AFeasibility Study ofMaking Biomass Pellets

with Plywood Plant Wastein Indonesia

CONTENT

1. Introduction............................................................................................1

2. Project Description................................................................................ 2

3. Advantages and Feasibility of the Project...........................................4

3.1 Abundant Raw Materials Potential in Plywood Manufactures.......4

3.2 Relatively Intensive Production Circle........................................... 5

3.3 Domestic Policy Support.................................................................6

3.4 Development of Pellet Equipment.................................................. 6

3.5 Vast Oversea Market........................................................................7

4. Benefit Analysis of the Project............................................................11

4.1 Solving Plywood Factory Waste Disposal Problem......................11

4.2 Bring Economic Benefits to the Plywood Industries....................11

5. Prospects of the Biomass Pellet Investment......................................12

6. Conclusion............................................................................................ 13

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1. Introduction

Energy is the foundation and important constraint of modern economic and social

development. With the growth of national economy and population, world energy

demand is rising in recent years. It can be said that to solve the energy problem is to

solve the problem of economic development. Traditional energy consists of oil, gas

and coal. They have some obvious defects: non-renewal, harm to the environment

after firing and the high price. These reasons lead to a prompt decrease in their using.

Renewable energy resources quickly enter into the market and the energy market will

reach to a diversified energy fix.

With the increasing awareness of energy conservation and environmental protection,

international community’s demand for energy saving standards has become higher

and higher. Thus, the development and utilization of clean energy have been gradually

carried out in many areas. At the same time, biomass energy has been popular in

many countries because of its cheap price and renewable nature. Biomass fuel

program has become an important part of world sustainable development strategies

and it can provide a win-win solution for the government: low prices can reduce

energy use costs; reduce carbon emissions to honor their commitments to the Kyoto

Protocol; reduce the dependence on oil country which is distant, political instability

and still dangerous; it is conducive to energy security.

Increasing demand for biomass, the pellet industries are rapidly developed all over the

world. With abundant forest resources, cheap labors and vast oversea markets,

Indonesia has great potential to develop wood pellet fuel industry. Indonesia has the

second large number of plywood manufacturers in the world. Also, Indonesia is the

world’s largest plywood exporter. The plywood plants generate a tremendous amount

of wood waste every year. Development of wood pellet fuel can help reduce the

impact of these wastes on the carrying capacity of environment in Indonesia, also

helps to reduce waste and promote income-generating efficiency of Indonesian

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plywood manufacturers, further ease the resource shortage contradiction. Plywood

manufacturers should actively develop biomass pellet fuel, on one hand, it can help

resolve the waste problem, protect environment; on the other hand, the biomass

pellets can be sold, increasing economic income.

Figure 1. The Challenge of Overcoming Energy Crisis

2. Project Description

The target object of this investment is plywood waste biomass pellets. The raw

materials are mainly plywood fragments, slag and scrap. They can be made into

biomass pellets through chipping, crushing, drying, pelletizing and cooling.

Energy

Crisis

SustainableDevelopment( environmentalfriendly and low

carbon)

Green

Economy

Wood Pellet Industry

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The production processes are as follows:

1. Transport biomass wastes to the crusher;

2. Drying the raw material by dryer;

3. Transport to the pellet mill for pelletizing;

4. Cooling the biomass pellets with cooler;

5. Packing pellets into bags.

The investment of wood pellet production line can better deal with the waste problem

of plywood factories. It can recycle the wastes to produce new alternative energy -

wood pellets. This production line have several advantages: a clear division of labor,

complete support equipment, high degree of automation, high productivity and

convenient operation. In addition, this production line can be operated only by six

persons. It adopts three-tier structure dryer new technology, which is more effective

than single-layer; equips with flue gas filtration equipment to reduce pollution; adds a

more effective control system. Azeus Wood Pellet Machinery Company can allocate

different size pellet production line according to customers’ requirements. And also

they can support technical guidance and after-sales service to ensure the smooth

running of production.

Example: Biomass pellet production line equipment list

Wood Crusher Machine * 1 set

Rotary Drum Dryer * 1 set

Flue Gas Filter * 1 set

Wood Pellet Machine * 2 sets

Cooler Machine * 1 set

Transportation Equipment * 4 units

Wood Pellet Weighing and Packing Machine *1 unit

Electricity Control Center *1 unit

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3. Advantages and Feasibility of the Project

Plywood manufacturers have more potentials to develop wood pellets. This project

has shown many advantages and feasibility on developing wood pellet in Indonesian

plywood industries.

3.1 Abundant Raw Materials Potential in Plywood Manufactures

Relying on the rich forest and cheap labor resources, there is a rapid development on

Indonesia’s timber industry, especially plywood and furniture manufacturing based on

raw materials such as logs and saw timbers. And these are increasing year by year.

Among them, plywood industry has become a major part of Indonesian economy.

