April 2026
April 2026
Southeast Asia’s industrial sector runs on coal. Cement kilns, textile dyeing plants, food processing factories, and palm oil mills across Thailand, Indonesia, Vietnam, and the Philippines burn coal to generate the steam and process heat that powers their operations. In a typical textile wet processing plant, boilers account for 50-60% of fuel use, and that fuel is overwhelmingly coal. In Indonesia alone, cement, iron and steel, pulp and paper, and textiles are responsible for over 70% of industrial greenhouse gas emissions.
Here is the opportunity that matters for a DFI like Norfund: these same factories sit in the middle of the world’s richest biomass belt. Southeast Asia produces 30 million cubic meters of wood residue, 19 million tonnes of rice husk, and more than 27 million tonnes of palm oil residues annually. That biomass can generate approximately 41,000 MW of power, but most of it is either burned in open fields (causing the annual haze crisis that chokes Singapore, Kuala Lumpur, and Bangkok) or left to rot. The problem and the solution are sitting next to each other, and the missing piece is the capital and the business model to connect them.
This is not about building power plants to sell electricity into the grid. The grid can buy solar at 3-5 cents per kilowatt-hour. The opportunity is about replacing coal-fired industrial boilers with biomass-fired boilers that provide steam and heat to factories, structured as an energy-as-a-service model where the industrial customer pays for steam, not for the boiler. That distinction is everything.
Think of industrial decarbonization like replacing the engine of a car while it’s still driving. A cement plant or textile factory cannot shut down for six months to retrofit. The energy supply has to be reliable, the steam temperature and pressure have to meet precise specifications, and the cost has to be competitive with coal, or the factory simply will not switch.
Before biomass-to-energy solutions existed, the options for industrial heat in developing Asia were: coal (cheap, dirty, reliable), natural gas (cleaner, but pipeline infrastructure is limited outside of Thailand and parts of Indonesia), or diesel/fuel oil (expensive, used mainly for backup). Electricity from the grid was not a substitute because most industrial processes require thermal energy (heat and steam), not electrical energy. You cannot heat a cement kiln with a solar panel.
The breakthrough is not technological. Biomass combustion is ancient. The breakthrough is the business model: energy-as-a-service (EaaS). Instead of asking a factory to spend $1-5 million on a new biomass boiler, a developer builds, owns, and operates the boiler on-site, sells steam to the factory under a long-term contract (typically 10-15 years), and takes responsibility for fuel sourcing, operations, and maintenance. The factory’s coal bill becomes a steam bill. No capex for the customer. This is the model Veolia uses globally and the model underlying the Norfund-Veolia platform.
The economics of biomass-to-energy are entirely driven by feedstock. Unlike solar (where the fuel is free and everywhere) or coal (where the fuel is traded on global commodity markets), biomass is local, seasonal, and heterogeneous. Knowing which feedstock is available where, at what cost, and at what quality is the core competency of this business.
| Feedstock | Calorific Value (MJ/kg) | Moisture | Where Available | Cost ($/ton) | Notes |
|---|---|---|---|---|---|
| Rice husk | 13-15 | 10-15% | Thailand, Vietnam, Myanmar, Philippines, Indonesia | $15-40 | Available at rice mills. Low moisture, good combustion. Thailand’s best biomass feedstock |
| Bagasse (sugarcane fiber) | 7-10 (wet) | 45-55% | Thailand, Philippines, Indonesia, India | Free-$10 | Available at sugar mills. Usually burned on-site for cogeneration. Essentially free if co-located |
| Palm oil residues (EFB, fiber, shell) | 8-20 depending on type | 30-65% | Indonesia, Malaysia, Thailand | $10-30 | Empty fruit bunches (EFB) are wet and low-quality. Palm kernel shell is excellent (high calorific, low moisture). Indonesia and Malaysia are the world’s largest producers |
| Wood waste/chips | 15-18 | 20-40% | All SEA countries | $30-60 | Rubber wood waste abundant in Thailand, Malaysia. Supply can be inconsistent |
| Coconut shell | 18-20 | 8-12% | Philippines, Indonesia, Sri Lanka | $40-80 | Excellent fuel (high calorific, low moisture, low ash) but limited supply and competing demand for activated carbon |
| Corn cob/stover | 12-15 | 15-25% | Philippines, Indonesia, Thailand | $15-30 | Seasonal, bulky, transport-limited |
The single most important variable in biomass economics is fuel cost as a percentage of revenue. In a biomass power plant, fuel typically represents 40-60% of total operating costs. Unlike solar (zero fuel cost) or gas (transparent commodity pricing), biomass fuel cost depends on:
The golden rule: biomass-to-energy works best when the feedstock is a waste product generated on-site by the customer. A palm oil mill burning its own palm fiber and shell for steam. A sugar mill burning its own bagasse. A rice mill burning its own husk. In these cases, fuel cost is near zero, and the “waste disposal problem” becomes the fuel supply. This is exactly why the EaaS model co-located at industrial facilities works better than standalone biomass power plants selling to the grid.
