Watt’s Up with erex

As we increase renewable energy, grid-balancing “dispatchable” power becomes more important. How do you view this challenge?

The more we expand renewables, the greater the need for flexible, dispatchable capacity—traditionally thermal power—because renewables are variable. To scale renewables responsibly, you must add balancing resources and, in parallel, reinforce the transmission network. That introduces three cost drivers: the intrinsic cost of renewables, the cost of balancing power, and grid upgrade costs. In Japan today, these cost-linked issues are the crux of our energy debate.

Before we turn to erex, could you connect Japan’s energy context to your company’s strategy?

That context explains our move set. When liberalization began around 2000, we entered electricity sales—initially focused on the high-volume client segment—then began building our own generation to support that growth. In the early 2010s we started developing new power assets, using Japan’s feed-in tariff (FIT) scheme effectively and selecting biomass as our core renewable platform. In short, sales capabilities first, then generation—biomass—aligned with Japan’s evolving system.

Globally, LNG and coal still form a significant share of generation. How does erex view Japan and Southeast Asia in that landscape?

Since 2011, roughly 70% of Japan’s electricity has come from LNG and coal. As we raise renewables toward ~40% and beyond, two questions dominate: price and supply stability. From the standpoint of an energy source for power systems, hydrogen and ammonia are, at present, very costly. In Southeast Asia especially, they are not yet economical for utility-scale power. They may find niche industrial uses—steel, chemicals—but as a stable, large-scale energy source in those markets, they are unlikely to be the answer in the near term. For Southeast Asia to lift self-sufficiency, biomass is comparatively competitive.

Vietnam is a case in point. By 2015–2016, domestic gas and coal production couldn’t keep pace with demand growth, and imports rose. Biomass offers both resource potential and price competitiveness there, so we chose biomass as the backbone of our Southeast Asian supply strategy. On the demand side in Japan, we’re going to invest in storage batteries to smooth variability and reduce peak demand. And we’re designing a framework to bring carbon credits generated in Southeast Asia back to Japan to support our decarbonization.

Carbon Credits

What specifically makes biomass compelling in Southeast Asia—economically and socially?

First, resource logic. Industrial development produces by-products—agricultural residues, wood offcuts—that can be valorized. In places with large agricultural or forestry activity, biomass feedstock is abundant. In Vietnam, for example, rice husks from paddy production are substantial and underutilized. Beyond residues, planned energy-crop plantations can be harvested on staggered five-year cycles to ensure stable supply without unsustainable logging; replanting and harvesting proceed in rotation.

Second, power-system logic. The region’s latent biomass potential is high—enough, by our estimates, to substitute a sizable portion of coal-fired capacity at competitive cost. Imported coal remains structurally expensive and volatile; biomass sourced locally can beat it on delivered cost, reduce import dependence, and improve energy security.

Third, development logic. Biomass creates jobs across the value chain—feedstock collection, processing, logistics, and plant operations. Even a small biomass plant typically supports dozens of direct jobs; solar or wind, once built, support far fewer ongoing roles. That translates into rural income, higher self-sufficiency, and durable community benefits. We’re advancing projects in Vietnam and Cambodia with government alignment on these co-benefits.

Some argue ammonia or hydrogen could be future solutions. Do you see a role for them in your markets?

Over time, technology and cost curves may improve. But evaluated against today’s two hard criteria—price and assured supply—they are not yet viable as mainstream power fuels in Southeast Asia, and even in Japan their broad use as primary power fuels appears unrealistic for now. Our priority is pragmatic decarbonization: measures that deliver system reliability, cost discipline, and near-term CO₂ reductions.

Japan has pledged carbon neutrality and is preparing an emissions trading scheme. What will it take—practically—to achieve this?

Carbon neutrality entails cost; it’s important to acknowledge that candidly. Japan should accelerate carbon-credit markets and the national ETS now planned to start soon. In Asia, coal will remain a significant reality for years; the region accounts for well over half of global CO₂ emissions, and Japan itself emits on the order of a billion tonnes annually. So we must deploy every effective lever: expand renewables and restart/replace safe nuclear where appropriate; strengthen grid flexibility; secure thermal balancing where needed; and invest in R&D, including carbon capture and removal. Equally, the lowest-cost ton of carbon is the one not emitted—so deep energy efficiency must come first. Nuclear, where accepted and safely managed, remains a powerful cost-effective decarbonization tool. Coal will not vanish overnight; managing its decline responsibly and economically is essential.

How do you secure sites and community support for biomass, given that renewables require land?

We prioritize “waste-to-value” and planned forestry. We start with residues—agricultural by-products like rice husks and wood-processing offcuts—then, where appropriate, add energy crops cultivated on a rotation with replanting. The aim is a sustainable local supply chain that avoids indiscriminate logging. Done right, Southeast Asia’s biomass resource can materially displace imported coal while lifting rural employment and incomes. We work with governments to embed these safeguards and ensure long-term community benefit.

