JP Biomass Webinar June 2020 Final

FutureMetrics
LLC
FutureMetrics is the leading global consultancy in the
wood pellet sector.
FutureMetrics provides information, analysis, operations
guidance, due diligence services, and strategic advice to
many of the world’s leading companies who are in the
wood pellet sector, or who are considering entering the
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FutureMetrics combines deep operational expertise,
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thought leading market awareness.
Copyright © FutureMetrics April 2020
Key Members of the FutureMetrics Team of Experts
Dr. William Strauss, John Swaan, Annette Bossler, Hannah Campbell, Laurenz Schmidt, Yoshinobu Kusano,

President Pellet Plant Market Intelligence Logistics Specialist Technology Specialist Japan Policy Advisor
Operations
Named one of the Annette provides Hannah brings the skills Laurenz is a globally Yoshi is one of the
most influential John is a leading detailed market and experience for respected expert in most highly
leaders in the biomass expert on pellet plant intelligence on providing project‐specific thermodynamics and respected
sector in 2016 and operations. He is the renewable detailed analysis of mass and energy flow participants in the
2017 by Argus Media. founder of Pacific p‐energy policies logistics strategies and dynamics in the Japanese biomass
Recipient of the 2012 BioEnergy and around the world with costs. Before she ran renewable energy sector. He was a key
International producer of the first a strong focus on USAF logistics operations, sector. He reviews and member of
Excellence in bulk shipment of Japan. Annette she earned a Bachelor of analyzes all advanced Sumitomo’s pellet
Bioenergy Award. wood pellets from speaks, reads, and Science degree from the pellet technologies. trading operations.
A leader in the North America to writes fluent Japanese. US Air Force Academy He provides valued
industry for more than Europe (1998). that was built around an insights into
two decades. Recipient of the 2014 engineering core Japanese policy
International curriculum. developments.
Founders Award.
Introduction: Japan’s Electricity Market in the Context of ‘Daishinsai’
The
‘Great Eastern Japan Earthquake Disaster’
東⽇本⼤震災
(Higashi Nihon Daishinsai)
of March 11th, 2011
is a major turning point
in Japan’s recent history, also with regard to the
energy market.
• Total immediate loss of lives: 14,238

• Missing persons: 12,228
• Evacuees from devastated and contaminated
regions: 130,935
• Unknown loss of lives from radiation impact
• Shutdown of all 54 nuclear reactors
• Mandatory power supply rationing for industry
and private households
Image Source: Asahi Shimbun
Japan’s Electric Power Market Structure
Prior to 2011:
• 10 utilities control the entire electricity market; own generation, transmission and distribution
• Coal and nuclear dominating generation mix prior to March 2011
• Renewables dominated by hydro
• Wind and solar less than 1%
March 2011 and beyond:

• Daishinsai ⼤震災- seaquake on March 11th, 2011, triggering huge tsunami waves and leading to over 14,000 known fatalities
• After Daishinsai and Fukushima nuclear accident, all nuclear power plants shut down
• LNG, coal and oil reserve power plants provided base load
• Mandatory power savings by industry and residential customers
• Japan buys approx. 50% of the world’s LNG for power generation
From Mid 2012:

• Introduction of renewable energy FITs in July 2012, but
• Solar PV switched to tender in 2017
• Some Biomass switched to tender in 2018
• Offshore wind switched to tender 2020
• Plans for 43 new coal fired power plants (approx. 19GW) partially abandoned
• Market still dominated by ten regional, vertically integrated utilities (EPCOs) with strong influence
• Power market reform started in 2015 and ongoing (unbundling of generation & distribution)
Renewables:
• 63.4GW renewables operating (as per end 2019)
• 55.5GW Solar PV
• 4GW Biomass power
• 3.9GW Wind power
• Offshore wind project pipeline of over 15GW
Grid management going forward:

• Change from ‘先着有線ʼSenchaku yusen (first come, first served = legacy generation sources have priority) to ‘Connect and
Manage’
• Starting in 2019, merit order for conventional sources, equivalent for renewables, all newly connected RE plants with output
control
• Capacity market started in July 2020
Power Market Reform – After numerous failed attempts, finally happening
Step 1 – 2015: Move towards a national grid

