Buy Wood Pellets or PKS (Palm Kernel Shell)?

The need for biomass fuel as a decarbonization effort because it is a renewable fuel that is carbon neutral is increasing. Two biomass fuels that are popular in the world and compete fiercely are wood pellets and palm kernel shell (PKS). Under normal conditions or without a spike in demand, the price of wood pellets is usually more expensive than PKS. This is understandable because wood pellet production requires more effort than PKS. Wood pellet production requires a number of equipment with an expensive investment, while PKS only requires minimal equipment, namely just a screening/sieving machine.

But what if the prices of wood pellets and PKS are almost the same or even PKS is even more expensive? This can happen due to several factors, namely first, the influence of market demand. High market demand, especially PKS from Indonesia and Malaysia, means supply is reduced or inadequate. PKS production in Indonesia and Malaysia is indeed much greater than wood pellet production from these two countries. Apart from the larger production volume, factors such as availability and continuity (long-term security of supply) can be guaranteed more than wood pellets. This is because it is estimated that there are 1500 palm oil mills in Indonesia and Malaysia that produce PKS which is a by-product or waste of palm oil mills. This allows for long contracts between sellers or suppliers (exporters) and buyers who are usually not end users but trading companies in Japan and Korea.

Loading PKS for export with transhipment (ship to ship)

The second factor is levy and tax. PKS exports in Indonesia are subject to levy and tax whose value is correlated with the price of crude palm oil (CPO). This is because PKS in Indonesia is included in the palm oil derivative product category, whereas in Malaysia it is not subject to these levy and tax, because PKS in Malaysia is included in the palm oil waste category. When levy and tax are high, the price of PKS will automatically become expensive. This levy and tax factor is something that PKS exporters cannot control. Through the APCASI organization (Indonesian Palm Kernel Shell Entrepreneurs Association) they are fighting for levy and tax to be more measurable or cheaper, even if they can be eliminated like in Malaysia.

Basically buyers will buy the best possible goods at the cheapest possible prices, or better quality goods but cheaper prices. The quality of wood pellets is better than PKS, namely in terms of calorific value, ash content, shape uniformity and moisture content. However, due to volume factor and continuity (long-term security of supply) which are often or still widely in doubt, the choice to go to PKS is still being made. To overcome this, wood pellets production must meet production capacity with a reliable source of raw material supply. Production of wood pellets from energy plantations is the solution.

With wood raw materials from energy plantations, the supply of raw materials will be more stable, unlike those that rely on collecting wood waste from sawmills or wood processing industries. With Indonesia's production forest area reaching tens of millions of hectares, of course land is not a problem in wood pellet production. Wood pellet production centers can be created on these production forest lands, for more details, you can read here.