IJERD – International Journal of Environmental and Rural Development (2017) 8-1

Research article
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Supply Chain Analysis for Determining the Requirements forContinuous Woody Biomass Energy Utilization Systems:
Comparison of the Actual Management Conditions in JapanKAZUYOSHI NEMOTO*
National Institute for Environmental Studies, Tsukuba, Japan
Email: nemoto.kazuyoshi@nies.go.jp

HIROMASA INUZUKA
Sensyu University, Kawasaki, JapanSHOGO NAKAMURA
National Institute for Environmental Studies, Tsukuba, JapanYASUHUMI MORI
National Institute for Environmental Studies, Tsukuba, Japan
Received 16 January 2017

Accepted 28 June 2017(*Corresponding Author)

Abstract In Japan, the number of newly constructed woody biomass power plants are expected
to increase with the introduction of the Feed in Tariff mechanism. However, many woody
biomass energy plants, including heat supply systems, face difficulties because of issues such as
high fuel costs and find it difficult to maintaining a stable supply. This study aims to reveal therequirements for continuous business regarding woody biomass energy, focusing on four
factors: wood supply, fuel manufacturing, energy supply, and energy demand. Specifically, we
selected multiple Japanese cases that focus on the types of woody fuels such as cordwood,
wood chips, and wood pellets, conducted semi-structured interviews, and compared andexamined how their supply chains successfully developed. We found that integral cooperation
among the four factors was essential, and support regarding each factor, economic viability, as
well as balanced supply and demand for wood were necessary for ensuring continuous woody
biomass energy utilization systems.
Keywords renewable energy, forest industry, regional revitalization, wood fuels

INTRODUCTION
In regions with abundant forests, woody biomass is a potentially promising renewable energy resource
and is expected to develop into a regional industry. In Japan, the utilization of woody biomass togenerate electric power expanded with the introduction of the Feed in Tariff (FIT) in 2012, which
resulted in the construction of woody biomass power plants in various parts of the country. In addition,energy supply systems using woody biomass heat were being introduced as government subsidized
projects. After a biomass energy system has been created, trees must be cut down and transported fromthe forests to produce fuel. Fuel has to be fed to heat boilers; its combustion must also be controlled.
Therefore, to ensure the continuity of a biomass energy system, it is vital to establish a stable system tosupply woody fuel from the upstream to the downstream end of the system.
This study was based on the idea that it was important to build a supply chain that ensuresbusiness feasibility for organizations that stabilize supply, and maintain cooperative relationships
between these organizations. For a biomass supply chain, of course it was important to balance
expenditures and income to ensure continuous operation. Further, because of the large number ofⒸ ISERD

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organizations characteristically involved, business feasibility and inter-organizational relationships
were selected as the themes of this study. Regarding woody biomass energy utilization systems,
Raychaudhuri (2015) surveyed the literature on biomass supply chains in some countries in Asia andEurope, but Japan was not included. Becker (2011) suggested supply chain analysis framework forassessing policies in the United States. Tahvanainen (2011) and Yoshida (2016) analyzed costs ofwood chip supply chains in Europe and the US respectively. In Japan Sato (2015) designed a model forwood biomass supply chains in Tohoku area. However, there was no research related to biomassenergy utilization systems in Japan that evaluated actual supply chains from the perspective of businessfeasibility. Further, there was very little research on the supply chains of the systems in Japan from theperspective of inter-organizational relationships and the balance between biomass supply and demand
among the players. Therefore, this study analyzed supply chains from three perspectives: businessfeasibility, the related inter-organizational relationships and the balance between biomass supply anddemand.
OBJECTIVE
This study examined Japan’s woody biomass energy utilization systems that utilize forest resources inorder to identify the entire supply chain formed by a series of linked business organizations, and thestate of operation of each constituent player in this supply chain based on actual cases. Next, based on
the information obtained, the supply chain and its constituent players were analyzed from theperspectives of their business feasibility and inter-organizational relationships and the balance between
biomass supply and demand among the players in order to state the conditions required to ensure thecontinuity of the system.
METHODOLOGYThis study proposed the framework shown in Fig. 1, which divided the supply chain for a woody
biomass energy utilization system into four constituents: raw material supply, fuel production, energy
supply, and energy demand. For a system to be sustainable each player in the system should havebusiness feasibility and all players should be interconnected. Raw material supply referred to the
cutting of trees in the forest, the transportation, and sale of timber. Fuel production referred to the
production and/or sale of woody fuel (including firewood chips or pellets). Energy supply included
burning woody fuel in the equipment and supplying the energy to users as heat or electric power.
Energy demand referred to consumption of electric power or heat for air conditioning, hot water inhouseholds, businesses, public baths, and similar facilities.