• Step by step transitioning from regional grid to national grid
management
• Commercial customers can select their power provider
• Establishment of OCCTO (Organization for Cross regional
Coordination of Transmission Operators), located within
METI:
• Modeled after US TSO/ISO structure (central
collection point for market information
(supply/demand); operates day ahead and intraday
markets; load prognoses development; capacity
market management) but with less authority
• Aggregates and analyzes the EPCOs’
supply-demand plans and grid plans, including inter-
regional grid to provide capacity benefit margin
(CBM)
• Coordinates the supply-demand balancing and
frequency
adjustment by transmission/distribution (T/D) sectors
in each area
• Orders EPCOs to reinforce generation and power
interchanges in a tight supply-demand situation
Image Source: Federation of Electric Power Companies in Japan
Step 2 – 2016: Establishment of full retail competition
• Extended retail competition to the residential sector
• Maintained regulation of retail tariff for under 50kW users to
incumbent 10 big EPCOs until at least until 2020
Step 3 – 2020:
• Unbundle transmission and distribution
• Unbundle the big EPCOs’ T/D sector by “legal unbundling” to
enhance neutrality and transparency
• EPCO can choose either a holding company or an affiliated
company format
Power Generation by Source 2010 ‐ 2019
Japan’s Electric Power Market Structure (after completed market reform)
Regulators Wholesale Pool Utilities Retailers Generators

Operators
METI (Ministry of JPEX (Japan Power Marubeni 10 Electric 600+ 10 Utility
Economy, Trade and Exchange)
Industry) Utilities Generation
(EPCOs) Companies
ANRE (Agency for OCCTO (similar to Sumitomo 206 Gas 20+ IPPs
Natural Resources and North American ISO)
Energy)
Surveillance TOCOM (Tokyo TEPCO 35+

Commodity Exchange for Oil
Commission and Electricity Futures) Renewable
Generation
Companies
Diet Trading Ca. 20
(Parliament/Congress)
Companies others
Japan’s Power Grid – A major Bottleneck
• Japan’s power grid: 40+ years old
• Originally built for legacy generation
• 50% of grid capacity still reserved for nuclear power plants -
renewable energy sector is pushing government to force EPCOs to
open up capacity but so far with limited success
• Impact of insufficient grid connection on renewables is significant:
• Utility can curtail output without compensation for up to 30
days
• Utility can decline grid connection if capacity outlook
suggests regular output curtailment of more than 30 days
• Utilities can treat grid connection applications exceeding the
‘acceptable capacity’ as ‘designated electricity utilities’,
allowing them to enforce unlimited curtailment without
compensation (a compromise established in late 2017 that
may be superseded with the implementation of proposed
‘connect and manage’ grid management approach )
• Utility can delay grid connection decision or where multiple Image Source: Federation of Electric Power Companies in Japan
projects want connection, can run a competitive tender
system in order to raise funds for grid capacity extension
work • Western Japan’s grid operates at 60 Hz frequency
• This applies even if METI has certified a project to qualify for FIT • Reason: originally developed by General Electric in 1895
• Developer pays for grid connection for any renewable energy • Eastern Japan’s grid operates at 50 Hz frequency
installation • Reason: originally developed by AEG of Germany in 1896.
• Developer application for grid is submitted to the respective EPCO • Three HVDC substations convert the frequency between the
after the project has been certified by METI to qualify for the FIT two regions with a total transmission capacity of 1.2GW
• METI has been more involved since the so-called Kyuden Shock in between the two grids.
2014 when Kyuden stopped accepting grid connection requests • Major reason why the utilities in Western Japan after the
• Situation has not yet improved since 'connect and manage’ was March 2011 catastrophe could only partially supply additional
introduced in 2019 power to Eastern Japan.
• Government introduced T&D charges to all generators starting in • Extreme grid capacity bottlenecks exist the Northern Tohoku
2020: additional unplanned cost for existing generation projects Grid and Kyushu
Renewable Energy Offtake Process
Solar PV
Generation Type PPA Term 2012 2013 2014 2015 April 1 2015 July 1 2016 July 1 2017 April 1 2018 April 1 2019 April 1 2020 April 1
(Years) JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh
Solar (less than 10 kW 10 42 38 37 36 33 31 28 26 24 21
without output control)
Solar (less than 10 kW 10 35 33 30 28 26 21
with output control)
Solar (less than 10 kW 10 25 25 24 -
without output control)
combined with fuel cell
Solar (less than 10 kW 10 27 27 26 -
with output control)
combined with fuel cell
Solar (50kW to 250kW) 20 14 12
Solar (250kW to 500kW) 20 14 Tender
Solar (more than 500kW) 20 Tender
Solar (more than 10 kW 20 42 26 32 29 27 24 21 18 - -
up to 2MW)
Solar (more than 2MW) 20 Tender Tender Tender Tender
• FIT of 42 Yen/KWh (US$ 0.39) introduced as per July 1st, 2012:
• METI accepting certification application for projects without requesting business plan and proof of site control
• Utilities not running line studies prior to acceptance
• Result” project pipeline ‘bubble’ of FIT certified projects that are not being built
• Replaced by Tender for projects above 2MW in 2017:
• November 2017: 500 Mw tender. 140MW across 9 projects awarded. Average bid price JPY19.6/kWh, undisclosed ceiling price of
JPY 21/kWh.
• 5 projects (total of 100MW) lost PPA as winning bidders did not pay bid fees
• September 2018: all bids received were above undisclosed ceiling price of JPY15.50/kWh. Lowest bid was JPY 16.47/kWh.
• September 2019: lowest bid at ¥10.50/kWh and the highest price at ¥13.99; undisclosed ceiling price of ¥14/kWh
• Bid proposals require a submission fee of JPY 127,000 plus a deposit of JPY 500 per kW. The winning bidder then pays a secondary deposit
of Yen 5,000 per kW.
• Solar projects with FIT rates of JPY 40, 36, 32 or 29 kW/h are likely to be subject to a new wheeling charge for solar FIT projects. These
may become effective by 2022 or 2023 and will reduce the current ROI of these projects; something that was most likely not been built
into the project financing calculations because it was an unforeseen factor.
Wind Power
Generation Type PPA 2012 2013 2014 2015 April 2015 July 2016 July 2017 April 2018 April 2019 April 2020 April
Term JPY/kWh JPY/kWh JPY/kWh 1 1 1 1 1 1 1
(Years) JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh JPY/kWh
Onshore Wind (less than 20 kW) 20 55 55 55 55 55 55 55