The workhorse. Biomass is burned in a boiler to produce steam, which either drives a turbine for electricity or is used directly for industrial process heat. This is the same technology that coal plants use, adapted for biomass fuel characteristics (lower energy density, higher variability, different ash chemistry).
Typical configurations: - Stoker-fired boilers (grate combustion): 1-50 MW thermal. Simple, robust, handles variable fuel quality. Most common in SEA. - Fluidized bed boilers: 10-300 MW thermal. Better combustion efficiency, handles mixed fuels and high-moisture biomass. Higher capex. - Co-firing in existing coal boilers: Blend 5-20% biomass into coal feed. Lowest capex (just modify fuel handling). Limited emissions reduction.
Unit economics for direct combustion:
| Parameter | Small (1-5 MW) | Medium (5-20 MW) | Large (20-50 MW) |
|---|---|---|---|
| Capex | $2-4M/MW | $1.5-3M/MW | $1-2M/MW |
| LCOE (power) | 8-12 cents/kWh | 6-9 cents/kWh | 5-7 cents/kWh |
| Steam cost | $25-45/ton | $20-35/ton | $18-28/ton |
| Efficiency | 20-25% (power) | 25-30% (power) | 28-35% (power) |
| 70-80% (CHP) | 75-85% (CHP) | 80-88% (CHP) |
Key insight: efficiency jumps dramatically when you use CHP (combined heat and power) rather than power-only. A power-only plant wastes 65-75% of the energy as heat. A CHP plant captures that heat as steam for the factory, reaching 80-88% total efficiency. This is why industrial co-location is superior to standalone power generation.
Microorganisms break down organic matter in the absence of oxygen, producing biogas (60% methane, 40% CO2) and digestate (fertilizer). Best suited for wet, high-organic waste: food processing waste, animal manure, palm oil mill effluent (POME), and the organic fraction of municipal solid waste.
Why this matters for Norfund: Norfund’s investment in Green Create (South Africa) uses anaerobic digestion to convert agricultural and industrial organic waste into biogas, electricity, clean water, and fertilizer. This is the technology behind the “waste-to-value” model Norfund has validated.
Unit economics: - Capex: $3,000-7,000 per kW (biogas engine) - LCOE: 8-15 cents/kWh (depending on feedstock cost) - Processing cost: $2-12 per ton of organic waste (vs. $15-35 for landfill disposal) - Byproducts: digestate as organic fertilizer ($20-50/ton), CO2 (potential for food-grade or industrial use)
Best use cases in SEA: - Palm oil mill effluent (POME): Every palm oil mill generates massive volumes of POME, a highly polluting wastewater. Anaerobic digestion captures methane (which would otherwise be released as a potent greenhouse gas), generates electricity, and produces clean water. Malaysia and Indonesia have mandated POME treatment at large mills. - Food processing waste: Cassava starch factories (Thailand, Vietnam), seafood processing (Thailand, Vietnam), and slaughterhouses generate high-organic wastewater ideal for AD.
Biomass is heated in a low-oxygen environment to produce syngas (a mix of CO, H2, and CH4), which can be burned for heat/power or further processed into liquid fuels or chemicals. Higher efficiency than direct combustion in theory, but more complex and less proven at commercial scale for biomass in SEA.
Status: A few pilot projects in India and Thailand. Not yet commercially competitive for most applications. Watch for developments in small-scale gasification (100 kW - 2 MW) for distributed power in remote areas.
Biomass heated without oxygen at 400-600 degrees Celsius to produce bio-oil, biochar, and syngas. Bio-oil can substitute for fuel oil. Biochar is a soil amendment and carbon sequestration tool.
Status: Mostly R&D stage for large-scale applications. Biochar production is commercial at small scale (and increasingly interesting for carbon credit generation). Not a primary focus for DFI investment yet.
| Technology | Best Feedstock | Scale | Maturity | LCOE | DFI Fit |
|---|---|---|---|---|---|
| Direct combustion (CHP) | Dry biomass (husk, shell, wood) | 1-50 MW | Proven | 5-12 cents | High. Bankable, proven, scalable |
| Anaerobic digestion | Wet organic waste (POME, food) | 0.5-5 MW | Proven | 8-15 cents | High. Waste-to-value, Green Create model |
| Co-firing | Any dry biomass | Existing coal plant | Proven | Marginal | Medium. Limited impact, transitional |
| Gasification | Dry biomass | 0.1-10 MW | Emerging | 10-18 cents | Low. Technology risk |
| Pyrolysis | Dry biomass | 0.1-5 MW | Early | Varies | Low. Carbon credit play |
Sell electricity to the grid under a feed-in tariff (FiT) or power purchase agreement (PPA).