EnergydemandRawmaterial
supplyEnergysupplyFuel
production

Fig. 1 Analysis framework of the woody biomass energy system
This study evaluated the four constituents of the supply chain of a woody biomass energy systemfrom the following three perspectives. The first was the business feasibility of each constituent player,Ⓒ ISERD

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whether each could be established alone without the support of external financial subsidy. The second
perspective was the relationship between the constituent players. The third was the balance between
biomass supply and demand among the players. To build a supply chain, the links between its players
were indispensable. It was also important for them to establish business relationships to ensure smoothbusiness. Moreover, it was equally important that they balance biomass supply and demand through thelinks between them.
This study conducted a survey to analyze a supply chain consisting of the four constituents
explained above by selecting six cases as typical energy utilization systems from among energy
systems such as electric power systems, heat systems. The six cases selected were shown in Table 1.
The supply chain and constituent players of the energy systems in each of these cases were shown in
Table 2. In Cases D, E, and F, local governments played major roles in building the overall supply
chains; therefore, these local governments as supporter were also included in our study.
Semi-structured interviews were conducted. The questions dealt with the business which theplayer conducts, stakeholders such as its suppliers and customers, quantities of biomass-related
products it acquired and sold, business costs such as the cost of production equipment, total sales,business prospects, and business challenges. The interviews were conducted from August 2014 toSeptember 2016.
Table 1 Cases analyzed
Case

Form of fuel

Energy equipment

Energy demand

A
B
C
D
E
F

Firewood
Firewood
Chips
Chips
Pellets
Pellets

StovesBoilers
Generator
Boilers
Stoves/boilers
Stoves/boilers

Heating
Hot water
Electric power generation
Cooling/Heating/Hot water
Heating/Hot water
Heating/Hot water

Amount of biomass
fuel (wet-t/y)
1,900
300
20,000
1,600
500
1,300

Table 2 The supply chain and constituent players in each case
CaseA

Raw material supply
Forestry association,
Citizens association,
Independent forester

Fuel production

Energy supply

Energy demand

Supporter

Company sellingwood stoves

Households

Households―

B

Independent forester

Community group

Public baths

Public baths

Citygovernment

C

Lumber company,
Orchard operator

Private enterprises

Electric power
utility

Households―

D

Lumber company

Sawmill operator

Third-sector

Public facility

E

Sawmill operator

Third-sector

F

Forestry association

Cooperative
association

Public facility
Households
Public facility,
Business officePublic facility
Households
Public facility,
Business officeTown
governmentCity
governmentCity
government

RESULTS AND DISCUSSION
1) Case A (wood stoves)
The system was principally supplying firewood for use in wood stoves used to heat households. With
regards to raw material supply, suppliers sorted out raw timber from managed forests for lumber andfirewood. With regard to fuel production, a wood stove company purchased the raw material and partⒸ ISERD205

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time workers used wood-splitting machines to process and naturally dried the material for producing
firewood. The processing was partly contracted to the raw material suppliers. Households equippedwith wood stoves purchased the firewood and used the energy to heat up their households.
The wood stove company established the supply chain. It had developed its firewood supply
system and home-delivery service, which helped to expand its wood stove market. Concurrently, thedemand for firewood rapidly surpassed forecasts, and with the production unable to keep up, stocks
became inadequate. This in turn led to deliveries being made after artificially drying the firewood for a
temporary duration. While the firewood fuel production system had balanced incomes andexpenditures, profits from new wood stove sales were higher; therefore, firewood fuel production was
not the principal business of the organization.
2) Case B (firewood boiler)
The system comprised a community group processing raw timber, which was supplied by independent
foresters, into firewood, which was subsequently supplied for use in a firewood boiler used to meet thedemand for hot water in public baths. In this case, the community group led the establishment of the
supply chain by forming an organization that purchased raw timber and made firewood. It purchased
the timber, with half of the necessary funds contributed by a local government. It built three yards(places to collect thinned wood), and in addition to firewood, handled the timber to sell to paper
makers. It also encouraged independent foresters to receive forestry training. A firewood boiler was
installed with the support of subsidies that covered two-thirds of the cost.
3) Case C (generating electricity with chips)
The system was the supply of woody chips for fuel to a woody biomass power plant. In this case, anelectric power utility built the supply chain. Fuel production was performed by a company affiliatedwith the power utility. The fuel production company signed raw material contracts with a group of
lumber companies in order to stabilize supplies of raw material. The raw material consisted of about
80% thinned wood, and woody waste was 20%. Energy supply was achieved by burning wood chips togenerate electric power for households. The purchase price of the electric power was supported by FIT
system, such that the power could be bought for a good price in relation to the overall production costs
set according to the type of raw material used as the woody fuel.
4) Case D (chip-powered boilers)
In this system, wood chips were supplied to a biomass boiler that supplied heat to a group of public
facilities. The town built the supply chain. At the suggestion of the town, a wood chip company
financed by a lumber company and a sawmill operator was established. Energy supply was the role ofthe third-sector public company that operated and maintained chip boilers owned by the town. The costof installing the three boilers was incurred by the town, prefecture and national government subsidy. It
cut the total value of fossil fuel costs in 2013 by 38.6 million yen per year. On the other hand, the town
paid 38 million yen for chip supply and equipment management. The town not only bore the cost of thechip production facility, it also signed supply contracts to help stabilize the income earned by thesystem for stable supply of the fuel.
5) Case E (pellet stoves and pellet boilers)
In this system, a city built a supply chain as a pellet production system to utilize forest resources. The
raw material (chip dust) for pellets was provided by chipmakers. In fuel production, a third-sector
company was formed with funds invested by the city, a forestry association, and small-scale
shareholders. Total funding for the fuel production equipment was provided by the city and nationalⒸ ISERD