Biomass Pellets

Beyond rice husks, which feedstocks do you consider promising?

We keep the aperture wide. The benchmark is simple: can a feedstock produce electricity at a cost lower than coal on a reliable basis? Depending on regional characteristics, candidates include agricultural residues (straws, husks, shells), forestry by-products, dedicated energy crops, and other locally available biomaterials. We’re developing 18 sites from south to north in Vietnam, and feedstocks will differ by location. Our approach is empirical: pilot, compare logistics and processing costs, then scale what proves most economical and sustainable in each region.

You’ve mentioned an “upstream” strategy. What does that mean for erex?

Integration. Generation margins alone are getting tighter. By moving upstream into fuel development—securing and producing biomass feedstocks across Southeast Asia—we can lock in cost and reliability, and supply both our plants and others. We’re building an exclusive position in certain projects in Vietnam and pursuing similar structures in Cambodia. Where it’s efficient, we can also import biomass fuels from the Philippines, Malaysia, or Indonesia. Mastering the upstream supply chain is decisive to long-term competitiveness.

How are you thinking about carbon credits within this model?

Carbon-credit trading is a core business pillar. Projects in Southeast Asia that displace coal or other fossil fuel can generate high-quality credits. At prevailing European prices—on the order of tens of euros per tonne—this becomes meaningful value. We intend to “earn abroad, utilize at home”: use credits to help Japanese customers meet compliance or voluntary targets,. We’re in dialogue with the Japanese government to align cross-border use with the emerging GX-ETS. The goal is a circular model: real emissions reductions on the ground in Asia, credited transparently, supporting Japan’s decarbonization.

erex's Overall Business Strategy

Will you replicate your Vietnam model elsewhere—Cambodia, Indonesia, Malaysia, the Philippines?

Yes, but with discipline. In Cambodia, we’re pairing solar with biomass so that variability is balanced by firm, dispatchable capacity—renewables as a system, not in isolation. We target a majority share in these integrated portfolios. Our EPC partners are competitive—Chinese firms, for example, offer strong engineering at attractive cost—and that matters for bankability. Our near-term focus is to establish clear success cases in Vietnam and Cambodia; those proof points will support expansion to Indonesia, Malaysia, and the Philippines.

In Japan, how has the policy shift from FIT to FIP affected development?

Under FIT, power was purchased at fixed tariffs funded by the public. Over time, policy shifted to the feed-in premium (FIP): the market sets the reference price and a premium bridges the gap where necessary. While FIP is fiscally prudent, it places market risk back on developers. Combined with rising capex for offshore wind and other technologies, current reference prices often do not support new projects without additional mechanisms. Meanwhile, Japan’s overall supply capacity is tight—variable renewables alone can’t fully cover peaks—and the market structure has not adequately incentivized new firm capacity. Japan is now exploring long-term decarbonization auctions and other tools to underwrite fixed costs. These instruments are essential to bring new, reliable capacity online.

Hau Giang Biomass Power Plant in Vietnam

What differentiates erex in a very competitive power market dominated by incumbents and trading houses?

Cost, partnerships, and integration. Building five plants in Japan taught us a great deal—but we also learned that comparable assets can be delivered overseas at roughly two-thirds the cost with the right EPC partners. Our collaboration with international contractors—again, including Chinese EPCs—has proven technically strong and capital-efficient. Financing is likewise more progressive on some overseas projects, with lenders willing to innovate when backed by government frameworks. All told, decarbonizing in Southeast Asia can reduce CO₂ at lower cost than purely domestic options, while strengthening Japan’s energy security through diversified supply and credits. That’s why our growth thesis is regionally integrated.

Turning to storage: can you share details of your Miyazaki battery project?

We’re deploying conventional lithium-ion storage—2 MW with four hours of duration, so 8 MWh. The business model spans three revenue stacks: supply-demand adjustment (ancillary services), the capacity market, and spot arbitrage. In plain terms, we aim to charge when wholesale prices are near zero and discharge when prices are high. This project validates the case; we intend to scale beyond 2 MW with partners. Microgrids are not our focus at this stage—the commercial model in Japan is still emerging—so we’re concentrating on grid-connected storage where market revenues are clearer.

You’ve also been converting coal plants to co-fire or full biomass. Why retrofit rather than build new?

Time-to-impact and cost. In Japan, our first full biomass conversion was at Tosa—proof that retrofits work. In Vietnam, where coal once was domestically supplied but is now roughly 40% imported, the government approached us in August last year to co-fire biomass fuel at existing coal units. We began demonstration this month; the plan contemplates around 20% biomass co-firing next year, with pathways to increase. Vietnam’s economics—local feedstock, lower retrofit costs, faster timelines—are compelling. We’ll pursue both tracks there: convert existing coal for near-term emissions cuts and build new biomass capacity to meet rising demand.

erex Biomass Power Plant

Finally, erex will mark its 30th anniversary toward 2029–2030. What is your personal vision for the company at that milestone?

