TOKYO -- As part of its campaign to convert aging, carbon-dioxide-spewing coal plants to run on biomass, Japanese energy company Erex will partner with South Korean engineering group Samsung C&T on building global supply chains for the cleaner fuel.
The companies, which recently signed a memorandum of understanding to partner on biomass, look to establish a joint venture in Japan next year to develop new fuels.
Erex plans to buy coal-run power plants from major utilities and refit them for biomass fuel, helping reduce Japan's CO2 emissions.
By working with Samsung C&T, which has commodity trading and construction operations in Southeast Asia, Erex hopes to boost annual procurement of biomass fuel to between 3 million and 5 million tons in 2025 from about 1 million tons now. It aims to hit 10 million tons in 2030.
The fuel will be used at Erex's own power plants and sold to other operators in Japan and overseas.
The partners also will consider joint development of biomass power plants. Erex plans to bring a 20-megawatt plant online in Vietnam in 2024, and is considering four or five additional plants there. Cambodia is also a candidate for a biomass plant by the Japanese company, which looks to tap Samsung C&T's know-how from its various construction projects around the world.
Pellets like these are made from wood scraps and can be used as biomass fuel. Samsung C&T has been a leading shareholder in Tokyo-listed Erex since the fiscal year ended March 2015. The construction firm held a 1.29% stake as of September and has supplied Erex with hundreds of thousands of tons of fuel yearly through group companies.
Erex aims to acquire two or three 15 MW coal-fired power plants by the end of March for conversion into biomass facilities.
These plants have operated for about two decades and are expected to cost several million dollars each. Erex plans to convert them to run on a mix of coal and 15%-30% biomass starting in fiscal 2022. They will run completely on biomass by around fiscal 2025.
Erex aims to have about 5,000 MW of capacity -- equivalent to five nuclear reactors -- by fiscal 2030. Producing that much power on a 50-50 mix of coal and biomass will require around 10 million tons of biomass fuel a year.
Erex also intends to bring a 300 MW biomass plant online in partnership with top Japanese oil refiner Eneos in fiscal 2026. Combined with its five facilities already in operation, Erex will need to secure nearly 15 million tons of fuel.
But supply constraints are just one obstacle facing Erex. Though burning biomass is considered in effect carbon-neutral, since it is based on plant matter that absorbed CO2 from the atmosphere while alive, increasing production has led in some cases to cutting down forests. The European Union and others question whether such fuel counts as renewable energy over concerns about deforestation.