Onshore Wind (more than 20 kW) 20 22 22 22 22 22 22 21 20 19 18
Onshore Wind (more than 20 kW - Repowering) 20 18 17 16 16
Offshore Wind (Fixed Substructure) 20 36 36 36 36 36 36 36 Tender
Offshore Wind (Floating Substructure) 20 36 36 36
Geothermal
Generation Type PPA 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020
Term JPY/kWh JPY/kWh JPY/kWh April 1 July 1 July 1 April 1 April 1 April 1 April 1
Geothermal (up to 15 MW) 15 40 40 40 40 40 40 40 40 40 40
Geothermal (up to 15 MW - 15 30 30 30 30
Repowering - Full
Replacement)
Geothermal (up to 15 MW - 15 19 19 19 19
Repowering - Underground
Facility Change)
Geothermal (15 MW and 15 26 26 26 26 26 26 26 26 26 26
above)
Geothermal (15 MW and above 15 20 20 20 20
- Repowering - Full
Replacement)
Geothermal (15 MW and above 15 12 12 12 12
- Repowering - Underground
Faclity Change)
Hydro Power
Hydro (less than 200 kW) Using existing 20 34 34 25 25 25 25 25 25 25 25
water resource infrastructure
Hydro (less than 200 kW) Constructing new 20 34 34 34 34 34
water resource infrastructure
Hydro (more than 200 kW up to 1 MW) 20 29 29 21 21 21 21 21 21 21 21
Using existing water resource infrastructure
Hydro (more than 200 kW up to 1 MW) 20 29 29 29 29 29

