Surplus Conditions, Why Import? Does Not Make Sense!!!

It is common practice that a country always protects its domestic products. Developing and increasing the quality and quantity of domestic products is one of the country's responsibilities in the economic field. It is strange and implausible when a country has a surplus of certain products, but on the other hand it imports similar products. This, of course, besides damaging the economy also directly affects the producers. The easiest example is in food or agricultural products. As an agricultural country producing rice when the surplus is clear, there is no need to import. Rice produced by farmers is not bought as well as sugar cane and so on, if at the same time a surplus such as a harvest is imported similar products. This is an economic murder for these farmers.

When the market goes increasingly liberal, the chances of cheating are also getting bigger. It could be that a country makes a hoax that discredits certain state products to protect the country's products. Especially if this is done by a large influential country. Of course this has a negative impact on the target country products so that the product does not sell well in the market or at a minimum the price falls. The evil trade politics are mostly done to bring down business opponents. Such efforts should not be carried out, but can use other better methods such as providing incentives for producers or users of domestic products. This further encourages the use of domestic products and revives the country's economy without harming other countries.

Recently Korea made a slight revision of the use of wood pellet fuels. Wood pellets produced from within the country are prioritized over imported products. This has encouraged the growth of the wood pellet industry in the country. With the large amount of wood pellet needs, it is very likely that the country will still not be able to meet its needs due to the lack of raw materials related to its natural factors. This is how it keeps them imported. But with this policy, Korea has taken sides with its domestic industry. As more and more countries in the world use wood pellets, wood pellet producers can also choose buyers at the best prices.

PKS For CFB Powerplant

49 MW Japan Biomass Powerplant
Operates Since 2015 That Use PKS As Fuel

The fluidized bed combustion (FBC) technology is not new since it has been used since 1960 to burn city waste and industrial waste. After proven successful, then made more than 300 units worldwide. The advantages of this technology are higher fuel flexibility, high efficiency due to good mixing, relatively low combustion temperature so as to minimize the problem of ash deposits due to melt and the use of small excess air, also increasing the efficiency and reduce the resulting flue gas. FBC technology is suitable for large capacity that is above 20 MW. In the development of this technology is divided into 2, namely bubbling fluidized bed (BFB) and circulating fluidized bed (CFB). In general the difference is not much, such as fuel size, unit construction and air-fuel ratio. PKS (palm kernel shell) or palm shell is more suitable for CFB powerplant because its size is less than 4 cm. The power plants in Japan in particular, which use PKS or palm shells as fuel because they use this CFB technology.

With relatively low operating temperature ie 650-900 C then the ash problem can be minimized. Certain biomass fuels sometimes have high ash levels and ash chemicals that potentially damage these generating units. In addition, the fuel cleanliness factor is also very important, this is because technically certain impurities such as metal can close the air pores on the perforated plate of FBC unit, whereas air, especially oxygen is absolutely necessary in the combustion process and also the making the fuel bed in fluidized condition. The requirements for clean fuel must be met by the provider or seller of the biomass fuel, therefore the purchasers require an acceptable amount of impurities (contaminants), ranging from less than 1%. Cleaning of PKS is done by sifting (screening) either manual or mechanical machine, for more detail biomass fuel cleanliness problem can be read here.

In addition to PKS, pellet fuel from agricultural wastes or agro-waste pellets such as EFB pellets that have a high ash content and low melting point can also be used and not to worry for the fuel with this technology. Agro-waste production can be encouraged if there is a buyer, namely a biomass power plant with CFB technology. Although agricultural wastes are abundant in Indonesia but generally only burned or in pile only, because they are considered as a problem or pollutant. Why are these wastes not processed into pellets? One is because they have not found a market or buyers, although there is basically there's always a market for every type of pellet fuel. While the PKS that can be produced in Indonesia with the current palm oil plantations of 12 million hectares is estimated to reach 10 million tons / year, can be directly used for the power plant CFB. This is why the PKS is more sought after by current buyers.

