Unlike Japan and South Korea, other Asian countries are mainly wood pellet exporters such as China, Thailand, Vietnam, Indonesia, and Malaysia. China's renewable energy industry has shown rapid growth in recent years. In 2013, the National Energy Administration of China issued the “Guidelines for Establishing Portfolio Standards for Renewable Energy Resources”, which requires that renewable energy sources account for 15% and 20% of primary energy consumption in 2020 and 2030, respectively. RPS is a requirement to increase the use of renewable energy sources such as wind, solar, biomass, and geothermal energy production. It is stipulated that power supply companies use a certain percentage of renewable energy, but some policies are still not perfect, such as the lack of regulatory and penalties.
China has a wide variety of biomass resources including crop stalks, branches, animal manure, energy crops, industrial organic wastewater, municipal wastewater, and garbage. The supply of wood (forest) waste is approximately 900 Mt, of which 300 Mt can be used for energy consumption. Energy crops such as sorghum and jatropha mainly occupy about 2 billion hectares to meet the demand for bio-liquid fuel feedstock with an annual output of about 50 Mt (2012 data from China National Energy Administration). Demand for wood pellets is increasing in China, mainly in the eastern and Guangdong provinces. The local government has banned coal-fired boilers and the cost of pellets is lower than in other parts of the country.
Regulatory frameworks, market drivers and barriers
Since its establishment in 2012, the Renewable Energy Portfolio Standard (RPS) has played an important role in the wood pellet market in Korea. Power companies are required to increase their renewable energy generation ratio from 2% to 10% in the next decade.
Compared with other renewable energy sources such as wind, solar, or hydroelectric power, biomass is expected to provide most clean energy, estimated at 50-60%. After the implementation of RPS, the demand for sawdust pellets in South Korea began to rise, and imports from other countries increased.
RPS has advantages, including lower costs through the penetration of competing technologies and the achievement of renewable energy supply obligations. However, investors may bear the risk of managing an excessively high or low cost electricity supply.
Production capacity, production and raw materials
According to estimates of FAOSTAT 2016, in the past five years, the average annual production of sawdust pellet in Korea is only about 15 kt, which cannot meet domestic demand. Forest products are mainly used for watershed protection and clean water to prevent soil erosion and forest landscapes (Korean Forest Service, 2015).
The consumption of sawdust pellets is much higher than that of wood pellets produced in Korea. Imported wood pellets increased from 122 kt in 2012 to 1,850 kt in 2014, and slightly decreased to 1471 kt in 2015 (FAOSTAT, 2016).
Import prices range from €109-135/t but in 2015 it is €110/t (FAOSTAT, 2016).
Trade and logistics
The South Korean government has set the goal of importing 5 Mt of wood pellets by 2020 to meet 75% of particle demand (Roos and Brackley, 2012). Wood products, including pellets, are mainly from Vietnam (70%) and other countries such as Malaysia and Canada (FAOSTAT, 2016). Other suppliers are from the United States, Canada, Russia, Indonesia and Australia.
Pellet quality standards
Unlike most other countries, Korea does not accept custody chain certification as evidence of fiber origin (Murray, 2015). The Ministry of Environment of the Republic of Korea requires that the wood pellets is legally sourced and that they must be made of pure wood fibre, without any non-wood materials mixed (Murray, 2015). The Ministry of the Environment has also introduced the "Act on Promoting the Storage and Recycling of Resources". According to the act, the importer or manufacturer of the SRF should report to the Minister of the Environment or the local government manager after conducting the quality inspection. If the product does not meet the standards, the Ministry can enforce import bans and production or make improvement as required. According to Murray, rice husk is one of the main problems because pellets containing any material other than wood are considered to be biomass solid waste fuel. Allows the import of solid waste fuel (SRF) made from waste, such as palm shells, but will strengthen the quality inspection of the import, production and use of these products, while establishing public and private organizations that waste energy.
South Korea allows the import of biomass fuels - palm shells. It is expected that the distribution of renewable energy can be expanded to replace fossil fuels. Moreover, this will help solve the concerns of power generation companies in implementing the Renewable Energy Portfolio Standard (Ministry of Environment of Korea, 2014).