Constructing new water resource
infrastructure
Hydro (more than 1 MW up to 30 MW) 20 24 24 24 14 14 14
Hydro (less than 200 kW) New 20 34 34 34
Construction
Hydro (more than 200 kW up to 1 MW) 20 29 29 29
New Construction
Hydro (more than 1 MW up to 30 MW) New 20 24 24 24
Construction
Hydro (more than 1MW up to 5MW) Using 20 24 27 27 27 27
new water resource infrastructure
existing water resource infrastructure

new water resource infrastructure
existing water resource infrastructure
Biomass Power
• Biomass FITs vary depending on different sources, including waste incineration as well
as use of construction debris
• FITs for biomass power generation plants that use domestic forest thinnings have
remained at a high level to promote rural economic development
Biomass (solid biomass 20 39 39 39 39
incineration)
Biomass (sewage sludge and 20 17 17 17 17 17 17 17 17 17 17
MSW)
Biomass (forest thinnings) above 20 32 32 32 32 32 32 32 32 32 32
2MW
Biomass (forest thinnings) up to 20 40 40 40 40 40 40
2MW
Biomass (whole timber) above 20 24 24 24 24 24 24 21
2MW
Biomass (whole timber) up to 20 24 24
2MW
Biomass (forest thinnings, left 20 24 24
over from saw mills etc. up to
10MW)
Biomass (forest thinnings, left 20 Tender Tender
over above 10MW)
Biomass (construction debris) 20 13 13 13 13 13 13 13 13 13 13
Biomass (General feedstock) 20 24 Tender Tender
Biomass Power
• First tender 2018 for 180MW biomass power generation capacity:
• Minimum capacity of 10MW
• Undisclosed ceiling price of JPY 20.6/kWh
• Seven bids, one award: Soma Kyodo Power for the 2,000 MW Shinchi power plant co‐fired with biomass and coal at JPY
19.60/kWh for 35 MW of biomass capacity or 1.75% of the co‐firing portion with wood pellets
• Soma canceled its winning bid and is instead going to bid into the upcoming capacity market system which is likely to be
more lucrative
• Second tender December 2019 for 120MW biomass power generation capacity:
• Any projects co‐fired with coal, palm kernel shell, palm oil and palm trunk excluded from bidding
• Minimum capacity of 10MW
• Undisclosed ceiling price of JPY 19.6 JPY/kWh
• Average bid price of 20.55 JPY/kWh but all from projects with less than the required 10MW capacity
• New co‐firing guidelines issued in March 2019:
• Change of the biomass ratio of those co‐firing plants which have been certified for the Feed‐in Tariff will result in
adjusted FIT in case of higher or lower biomass portion
• Prevents co‐firing plants reducing the biomass‐to‐coal ratio over time, but still receive the FIT as per original
certification and to encourage the increase of biomass use at plants which started with a lower ratio
• Reduction of FIT certified project pipeline bubble (similar to solar PV bubble):
• Projects with FIT certification that do not order equipment for the new facilities within 2 years after the certification
date, will no longer be entitled to the FIT and will instead have to participate in the new tenders
• Numerous facilities are not going to meet this deadline
• FutureMetrics estimates the ‘bubble’ to be around 1.4GW
Certified Biomass Power Generation Projects versus Commissioned Projects (MW)*
General General
wood based wood based
biomass biomass
Certification power Operation power
Year generation Start Year generation
below 10MW above 10MW below 10MW above 10MW
2012 6 9 2012 0 0
2013 19 367 2013 9 9
2014 0 390 2014 18 0
2015 13 511 2015 7 87
2016 35 3,186 2016 13 116
2017 11 1,546 2017 6 323
2018 0 0 2018 6 50
Total 84 6,009 Total 59 585
* 100% biomass fueled projects only; no co‐firing
Biomass Fuel Supply in Japan
Domestic Biomass
Domestic Woody Biomass used for Power Generation by
Source
Unit: Dry Ton
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Wood Thinnings Lumber Mill Construction Imported Wood Imported Logs Other sources
Residue Debris Chips (e.g. pruned
branches etc.)
2015 2016 2017 2018
Data source: Japanese Ministry for Agriculture, Forestry and Fishery (MAFF)
• Imported wood chips and imported logs are left over supplies from other industries
• Wood thinnings are increasing, also due to the high FIT:
• Source are Japan’s 24,432,757 hectare (ha) forested land of which 29% are controlled by the government forestry
agency, 55% are privately‐owned and the remaining 16% are held by municipalities, prefectures and other public
entities
• Behind these percentages are 87,284 forest management entities of which 78,080 are family‐owned
• 27% of private owners own less than 5 ha and 28% between 5 and 10ha
Biomass Fuel Supply into Japan
Imported Wood Chips
Imported Wood Chips into Japan and Utilization 2009 ‐ 2019
Unit: MT
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total Imported Wood Chips Wood Chips used by Paper Industry
Wood Chips used by Particle/MDF Manufacturing Wood Chips available for fuel use
Wood Chip Imports into Japan