The weakness of the CFB power plant is the high concentration of the flue gas so that the dust precipitator and the boiler cleaning system must be able to work efficiently. In addition the bed material is also lost with ash, so periodically need to be added again. Bed material commonly used is silica sand and dolomite. To reduce the cost of bed material usually reused after separated with ash. The technique is that the ash mixture is separated from a large size material with fine particles and silica sand in a water classifier. Next the fine material is returned to the bed. More specifically, CFBs are more efficient and less flue gas than BFBs so that boilers and flue gas cleaning systems can be designed to be smaller.

Biomass fuel gets a 4.3% share in Japan on their 2030 energy projections. This means that biomass accounted for 4.3% of 245 million MW per year with renewable energy or about 6,000 MW of biomass. To reduce CO2 emissions from coal Japan also make regulations on the efficiency of the coal power plants, to a minimum of 41% by 2030 while most of the current coal power plant efficiency is around 30-35%. Currently power plants that have an efficiency of more than 41% are only ultra supercritical pulverized coal. Modification of power plants can also be done to improve the efficiency, but certainly require more costs, so that the condition is increasingly becoming the driving force of biomass power generation especially CFB powerplant and the effect of increasing PKS demands. 

Wood Pellet, PKS and Biomass Power Plant Market in Japan

PKS (Palm Kernel Shell) to be a hot topic of renewable energy source or fuel commodity currently in Japan. This is because PKS is the cheapest biomass fuel and is currently still available in large quantities. PKS is a waste of palm oil mill from CPO production. So it is automatically PKS is widely available in areas of palm oil mill or CPO producers, namely in Indonesia, Malaysia, and Thailand. Selection of PKS as fuel also its characteristics that can be poured, high calorific value and high density also. 

What about wood pellets? The world's leading producer of wood pellets today, certainly not Indonesia or other Southeast Asian countries, but North American and Scandinavian countries. Even for Indonesia itself wood pellet is a new thing, so its production capacity also not big. Wood pellet price is more expensive than PKS. Most wood pellets are produced in Indonesia from wood waste such as sawdust, wood shaving, plywood waste and so on. The development potential for quantity enlargement is also very possible with energy plantations. Technically the properties of wood pellets are not much different from the PKS.

Japan biomass power plant status map, red means already operating, yellow means in the development stage, blue means in the planning.

Biomass is one of the alternatives  fuel of power plants in Japan, following the accident or destruction of the Fukushima nuclear power plant (NPP) in 2011.  PKS becomes the favorite choice of biomass power plants there. Most of these biomass power plants use PKS as their energy source, and only a few operate with wood pellets. The large number of biomass power plants built, automatically also requires a lot of fuel supply. Most of the biomass power plants are built in 2015 and by 2017 some of them are in operation and by 2019 it is estimated that they are all operating, so it can be imagined the need and competition to get the supply of the PKS.

Japan is a country that almost all rely on imports to meet domestic needs, this is because the potential of the natural resources is minimum there, including the energy sector. With a population of approximately half of Indonesia, their energy consumption is almost 5 times Indonesia, so practical energy needs including fuel is also huge. The biomass power plant that uses wood pellets predicts that in the next 1 - 2 years there will be a shortage of supply of PKS, so early on it has anticipated, although at present the advantage of selling electricity is smaller, because of its more expensive raw material (wood pellet) prices. With this experience they will confident if next years wood pellets become more common fuel. 

PKS must meet the specifications before being exported to the destination country. Some key specifications for PKS are: moisture content, calorific value and impurities or contaminants (foreign materials). All three variables must meet a certain level to achieve export quality. Japanese markets or their consumers generally require contaminants from 0.5 to 2%, while European 2% - 3%. A simple process can be done to get the quality of the PKS as above. Japan usually buys with a volume of 10,000 tonnes per shipment or their import, so for PKS providers must prepare a sufficient stockpile for the PKS. The location of PKS stockpile that close to the seaport is the ideal condition to facilitate transportation to shipment. 