Problem: These tariffs were set when solar was expensive. Now that solar LCOE is 3-5 cents/kWh, governments are reluctant to renew generous biomass FiTs. New biomass power plants selling only electricity to the grid face increasing competition from solar + storage.
Sell steam or thermal energy to an industrial customer under a long-term service contract.
Why this is better than grid power: 1. Industrial steam prices are higher per unit of energy than grid electricity tariffs 2. CHP efficiency (80-88%) vs. power-only (25-35%) means more revenue per ton of fuel 3. Customers have a real pain point (coal replacement mandates, ESG pressure from buyers, carbon taxes) 4. Off-taker is a private company with a balance sheet, not a state utility with payment delays 5. Carbon credit revenue is additional upside ($5-15/ton CO2 avoided)
This is the Veolia-Norfund model. Performance-based contracts where the developer builds, owns, and operates the biomass energy system, and the customer pays for output (steam, treated water, waste processed), not for the asset.
Methane avoidance from POME treatment, biomass replacing coal, or biochar production can generate carbon credits under Verra VCS or Gold Standard. At $5-15/ton CO2e (voluntary market, 2024-2025 prices), carbon credits add 10-20% to project returns but are not sufficient to make a project viable on their own.
Announced in July 2024, this is a joint development and financing platform targeting industrial decarbonization in Africa. Key terms:
What Veolia brings: Global technical expertise in water, waste, and energy services. Operational capability. Technology IP. What Norfund brings: Risk capital, local presence across Africa, DFI mandate alignment, patience.
The Veolia-Norfund platform was designed for Africa, but the industrial decarbonization opportunity in Southeast Asia is arguably larger:
Bigger industrial base. Thailand, Indonesia, Vietnam, and the Philippines have far more industrial output than most African economies. More factories = more potential customers for biomass steam and water reuse services.
Better feedstock availability. SEA’s agricultural base produces enormous volumes of rice husk, palm waste, bagasse, and wood waste at predictable locations (mills, processing plants). Africa’s biomass supply is more dispersed and less aggregated.
Stronger regulatory push. Thailand has a carbon tax under discussion. Indonesia has a carbon trading scheme. Vietnam has NDC commitments. The EU’s CBAM (Carbon Border Adjustment Mechanism) is already pressuring SEA exporters (textiles, cement, aluminum) to decarbonize.
More creditworthy off-takers. Thai and Indonesian industrial companies are generally more creditworthy than their counterparts in most African markets, reducing off-taker risk.
Norfund already has a Bangkok office covering Vietnam, Indonesia, Bangladesh, Sri Lanka, Cambodia, Laos, Myanmar, Philippines, India, and Nepal.
The pitch for the interview: “The Veolia platform proves the model in Africa. The question is whether Norfund’s green infrastructure team should replicate it in Asia, where the industrial base is larger, the feedstock is more abundant, and the regulatory pressure is stronger. Norfund’s Bangkok office already covers the right markets.”
Cement production accounts for 8% of global CO2 emissions. In SEA, cement kilns burn coal and petroleum coke at 1,400+ degrees Celsius. Biomass cannot fully replace coal in cement (the temperatures are too high for most biomass), but: - RDF co-processing: Refuse-derived fuel (processed municipal solid waste) can substitute 10-30% of coal in cement kilns. This is already happening in Thailand (SCG Cement uses RDF at several plants) and Indonesia. - Revenue model: Cement companies pay a gate fee to accept waste-derived fuel, similar to the Befesa model. The waste supplier gets paid to take waste AND saves on fuel costs. - Norfund angle: Waste collection and RDF production is the investable layer. The cement company is the off-taker, not the investment target.
Textile wet processing (dyeing, finishing, washing) consumes enormous amounts of steam and hot water. In Indonesia and Vietnam, textile factories burn coal for boilers. The EU’s CBAM and buyer ESG requirements (H&M, Zara, Nike sourcing policies) are creating real pressure to switch to biomass or electrification.
