Paper manufacturers in Japan facing a lack of demand for their product are hoping to energize profits by plugging into the biomass power generation industry.
Motivated by a government feed-in-tariff system for clean energy, companies are also hoping to promote more effective use of wasted wood chips from forest thinning through their new business.
Between last fall and this summer, Japan’s largest paper maker, Oji Holdings Corp., decided to install biomass power generating equipment in its three plants in Shizuoka, Miyazaki and Hokkaido prefectures.
Spending a total of 26 billion yen ($264 million), the manufacturer will install new boilers to generate electricity using wood chips as fuel. Oji Holdings plans to start operations of the new equipment at the three plants by the end of 2015.
Oji Holdings already has private power facilities to generate electricity used in its plants. The facilities produce 600 gigawatts of power each year mainly from coal, and the company sells surplus electricity to power utilities.
Oji Holdings currently estimates that the planned biomass power equipment will earn a higher profit than its existing facilities, thanks to the government’s system to oblige electric utilities to purchase renewable energy at fixed rates over 20 years.
The paper manufacturer plans to generate 500 gigawatts of power with the new biomass equipment per year, and aims to raise its total electricity sales to 28 billion yen in the future.
Although the planned electricity sales are relatively low compared to its total sales of 1.2414 trillion yen, company officials said the attraction of power production is the stable profit it will generate every year.
Nippon Paper Industries Co. also plans to construct a new biomass power plant in Kumamoto Prefecture, which will be Japan’s first to solely use wood chips from forest thinning as fuel to produce electricity. Typical biomass power plants combine wood chips with a substantial percentage of heavy oil and coal to generate electricity.
The plant is scheduled to start operations in spring 2015.
Sales of Nippon Paper Industries’ power generation sector were 20 billion yen in fiscal 2012, while sales of paper have been falling gradually. In fiscal 2012, its sales of paper decreased by 2 percent from the previous year to 1.025 trillion yen.
Most of Nippon Paper Industries’ power production facilities are coal-fired plants.
The company currently aims to raise its electricity sales to 50 billion yen in the near future by lifting the rate of biomass electricity generation in its total power production, as well as installing more coal-fired power plants.
Nippon Paper Industries intends to make the power production sector one of its main pillars.
Major paper makers normally have their own forests to secure the wood chips needed to produce paper. But as wood chips from forest thinning cannot be used as raw materials, they are generally discarded.
Thus, biomass power production is a good way for paper manufactures to promote effective utilization of the excess wood residue.
However, because the wasted wood chips from their own forests will not be enough to ensure stable power generation, paper makers will have to purchase a necessary supply from suppliers at home and abroad.
Nippon Paper Industries officials said the company had already finished preparation to procure the necessary amount of wood chips: 70,000 tons per year.
If an increased number of paper manufacturers enter the biomass power generation industry, they would face a shortage of wood chips. A future issue will be how companies can secure the necessary amount to ensure stable electricity generation.