Wood Pellet and AEC (Asean Economic Community)

Economic integration among ASEAN members in the AEC, which is planned to begin later this year, is an advanced form of AFTA relationship that is more thorough than just trade. The highest integration on economic aspects as well as in countries belonging to the European Economic Community (EEC) is the unification of the currency, but this seems pretty yet to be done in the near future on the AEC. AEC makes various ASEAN countries to make a regulation or rule together in the area of economic region. Trading blocs and the economy was a lot made today based on a specific area that is clearly also has a specific purpose as well. The economic integration in the AEC make various ASEAN countries competing to increase competitiveness in order to maintain the lead in the regional arena. Indonesia with the largest area and population (approximately 250 million) plus the abundance of natural resources is a tremendous economic potential or emerald equatorial country will be the main focus or attention on the AEC. 

Demographic bonus in the form of productive age population exceeds the number of non-productive age will also be another factor that will add to the attractiveness of Indonesia, which is the opposite condition with the condition of European countries, Japan and countries other strong economies. Of course with these conditions Indonesia should not only be market of various overseas products and a strong economy that makes the trade balance is not balanced and will always make Indonesia conditions worsen. Opportunities and challenges to be faced so that the necessary preparations should a serious and mature. ASEAN countries have set up ahead of time to deal with this AEC, but Indonesia has not seen seriously prepare to face this AEC.

Wood pellets have a strategic role in facing the AEC because of the high demand. The extent of land, fertile soil and tropical climate make the raw material for wood pellets which can be said to be one of the key success factors in the business of wood pellets, are not difficult to cultivate.A number of forest management area which is prepared for industrial plantations and can be cooperated with the private sector with tens to hundreds of thousands of hectares available. Besides the millions of hectares of marginal and unused land are also potential, considering the plant for wood pellet raw material is also very easy to grow and cultivated. Making the energy plantations that term used for the production of raw material for wood pellets have many advantages. In principle, create a mutually beneficial business between the various parties and does not destroy nature so that it can continue to be sustainable in any strongly held to be faced include these AEC.

The Wave of World Biomass Energy

According to the organization of FAO (Food and Agricultural Organization), the production of wood pellets in 2013 exceeded 22 million tons and more than half are traded internationally with 80% of the production is consumed by European countries. The main factors that affect it is the European Union's Renewable Energy Directive, which instruct the use of renewable energy to 20% in their energy mix by 2020. While in 2024 global production of wood pellets predicted 50 million tons.

The development of wood pellets industry very massive actually can be traced, in 2007 when the European Commission issued an ambitious program of the Renewable Energy Directive as mentioned above, which is the first factor driving world countries ratified the Kyoto Protocol. Furthermore from the Renewable Energy Directive,  the European countries individually create its own policy mechanisms to achieve these goals. One inexpensive and effective approach is to reduce CO2 at the power plant by replacing a number of coal burned in power plants with biomass, which is mainly wood pellets. Policy makers are interested in the above approach, because it would result in the acceleration of implementation rather than wind, solar, water and geothermal.

In the UK policy is initially set in the Renewables Obligation subsequently revised to become a mechanism Program Contracts-for-Difference (CFD), while in the Netherlands a similar program was originally known MEP and subsequently also revised the currently named SDE-plus. Countries in Asia are also slowly began to follow, this time two strong economies namely South Korea and Japan began to implement it. The program in South Korea set in RPS (Renewable Portfolio Standard) and Japan implement policies in FIT (Feed-in-tarrif). Gradually various countries began to follow him. While in the United States and Canada, most of the wood pellets used for heating (residential / space heating), especially in winter.

The Fear of Deforestation
The development of the massive production of wood pellets is much feared by some parties will stimulate the flow of deforestation including the scientist and policy observers have questioned whether energy generated from wood pellets capable of achieving these goals. Actually it does not need to worry, if it knows the production process at the same time selling price of wood pellets itself. Wood pellets are made from raw material of woody biomass could come from wood-waste or  cultivated through the energy forests or plantations, but with a note that the price of woody biomass as a raw material for wood pellets must worth as wood waste. If the price the price of woody biomass exceeds the wood waste in the market, so the production of wood pellets become uneconomical.

