pellet producers in Europe namely, Germany (2 million tons), Sweden (1.7 million tons), Latvia (1.6 million tons), Estonia (1.3 million tons), Austria (1 million tons) and France (1 million tons). And for more details the major pellet consumer countries for the European heating sector are Italy (3.1 million tons), Germany (2.3 million tons), Denmark (1.8 million tons), Sweden (1.6 million tons ), France (1 million tons), and Austria (0.9 million tons). Heating stove (pellet stove) also beat the boiler. Italy with 95% pellet consumption for stove, and boiler only 5%, while Germany 60% wood pellet with stove and boiler reach 40%.

China has so far been unclear about its biomass fuel-related policies, both the production potential and the use of wood pellets. But the data that the forest area in China is so limited that it will be difficult to produce wood pellets in large quantities, but agricultural waste is very abundant. This pellet from agricultural waste has limitations on its quality, ie high chlorine which is corrosive to the metal pipe boiler and silica is abrasive. The agro-waste pellet or pellet fuel from these agricultural wastes becomes unusable in the pulverized system, since it is mainly a chlorine problem, or if it can be used the portion is so small that the problems can be minimized. Another problem with low melting ash temperature will cause slag or clinker which may damage the combustion equipment at the plant. So that agro-waste pellets can be used on non-pulverized systems such as combustion with moving grate (chain grate) and gasification. Although there is always amarket for every pellet fuel, but because the majority of existing power plants use pulverized systems so it is necessary to replace the system to use agro-waste pellets and this is of course not easy, fast and cheap. It also makes the target of reducing CO2 (Carbon Reduction) is also difficult to meet. Another thing that can be done is to use wood pellets and it means that import is very much needed. High silica content in agricultural waste becomes a problem especially during production or shoveling and its use. Examples of high agricultural waste silica content is rice husk. Still according to FutureMetrics calculations if the portion of co-firing wood pellet is only 5% only and that too is done only by 16% of coal power plant in China, hence it can cause wood pellet demand almost 40 million ton / year.

 

Indonesia's potential is good enough to become one of the world's major player of wood pellets. With a tropical climate, high rainfall, fertile soil, geographical location is quite close to Japan, South Korea and China and the area of ​​good plantation industry (HTI) which covers about 80 million hectares, polyculture with oil palm plantations, marginal that can be used for energy plantations. Why use energy plantations to supply woody raw materials for wood pellet production? This is because with the energy plantation the supply of raw materials for wood pellets can be large and stable for a long period of time, more detail for energy plantation can be read here. Indonesia is also known as the largest producer of CPO or crude palm oil with production of 23 million tons / year, but with monoculture in large plantations the plantation will be susceptible to disease and its production is not optimal, for that polyculture with energy plantation is the best solution for more detail can be read here. Forests of industrial crops that also millions of hectares can also be optimized with energy plantations, for more detail can be read here. Meanwhile, to design wood pellet production from energy plantation can be read here.

Likewise the unused fields, marginal land to critical land will also provide great benefits with the energy plantation. One more thing is the consumption of protein, especially meat for the people of Indonesia also still needs to be improved because it is below the average world consumption, which is 16 grams / day, while the world average of 31 grams / day. Big sheep farms can be made by feeding the leaves of energy-rich leguminoceae plantation crops, also low in tannins and grasses with grazing in the plantations. The leaves are rich in protein has a high conversion into lamb meat, which later on the meat is eated by humans. This protein is very important for the body because it works for the growth of cells and the sheep will also be our best treasure. Do not let Indonesia want to boost meat production with the farm, but on the one hand also boost imports of animal feed such as corn and soybeans due to less availability of domestic animal feed. In addition, sheep feed with grass and foliage will make the meat has a ratio of omega 6 to omega 3 close to 1, so it will be the world healthiest food. Unlike if the cattle are fed grains then the ratio of omega 6 to omega 3 large, can be more than 10 and this is also less good. 

Will Indonesia also be barrier-free to become one of the world's largest producers of wood pellets? The answer, of course not. Major countries such as Canadian wood pellet producers who are rich in woody biomass from forestry also do not remain silent and try to seize and lead the world wood pellet market. Even Canada has targeted Europe and Asia as its wood pellet market, namely wood pellet production from western Canada for Japanese and Korean markets and from the eastern part for the European market. Meanwhile, domestic policy also requires wood pellets because pan-Canadian climate deal is targeting coal-free power plants by 2030. Europe is still the most important market destination for export wood pellets from Canada, accounting for 80% of its export volume. And almost all is for the electricity industry sector, namely in England, Belgium and the Netherlands and only slightly for the heating sector in Italy. Seeing opportunities for the shortage of wood pellet supply in Europe, some European countries have also started emerging as wood pellet producers by 2016, such as Ukraine 360 ​​thousand tons (plus 1 million tons of pellet fuel made from agricultural waste such as straw from wheat, sunflower husk), Serbia (250 thousand tons), Croatia (232 thousand tons), and Slovenia (110 thousand tons). Estonia and Latvia, two small countries in Europe also began to become rivals for Canada. While other countries in Europe have also started to increase production. What is the current production of wood pellets in Indonesia? Wood pellet production in Indonesia is relatively small approximately 80,000 tons per year while Malaysia has more than 180 thousand tons per year and mostly for the Korean market which is more than 70% both from Indonesian and Malaysian producers. While the export to Japan is still very small. Finally there are some things to note for the producers: first, evidence of sustainability, the two qualities, the three strengths and financial reliability, and the fourth that is the competitive price.

In addition to Canada, the United States and Europe are the largest producers today, as well as users of wood pellets in large quantities. But there is a difference between the three, which Canada exports most of its wood pellets, many Americans use wood pellets domestically, while Europe still needs very much wood pellets from other countries. There are also a number of wood pellet producers in Asia, more specifically in Southeast Asia such as Malaysia, Thailand and Vietnam. The land area in Indonesia and the various conditions that support it make the potential to become a leader for the production of wood pellets in Southeast Asia is very large. Another factor is the low target of the Indonesian government for biomass energy in the national energy mix which according to Indonesian PresidentialRegulation no 5 of 2006 only 5% and even then in 2025, so the majority of wood pellet production can be directed to big wood pellet market like Japan and South Korea. Meanwhile, if the heating market is more influenced by the price of energy or fuel of competitors, not because of policy or regulation, the price of competitor's fuel such as coal, petroleum, gas and even wood will determine the amount of wood pellet consumption in the country. Conditions in Indonesia basically also support for the wood pellet market for heating both for industry and household that use LPG (propane), because the price of wood pellet is much cheaper in terms of energy content. Unfortunately not many are working on this market, this is because there are several barrier factors that are limited supply of wood pellets and cook stoves are practical for the sector.

Conclusion: Indonesia has a great chance to become a major player of wood pellet both as producer and user as well. It is supported by a number of natural conditions, land area and geographic position. But since there is no clear policy for the use of fuel or wood pellet energy sources for power generation and national energy policy under Presidential Regulation no 5 of 2006 only targets 5% for biomass energy in renewable energy mix so that the role of wood pellet producers with the majority of their products for export market is more a priority. Energy plantations as a way to produce the raw material of wood pellet industry with large quantities, continuous and stable and the potential to produce food in the form of protein from sheep meat is the best choice. Improvement of generations to a glorious civilization to light the world, one of them with food in the form of meat that halalan thoyyiban, namely healthy, delicious and quality with sufficient nutritional content of the protein.Energy development with wood pellet production derived from wood in the trees in the energy plantations  are  also in line with the instructions of theQur'an.