Some fundamentals never change: energy must be affordable and reliably delivered through robust logistics. The decisive new layer is decarbonization. Our purpose is to contribute to society by providing clean, dependable energy and by enhancing energy security—for Japan and for our Southeast Asian partners. If our projects make communities more prosperous and resilient, that is national security in practice.

I want erex to remain adaptive: if serving society best means integrating generation with data centers, we will do so. What matters is impact—lower emissions at real cost, reliable supply, and shared economic value. Working with our team and partners, we intend to keep expanding that impact across Japan and Southeast Asia, building an energy system that is both economically rational and environmentally sound.

One area readers often ask about is sustainability safeguards. How will you ensure that biomass procurement does not drive deforestation or land-use change?

Our model prioritizes residues first—agricultural by-products such as rice husks and wood-processing offcuts—and then moves, where appropriate, to planned energy-crop plantations on rotational cycles with replanting. The intent is to avoid indiscriminate logging. Projects are designed with local governments to embed reforestation requirements and transparent oversight so that supply is sustainable over the long term.

How will you verify the integrity of carbon credits generated in Southeast Asia?

Credits must reflect real, additional, and measurable reductions. We therefore structure projects so that emissions avoided—such as displacement of coal generation—are clear, and monitoring and verification can be conducted transparently. The goal is to “earn abroad, utilize at home” in a way that stands up to scrutiny, supports Japan’s decarbonization, and is aligned with evolving compliance frameworks.

Lifecycle emissions from biomass can be debated. How do you think about net CO₂ outcomes?

We take a full-chain view—feedstock sourcing, processing, logistics, and plant operations. Residue-based fuel and planned replanting help maintain carbon stocks, while localizing supply shortens transport. Where conversions co-fire biomass in existing coal units, we target rapid, material reductions versus baseline coal use, then scale the share upward as supply allows.

What are the community benefits beyond power generation?

Employment and income. Biomass supports jobs across collection, processing, logistics, and plant operations—far more ongoing roles than variable renewables once built. That translates into rural income, higher self-sufficiency, and durable community development. We design projects so those benefits accrue locally.

What policy tools in Japan would most effectively unlock new firm clean capacity?

Long-term decarbonization auctions or similar mechanisms that underwrite fixed costs are crucial. With fixed costs covered, projects can compete on variable cost, and developers can invest with confidence in reliable, round-the-clock clean power, including large-scale biomass and storage.

How do you manage execution risk when scaling in multiple Southeast Asian markets?

By sequencing. We’re focused on establishing clear success cases in Vietnam and Cambodia first—integrated portfolios that pair solar with dispatchable biomass—before expanding to Indonesia, Malaysia, and the Philippines. Upstream fuel security and local partnerships are the gating items; we don’t scale until those are robust.

Financing conditions differ across countries. What is your approach to bankability?

Competitive EPC, disciplined costs, and alignment with government frameworks. In several markets, international EPC partners deliver strong engineering at attractive cost, and lenders are prepared to innovate where policy frameworks are clear. That combination improves bankability and accelerates delivery.

For Japanese customers, which demand segments are driving interest in firm clean power?

Large IT loads and data centers are prominent—they need assured, CO₂-free, 24/7 power. Industrial customers with compliance or voluntary targets are also increasingly engaged, especially as carbon market mechanisms mature.

Storage will be central to flexibility. How quickly do you intend to scale beyond the initial 2 MW/8 MWh project?

Our objective is to scale with partners as revenue stacking—ancillary services, capacity market, and spot arbitrage—proves out. We are focused on grid-connected systems where market signals are clear; microgrids may follow once commercial models in Japan are more established.

On coal-to-biomass conversions, what milestones should stakeholders watch?

Near term, successful demonstration runs and stable co-firing ratios—on the order of around 20%—at existing units, followed by progressive increases as upstream fuel scales. In parallel, greenfield biomass capacity will be advanced to meet structural demand growth.

How do you define erex’s competitive edge in one sentence?

Integrated cost leadership—tying upstream sustainable fuel to dispatchable clean generation and storage, with regionally grounded partnerships that contribute global decarbonization and durable local value. One of our core strengths is our ability to navigate the Vietnamese regulatory landscape through direct communication with the government. While many foreign companies struggle to operate smoothly in Vietnam, President Honna’s extensive networking capabilities provide us with a distinct advantage. Having cultivated a high-level network since early in his career, he maintains direct lines of communication with several Administrative Vice Ministers in Japan. He has successfully leveraged this expertise in Vietnam, where he frequently meets with key stakeholders, including cabinet members. This level of direct access is a rare asset that sets him apart from the typical executives of non-Vietnamese corporations.

For more information, visit their website at: https://www.erex.co.jp/en/