Not only could this increase supply costs, at least initially, it could also lead to less favorable carbon footprints, negating some of the positive impact bioenergy can have on net carbon emissions in the power sector. Project cancellations can also be expected, as developers are likely to struggle to secure long-term supply contracts for the required biomass assortments at affordable price levels.
The expectation of significant demand increases in Japan and South Korea offers interesting opportunities for a range of stakeholders across wood pellet and wood chip supply chains. Indonesia, Malaysia, Thailand and Vietnam are attractive supply sources where production capacity can be expanded, drawing on a mixture of roundwood from fast-growing forestry plantations, residues from wood processing industries, and other residue sources such as rubber wood plantations. Other regions, such as the Russian Far East, western Canada, Brazil and Australia are also expected to play important roles as potential supply regions, due to an existing biomass surplus and the potential for establishment of new plantations.
Several developers of bioenergy projects in Japan and South Korea have also shown intent to invest upstream, by acquiring or co-investing in existing biomass supply projects, or by developing their own greenfield projects. However, any upstream integration strategy that does not cover the full supply chain still leaves the risk of increasing biomass raw material prices, or even supply shortages, potentially increasing investors’ exposure to risk.