Biomass Power as Major Power Source

~ Creation of Asia Biomass Community~

September 6th, 2018

Issei Sawa President , NEED

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Driving force to create Biomass Energy Industry

Agriculture （6th. Industry)

Environment （CO2 Reduction）

Energy （Portfolio）

Political Action

Strategic Promotion

Industrialization Employment

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Biomass Energy Policy EU & U.S. vs Japan

Policy EU & U.S. Japan

Energy

●As Energy Security ●Ａｓ Ｅｎｅｒｇｙ Ｐｏｒｔｆｏｒｉｏ ●Ｌａｓｔ Resort of Renewable Energies ●Ambitious Target ⇒ Industrial Scale ●Creation of Large Market

●Minority among Renewable Energies ●Limited Target ⇒ Small Market ●Small Scale

Agriculture

●New Application of Agro and Forest Product ⇒New Market , New Industry ●Creation of New Industry （6th. Industry） in Agro and Forest Industry. ●Increase Farmer and Forester’s Income

●Tech. development project by Engineering Co. ● Small scale Demo Projects subsidized by Government are recognized as ‘’ Not economically viable’’

Environment ●Effective solution for GHG Reduction. ●BECCS (carbon negative) concept introduced by IPCC.

● Not recognized as GHG Reduction solution ● Too much attention on Food vs Fuel and Bio Diversification issues

Industry ●Promote as Strategic Industry ●New Employment Opportunity ●Sustainability Rule ⇒ Global Competition ●Subsidy ・Tax Incentives ⇒ Obligation

●Projects based upon Governmental Subsidy （Tech. Development or Small Scale Demo Projects）

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Unutilized Wood (1)

General Wood (2)

Waste Materials Sewage sludge

Recycled Wood

Cost

Power Plant Cost ¥ 410,000/kW ¥ 410,000/kW ¥ 310,000/kW ¥ 350,000/kW

Annual O& M Cost ¥ 27,000/kW ¥ 27,000/kW ¥ 22,000/kW ¥ 27,000/kW

Expected IRR (before tax) 8% 4% 4% 4%

Original FIT Rate (¥ /kWh) 32 24 17 13

Revision 40 (3) 21(4)

⇒ Bid (5) No change No change

Duration 20 years

FIT (Feed in Tariff) for Biomass Power Generation FIT was introduced on July 1, 2012 by METI.

(1) Forest residues (2) Wood Chips , Pellets etc. including imported one (even PKS, Palm Oil) (3) Applicable for less than 2MW Projects since April 1, 2016 (4) After Oct. 1, 2017 for more than 20MW (5) After April 1, 2018 for more than 10MW (180MW in 2018 including co-firing with coal)

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Energy Mix. of Power Generation in 2030

・ Oil : 31.5 Bill. kWh 3% ・ Coal : 281 Bill. kWh 26% ・ ＬＮＧ : 284.5 Bill.kWh 27% ・ Nuclear : 231.7～216.8 Bill.kWh 22～20% ・ Renewable : 236.6～251.5 Bill.kWh 22～24% -------------------------------------------------------------------- Total ： 1,065 Bill.kWh * 100% （*As assumption that electricity consumption shall be 980.8 Bill. kWh after 17% energy saving from current） Breakdown of Renewable Energy (Ratio**） ・PV ： 74.9Bill.kWh 7.0% (30%) ・ Wind ： 18.2Bill.kWh 1.7% ( 7%) ・ Geothermal ： 10.2～11.3Bill.kWh 1.0～1.1% ( 5%) ・ Small Hydro ： 93.9～98.1Bill.kWh 8.8～9.2% (39%) ・ Biomass ： 39.4～49 Bill. kWh 3.7～4.6% (19%) （** Upside case ）

GHG Reduction Target in 2030 ⇒▲ 26% from 2013

Advantage of Biomass Power over VRE

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１．Biomass PS is Stable base-road power source and Controllable like thermal PS ⇒・Considered as Coal-Fired PS Substitution. ・ play a role as a carbon free regulator for VRE (PV/ Wind) 2. High Capacity Factor (Biomass 80% , PV13% , Wind 20% ) 3. Power Source (Bio Fuel) can be transportable ⇒ Bio Fuel can be produced at different locations.

Target of Biomass Power Generation (2030)

Categoly 2014 .11 2030 Target (Ratio） Additional Facility

1. Utilized Wood 30MW 240MW (8 times） + 210MW

2. Recycled Wood 330MW 370MW (1.1 times） + 40MW

3.General Wood 100MW 2,740 ～4,000MW (27.4 - 40 times）

+ 2,640 – 3,900MW

Wood Biomass Total （Sum of 1～3 ）

460MW (3.2Bill.kWh)

3,350 - 4,610MW (7 - 10times) (22 - 31 Bill. kWh)

+ 2890 - 4150MW (+ 19 - 28Bill.kWh)

4. BIogas （Methane） 20MW 160MW (8 times） +140MW

5. Waste

780MW 1,240MW (1.6 times） + 460MW

6. RPS 1,270MW 1,270MW

Biomass Total （Sum of 1～6）

2,520MW (17.7Bill.kWh)

6,020 -7,280MW(2.4-2.9times） (39.4 – 49 Bill. kWh)

+3,490 – 4,750 MW (+21.7-31.3BillkWh)

FIT Status as of Dec., 2017 (Certified & Operated)

Certified Operated Unoperated

1. General Wood : 11.31GW 0.57 GW 10.74GW (1) Dedicated : 5.05 GW 0.57 GW 4.48GW (2) Coal Co-fired : 1.74 GW -- 1.74GW (3) Palm Oil : 4. 51GW -- (4.51GW)