Plywood manufacturing process is as following:

Logs→Log grading→Debarking & bucking→Peeling & dipping→Drying→Veneer

selection & repairing→Lay up→Glue spreading→Cold & hot processing→Sizing &

sanding→Laboratory test→sorting & grading→Packing

There are so many wastes in the process of plywood production and these wastes are

mainly produced in four steps of the process. First of all, the length, the curvature and

the defects of logs have a direct impact on the production rate of plywood. The wastes

are small logs, truncated and sawdust. The loss rate in cutting step is generally

3%-10%. Secondly, there exists so many barks in the process of peeling. Thirdly,

veneer peeling is the biggest loss step in plywood production process. In this step, it

results in a huge number of substandard broken veneer, irregular pieces of wood and

damaged wood core. The loss rate may reach to 15%-25%. Finally, it is the leftover

materials in the step of sizing and sanding.

There are hundreds of plywood manufacturers in Indonesia, with an annual output of

more than 900 million cubic meters of plywood. In accordance with the overall

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utilization levels of 65% in Asia, Indonesia plywood industries have generated an

extremely alarming number of wastes every year.

Figure 2. Plywood

3.2 Relatively Intensive Production Circle

The distribution of Indonesian plywood manufacturers is relatively concentrated.

Information and data has shown that large-scale plywood manufacturers spread

mainly in three regions in Indonesia. They are regions nearby Jakarta, Semarang and

Surabaya. Relatively concentrated distribution of industries can conductive to form a

co- production of wood waste recycling circle. They can also recycle and process the

wood waste dealing in a unified way. Manufacturers gathered not only solve the

disadvantages that small manufacturers can not afford to waste recycling alone, but

also meet large manufacturers’ demands for raw materials that they purchase complete

sets of machinery for production. They can reduce the cost and enhance the

technology sharing in these cycles.

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3.3 Domestic Policy Support

Indonesia is an important exporter of processed timber. State policy prohibits the

export of logs, however it encourages the development of the plywood industries and

the wood pellet fuel production industry. Under the influence of the Kyoto Protocol,

Indonesian government introduces policies to promote the development of biomass

pellet fuel. In this way, it can help to ease the pressure on energy use and

environmental carrying capacity. On January 31, 2012, Indonesian government

promulgated several tax subsidies for the development of bio-energy, bio-gas and the

re-utilization of other solid waste. Plywood industries should respond to the national

policies and take full uses of the advantages to open up a new approach which

contains plywood production, waste disposal and wood pellet processing. In a

relatively mature time of pellet technology development, they should take the

shoulder to develop such a process, and by the way these developments can benefit

them, too.

3.4 Development of Pellet Equipment

Development of science and technology has also promoted the development of pellet

equipment industries. Modern pellet equipment has entered a era which has been

called a complete production line of crushing, cooling, drying, pelleting and

packaging. The entire production line is flexible and easy to operate. It can

significantly promote the production efficiency under a condition of using less energy.

There is no doubt that these new machines’ development will make it possible for

plywood manufactures to work on the recycling and further develop the wood pellet

fuel production. Plywood manufacturers can easily participate in the production of

biomass pellets themselves without affecting their major productions. They can

recycle the wood wastes for another using so as to achieve the goal to get more

benefits.

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Figure 3 . Azeus 500kg/hour Mobile Wood Pellet Plant

3.5 Vast Oversea Market

At a stage of rapid development in biomass pellet manufacturing, Indonesia has a vast

overseas market. Global wood pellet consumption expectation will have a great

development in 2020. Wood pellets are used worldwide for heating (63%) and

electricity generation (37%), of course there are some differences between countries.

For example, wood pellets are mainly used for heating in Germany, Austria and Italy;

while they are used for electricity generation in the Netherlands and Belgium. On the

other hand, wood pellets are used for heating and electricity generation in Sweden,

Denmark and Finland. The retail price for wood pellets is 200euro/tonne (330,000

won/tonne) and $300/tonne (370,000 won) in Europe and America. The increasing

demand is bound to affect the development of primary pellet producing countries. As

a main representative of low-cost manufacturing region, Indonesia will gradually

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become one of popular wood pellet fuel exporters to European and American

countries.

Figure 4. World’s Pellet Consumption Outlook

Demand for the biomass pellet in Asia market is also rising, three of the obvious ones

are China, Japan and South Korea. And their pellet consumption is projected to

exceed that of Western Europe by 2020. The East Asia nation saw an increase in pellet

consumption, with 2013 figures estimated at 500,000 tons, compared to 174,000 tons

in 2012. According to the assessment report of ITA (International Trade

Administration) in 2014, China will account for one quarter of the biomass pellet

consumption in the export market. China is rich in natural resources, but the demand

for fuel is still in a state of extreme shortage. China has a vast market and a relatively

advanced machinery manufacturing technology. It can meet the domestic needs

through investment in technology and capital to develop pellet fuel production. As a

country rich in biological resources, Indonesia should strengthen the cooperation in

production styles and technologies and the sharing of market supply with China. It is

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a win-win choice.

