2019 Volume 98 Issue 6 Pages 124-131
We verified the profitability improvement effect of a lumber company (large-scale sawmill) in Japan establishing a feed-in tariff (FIT) biomass power generation business using its own sawmill residues. Various profitability indexes were compared between the following two scenarios: Scenario 1, the lumber company sells byproducts such as chips, sawdust, and shavings to other paper companies or stockbreeding companies; and Scenario , the lumber company establishes a power generation company based on FIT near the sawmill and sells its byproducts to own power generation company. In Scenario 2, the calculated IRR and NPV of the power generation company were low because the investment cost of the project was high, and it takes more time to recover the cost of the investment. However, it is guaranteed that the generated electricity will be purchased at a fixed price under FIT for 20 years. In the case of an only 3% reduction in the sales unit sales price of sawmill products, the profits were greatly reduced in Scenario 1, whereas all the evaluation indexes were better in Scenario 2.