Will Indonesia's Wood Pellet Production Beat Vietnam?

Vietnam's wood pellet production began in 2012 with a very small capacity of around 175 tons/year and now in 2021 or about 9 years later, its production has reached around 4.5 million tons/year, placing Vietnam in second place as the world's wood pellet producer after the United States. The total production of 4.5 million tons/year is supplied from 74 wood pellet factories in Vietnam. In 2020 exporting wood pellets of 3.2 million tons to Japan and Korea for power plants with an export value of close to USD 351 million. In addition to Korea and Japan, Vietnam's wood pellets are also exported to Europe.

Initially, Vietnam's wood pellet production used waste from the furniture industry. Furniture waste in the form of sawdust from the industry has dried and the particle size is suitable for wood pellet production, so equipments such as hammer mill and dryer are not needed. Many Vietnamese wood pellet factories at that time did not have the hammer mill or dryer. With raw materials that are ready to be pelleted, the cost of producing wood pellets is very cheap, plus labor costs are also cheap. But as the demand for furniture industry waste for wood pellet production is getting higher, the availability of these raw materials is getting scarcer, so that new wood pellet factories can no longer use these wastes. Other wood processing industry wastes such as sawmills and veneer factories also become raw materials. Furthermore, with the increase in wood pellet production, forest wood wastes and other logs become the next source of raw materials. This also makes production costs increase because they need equipments such as hammer mills and dryers so that the raw materials are ready to be pelletized.

Vietnam is the largest exporter of wood furniture to the United States, surpassing China. In 2020, Vietnam's wooden furniture exports to the United States reached more than USD 7.4 billion, an increase of 31% compared to 2019. Meanwhile, China exported wooden furniture worth USD 7.33 billion in 2020. Although the difference is only small, it proves about growth of Vietnam's growing wood furniture industry. Meanwhile, the export of Indonesian furniture and handicrafts according to HIMKI (Indonesian Furniture and Handicraft Industry Association) is estimated to reach USD 2.75 to 3 billion this year. According to Abdul Sobur, president of HIMKI, the furniture and handicraft industry is an important industrial sector and has become a pillar in the current pandemic era. With Indonesia's land area reaching 1.9 million square km or more than 5 times that of Vietnam, Indonesia's potency to develop the wood pellet industry is very potential for Indonesia. In addition to utilizing biomass waste from the furniture and handicraft industries, the wood processing industry, and forest wastes, energy plantations are also very potential to be developed in Indonesia. One of the advantages of Vietnam compared to Indonesia is its position which is closer to Korea and Japan so that the cost of transporting wood pellets to buyers or users is cheaper.

With this land area, Indonesia has the potential to develop energy plantations for massive wood pellet production. Even the energy plantation can be made from ex-coal mining land which covers an area of about 8 million hectares, for more details read here. Although currently Indonesia's wood pellet production is still around 100-200 thousand tons / year or like Vietnam’s wood pellet production in 2012 but with this huge potential, Indonesia's potential to become the world's main producer of wood pellets is also large, even becoming a leading country in energy use of biomass. The cofiring program at a number of coal powerplants in Indonesia also encourages the use of biomass energy, especially wood pellets. There are 114 coal powerplants units owned by PLN (Indonesia state owned electricity company) that have the potential for cofiring spread across 52 locations with a total capacity of 18,154 megawatts (MW) with a target for completion in 2024. Energy plantations in addition to supporting business & energy security, should also support the livestock sector, especially ruminants for more details read here, so that food security to achieve self-sufficiency in meat can be done. So can Indonesia surpass Vietnam's wood pellet production? Of course it can, but it takes a lot of extra efforts, and it takes a long time. But at least if Indonesia promotes its wood pellet production, there will be many benefits, including economic, social and environmental.