# Research Trends and Future Direction for Utilization of Woody Biomass in Japan
## 8 Discussion
### Balancing Cost and Scale of Wood Biomass Business  
In Japan, woody biomass utilization has already reached a significant level and contributed to regional revitalization to some extent. However, the high cost of woody biomass utilization is a pressing issue that requires prompt resolution, despite substantial government subsidies. FIT and economies of scale play crucial roles in the success of woody biomass power generation: FIT enables power plants to sell electricity at prices above market rates, while economies of scale reduce the costs associated with constructing and operating power plants. Nevertheless, the increased prices resulting from FIT are ultimately borne by the Japanese public in the form of taxes. Additionally, as the scale of woody biomass power generation has expanded, the demand for woody biomass fuels has increased. Owing to the prolonged slump in Japan's domestic wood industry, supply has not been able to keep up with the rapid increase in demand, consequently causing the price of woody biomass fuel to skyrocket. Fuel costs account for nearly 60% of the total cost of woody biomass power generation and significantly impact the success of the woody biomass business. Furthermore, owing to the decentralization and fragmentation of Japanese forests, the cost of wood harvesting is relatively high [95]. Therefore, although the FIT and economies of scale have temporarily promoted the widespread use of woody biomass for power generation, they do not represent a fundamental solution. On the other hand, government subsidies play a crucial role in the establishment of wood biomass heat utilization, with many heat utilization businesses benefiting from subsidies that reduce or exempt about half of their initial costs, including equipment and construction costs [96]. However, it is important to note that government subsidies typically cover only the initial costs. Consequently, many heat utilization businesses remain susceptible to fluctuating fuel prices, causing instability [44]. While economies of scale also apply to heat utilization, challenges such as the lack of infrastructure and difficulties in ensuring sufficient heat demand hinder the potential for cost reduction through scale increases.  
Many studies have considered CHP as an excellent solution for reducing the cost of woody biomass utilization because the high efficiency of heat utilization enhances the overall energy utilization efficiency, resulting in significant cost savings [75; 97; 98]. However, as mentioned earlier, CHP generates a substantial amount of heat, and the key challenge lies in its effective utilization. In countries with advanced woody biomass utilization, such as Finland and Estonia, government subsidies support the utilization of woody biomass, whereas a stable heat demand is ensured through DHSs by integrating CHP facilities with residential and industrial areas [6]. Nevertheless, DHSs are rare in Japan, and the high cost of constructing DHSs makes it nearly impossible for the private sector to promote them. Therefore, when promoting CHP, it is important not only to conduct urban planning to ensure sufficient heat demand but also to encourage the construction of heat utilization infrastructure and DHSs with public funds.