Food processing generates organic waste AND needs process heat, making it a double-fit for biomass CHP: - Cassava starch factories (Thailand, Vietnam): Cassava pulp and wastewater can fuel anaerobic digestion - Palm oil mills (Indonesia, Malaysia): POME treatment + palm fiber/shell combustion - Sugar mills (Thailand, Philippines, India): Bagasse cogeneration is already standard - Seafood processing (Thailand, Vietnam): Organic waste for AD
Palm oil mills are the ideal biomass-to-energy application. They generate fuel (fiber, shell, EFB) and waste (POME) simultaneously, and they need steam and electricity for processing. Most large mills already have basic cogeneration, but there is a massive upgrade opportunity: - POME methane capture (regulatory mandate in Malaysia, increasingly in Indonesia) - Boiler efficiency upgrades - EFB processing (currently underutilized due to high moisture)
| Company | Country | Focus | Notes |
|---|---|---|---|
| Veolia | Global (HQ France) | Industrial water, energy, waste services | Norfund partner. Strong in Thailand, Vietnam |
| BCPG (Bangchak) | Thailand | Biomass, solar, wind, geothermal | Listed (SET: BCPG). Biomass in Thailand, wind in Philippines |
| Thai Solar Energy (TSE) | Thailand | Biomass power plants in southern Thailand | Listed (SET: TSE). 8+ biomass plants using rubber wood, palm waste |
| Thachang Green Energy (TGE) | Thailand | Biomass power, WtE | Listed (SET: TGE). 36.7 MW, targeting 200 MW |
| Thermax | India | Biomass boilers, industrial solutions | Listed (NSE: THERMAX). Commissioned rice husk plant in Philippines. Strong in India |
| Sembcorp | Singapore | Renewables, integrated energy | Listed (SGX: U96). Industrial energy services in India, Vietnam, Indonesia |
| Vena Energy | Singapore | Renewables developer | PE-backed (GIP). 6 GW+ portfolio across APAC |
| Super Energy | Thailand | Biomass, solar | Listed (SET: SUPER). 30+ biomass/biogas plants |
| Mitr Phol | Thailand | Sugar, bagasse cogeneration | Private. Thailand’s largest sugar group. Major bagasse power producer |
Feedstock risk. Banks cannot underwrite a 15-year project if the fuel supply is not contractually secured. Unlike solar (fuel is free) or gas (fuel is a commodity with transparent pricing), biomass feedstock requires long-term supply agreements with agricultural aggregators, mills, or waste generators. Supply disruption = revenue disruption.
Technology risk perception. Even though direct combustion is proven, lenders in SEA treat biomass differently from solar because they are less familiar with it. Fewer reference projects means higher perceived risk, which means higher cost of capital.
Off-taker creditworthiness. Industrial EaaS contracts depend on the factory staying in business for 10-15 years. For mid-market manufacturers in SEA, this is a real credit risk that banks price conservatively.
Seasonal variability. Cash flows fluctuate with feedstock availability (harvest cycles) and industrial demand (factory operating schedules). This creates debt service coverage challenges during off-peak periods.
Regulatory uncertainty. FiT rates can change. Carbon credit prices fluctuate. Environmental permits can be delayed. All of this makes cash flow projections uncertain.
| Challenge | DFI Structuring Tool | Example |
|---|---|---|
| Feedstock risk | Long-term supply agreements + backup fuel clauses + multi-fuel boiler design | Norfund’s Frontier Facility convertible loans for early-stage validation |
| Technology risk | First-loss tranche to absorb early-stage risk | BFET-style catalytic layer (Pink’s COP28 deal) |
| Off-taker credit | Partial credit guarantees for the off-take contract | US DFC, MIGA, or GuarantCo guarantees |
| Seasonal variability | Cash reserve accounts + flexible debt amortization | IFC project finance with sculpted repayment |
| Scale | Platform approach (portfolio of projects, not one-off) | Veolia-Norfund platform model: aggregate multiple small projects under one financing vehicle |
The platform model is the answer. Individual biomass projects are too small (EUR 3-15 million each) for institutional capital. But aggregate 10-20 projects under a platform with a common operator (like Veolia), and you have a portfolio large enough for DFI investment, with diversification across feedstock types, geographies, and off-takers.
The biomass-to-energy value chain in SEA has three layers where capital can be deployed:
Layer 1: Equipment supply (low margin, competitive) Boiler manufacturers, turbine suppliers, EPC contractors. Dominated by Chinese manufacturers competing on price. Margins of 8-15%. Not attractive for DFI investment.
Layer 2: Project development and operation (moderate margin, defensible) Develop, build, own, and operate biomass CHP plants under long-term EaaS contracts. EBITDA margins of 20-35% at scale. This is where the Veolia-Norfund model sits. Defensible because of contracted revenue, operating expertise, and feedstock relationships.
Layer 3: Feedstock aggregation and supply (high margin opportunity, fragmented) Aggregate biomass from thousands of smallholder farmers, process it (pelletize, dry, sort), and supply it to industrial users or power plants. Currently fragmented and informal. Whoever professionalizes feedstock supply chains in SEA creates a moat. Some players are starting to emerge (SIMO biomass aggregation platforms), but no dominant player yet.
“Biomass-to-energy works when the fuel is waste, the customer is an industrial company that needs heat, the contract is long-term, and the project is structured as a platform, not a one-off.”