Learning from the Success of Wood Pellet Industry in Asia (Vietnam) and Europe (Latvia)

The trend of using wood pellets globally has not been long, it only started around the early 2010s and a number of countries responded quickly so that their wood pellet industry grew rapidly as part of their economic engine in line with the global trend for decarbonization and green economy or bioeconomy. The readiness of a number of countries to respond to this opportunity is also not without reason but indeed their insight and knowledge have supported them to do so. Indonesia as a tropical country with vast land and abundant human resources should also be able to boost the opportunities of this wood pellet industry so that it becomes one of the world's main players.

Vietnam and Latvia are two countries in the world that are currently leading the wood pellet industry, there is even the largest wood pellet factory in the world there, for more details read here. Initially, both countries also started this industry from a small capacity. For Vietnam, Vietnam's wood pellet production began in 2012 with a very small capacity of around 175 tons/year and currently in 2021 or around 9 years later, production has reached around 4.5 million tons/year, placing Vietnam in second place as a world 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, 3.2 million tons of wood pellets were exported to Japan and Korea for power plants with an export value of nearly USD 351 million. In addition to Korea and Japan, Vietnam's wood pellet production is 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 was dry and its particle size was suitable for wood pellet production, so equipments such as hammer mills and dryers were not needed. Many Vietnamese wood pellet factories at that time did not have hammer mills or dryers. With raw materials ready to be pelletized, the cost of producing wood pellets was very cheap, plus the cost of labor was also cheap. However, as the demand for furniture industry waste for wood pellet production increased, the availability of these raw materials became increasingly scarce, so that new wood pellet factories could no longer use these wastes. Waste from other wood processing industries such as sawmills and veneer factories also became raw materials. Furthermore, with the increasing production of wood pellets, forest wood waste and other round wood became the next source of raw materials. This also increased production costs because tools such as hammer mills and dryers were needed so that the raw materials were ready to be pelletized.

Meanwhile, Latvia, as a small country in northern Europe, saw an opportunity to lead in this growing industry. With almost half of its territory covered by forest, Latvia had the natural resources to produce wood pellets. In the early 2000s, with government support for responsible forest management, sustainable wood production was introduced, including support for entrepreneurs who wanted to start producing wood pellets. It wasn’t long before the world caught on. Countries across Europe, including the UK, Denmark and Italy, began relying on Latvian wood pellets for their heating and power plants.

Despite being a small country, Latvia has become a major player in the wood pellet industry, competing with larger countries such as Germany and Sweden. Latvia is now one of the largest exporters of wood pellets in the world. Latvia's success story teaches us that even a small country with strong will, focus on quality, innovation and sustainability, natural resources can lead to global success. Latvia's success shows that when there is government support, technology investment and dedicated people, even a small country can lead in a competitive global market. And as the world increasingly looks for clean and sustainable energy solutions, the success of Latvia's wood pellet industry is an inspiring example of what can be achieved with vision, hard work and a commitment to sustainability.

Tropical countries like Indonesia are a "heaven" for biomass energy, this biomass energy is like a green battery that must be developed, for more details read here. When small countries like Vietnam and Latvia can boost their wood pellet industry, then Indonesia should not want to be left behind. When great potential is wasted, then besides being an ungrateful attitude that will have an impact on poverty and environmental damage, it is also stupidity. The large amount of land available, even millions of hectares becoming critical land and multi-benefit from energy plantations should motivate the wood pellet industry. When Vietnam and Latvia can do it, Indonesia should do the same.

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.