Unit: MT 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total Imported Wood Chips 10,477,785 12,118,042 11,787,195 11,135,747 11,014,788 11,656,002 11,904,051 11,900,262 12,169,839 12,448,571 12,170,601
Wood Chips used by Paper Industry 7,030,106 8,032,861 7,712,467 7,058,719 7,098,521 7,596,706 7,610,030 7,514,244 7,685,355 7,786,065 7,557,972
Wood Chips used by Particle/MDF Manufacturing 2,827,653 2,915,550 3,064,476 2,981,282 3,235,824 3,288,239 3,173,840 3,237,743 3,223,947 3,160,138 3,160,602
Wood Chips available for fuel use 620,026 1,169,631 1,010,252 1,095,746 680,442 771,056 1,120,181 1,148,275 1,260,537 1,502,367 1,452,027
Data source: Japan Ministry of Finance
PKS
PKS Imports into Japan 2009 ‐ 2019
Unit: MT
2,000,000
1,500,000
1,000,000
500,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Malaysia MT Indonesia MT Total
PKS Imports into Japan ‐ Average CIF per Ton
Unit: JPY / MT
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Malaysia Yen / MT Indonesia Yen /MT Average Yen/MT based on Ttl Imports
Wood Pellets
Wood Pellet Imports into Japan 2012 ‐ 2019
Unit: MT
1,000,000
886,984
900,000
800,000
700,000
632,739
589,661
600,000
500,000
360,068 373,524
400,000
300,000 260,935
200,000 146,150 131,115

90,676
66,470 72,151 62,441
100,000
27,440
3,533 2,897 1,979
0
2012 2013 2014 2015 2016 2017 2018 2019
Vietnam Canada Malaysia Thailand Australia Indonesia China USA
Wood Pellets
Average CIF Cost per MT
Unit: JPY/MT
30,000
27,129 26,216
25,000
23,885 23,882 22,086
21,724 21,248
21,073 20,872 20,803 20,554
20,000 19,732
18,691 18,264
17,022
15,000 15,253
14,457
12,772
10,000
5,000
0 0 0 0 0 0
0
2012 2013 2014 2015 2016 2017 2018 2019
Indonesia Malaysia Thailand Vietnam Canada Australia
Biomass Fuel Demand by Power Plant Type
Co‐firing Coal Plants
Total Capacity
Plant Type Fuel Type # of Plants MW
Coal Coal 57 23,457
Coal with Biomass Co-firing 68 26,477
Total Coal 125 49,934
Planned new coal capacity

Coal Coal 13 8,095
Coal with Biomass Co-firing 7 2,757
Total new coal power generation pipeline 20 10,852
• The number of coal plants that are co‐firing with biomass is likely to further
increase
• 10 additional plants with a total of 11.6 GW capacity filed for FIT
certification of their biomass portion in March and September 2017,
respectively, but have not yet implemented the fuel change.
Biomass Fuel Demand by Power Plant Type
Co‐firing Coal Plants by Fuel Type
Coal Co-firing by Fuel type (operational by end Total Capacity

of 2019) # of Plants MW
Coal and Woody Biomass 26 12,607
Coal and Wood Chips 1 2,000
Coal and PKS 7 252
Coal and Wood Pellets 16 8,300
Other Biomass Mix Combination 7 418
Unknown 11 2,900
Total 68 26,477
Coal Co-firing by Fuel Type (Pipeline beyond Total Capacity

2019) # of Plants MW
Coal and Woody Biomass 2 1,100
Coal and Wood Pellets 3 1,289
Coal, Woody Biomass and PKS 1 68
Unknown 1 300
Total 7 2,757
• Not all plants disclose fuel type in detail
• Woody biomass in many cases is domestic woody biomass, especially from
thinnings, due to the higher FIT
100% Biomass Fuel Power Plants
Existing and planned number of plants and total capacity added p.a.
Existing Power Plants (>1MW) by Fuel Type (where known)
# of
Plants (>1MW) by Fuel Type operating by End of 2020 Total MW
Plants
Wood Pellets (100%) - -
Wood Pellets and PKS 4 223
PKS (100%) 3 154.4
Wood Chips (100%) 14 182.4
Wood Chips and PKS 4 85.4
Woody Biomass (100%) 58 340
Woody Biomass and PKS 17 223.2
Other Biomass (e.g. Waste Wood etc.) 21 543.7