Trees or plants from industrial forests or community forests will produce wood especially for the sawmill, processing industries wood such as plywood, wood carpentry, furniture, construction, or even CLT (cross laminated timber) and so at rates far above the waste timber. Wood pellet mill also will not buy the wood due to economic reasons. Whereas if the energy plantation forests or plantations so  short rotation coppices or fast growing plants will produce woody biomass in large quantities and faster time with use marginal lands or unused lands, so will be economical for the production of wood pellets.

Wood from trees as a source of energy is a carbon-neutral fuels in combustion. Forests as Carbon Sink if the speed of harvesting and use of wood does not exceed the speed of growing trees or plants, in this case mainly energy forests or plantations. In addition, each MWh of electricity from coal is also emit more CO2 than from wood pellets, which at 150 kg CO2 released coal with wood pellets while only 45 kg. So the use of wood pellets is said to be also a low carbon economy activity.

Opportunities for Indonesia
Indonesia has a huge opportunity to capture these opportunities, it is because the extent of land available, the fertility of the soil and tropical climate. Short rotation coppice like calliandra very suitable to be cultivated to obtain the raw material of wood pellets. If the conditions in Europe or sub-tropical countries took 4 years to harvest woody biomass from SRC like the poplar and willow, then in Indonesia only took one year for calliandra achieve conditions such as poplars and willows. Energy forests or plantations are integrated with other agro-forestry and cattle or goats livestock could be the main attraction.

Enter the Global Wood Pellet Market

In fact the massive growth of wood pellets derived from the encouragement of a number of policies in Europe, more specifically the electricity business in the UK. In 2020 the world consumption of wood pellets is estimated at 22 million tonnes. Two power plants in the UK are 100% use wood pellets that Drax and Eggborough, requiring 10 million tons annually. Other major needs are wood pellets from Western European countries, especially Italy. While in Asia, Japan and Korea are the two countries most widely consumed wood pellets. Whereas in 2024 the production of wood pellets is predicted to reach 50 million tons globally.

Canada is one of the main producers of wood pellets which supply the needs of some countries above. The extent of the forest so abundant source of raw materials that make Canada one of the main producers of wood pellets. Russia is the other major country which began producing wood pellets. The extent of forests and abundance of raw material resources make Russia comparable to Canada in the production of wood pellets but mainly infrastructure problems is still a major barrier to the development of wood pellet industry in Russia. How about Indonesia? Indonesia also has a great opportunity to join in wood pellets business. Although the forest area which can be used as a source of raw materials is not as large as area of Canada and Russia, but the tropical climate in Indonesia that makes the sun shines all year round is a kind of blessing. Thank God, this is one of the pleasures of Allah that we should be. Energy forests or plantations with short rotation crops (SRC) as calliandra can be cultivated with productivity four-fold compared subtropical regions such as Canada or Russia for similar plants such as Willow or Poplar. In addition, users of wood pellets in Asia such as Korea and Japan also will be looking for wood pellets from Asia prior to Canada or Russia.

Natural or environmental sustainability issues are important things that must be considered, so that the business continuity and environmental sustainability are two things simultaneously maintained. The power plant is a major market wood pellets with large and long-term needs for environmental sustainability that needs to be a serious concern. Almost all the buyers of wood pellets for power generation will also require sustainable forest management practices and certification (FSC or SVLK) about the origin of the raw materials that could be accounted means that does not destroy the forest. Specifically for conditions in Indonesia, with an energy plantation or forest with integrated calliandra plantation with goat or cow farming activities will cycle sustainability and nature conservation will be maintained.

Steam power plant with coal fuel is one of the biggest contributors to CO2 in the atmosphere, so if it can be replaced up to 100% or full with wood pellets as a carbon-neutral fuels will reduce CO2 emissions significantly. Rodenhuize 240 MW power plant in Ghent, Belgium is one example. At first Rodenhuize is coal power plant then after that in 2011 using 100% wood pellets. Earlier in 2005 the power plant was modified so that it can work with co-firing of coal and wood pellets and in 2011 the plant switched to 100% of coal (coal) with wood pellets. The shift from coal to wood pellets has made Rodenhuize power generation reduce 1.6 million tons of CO2 emissions. Rodenhuize pattern seemed to be a reference and will be followed by coal power plants more especially in countries that have implemented environmental policies in the energy sector to compete lowering the temperature of the earth.