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government subsidy. Initially, it was predicted that it would supply pellets for stoves in households.
However, because stoves had not gained as much ground as was expected, most of the pellet was
consumed by the city hall, schools, and welfare facilities.
6) Case F (pellet stoves and pellet boilers)
In this system, pellets were supplied to stoves in business offices and to pellet boilers installed inpublic baths in a city. Regarding raw material supply, raw timber was supplied through a market. In
fuel production, a cooperative association produced chips for paper makers in addition to those used to
produce pellets. Energy supply and demand were primarily regarding pellet boilers and pellet stoves
owned by the city along with demand for hot water supply and heating. The city led the developmentof the supply chain. It supported the formation of a cooperative association to manufacture pellets andworked to create demand for these pellets in order to revitalize the forestry industry. The city installedpellet boilers in public facilities, and pellet stoves in schools.
Analysis of the Supply Chain from Three Perspectives
1) Business Feasibility of Constituent Players
As seen from the six cases, in all systems, each constituent system could be operated stably. However,it could not be concluded that their systems were established economically, as many of these
constituent players covered costs of equipment for fuel production and energy supply with subsidies. In
Case C, it was clear that the system could continue as long as the FIT system was maintained.
Regarding Case A which acquired no subsidy, the system was established in combination with otherbusiness. The system was achieved by combining the production of firewood with the sale of stoves. In
addition, there were also cases where a player established its own systems in combination with otherbusiness. Regarding fuel production in Case B and F, biomass was a source of secondary income forthe players. They manufactured and sold materials to paper makers separately from biomass energy
utilization systems. Previous studies state that business feasibility requires an increase in efficiency
through measures such as increasing the scale of fuel production or changing the location of thechipper, or financial assistance to initial investments in each system. However, these studies do notdiscuss combining different businesses together.
2) Interrelationships between Constituent Players
An analysis of the six cases confirmed that private companies, administrative bodies, or community
groups acted as the builders of supply chains by creating business relationships between the various
players. Moreover, even after a supply chain had been constructed, the local government was seen toplay the role of overall manager of the chain in Case D, E and F. There were also cases where thebuilders also took part in the formation of constituent players or fuel production system of the supply
chain in Case A, B and C. For example, in Case B, a community group created a purchasing systemand provided independent foresters with practical forestry training. It also assisted with preparations ofsubsidy requests to introduce firewood boilers that would be later supplied with firewood through thesystem. Previous studies point to the need of coordinating with the stake holders and present casestudies where timber owners manage their businesses by outsourcing of fuel production. The role ofthe supply chain builders in our study incorporates all these activities.
3) Balanced Biomass Supply and Demand between OrganizationsⒸ ISERD