• Woody biomass is predominantly from domestic sources and used in many small
plants (0.5 to 3MW); high FIT
• 100% wood chips or wood chips and PKS are often used by power plants affiliated
with paper or board manufacturing and use PKS to handle wood chips availability
fluctuations
• Similar applies to power plants using woody biomass and PKS
Planned Power Plants (>1MW) by Fuel Type (where known)
• First plants with 100% pellet fuel
• 100% PKS fueled plants decreasing – mitigating the sustainability risk
• Woody biomass and PKS fuel combination – continued growth
Import Ports for Wood Pellets
Japan Biomass Fuel – Demand Outlook
Scenario 1
• Based on our database of existing and confirmed future biomass power generation,
including coal plants that are co‐firing
• Assumption that PKS imports are reduced starting in 2022 due to the new sustainability
requirements imposed by the Japanese government *
• Since most of the PKS is used in co‐firing coal plants, we expect that these plants are
switching over to domestic biomass and imported wood pellets.
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Wood Chips 1,148,000 1,260,000 1,502,000 1,452,000 1,524,600 1,600,000 1,680,000 1,764,000 1,853,000 1,945,000
Wood Pellets 347,000 506,000 1,060,000 1,200,000 2,122,000 4,842,000 6,572,000 7,172,000 7,522,000 9,022,000
Domestic Biomass 119,000 125,000 131,000 138,000 146,000 153,000 161,000 165,000 173,000 182,000
PKS 761,000 1,137,000 1,265,000 1,404,000 1,560,000 1,734,000 1,926,000 963,000 722,000 542,000
*
Revised sustainability requirements for PKS may not be as strictly enforced.
However, PKS is a fuel impacted by palm oil production which is currently impacted
by reduced demand due to the Corona pandemic.
Scenario 2
• Assumption that a majority of coal plants with the technical capability to do so switch
to a minimum of 3% co‐firing of pellets
• This scenario would drive up the total annual wood pellet demand to over 13 Million
MT in 2025
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Wood Chips 1,148,000 1,260,000 1,502,000 1,452,000 1,524,600 1,600,000 1,680,000 1,764,000 1,853,000 1,945,000
Wood Pellets 347,000 506,000 1,060,000 1,200,000 4,986,000 7,142,000 8,939,000 9,721,000 10,274,000 13,337,000
Domestic Biomass 119,000 125,000 131,000 138,000 146,000 153,000 161,000 165,000 173,000 182,000
PKS 761,000 1,137,000 1,265,000 1,404,000 1,560,000 1,734,000 1,926,000 963,000 722,000 542,000
• Assumption both scenarios that a significant demand growth will be seen for industrial
wood pellets but not for wood chips due to due wood chips having higher moisture
content and lower energy density, as well as cost
• The Japanese government released efficiency standards for thermal power generation
plants in 2016:
• All new coal‐fired power plants: Recommended heat efficiency of at least 42% with
target of 44.3% efficiency by 2030 (equivalent to so‐called ultra‐super‐critical
plants or the most advanced technology available for commercial operation)
• Plants not meeting that threshold are encouraged to gradually ramp down
operations.
• Targets are not binding at this time but assumption that most operators plan to
comply
Scenario 3
Estimated Pellet Demand (MT) Scenario: all currently operating Japanese Pulverized
Coal Plants are operating in 2020
• However, many of the sub‐critical and super‐critical plants are old.
• If plants currently older than 30 years are assumed to be shut down by 2030,
then total utility coal generation capacity will drop from about 27.8 GW to about
21.3 GWs.
• Total pellet demand required for compliance with minimum efficiency
requirements will then be about 2.9 million MT per year.
Ability to pay under various off‐take price scenarios
(FIT and tender PPA prices)
• Given the Japanese government’s objective to reduce power prices, the continued
growth of biomass power generation will depend on meeting a certain Yen/kWh price
(including fuel transportation)
• Overall price trajectory is going down as seen in 2018 and 2019 tender ceiling prices
Question:
Can lower PPA prices still support future growth for wood pellet demand?
Answer:
• Depends on LCOE, i.e. delivered price of the wood pellet fuel and the capital cost burden
