Surging price of palm oil sidelines Japanese power plant projects

With no end in sight to sky-high prices for palm oil, Japanese businesses have idled their power plants that burn it to generate electricity.

And they do not appear ready to resume operations anytime soon.

Russia’s invasion of Ukraine, and a poor oil palm harvest caused by extreme weather events, have sent prices shooting upward over the past two years.

One analyst said all that was enough to put the fledgling industry on the rocks.

“The business has become difficult to continue,” said Ryosuke Sakaizawa, chief consultant at Mizuho Research & Technologies Ltd.

“(Electricity generating businesses are) susceptible not only to changes in price but also to environmental burdens caused by production and distribution, as well as current world events.”

The inflated costs come alongside the public relations problems the businesses face.

Farming oil palms has fallen under intense criticism for being incredibly environmentally destructive, which is another factor that makes it unclear whether these projects will be able to restart.

The businesses burn the oil extracted from the fruits of oil palm trees as fuel for diesel engines that power electricity generators.

BILLED AS RENEWABLE POWER

Japan considers palm oil to be a renewable energy source because the trees absorb carbon dioxide when they grow.

So, it made palm oil generation subject to its feed-in tariff (FIT) system, under which electric utilities are required to buy power created…