2. Others : 0.93GW 0.58GW (0.35GW)

-------------------------------------------------------------------------- Total : 12.24GW 1.15GW 11.09GW

Assumption of Practical FIT Certified Projects

(based on FIT Status as of Dec., 2017)

1. Assumption of Operation : 1.77 ～ 2.21GW (1) 20～30% of Dedicated 4.48 GW : 0.90GW～1.34GW (2) 50% of Wood Coal Co-fired 1.74GW : 0.87GW

2. Biomass Operated : 3.46GW (1) FIT newly Certified : 1.15GW (2) Before FIT : 2.31GW (including RPS→FIT 1.12GW)

3. Above 1 + 2 : 5.23 ～ 5.67GW

Quantity & Price of Imported Wood Pellet (Japan)

9

71,98183,769

96,745

232,425

346,855

506,353

21,456

23,350

26,742

23,750

19,744 19,342

0

5,000

10,000

15,000

20,000

25,000

30,000

0

100,000

200,000

300,000

400,000

500,000

600,000

2012 2013 2014 2015 2016 2017

Pric

e(￥

/ｔ）

Qua

ntity

（ｔ）

Quantity(t)

Price(¥/t)

Quantity & Price of Imported PKS (Japan)

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57,88627,539 25,816

131,205

244,178

456,017

761,496

1,430,590

9,3718,995 8,989

11,78612,099

12,766

10,760

11,410

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2010 2011 2012 2013 2014 2015 2016 2017

Pric

e(￥

/ｔ）

Qua

ntity

（ｔ）

Quantity(t)

Price(¥/t)

Global wood pellets trading volume (2017)

11

2.9

3

0.5Baltics Total Asian demand

served

Canada West

Total European

Demandserved

Portugal

1.8

West Africa

0.5

Canada EastCanada West

1.0Russia

ChinaEast Asia

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6.4

4.0

US

2.3

【Unit：Mil. MT】

Source：KBLT

Vietnam

Malaysia

Canada

Russia

Indonesia

Thailand

China

1,650

510

130

100

Australia

Korea

10

Japan

0

10

U.S.A.

410

120

2,430

510

Pellets Trading in the Far East 【2017】

12 Source：KBLT

【Unit : thousand MT】

Pellets Import to the Far Eastern Market 【2023 Forecast】

13 Source：KBLT

【Unit : thousand MT】

Vietnam

Malaysia

Canada B.C.

Russia

Indonesia

Thailand

China

3,000

3,000

500

2,000

Australia

Korea(2023)

100

Japan（2018）

400

1,000+ Balance

U.S.A.

Japan（2020）

Japan（2023）

3,000

1,300 1,900 5,000 +alpha

800200

Comparison of LCA - CO2 Reduction for Import vs Domestic Wood Pellet

CO2 reduction of biomass power plant compared with coal fired power plant（t-CO2/year）

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7,605,3177,062,680 7,113,135

903,4801,446,117 1,395,662

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Domestic wood pellet Imported wood pellet from USA Imported EFB from Indonesia

CO2

Redu

ctio

n（t-C

O2/y

ear）

CO2 reduction in whole life cycle CO2 increase in process other than power plant

CO2reduction in power plant

△11％

CO2 reduction in power plant

CO2 reduction in whole life

cycle

△17％ △16％

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Creation of “Asia Biomass Community”

Market

Production

Feedstock

Market

Technology

Finance

North American Market

Japan-S.E. Asia

Joint Projects

Enhance the Multilateral partnership Governmental level ・Governmental scheme such as ODA , JCM, NEDO, JBIC etc. ・Biomass Plantation Private level

European Market

Local Consumption

EXPOR

T

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Phase-1 Production of Biomass Fuel in Asia and Biomass Power Generation in japan

Wood Pellet

Pellet Production in Asia under JCM scheme （JV with Local Co.）

Biomass Power Generation in Japan

under FIT （Dedicated, Co-fired） JCM Eligible Countries in Asia

Vietnam、Laos、Indonesia 、Cambodia、、Myanmar、Thai, Phillipine

Torrefaction

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Phase-2 Biomass Power Generation and Production of Fuel in same location in Asia under JCM Scheme

Wood Pellet

Torrefaction

Pellet Production in Asia under JCM scheme （JV with Local Co.）

Biomass Power Generation under JCM scheme （JV with Local Co.）

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Establish Sustainable Biomass Industry Biomass Plantation

・Next Generation Agriculture and Forestry “Contract Farming & Afforestation for Various usages” ・Biomass Plantation under ODA.

Improvement of Yield Mechanization Infrastructure Logistics

Biomass Industrial Complex

Bio Ethanol （Ｃｅｌｌｕｌｏｓｉｃ） Bio Pellet (⇒Torrefaction) Bio Jet Fuel (at existing

Petrochemical Refinery) BDF (⇒High Quality) Biomass Power Generation Bio Chemical Feed, Fertilizer

Creation of Sustainable Supply Chain of Industrial Complex

Biomass Refinery Market

Feedstock Management (Stable Supply・Cascade Usage)

Stable & Matured Market

Local Consumption Export to Japan Export to the other countries

Industrialization (Co-Production・Co-Location)

Long Term Offtake Agreement Reasonable Sales Price

Establish Relationship with Buyers (Utilities, Industries, Others)

Thank you for listening !!

NEED (Nippon Environmental Energy Development Co. ,Ltd.)

HP: http://need.co.jp

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