Mr Simon Yim, the Founder of SKY Renewables, has set his sight on utilizing local sugarcane waste as feedstock for renewable energy since his first trip to the Burdekin in 2018 and meeting with the leadership of Burdekin Renewable Fuels (BRF). As a visionary first mover, his plan was to process the fibre locally into biomass pellets for export to Japan.
Mr Yim also recognized very early on that biomass pellets are the only form of renewable fuel which is exportable and importable in its original form and economically across continents for years to come. And unlike the intermittent nature of wind and solar, biomass power is dispatchable baseload 24/7 renewable power.
Japan imports over 90% of its energy, including 42% of Australia’s liquefied natural gas (LNG) and one-third of Australia’s coal. The Japanese Government encourages biomass power generation as baseload renewable power through offering high feed-in-tariffs in excess of Yen equivalent of $250 per MWh under 20 years of “take-or-pay” power purchase agreements with the generators.
Japan has no meaningful domestic biomass resources. Approximately 25% of global export of wood pellets of 21m tons in 2022 found its way to Japan. Japan also imports the same amount of palm kernel shell from Southeast Asia as biomass fuel, but that volume is going to shrink substantially when the sustainability requirement imposed by the Japanese Government coming into effect in April next year.
SKY Renewables approached the canegrowers from the demand side as early as 2019 by bringing the Japanese market here through written expressions of interests from Japanese end-users. This complements very well with BRF’s strategy.
Unfortunately, SKY Renewables’ pursuit was interrupted by Covid, just like everybody else. Japan and Australia have both committed to Net Zero in 2020 and 2022, respectively. However, with very limited renewable resources and a large reduction in nuclear generation, Japan has to keep relying on coal and natural gas for power generation. As a long-term mitigation measure, the Japanese Government requires all coal-fired units to co-fire coal with renewable fuel such as biomass pellets in order to reach its mandatory efficiency standard of 43% by 2030. Together with co-firing demand, Japan will need more than 60m tons of biomass pellets by 2030. To address the huge supply shortfall, the Japanese Government has in April this year approved sugarcane waste as feedstock under the FIT scheme. Both Mr. Yim and BRF’s vision have proven correct.
The other black swan event was the war in Ukraine. Newcastle coal price reached a high-water mark of USD435 per ton in September 2022. Even though it has eased to the USD140-160 range in recent months, it is still a far cry from the ~USD70 per ton range just before the war. When the price of coal and biomass pellets have substantially narrowed, using biomass pellets to substitute for coal is a no-brainer.
Mr Simon Yim
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