Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio.
Today, I would like to talk about, “Wood pellets for Japan to increase 60% this year to 4.8 million tons. Tightness of short sea vessels and return vessels persists.”
Daily Logistics Radio by IINO san in 18th Feb. 2022
Biomass Power Generation Fuel, Expanded Transportation
Cargo movement of biomass power generation fuel to Japan is expanding.
According to the forecast of some Japanese shipping companies, woody pellets bound for Japan this year are expected to increase by 60% to 4.8 million tons and PKS (palm kernel shell) by 5% to 4.2 million tons.
FIT to Stimulate Projects
Biomass power generation projects are gaining momentum all over the country due to FIT in Japan.
FIT, which started in 2012, is a system under which power companies purchase electricity from renewable energy generators at a fixed price.
Importance of Stable Power Supply
Japan is aiming to be carbon neutral by 2050, and decarbonization efforts are underway in various industries.
The automotive industry is particularly noteworthy, with all but Toyota initially shifting to EV, and recently, Toyota has finally begun to shift to EV as well.
When shifting to electric vehicles, a stable supply of electricity is important, therefore, renewable energy is required to use for that power as well.
FIT and FIP
In addition to FIT, a new system called FIP will be launched in April 2022.
FIT: Feed in Tariff
FIP: Feed in Premium
FIT is a system that purchases electricity at the same price regardless of whether demand is high or low.
It is an initiative to increase the number of renewable energy power generation companies.
FIP is a system in which the purchase price fluctuates in accordance with the balance of supply and demand in the electricity market, and a premium price is added to the purchase price.
FIP will be introduced to balance the electricity market.
The fact that such a system is being created means that we are moving towards carbon neutrality.
Large Power Plants Start Operation One after Another
In particular, from this year to next, a series of large power plants that use wood pellets as their main fuel are scheduled to start operation.
Import of fuel from North America and Southeast Asia is expected to expand.
It is reported that the tightness of short sea freighters and bulk carriers on the Japan-North America route is likely to continue.
It is due to be driven by the successive operation of large biomass power plants in Japan.
Furthermore, it is expected that the expansion trend of biomass power plants will continue from next year onward.
Biomass Fuel in the Future
Wood pellets for Japan are expected to increase to 6.5 million tons and PKS to 4.7 million tons by 2023.
PKS is made by drying the shells of palm trees after palm oil has been extracted from them, and Indonesia is the world’s largest producer of PKS.
Biomass fuel has been increasing in the recent short sea cargo ships of Japanese ship operators.
There are growing calls that “return-to-ship trade will become the mainstay of ship allocation in a few years.”
Return-to-ship is a flight from Japan to Southeast Asia carrying steel, etc., and from Southeast Asia back to Japan, carrying palm, etc.
It would be fine that you think of it as a return flight.
10-year Long Term Contract
The most important issue under FIT is the long-term stable supply of fuel for power generation.
For this reason, it is increasing number of contracts for long-term contracts of 10 years or more, which is unusual for short sea cargo vessels.
Japanese shipping official remarked, “it will be easier to make plans for the construction and maintenance of new short sea cargo ships and handy size ships in the future.”
It is because, “biomass fuel can be calculated as base cargo.”
They also pointed out that they are expecting a positive effect on investment. Japan’s decarbonization efforts are affecting cargo movements of biomass power generation materials.
Advantage of Long Term Contract
I think the long-term contract of 10 years is a big factor.
With a long-term contract, shipping companies are less likely to compete on price, and they can expect to recover their investment and stabilize their business.
There is other decarbonization initiative called CCUS. Investment in ships to transport the CO2 emitted has begun, with MOL and other companies starting to do so.
In international logistics, container ships are currently having a major impact.
However, environmental measures are changing what we carry and the ships we use, which I think is very interesting.
I believe that profitable shipping companies will continue to make these kinds of investments, creating an environmentally friendly form of transportation for the future.
That’s all for today. Thank you.