Wood pelletproduction process is more complex than PKS, so wood pellet is categorized as finished product. PKS can be said raw product because of its industry activity is very minimal and simple, as explained above. In the production process of wood pellet will include selection of raw materials and the properties namely : cleanliness, drought, size, shape and hardness. Based on the characteristics of these raw materials, the next process varies until become the wood pellet products. The wood pellet production process is very much like the wood briquette. The quality of wood pellet is generally viewed from its density, calorific value and ash content. Indonesia wood pellet export is not as big as PKS, it is also because of the limited producers of wood pellet itself. Japan buys wood pellets from Indonesia mostly for testing on their biomass power plants. Shipping or export by container is still common in wood pellet commodity because the volume is still small.

For short-term orientation exporting PKS is a profitable business. This PKS some time ago only waste that contaminate and unworthy then large amount of it only used for road hardening and so on, but currently become a “hot” commodity.  Wood pellets with raw materials from energy plantations by planting the legume types such as calliandra are medium-term solutions to meet biomass fuel needs in Japan.  Torrefaction followed by densification can be a long-term orientation, so the torrified pellets product is superior to wood pellets because it can save transportation and facilitate handling, hydrophobic and higher calorific value.

Torrified Pellets

Government Regulation namely Indonesian Minister of Finance Regulation No. 67/2010 on Stipulation of Export Goods Subject to export duties (BK = Export Duties) have purpose to push downstream or production of various derivative products from oil palm including PKS. But the fact is not much that happened in the field related to PKS. In fact, many PKS providers are experiencing setbacks and even closed their businesses. This BK has made the price of PKS higher, thus making the market demand decrease. The higher the BK for the raw product and the lower the BK for the finished product the downstreaming will be faster, but it must be done through the process gradually, well-planned and comprehensive. Ideally the BK for the finished product is zero percent. Does the government ask people to wait next 2 years when PKS prices are high because their needs are projected to rise sharply? We don't know. While the best scenario is to reduce taxes so that the industries can grow so then they can start develop new products. Torrefaction of PKS becomes torrified PKS becomes the best solution for next development, because upgrading of PKS quality will give more economic value added. Carbonization or pyrolysis of PKS to PKS charcoal (PKSC = palm kernel shell charcoal) and then followed by densification into PKS charcoal pellets is also an attractive alternative.

Looking Wood Pellet Market In Asia

Wood pellet market growth projections indicate Europe as the main market with a consumption of 25-30 million tons in 2020, about 2.5 times more than the consumption in 2010 of 12 million tonnes. The  countries main producing wood pellet currently are Canada, USA, Sweden and Germany. The United States is the largest producer of wood pellets, but the majority of its production for domestic consumption for space heating (home heating), while Canada as the largest manufacturer of wood pellets after the United States, approximately 80% of production is for export. The big market changes that occurred in the Asian markets of less than 1 million tons in 2010 to about 15 million tonnes in 2020. Global wood pellet production also increased which grow up to 300% from 2012 to 2020, from 16 million tons to 40-50 million tons.

Global Energy Production by Source
Source: EIA 2008

Areas that are able to produce wood pellets with low prices would be a major exporter of wood pellets. Two components that are very influential in the production of wood pellets is the price of raw materials to factories and transportation costs to market. The position of Indonesia is located in the Asian region with a tropical climate so the potential to becomethe largest producer of biomass has a strategic role of being a manufacturer of wood pellets for the Asian market. Below are three major countries in Asia as market for wood pellets:

South Korea’s energy consumption by type. Source: Economic Intelligence Unit 2009

South Korea Market Development

Although South Korea is a small country, but a country 10th in the world with the energy user fifth oil importer and second importer of coal. Currently produces about 65% of the electrical of fossil fuels. South Korea seriously to reduce greenhouse gas emissions to 30% reduction in CO2 emissions from 2010 levels by 2020. South Korea has also issued a RenewablePortfolio Standard (RPS) which requires a minimum power plant to use the 2% renewable energy by 2012, with an increase of 0.5% / year until 2020. In 2020 they will need a minimum of 10% renewable energy with the expected composition of 60% of renewable energy derived from wood biomass, while the remaining 40% from other sources.