Due to a shortage of domestic resources and a growing demand for the electricity for

the development of industry, South Korea and Japan urgently need to develop new

fuel energy to meet the demand of domestic production. Both countries have focused

on the Southeast Asia regions and carried out the project of biomass pellet fuel

through investment or cooperation. South Korean has imported a large number of

biomass pellets. Korea is the world’s 10th largest energy consumer, fifth-largest oil

importer, second-largest coal importer. 64% of its electricity is produced from fossil

fuels. Further more, it also actively looks for the right opportunity to invest and build

factories in neighboring countries. Indonesia is one of the main targets. According to

the data from Korea, Indonesia offers the cheapest pellet. Japan has a similar situation

as South Korea. Lack of energy resources, coupled with the development of the

industrial economy’s dependence on energy, Japan has become the other biggest

market in Asia. The great demand of biomass pellets in South Korea and Japan could

be a great opportunity for Asian countries. We have learned that there have been many

biomass pellets plants in China, Indonesia, Malaysia, Pakistan, Nepal, India and Sri

Lanka etc. Yet more pelletizing plants are needed, and more countries and regions will

use biomass pellets in the future.

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Figure 5. Biomass Pellet and Coal Consumption in China, South Korea and Japan

Figure 6. Pellet Production and Consumption in Korea and Japan

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4. Benefit Analysis of the Project

Indonesia plywood manufacturers have so many advantages to develop the wood

pellet production. Here are several analysis of the benefits.

4.1 Solving Plywood Factory Waste Disposal Problem

Indonesian plywood production ranks top three in the world. Plywood industry is an

important part of the economy. According to the statistics, Indonesia’s current annual

production of plywood is over 900 million cubic meters. Due to the continuous

expansion of world market, these productions are still on an upward trend. In the

utilization of wood, Asian developing countries have a definite gap with developed

countries. The rate is about 60%, which means that in this level, wastes that

Indonesian plywood industries annually produced have reached to a number of

millions cubic meters. Improper handling of waste wood materials will bring many

consequences, sometimes even seriously pollute the environment and be harmful to

human’s health. Accumulation of wastes is also likely to lead to social security issues,

breed theft and fire phenomenon. It has become public topics about how to solve the

problems of wood materials recycling and utilization and to promote sustainable

development of plywood industries. Investment on wood pellet production line can

precisely solve these problems. The rest of the wood chip slags and scraps after the

plywood production are the excellent raw materials to make wood pellet. Pellet

production can also solve the problem of pollution caused by unreasonable treatment

wastes. Enterprises should bear the social responsibility to protect the environment

and achieve a sustainable development.

4.2 Bring Economic Benefits to the Plywood Industries

Investing on the production line can not only solve the problems regarding waste

disposal and environmental pollution of the plywood manufacturers, but also bring

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better economic benefits to them. Currently, the world’s awareness of energy rises to a

new level. Wood pellet fuel has become a popular target that developed countries and

some developing countries highly demand for. And in this way, it steps on a new rank

in energy groups. The tendency of developing biomass pellet can not be changed.

Plywood industries have many advantages that other industries do not have. Through

recycling the waste into treasures, plywood manufacturers can bring in a substantial

amount of revenue.

5. Prospects of the Biomass Pellet Investment

Nowadays, many countries begin to strengthen national concerns and attentions on

global warming and low carbon economy. Wood pellets, which can be used to fuel

power plants and for heating, are compressed biomass deriving from sawdust and

waste from saw milling. Many forum participants said the energy from wood pellets

was “renewable, clean and economical”. More and more countries have started a

project which updates the power plants from using coal as their main energy to burn

the wood pellets and straw pellets as the leading. It can be obviously found that most

power plants in western countries have already utilized biomass pellets as their main

fuel. There has been a great increase in the demand for biomass pellet overseas. The

global production of wood pellets will grow by more than 30 percent a year and the

demand is anticipated to be 150 million tonnes by 2020. The conflict between various

new requirements on the environment proposed in the Kyoto Protocol and the

insistent requirements of energy from economic development has gradually grown.

Exploration of new alternative fuels has become a new topic in the process of

industrial development. Wood pellet is one of the new alternative burning fuels. It is

belonging to a part of sustainable development and warmly welcomed by many

countries. According to statistics, South Korea has set several investment for factories

in Indonesia to develop pellet production. The market is large. Plywood

manufacturers should size the opportunity to open a new path for their own

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development.

6. Conclusion

Development of the plywood manufacturers in Indonesia will drive the promotion of

wood pellet industries, as the development of wood pellet industries will bring new

profits for plywood manufacturers. This is a win-win investment. Wood pellet

machines produced by Azeus Pellet Machinery have the first-class level in Asia. This

company has some high-top technologies differ from other similar industries and also

provides first-class technical guidance and after-sales services. The machines combine

high efficiency, energy saving, equipment sophisticated and hard quality features. It

should be a better partner for every wood pellet manufacturer. Indonesia has huge

potential in biological resources. Plywood industries have their own advantages to

develop biomass pellets. Enough raw materials reserve, low labor cost and convenient

transportation will certainly accelerate the transformation of this industry. They

should match the energy saving trend and accompany by the advantage of large world

market demand to invest on the wood pellet production. This is a new breakthrough of

the future development of the plywood industries.