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In many cases each constituent ensured multiple suppliers and purchasers in order to prepare forfluctuations in demand for their energy systems. For example, in Case A, the firewood producer
associated with multiple suppliers, and also entrusted to the suppliers some part of processes infirewood production. While in Cases D, E and F, the local governments created a large demand byincreasing the number of boilers in public facilities. Even after their supply chains were completed andthe systems were in operation, there were cases where it was important to watch the flow of biomass
throughout the supply chain and overcome problems of quality control in the fuel and the supply
system. In both ways, the builders of the supply chains played important roles. Previous studies
mention the need for securing storage space, temporary workers for fuel production or the importanceof communication between upstream and downstream stakeholders. The multiple suppliers andpurchasers in our research extend these aspects and add management of energy demand.
DISCUSSION
Conditions of economic support for the supply chains were different between the electric power
generation system and the heat system in which stoves or boilers operated. The FIT system wasavailable for electric power generation systems, and the system economically ensured the continuity ofsales. In the case of heat system, although subsidies were available to cover cost such as introducing
boiler for the heat supply systems, there were no systems designed to ensure continuous operation of
the heat supply system along the overall supply chain. The economic difficulty in establishing a heat
system could be analyzed through the following two aspects. Firstly, the heat system competed with
low-priced energy systems, such as fossil fuel. Secondly, some regions would have small or no markets
for the heat system. These regions faced challenges such as few sellers of woody fuel or materials andfluctuations in supply and demand.
In the light of the above underlying circumstances, followings steps were being taken. With
regards to the first point, players were believed to have established systems by combining the biomassenergy business with other businesses. But, it relied on capabilities and size of the business
management of the players. With regards to the second point, it was necessary for a local government
or community group to build the supply chain. They should encourage the players to cooperate, help
the players to obtain public fund for fuel production equipment and create heat demands in regional
and public facilities. In addition to a balanced wood fuel supply and demand, the builders of the supply
chain needed to encourage players to have multiple suppliers and purchasers in regions where there
were no markets to trade inventory shortfalls or surpluses. Besides this, supply chain builders could notexist in all regions because it depended on the capability of the builders and their financial conditions.
Therefore, just like an electric power generating system, a heat supply system also would require asystem to support the overall supply chain. It was thought to be important to create, for example, asystem to correct the price gap between fossil and woody fuel, or a system to subsidize the purchaseprice of the biomass fuel or the heat supplied.
In terms of future challenge, this study couldn’t include wood biomass combined heat and powersystems because of no such systems operating stably in Japan at the time of the survey. It waspredicted that the future construction of many biomass power plants would rapidly increase thedemand for wood and raise its price. Therefore, even in the cases surveyed for this study, changing the
supply constituents would be unavoidable. These issues will have to be taken up in a future survey.
CONCLUSION
This study was undertaken by conducting interviews concerning six cases in order to clarify therequirements for continuous stable operation of biomass energy utilization systems using forest
resources in Japan. The supply chains in each case were divided into four constituents and analyzed
from three perspectives, that is business feasibility, relationship among constituents, and balance of theⒸ ISERD

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biomass supply and demand. The results showed that the following conditions were required tocontinuously operate a woody biomass energy utilization system.
1) For the constituent players, combining the biomass energy utilization system with anotherbusiness was necessary in order to ensure business feasibility.
2) In order to link the four constituents, it was important that there was a supply chain builder toestablish the necessary constituent players where none existed and to interconnect these players.
3) It was necessary to ensure multiple suppliers and purchasers for balancing the flow of materials
in demand and supply between the constituents.
4) A system such as FIT for electric power systems was also necessary for heat supply systems inorder to ensure the business continuity of the entire supply chain.
ACKNOWLEDGEMENTS
This work was supported by the Ministry of the Environment, Low Carbon Technology Assessment
Program. We wish to thank everyone who spared their valuable time and granted us interviews.
REFERENCES
Raychaudhuri, A. and Ghosh, S.K. 2015. Biomass supply chain in Asian and European countries. Waste
Management for Resource Utilisation, 35, 914-924.
Becker, D.R., Moseley, C. and Lee, C. 2011. A supply chain analysis framework for assessing state-level forest
biomass utilization policies in the United States, Biomass & Bioenergy, 35 (4), 1429-1439.
Tahvanainen, T. and Anttila, P. 2011. Supply chain cost analysis of long-distance transportation of energy woodin Finland. Biomass & Bioenergy, 35 (8), 3360-3375.
Yoshida, M. and Sakai, H. 2016. Form of supply chain management of fuel use wood chips and roles ofconcerned parties. Journal of Forestry, Japan, 4, 27-34 (in Japanese).
Sato,Y., Frubayashi, T., Morikami, K. and Nakata, T. 2015. Design of sustainable woody biomass supply chain
applying mixed integer linear programming. Proceedings of Conference on Biomass Science, The Japan
Institute of Energy, 119-120 (in Japanese with English summary).

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