Japan’s energy portfolio. Source: U.S. Energy Information Administration 2010

Japanese Market Development

Japan has almost no natural resources, so that imports nearly all of almost all the coal, oil and gas. Japan is the largest importer of natural gas and petroleum ranked second in the world. Since the accident or the explosion of Fukushima nuclear power plant in 2011, the Japanese government review of national energy policy and resource development. The policy indicates that for the next 10 to 20 years for renewable energy, the increased use of non-fossil energy to 50% and greenhouse gas reductions in electricity generation from 34% to 70% in 2030.

China’s energy consumption by type. Source: Economic Intelligence Unit 2009

China Market Development

China is currently the second largest energy user after the United States. Energy is the foundation of economic growth in China. Coal is the main energy in China that make this country the largest user of coal in the world. Although very little renewable energy policy announced by the Chinese government, China in its five-year plan to allocate $ 750 million in direct subsidies, incentives and tax exemptions for building 200 green energy demonstration project in 2015 or at least 15% of its energy needs from renewable energy. China has also set up a biomass energy production with a target of 50 million tonnes of coal equivalent by 2012. Although the 5-year plan does not indicate specific green energy projects to be addressed, a number of assumptions stated China will produce wood pellets to replace coal. The majority of the production of wood pellets also comes from domestic production so that its import was minimal.

Racing for Lowering The Temperature Of The Earth

Although the carbon neutral scenario does not reduce greenhouse gas concentrations in the atmosphere, but with this scenario does not add more greenhouse gases in the atmosphere. The use of carbon neutral fuel from biomass is the concrete step. Gradually the role of the biomass fuel usage is improved and strengthened with the support by the state regulations. A number of countries have dared to take an ambitious policy for the utilization of biomass in the massive scale. Confidence factor such as the solution to the environmental problems of climate change and global warming, depletion of fossil fuel reserves, the image of an environment friendly country that will be known the world , and the economy are driving some of those countries to implement the policy.

For Asia, South Korea has started using biomass massively with the officially issued the Renewable Portofolio Standard (RPS) in Korea in 2012. The regulation state that 2% of the electricity shall come from renewable energy. Percentage of renewable energy needs will increase in incremental reach 10% in 2022. Another driving force is the emissions trading scheme which will be issued in January 2015. Whereas in Japan the energy strategy to be the hit of nuclear reactors has since abandoned some time ago. The actual strategy including the manufacture of power plants with the composition of nuclear and renewable energy from 30% to 70% until 2030. Japan with a population about half the residents of Indonesia but its energy consumption 5 times in Indonesia. Japan is also targeting production of energy from biomass power plants with a capacity of 1100 MW until 2020. As for the use of renewable energy have a target to reduce Japan's emissions of CO2 by 1990 levels by 2030. While China has a goal to use the 11.4% from non-fossil fuels from primary energy consumption in 2015. Its CO2 emissions will be reduced by as much as 17%. The Target reduction of CO2 emissions by as much as 40-45% by 2020 to reach such a level in 2005. In Europe, with a target of 20-20-20 has prompted demand especially for biomass pellets fuel. Target 20-20-20 is a greenhouse gas reduction of 20%, 20% renewable energy use and energy efficiency at 20%. Effective tool in Europe to achieve the targets is the emissions trading scheme (emission trading scheme EU ETS/).

  

Indonesia has also announced to reduce fossil energy by 2025, with the share of fossil fuels 83% and renewable energy around 17% in particular biomass gets a share of less than 5%. The energy potential of biomass in Indonesia is huge i.e. equivalent electric 49,810 MW but in utilized is still less than 4% or equivalent of 1,680.4 MW. Critical land and unused land that reach millions hectares, become an extraordinary potential to provide energy plantations to produce biomass as an energy source. Optimisation of the potency will support the target achievement the energy consumption of biomass as renewable energy in total energy mix. . Finally the creation of a low-carbon economy can be a solution for the welfare of society and improve the quality of the environment, with the most popular commodities i.e. wood pellets. The Global market for these pellets predicted to rise from 16 million tons (2010) becomes 47 million tons in 2020.