that is part of the cost of generation.
We have therefore run a number of scenarios using FutureMetric’s ‘Ability to Pay’ dashboard
for wood pellets.
100% Biomass fuel (Pellets) – at US$ 3,000 CAPEX per kW of Capacity:
• At “overnight” capital cost of $3,000 per kW of capacity for the power plant, the net of revenue minus the levelized
cost of electricity (LCOE) is positive for most combinations of CIF pellet price and FIT price.
• At FIT prices below ¥19/kWh, pellet gate prices and supply chain logistics costs must be tightly controlled.
• Lower FIT prices will stifle the development of any new projects
• Challenging to those approved projects with a FIT of JPY 21/kWh
Concluding Thoughts
• The Japanese power generation market is undergoing significant changes due to the
impact from the Daishinsai in March 2011 and the ongoing power market reform.
• Just like other countries, Japan is seeing increasing impact from climate change such as
stronger typhoons and new record temperatures during the summer months.
• The government is likely to continue policies that try to balance climate change
mitigation with protecting Japanese industry.
• This will be reflected in the continuous ‘small step’ approach that is quite typical for
the country, unless something dramatic happens.
• Japanese targets tend in general to be on the conservative side so that they are
achievable. However, actual developments can outpace the targets as seen in the
renewable energy sector with solar PV development and mostly likely also with regard
to offshore wind power generation.
• Biomass is another sector where this may happen.
• There is a market for biomass power generation as nuclear power generation capacity
as well as coal capacity has to be replaced.
• As outlined, biomass power generation, especially using pellet fuel, can be profitable
long term, assuming that off‐take prices will not drop below a certain level.
• It is up to suppliers to manage capacity, costs and especially supply security.
• Supply security will always be key for the island nation of Japan.
• Japan has to develop efficient infrastructure and logistics, especially for pellet import
and storage. The investments in LNG facilities show what is possible if a fuel type has
long‐term support by industry and government.
This presentation was based on FutureMetrics’ Comprehensive Report on
Japan’s Biomass Power Markets.
The report contains 127 pages of information and analysis
Webinar attendees are offered a coupon
for US$1,500 off the normal price:
JapanWebinar2020
Coupon valid until June 31, 2020
Prepared by:
FutureMetrics, LLC
8 Airport Road
P.O. Box 840
Bethel, ME 04217
Phone: 207‐824‐6702
Fax: 207‐824‐4816
Disclaimer:
Information presented in this report may not be further distributed or copied without
permission from FutureMetrics LLC and original sources.
While FutureMetrics LLC makes every effort to provide accurate and complete
information, various data such as statistics etc. may change prior to updating.
FutureMetrics LLC provides no warranty, expressed or implied, as to the accuracy,
reliability or completeness of the furnished data.

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FutureMetrics

Dr. William Strauss, John Swaan, Annette Bossler, Hannah Campbell, Laurenz Schmidt, Yoshinobu Kusano,

• Total immediate loss of lives: 14,238

March 2011 and beyond:

From Mid 2012:

Grid management going forward:

Step 1 – 2015: Move towards a national grid

Regulators Wholesale Pool Utilities Retailers Generators

Surveillance TOCOM (Tokyo TEPCO 35+

Onshore Wind (less than 20 kW) 20 55 55 55 55 55 55 55

Hydro (more than 200 kW up to 1 MW) 20 29 29 29 29 29

Hydro (more than 5MW up to 30MW) Using 20 24 20 20 20 20

2015 2016 2017 2018

Wood Chip Imports into Japan

Malaysia MT Indonesia MT Total

Malaysia Yen / MT Indonesia Yen /MT Average Yen/MT based on Ttl Imports

200,000 146,150 131,115

Vietnam Canada Malaysia Thailand Australia Indonesia China USA

Indonesia Malaysia Thailand Vietnam Canada Australia

Planned new coal capacity

Coal Co-firing by Fuel type (operational by end Total Capacity

Coal Co-firing by Fuel Type (Pipeline beyond Total Capacity

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