Japan may exclude coal-biomass project from FiT scheme
Japan is pushing forward with a plan to exclude a new biomass- and coal-fired power generation project from its feed-in-tariff (FiT) scheme from the April 2019-March 2020 fiscal year, posing a headwind to the country's coal power industry.
A special committee under Japan's economy, trade and industry ministry (Meti), which was formed to discuss FiT pricing, has decided to drop coal from a biomass power project under the FiT scheme, as its recent study has shown that overall costs to maintain a co-fired power plant are lower compared with a dedicated biomass power plant that uses woody biomass, liquid biomass or construction waste. It is necessary to provide appropriate competition, the committee said.
Biomass such as pruned branches, wood shavings, paper, food debris, waste cooking oil and black liquor will be excluded from the FiT scheme from 2021-22 for co-firing with coal.
The decision, if approved by the government, will be applied to the country's biomass power tender for 2019-20, which will exclude projects co-fired with coal. The first 2018-19 tender for biomass power generation under the FiT scheme was awarded to Japanese power joint venture Soma Kyodo Power for the 2,000MW Shinchi power plant co-fired by biomass and coal.
The second 2019-20 tender under the FiT scheme seeks 120MW of power generation capacity, lower than 200MW for 2018-19. The committee has suggested a bidder should offer generation capacity of more than 10MW for a woody biomass plant, with no such rules set for a liquid biomass plant. The submission of pre-tender documents is scheduled for July.
Coal- and biomass-fired power projects that received government approval to operate prior to 2018-19 can continue to take advantage of the FiT scheme. But projects in the capacity market, which is scheduled to be launched in 2020-21, will not be eligible for the FiT scheme.
The exclusion of coal from the FiT scheme will place further pressure on Japan's coal power sector, which is facing criticism because of its high CO2 emissions. An increasing number of Japanese firms have started to shift from coal, in line with the global trend. An ongoing discussion by another Meti committee to tighten rules for new power plants co-fired by biomass and coal is also expected to discourage investments in such projects.
The committee aims to revise rules to determine thermal efficiency, to encourage more introductions of advanced coal technologies to reduce emissions. Japan's Energy Conservation Act currently excludes biomass from the thermal efficiency calculation, taking into account only coal-derived energy input. This calculation theoretically increases thermal efficiency compared with a calculation that is based on energy input from both coal and biomass.
Meti has warned that the current calculation allows power firms to build non-efficient power plants using less advanced coal technologies, such as a supercritical unit. This is inconsistent with the government's plan to increase the use of advanced coal technologies, such as ultra-supercritical and integrated coal gasification combined-cycle.
Changing the calculation to include energy input from biomass may affect investments in power plants co-fired by coal and biomass, as such projects will be required to install advanced technologies to meet efficiency regulations, which is currently set at 42pc for coal-fired generation.
The FiT pricing committee is separately discussing adding new biomass feedstocks for power generation under the scheme, with a focus on sustainability and stable procurement of food. It is unclear when new biomass feedstocks will be added to the current list, which includes woody biomass, palm kernel shells, palm trunk and palm oil.
Potential feedstocks include empty fruit bunches; plant shells such as coconut, cashew nut, walnut, almond, pistachio and sunflower seed; napier grass; sorghum; jatropha seeds; and plant oils such as canola, soy, peanut, sunflower and palm acid.
Stay updated on the biomass markets
Argus Biomass Markets is a weekly report covering international wood pellet, wood chip and palm kernel shell sectors.
Our reports and prices are available on Argus Direct, via desktop and mobile application platform.
To read the other stories, click on the links below:
To read the other stories, click on the links below: