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INSIDE: RESEARCHERS STUDY CATTAILS AS A PELLET FEEDSTOCK

Spring 2011

Pellet Prowess How Brazilians Plan to Create a Market for Bagasse Pellets Page 18

Plus: How Standards Benefit Producers and Protect Consumers Page 12

Manufacturers Share Thoughts on Production, Marketing, Competition Page 30

Why North American Biomass Suppliers are Watching the UK Page 42

www.biomassmagazine.com/pellet-mill-magazine

Contents »

SPRING 2011 | VOLUME 1 | ISSUE 1

FEATURES

12

STANDARDS

18

INTERNATIONAL

06 STANDARDS STEWARD

Brazilian entrepreneurs want to perfect their recipe for making pellets from sugarcane bagasse and convince domestic and foreign buyers to give them a try. By Bob Moser

08 TESTING GROUNDS

24

EXPORTS

30

SUPPLY

36

FEEDSTOCK

42

DEMAND

DEPARTMENTS 04 EDITOR’S NOTE

Introducing Pellet Mill Magazine By Rona Johnson

Pondering Pellets By John Crouch

Setting Up an Internal Testing Lab By Chris Wiberg

09 MAINE-LY PELLETS

Consistency is Priority No. 1 By Bill Bell

11 BUSINESS BRIEFS

CONTRIBUTIONS 50 EVENT Learning from Austria’s Biomass Thermal Success Story

Austria’s use of biomass thermal technologies could be a model for the U.S. Northeast in reducing its dependence on heating oil for home heating. By William Strauss

46

Raising the Bar

The Pellet Fuels Institute is drafting new standards for North American pellets that will include specific properties and quality parameters for optimal use and performance, and third-party verification. By Lisa Gibson

Capitalizing on Cane Waste

Pellet Pitfalls

Producing pellets to ship overseas is not as easy as just loading them onto a boat and waving good-bye. Quality, logistics and economics are just a few of the issues that require attention. By Lisa Gibson

Making Ends Meet

North American pellet manufacturers must be able to weather dips and spikes in demand that can send false signals to those looking to get into the business. By Anna Austin

An Unconventional Pellet Feedstock

Harvesting cattails to produce bioenergy benefits watersheds that are overgrown with them, yet doesn’t reduce their ability to filter excess phosphorous and nitrogen from the water. By Anna Austin

Burgeoning Biomass Importer

Aggressive renewable targets and incentives and a desire to minimize carbon dioxide production prompt a flurry of interest in building biomass power plants in the U.K. By Huw Kidwell

BUSINESS

Different Perspectives on the Pellet Market

Meeting U.S. residential demand for high-quality pellets requires traditional supply methods and innovative techniques developed in countries with more advanced thermal heating systems. By Rona Johnson

SPRING 2011 | PELLET MILL MAGAZINE 3

« Editor’s Note

Introducing Pellet Mill Magazine

Rona Johnson

Editor rjohnson@bbiinternational.com

I hope you enjoy reading this inaugural issue of Pellet Mill Magazine as much as we enjoyed conducting the research, interviewing people in the industry and writing articles for it. One industry topic that the editors tried to hit hard in this first issue was supply and demand, here and overseas and how it impacts the pellet mills that supply the residential markets and those that cater to the industrial users. Although industrial and residential pellet mills don’t compete for customers, they do compete for feedstocks, so it was important that we include both segments of the industry in our coverage. We also wanted to provide some insight into the biomass power industry in the U.K. and get a handle on how it might impact pellet production in North America. We worked with a freelance journalist from the U.K. to write the feature because it’s such an important issue right now and we thought it was imperative that it be written by someone who is actually in the country (see “Burgeoning Biomass Importer” on page 42). We plan to do more stories on the U.K. and on Belgium, Denmark and the Netherlands as they are the largest importers of pellets from North America. We also worked with a freelance writer in Brazil to produce an article about the potential for the production and marketing of sugarcane bagasse pellets (see “Sugarcane bagasse pellets in Brazil” on page 18). The magazine would not be complete without a feature on alternative feedstocks, and in this issue we included one on the production of pellets using cattails (see “An Unconventional Pellet Feedstock” on page 36). Although wood is currently the favored feedstock, other forms of biomass will become more important as the industry grows. We also enlisted the help of experts in the industry who will be writing regular columns for the magazine, including John Crouch with the Pellet Fuels Institute, Chris Wiberg of Twin Ports Testing and Bill Bell of the Maine Pellet Fuels Association. Gordon Murphy, executive director of the Wood Pellet Association of Canada, will share his insights in a column in the fall issue of Pellet Mill Magazine. Although we tried to hit as many areas of interest as we could, this is a complex industry and there are probably some issues that we have missed. But that’s OK because this is a biannual publication and we’ll be publishing another one in October. So if you have any story ideas for our editors or would like to write a contribution, please feel free to contact me at rjohnson@bbiinternational.com.

For more news, information and perspective, visit www.biomassmagazine.com/pellet-mill-magazine

Associate Editors

Anna Austin

In her feature “An Unconventional Pellet Feedstock,” Associate Editor Anna Austin writes about the research being conducted at the University of Manitoba to study the benefits and methods of harvesting and pelletizing cattails for bioenergy production. Austin also talked with pellet manufacturers in North America about the state of the industry and how they are “Making Ends Meet.”

4 PELLET MILL MAGAZINE | SPRING 2011

Lisa Gibson

Associate Editor Lisa Gibson writes about how and why pellet standards are developed and why they are so important not only for producers but also consumers in her feature “Raising the Bar.” In her feature “Pellet Pitfalls,” Gibson writes about the intricacies involved in maintaining quality and consistency when shipping pellets from North America to Europe.

Editorial EDITOR Rona Johnson rjohnson@bbiinternational.com ASSOCIATE EDITORS Anna Austin aaustin@bbiinternational.com Lisa Gibson lgibson@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

Art ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Elizabeth Burslie bburslie@bbiinternational.com

Publishing & Sales CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Marty Steen msteen@bbiinternational.com Chip Shereck cshereck@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com SUBSCRIBER ACQUISITION MANAGER Jason Smith jsmith@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com SENIOR MARKETING MANAGER John Nelson jnelson@bbiinternational.com

Subscriptions to Pellet Mill Magazine are free of charge—distributed twice a year—to Biomass Power & Thermal subscribers.To subscribe, visit www.BiomassMagazine.com or you can send your mailing address to Pellet Mill Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Back Issues & Reprints Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (866) 746-8385 or service@bbiinternational.com. Advertising Pellet Mill Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Pellet Mill Magazine advertising opportunities, please contact us at (866) 746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Pellet Mill Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to rjohnson@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

Please recycle this magazine and remove inserts or samples before recycling TM

COPYRIGHT © 2011 by BBI International

SPRING 2011 | PELLET MILL MAGAZINE 5

« Standards Steward

Pondering Pellets BY JOHN CROUCH

“Can you tell me about pellet stoves?” asks the voice on the other end of the phone. “Oh dear,” I think, “another one of those calls.” It is another mainstream magazine writer who works at a glossy “shelter magazine” (a consumer magazine that focuses on gardens and homes). The writer is probably young, living downtown in an apartment or condo (heated by natural gas), very urban, and has clearly never ever heard of wood pellets. You see, for years I’ve worked for the trade association that represents the pellet appliance manufacturers, the Hearth, Patio & Barbecue Association, and more recently, I now split my time between HPBA and the Pellet Fuels Institute, the association for pellet fuel manufacturers, so I often get to help with these kinds of calls. There have been fewer of them over the past two years because consumers are becoming more knowledgeable about pellet fuel and pellet stoves, but inevitably, the next energy crisis will bring a bevy of these questions. “Sure, I can help you with pellet stoves,” I reply enthusiastically. These calls tend to come from magazine writers who have just come off a story on refrigerators or bath fixtures, and have been assigned to cover the latest trends in fireplaces and other hearth products. They are often good writers and fast learners, but they usually

6 PELLET MILL MAGAZINE | SPRING 2011

have little or no experience with the day-to-day costs of heating a typical 20- or 40-year-old home. They typically live in New York City and hear or read about fuel oil, but usually the stark difference between $2 a gallon and $4 a gallon for oil is something they’ve had no personal experience with yet. (If it can’t be answered by Google quickly, it’s hard to understand.) So I dive into the world of pellets with them, starting with the basics: why the fuel is so clean and what makes it a renewable fuel. Since I work a great deal on wood burning and air quality issues in the Western states, I often talk about how clean-burning pellet appliances are. If I detect that they are interested, I’ll take them a little deeper into the subject: how pellets have been used for more than 20 years in the U.S., but Europe has moved far ahead of us in pellet appliance usage and fuel delivery systems. Many readers of this magazine have been in the pellet fuel business for years and have fielded these types of calls as well. We are all “geeks” on this subject, and, have to be careful not to say too much and confuse these writers. One issue I hope we all cover with these calls is that most pellets in the U.S. and Canada come from wood fiber that is a byproduct of other wood manufacturing or from trees that have either been killed by insects or are in danger of being killed if they

are not thinned. (We always have to be careful about this last issue, since many folks in the East have no idea how incredibly overgrown and/or dying our Western forests are.) For me, the best aspect of these calls, as frustrating as they can be, is the basic reminder that there are still many people who don’t know much, or anything, about wood pellets, and that we have a responsibility to never stop talking about this “new” fuel to anyone who will listen. Just because some of us have been talking and thinking about this for 20 years, doesn’t mean it isn’t still news to much of the population in both the U.S. and Canada. There are still many people who may not be ready for many of the other complex issues we would love to explain to the press, but they may be interested in an alternative or secondary source of heat during the winter. We also can’t talk about how domestic supply and demand for wood pellets are always going to be mismatched and inherently unbalanced (these questions surface every three or four years when there is a so-called shortage in fuel supply). But that is a topic for my next column. Author: John Crouch Director of Public Affairs, Pellet Fuels Institute crouch@pelletheat.org www.pelletheat.org

Now Accepting

Speaker Abstracts

Deadline: June 24th

The 2011 Northeast Biomass Conference and Trade Show offers industry experts an unparalleled opportunity to showcase their industry knowledge and expertise to biomass professionals in the northeast region of the United States. Speakers at BBI International Events enjoy: • Complimentary Registration for the Conference • Inclusion in both print and electronic marketing campaigns • Opportunity for inclusion in a weekly ‘Panel Preview’ marketing series • Exposure at a well attended, well produced industry event Don’t miss this unique opportunity. Submit an abstract today! www.biomassconference.com/northeast 866-746-8385 speakers@bbiinternational.com

« Testing Grounds

Setting up an Internal Testing Lab BY CHRIS WIBERG

Whether you are selling your product into residential, commercial, industrial, utility or even overseas markets, it is becoming increasingly common that pelletized fuel will be required to comply with stricter quality standards. While third-party testing is regularly used to demonstrate compliance, many manufacturers are installing internal laboratories to manage day to day product quality. Manufacturers who set up their own internal labs should be aware of the pitfalls. First, understand the method you need to perform. Sometimes slight method variations can result in significant differences in your results. Durability is a great example. While the European and North American durability test methods are identical in procedure, the equipment is not exactly the same. The North American tumbler is 15 millimeters (mm) wider than the European tumbler. In addition, the North American method uses a 3.18 mm square hole sieve to separate the fines while the European method uses a 3.15 mm round hole sieve. While the dimensions themselves don’t seem that different, the fact that one is a round hole sieve and the other a square hole sieve means that the North American method uses an aperture size that is nearly 30 percent larger than the European method. This will significantly bias your results low if the North American durability method is used to report results for European quality specifications. Bulk density is another method with similar issues. Slight variations in the container size, drop height or number of drops can 8 PELLET MILL MAGAZINE | SPRING 2011

result in significant differences in test results. Moisture and ash methods can differ by the temperatures that are used as well as by the amount of air that is exchanged within the furnace or oven. Second, understand equipment limitations. Most published test methods specify tolerances for each piece of equipment. If the method calls for a four-place analytical balance and all you have is a two-place balance, the test will not be accurate. Try to maintain the analytical sensitivity that the method is calling for and pay close attention to the precision and bias section within the method. Also, keep a close eye on the calibration section—or the lack there of. All measuring devices require a calibration, whether it is a caliper, balance or vessel. Bulk density is again a good example. More modern methods include a method for calibrating your bulk density container while older methods do not. Don’t assume that just because you bought a one-fourth cubic foot bulk density mold that the interior volume is exactly one-fourth cubic foot. Third, your analytical results are only as good as the sample you start with. Take the time to develop sampling plans and sample preparation procedures that will assure that the analyzed sample is representative of the feedstock material or final product being assessed. Composite sampling (collecting several samples throughout the material and combining them into a single sample) is a good way to generate results that are representative of larger volumes of material, however, it may not identify the variability within

the material. Grab sampling (extraction of a small amount of material from a single location) will help identify the variability, however, be careful not to rely on a single grab sample for larger volumes of material. Sample preparation is also very important. The reduction of the sample particle size or the sample volume should be conducted in a carefully defined fashion so as not to introduce bias into the analysis sample. The use of good grinding equipment as well as riffling and splitting equipment is essential. Finally, get the proper equipment and set it up in an appropriate location. The natural tendency is toward cheap and easy. It is common to gravitate toward less expensive equipment and place it in the most convenient space available. Using alternative equipment to grind the sample or placing testing equipment too close to an operating pellet mill may produce an inaccurate analysis. If your internal test results are not satisfying the purpose they are intended to serve, then you are better off not investing the time and money into setting up an internal lab. On the other hand, be assured that it is possible to set up a good internal lab to help comply with day to day product quality. With the right equipment and guidance, this can be achieved. Author: Chris Wiberg Chief Operations Officer, Twin Ports Testing chris.wiberg@twinportstesting.com (715) 392-7114

« Maine-ly Pellets

Consistency is Priority No. 1 BY BILL BELL

In the three brief years that our Maine Pellet Fuels Association has been in existence, I have been working with Maine’s legislators to promote support for our industry. One issue that always comes to the forefront is the lack of consistent pellet quality. My job is to keep Maine from being the first state to regulate pellet fuels. I am best able to do so by understanding where legislators are coming from when they introduce bills with titles such as an Act to Standardize the Labeling of Wood Pellet Fuel or an Act to Regulate the Advertising of Wood Pellets. In these and similar incidents, legislators are acting based on a complaint from a constituent (Maine’s many legislative districts are sparsely populated and a single complaint can trigger the filing of a bill). In every instance, the legislator involved is not really familiar with the Pellet Fuels Institute standards. Most important, in every instance, the real issue is that different brands of pellets burn differently. Maine has four pellet manufacturers, plus there are plants nearby in Canada and New Hampshire. Many, many different brands of pellets are offered for sale at big box stores and other

retail outlets, some from as far away as British Columbia, Canada. Some consumers are well aware that these pellets will vary greatly in color, length, burning characteristics, amount of ash generated and other characteristics, and will still all meet the PFI “premium” designation with which most of the bags are labeled. Maine is by far the most oil-dependent state in the country when it comes to home heating. Almost 80 percent of Maine homes are heated with oil, and these folks think that pellets should, like oil, be pretty much the same from one company to another. When this turns out to not be the case, some consumers in their first winter of pellet heat think that they are getting ripped off when one brand in their particular stove is less satisfactory than another. Hence the phone calls to legislators demanding standardization. To date, legislators have been willing to give our new industry the benefit of the doubt, and have gone back to disgruntled constituents with explanations about the new PFI standards and the need to give things time to work. This tolerance may not last forever. While most consumers will find a brand

that performs well in their pellet stove (boiler system pellet heating is not at issue here) and realize that the more expensive brands may burn a little better, with less ash and slag, some will find fault with the voluntary nature of the PFI labeling and demand greater assurances. At the same time, as the number of consumers increase, many of them are purchasing inferior stoves so the number of unjustified complaints based on faulty storage or other factors unrelated to pellet manufacturing will also increase. A basic mission of trade associations—and I have managed a number of them—is to interpret an industry to legislators, the media and the general public. We will do well to explain that wood pellets are not a bulk commodity but like fine wines, or at least good ales, each brand has its own characteristics. We will also need to provide consumers with more meaningful information on the pellet bag than the little numbers below the PFI label. Author: Bill Bell Executive Director, Maine Pellet Fuels Association feedalliance@gwi.net

SPRING 2011 | PELLET MILL MAGAZINE 9

• Educational Sessions • Industry Exhibits • Networking Opportunities

Register Now Conference and Hotel Registration now open. For more information, visit the PFI website.

www.pelletheat.org

Key Topics: • Maximizing Pellet Plant Operations • Fire Prevention and Safety • Combustible Dust Management • International Market Development • Industry Standards • Federal Legislative and Regulatory Update

Who should attend: • Pellet Fuel Manufacturers • Industry Suppliers • Federal, state and local government biomass experts • Anyone interested in learning more about the densified biomass industry

For more information, contact PFI at pfimail@pelletheat.org. The Pellet Fuels Institute, located in Arlington, Virginia, is a North American trade association promoting energy independence through the efficient use of clean, renewable, densified biomass fuel. For more information about pellet heat, contact the Pellet Fuels Institute at (703) 522-6778 or visit www.pelletheat.org.

Business Briefs

PEOPLE, PRODUCTS & PARTNERSHIPS

MOISTURE MEASURE: The GreCon IR 5000 uses infrared light to determine material mosture.

The GreCon IR 5000 moisture analyzer ensures high product quality through reliable moisture measurements unaffected by variations in pellet size, light, relative humidity, product temperature or height. After the initial installation, no recalibration is required, saving up to $70,000 in maintenance and calibration expenses over five years. The noncontact online measuring system IR 5000 uses light of the near infrared (NIR) region to determine the material moisture by reflection. Light rays from halogen lamps are led through a filter wheel to filter out the excessive spectral regions of the light. The light beam is divided into several measuring and reference beams by means of a high-quality, mirror-lens combination. The remaining rays of the NIR region are projected onto the measured pellets. Since the IR 5000 uses dual sensor technology, the reference light beam is consistent and as a result the moisture measurements are drift-free. WoodPellets.com launches stove finder tool WoodPellets.com, a distributor of wood pellet fuel, launched an innovative research tool for consumers to educate themselves before purchasing a wood or wood pellet heating system. The Stove Finder is designed to work collaboratively with industry manufacturers and hearth shops. By leveraging WoodPellets. com’s website traffic and marketing expertise, local businesses, which often have limited marketing budgets, are able to dramatically increase their visibility and outreach to consumers, and thus increase their sales. Before being

Modular conveyor guards improve safety and productivity

SAFTY FIRST: Martin Engineering's new conveyor guards reduce risk to workers and increase efficiency.

Martin Engineering, a bulk materials handling company, has announced a new generation of modular conveyor guards, enabling workers to do their jobs with reduced risk and greater efficiency, while helping to ensure plant compliance with safety standards and regulations. EVO Conveyor Guards from Martin Engineering provide a simple, flexible and cost-effective solution to conveyor guarding, with component designs to help keep personnel safe by restricting access to moving parts and pinch points. The user-friendly design of the new guards is provided by standardized panels that take a systematic approach to guarding, with the flexibility to fit virtually any conveyor design. Wedge clamps allow the guarding panels to be removed and reinstalled quickly and easily, so systems can be expanded or relocated as needed. A variety of wedge bolts and bracket sizes are available to suit a wide range of mounting options.

CBI introduces newest shingle grinder

PHOTO: CBI

directed to a local dealer, consumers can research products by manufacturer, fuel source, and appliance type, and compare stoves, fireplace inserts, furnaces and boilers side by side. In this way, consumers can find the perfect stove according to design, efficiency rating, size and options. The Stove Finder offers complimentary listings for manufacturers and dealers, which include contact information and product details and options. WoodPellets.com has also developed extensive sales packages for manufacturers and dealers to customize and improve their listings.

PHOTO: MARTIN ENGINEERING

PHOTO: GRECON

GreCon online moisture analyzer maximizes production, profits

HEAVY DUTY: CBI's shingle grinder can be used to process all types of biomass material.

Continental Business Industries Inc. recently unveiled its newest Magnum Force Series Grinder: the Shingle Pro XL 406. Because shingle grinding is one of the toughest applications a machine can be built for, the Shingle Pro XL 406's design features also make it ideally suited for high-volume reprocessing of all types of material into a small uniform end product. This includes wood and bark reground into high-quality mulch, or any other feedstock that requires regrinding into material such as pellet feedstock, pulverized fuel or waste material into kiln fuel. Designed for single-pass processing to a finished end product, the Shingle Pro XL 406 comes with a CAT C27, 1050 horsepower electric start engine; a unique hog box design, which allows the upper hog box and bonnet assembly to hydraulically lift to expose the rotor and grates for safer and easier maintenance; a heavy-duty reinforced housing with replaceable wear liners; a rugged forged rotor with heavy-duty hammers and tips that are easy and cost effective to maintain; an integrated water spray system designed to control dust in the grinding chamber (also doubles as a color injection system for mulch processing); a completely enclosed discharge conveyor for added dust control; and a unique engine cooling system that prevents radiator clogging. SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Industry Briefs, Pellet Mill Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to rjohnson@bbiinternational.com. Please include your name and telephone number in all correspondence.

SPRING 2011 | PELLET MILL MAGAZINE 11

« Standards

12 PELLET MILL MAGAZINE | SPRING 2011

Standards Âť

Raising the Bar The Pellet Fuels Institute is rolling out new pellet standards to not only define and level the playing field for producers in North America, but also to protect consumers. BY LISA GIBSON

SPRING 2011 | PELLET MILL MAGAZINE 13

« Standards The difference between 0.5 percent ash content and 1.5 percent ash content in wood pellet fuel means manually cleaning out the ashes three times more often in appliances without automatic ash removal. Given the fact that the majority of the U.S. pellet market is residential or small scale, that factor is important to customers. And the customer is exactly what the Pellet Fuels Institute has in mind while drafting its new standards for North American pellets. The label featured on the bags of fuel will promise specific properties and quality parameters for optimal use and performance. And perhaps most important, the program will include third-party verification, crucial for producers who want to ensure their competition is honest in quality claims. That consistent and verified quality allows the competitive free market to function and gives appliance manufacturers a clear picture of what types of fuel will be used in their products. “The longterm value for the industry is pretty obvious,” says John Crouch, PFI’s director of public affairs.

By the Numbers Although still a draft and subject to change, PFI’s standards are divided into three fuel grades: premium, standard and utility. They specify parameters for a number of properties including ash content, diameter, durability, fines, moisture and chloride content, among others. In the all-important ash content category, PFI’s premium fuels require 1 percentor less, standard requires 2 percent or less, and utility grade requires 6 percent or less. Utility grade is seldom used in residential appliances, Crouch says. “When you’re up around 6 percent, you really need an automatic ash removal system.” For moisture content, premium fuels require 8 percent or less, while both standard and utility must be equal to or less than 10 per-

More

Than Just

cent. Bulk density is an important factor in industrial applications as it heavily impacts storage capacity. PFI’s standards set premiumgrade bulk density at between 40 and 46 pounds per cubic foot; and both standard and utility at between 38 and 46 pounds per cubic foot. Another important category is percentage of fines from the fuel at the mill gate. PFI specifies less than or equal to 0.5 percent for premium fuel, and less than or equal to 1 percent for both standard and utility grades. But the bag label touting the fuel grade means almost nothing without a third-party audit of those quality parameters, so PFI has included a three-level verification system beginning with the pellet mill itself. The second verification comes from on-site visits once a month by inspectors who are well-versed in the timber industry, doing other forest product inspections such as lumber grading, Crouch explains. Finally, the inspectors’ assessments will be audited by a certification body, which had not yet been confirmed at press time. In addition, PFI is hopeful that the U.S. EPA will adopt the standards as a framework for the revision of its New Source Performance Standard for Residential Wood Heaters. It looks promising, Crouch says, as EPA’s project lead for the revision is supportive of the drafted standards, despite some lingering questions. That would mean appliance manufacturers will be required to rely on the standards in the production process and dictate use of a specific grade to maintain warranties. PFI hopes the new labels will be attached to bags of pellet fuels in North America beginning this fall, Crouch says. A number of pellet producers have pledged to support and comply with the standards, but cost is a big factor. “One of the key questions is how much it’s going to cost per bag of pellets,” he says. “I suspect in any new standards process, the same questions arise.” Cost will de-

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1301 N 3rd Street Superior WI 54880 14 PELLET MILL MAGAZINE | SPRING 2011

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Standards » Residential/Commercial Densified Fuel Standards PFI Premium

PFI Standard

PFI Utility

40.0 - 46.0

38.0 - 46.0

38.0 - 46.0

0.230 - 0.285

0.230 - 0.285

0.230 - 0.285

5.84 - 7.25

5.84 - 7.25

5.84 - 7.25

Pellet Durability Index

≥ 96.5

≥ 95.0

≥ 95.0

Fines, percent (at the mill gate)

≤ 0.50

≤ 1.0

≤ 1.0

Inorganic Ash, percent

≤ 1.0

≤ 2.0

≤ 6.0

Length, percent greater than 1.50 inches

≤ 1.0

≤ 1.0

≤ 1.0

Moisture, percent

≤ 8.0

≤ 10.0

≤ 10.0

Chloride, parts per million

≤ 300

≤ 300

≤ 300

Ash Fusion

NA

NA

NA

Heating Value

NA

NA

NA

Fuel Property Normative Information - Mandatory Bulk Density, pound per cubic foot Diameter, inches Diameter, millimeter

Informative Only - Not Mandatory

SOURCE: PELLET FUELS INSTITUTE

pend on the extent of current quality control measures at individual mills, Crouch explains. “The producers vary as to how sophisticated their in-house QA/QC (quality assurance/quality control) procedures are.” But Crouch is clear about one thing. “The standards process is not designed to replace the internal QA/QC process, but to audit and support it.”

Exporting Advantages Although the standards will bring numerous benefits to the U.S. pellet industry and its customers, they will also encourage more use of American pellets in Europe. The continent has a 9.5 million ton-per-year pellet market, split almost evenly between heat and power. But currently, export markets to Europe are dominated by multiyear bilateral contracts and are not spot market friendly, ac-

SPRING 2011 | PELLET MILL MAGAZINE 15

ÂŤ Standards and B. A1 and A2 are intended for residential use and B is for nonresidential, or bulk, all certified through an individual initiative dubbed EN Plus. In implementation, individual participating countries will register a specific organization with the European Pellet Council to administer the EN Plus handbook in that country, according to Chris Wiberg, chief operating officer of Twin Ports Testing and co-chair of the PFI standards committee. In fact, PFI used the EN Plus handbook as a reference in the development of its standards, Wiberg explains. In comparison, proposed ash content parameters for EN’s A1 is 0.7 percent. A2 specifies 1.5 percent, and B’s standard is 3 percent, all a bit lower than PFI’s standards for similar grades. EN’s moisture control standard, however, is 10 percent across the board, while PFI’s premium specifies 8 percent. Although most of the numerical parameters are similar, the PFI standards vary from Europe’s because of regulatory agencies and their rules. “There are significant differences between the European EN Plus and the U.S. PFI standards, and mainly because of the EPA,â€? Wiberg says. The key contrast is the fact that EN standards cover the entire supply chain and the U.S. draft does not. And in addition to the different fuel grade categories between the two standards systems, the testing methodologies used are also dissimilar.

PHOTO: WOOD PELLET ASSOCIATION OF CANADA

cording to Crouch. “One of the things you need before you can have a spot market is standards,� he insists. “Otherwise, you really have to do bilateral contracts where you establish a relationship with one mill and you sign a multiyear contract.� And given the fact that the industry is manufacturing a product that is used more extensively during the winter months and will experience peaks and valleys, the spot market is important, he adds. The PFI standards will guarantee a quality product for European spot markets, along the lines of their own specifications. “We’ve been very careful to make sure that there’s no white space between us and the European major, major areas,� Crouch says. The European Committee for Standardization (CEN) is currently implementing its EN standards system under the authority of the European Pellet Council, intended to replace country-bycountry standards and also featuring third-party verification. CEN Technical Committee 335 began developing the standards around the year 2000, and while it’s anticipated that all 27 European Union countries will use  On the Web: them, only Germany, Spain and Austria To access EN visit have committed to it so far, according to standards, www.eubionet. Gordon Murray, executive director of the net/default. Wood Pellet Association of Canada. EN asp?SivuID=26243 standards include three categories: A1, A2,

BAGS O' BIOMASS: Canada's Premium Pellet Ltd. adheres to the pellet standards of individual utilities in Europe, as do all the other Canadian pellet producers who ship overseas.

16 PELLET MILL MAGAZINE | SPRING 2011

Standards »

2 0 11

Possible Alterations While EN covers a wider array of pellet aspects, what it lacks is standards for industrial-grade pellet fuel, crucial in Europe because of its numerous pellet-fueled commercial power plants. Instead, individual power companies each have their own standards, Murray says, adding that Canada does not have its own national standards and instead follows those of the power companies, as the majority of Canadian pellets are exported to them, mainly in the U.K., Belgium and the Netherlands. While the standards of different power companies are not vastly different in most aspects, a unified set of standards would simplify the production process for suppliers. “Really, they should have a common standard,” Murray says. And it’s on its way. The largest eight power companies in the EU are working together to develop standards for industrial pellet grades one and two. Discussion with the European Committee for Standardization surrounding whether to include those standards in EN is ongoing, but no decisions have been made. In addition, Sweden proposed through the International Organization for Standardization (ISO) in 2007 that the EN standards become global, according to Wiberg, who is also a member of six out of seven working groups dedicated to developing those global ISO standards. “In other words, seven years later down the line, now they’re converting into ISO standards,” Wiberg says of EN specifications. “Under the ISO umbrella, they can open up the discussion to non-European countries.” Wiberg says specifics of ISO proposed standards are not published and therefore not available to the general public, although they are essentially the CEN methods developed under ISO. But even if ISO implements a set of common standards for global pellet production, there’s no guarantee they will be adopted in lieu of CEN or PFI’s systems, Murray cautions. “Why would they adopt ISO if they’re happy with their own standards?” Still, it seems the more unified and encompassing the standards, the better. Both Crouch and Murray compare pellet standards to gasoline standards, saying premium gasoline at one pump will have the same quality parameters as the next. In contrast, pellet producers are not required to adhere to pellet fuel standards, but doing so will enhance the products they sell. “All the standards are voluntary, but it’s a market access issue,” Murray says. “The whole point is to make sure the pellets are a high standard.” The fear is low-quality producers can give all pellet fuels a bad reputation, discouraging their use. “We want to avoid that,” he says. And those quality-assurance standards are subject to change as the customers’ needs change. “Standards are designed to evolve,” Crouch says, adding that if any end-user factors arise, North American pellet producers will evaluate possible changes. “Right now, the key is to get a good consistent product across all of North America.”

Filling Machines Pelletizing Processing Raw Materials

Logistics

Transport Storage Boilers | Stoves Flue Gas Systems

October 5–7, 2011 Trade Fair Center Stuttgart, Germany International Exhibition for Pellets Technology and Wood-fired Heating With the International Conference 11th Pellets Industry-Forum

Author: Lisa Gibson Associate Editor, Pellet Mill Magazine (701) 738-4952 lgibson@bbiinternational.com

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« International

18 PELLET MILL MAGAZINE | SPRING 2011

International »

Capitalizing

on

Cane Waste

Every year during Brazil’s January-to-March sugarcane off-season, managers of the 440odd cane mills take pause beside mountains of fibrous cane waste that litter their lots, and curse the fact they must pay someone to haul it away. BY BOB MOSER PHOTOS BY DEMIAN GOLOVATY

SPRING 2011 | PELLET MILL MAGAZINE 19

« International Brazil is the world’s top sugarcane producer, and its ever-growing cane industry earns billions annually making sweeteners, ethanol, alcohols and even electricity by burning most of the cane fiber, called bagasse. But they can’t burn it all. Each year Brazil accumulates millions of tons of bagasse that, until now, have been treated as a burden instead of a blessing. Pellet producers have tried and failed for decades in Brazil to capitalize on the low-cost, high-value feedstock of cane bagasse. But a small handful of new entrepreneurs are taking a fresh stab at bagasse pellets, whipping up new formulas to treat the feedstock and building domestic market demand from the ground up. Why bagasse as a pellet feedstock? It has a high energy content and burn quality. It’s also an existing agricultural byproduct that avoids impacting the food chain. If bagasse were left to rot, it would break down and release greenhouse gases, particularly methane, which is 20 percent more dangerous to the ozone than carbon dioxide (CO2). That’s why bagasse pellets can earn carbon credits for European utilities, which are pursuing new sources to meet the European Union’s 20 percent renewables mandate by 2020. Green Energy Group is the most prominent company of a rumored handful currently testing the pellet waters in Brazil. It’s also easily the furthest along in convincing domestic and foreign buyers to try bagasse pellets. Started in 2006 by three entrepreneurial engineers, the group sees gold in industrial-grade pellets for both Brazilian factories and the European market.

CANE KINGS: Brazil's 440 cane mills crushed more than 556 million tons of sugarcane during the 2010-'11 harvest season.

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International » ‛The Brazilian pellet market hasn't developed at all because every [pellet] producer in the past has only thought export. This is very incipient in Brazil, it's just the beginning. We’ve had to create the market from scratch here, educating customers one at a time.’

—Diego Maurizio Zannoni, CEO, Green Energy Group

“There is very high demand in the EU if the price is right,” says Gloria Jacobovitz, a consultant that helped GEG prep its business plan, get feedback in Europe and win international loans. “In Brazil it’s a market that has to be built, but it makes financial sense, and if Brazil’s federal or state governments want to cap CO2, there’s a market for this.”

From the Ground Up If bagasse pellet sales were easy, Brazil would already be a world leader in consumption and export. Its 440 cane mills crushed more than 556 million tons of sugarcane during the 2010-’11 harvest season, up 3 percent from the year prior. After squeezing out every ounce of sugary juice, as much as 30 percent of that cane weight ends up as fibrous bagasse (nearly 167 million tons last season). All of Brazil’s cane mills today burn their bagasse for energy, using between 60 and 100 percent of their supply depending on the mill’s size. On average, they burn 80 percent, so the remaining 20 percent of bagasse is waste material with few secondary markets.

That’s potentially 33.4 million tons of bagasse last year alone for new products like pellets. But it hasn’t been easy. It’s been slow and arduous, highlighted by thousands of hours in the lab and on the road for GEG staff, perfecting recipes for both pelletizing bagasse, and weaning industrial clients off fossil fuels. “The Brazilian pellet market hasn't developed at all because every (pellet) producer in the past has only thought export,” says Diego Maurizio Zannoni, GEG CEO. “This is very incipient in Brazil, it's just the beginning. We’ve had to create the market from scratch here, educating customers one at a time.” Brazil’s pellet production has been limited until now to an inconsistent 200,000 tons or less per year, produced by small logging companies almost solely from wood chips or debris, and sold domestically where the power supply is unreliable. The market is so small that it’s been hard to keep track of who is producing what each year, says Celso Oliveira, president of the Brazilian Association of Industry Biomass. He’s also head of the bagasse pellet venture Brazil Biomass and Renewable Energy, which is pursuing export deals in Holland and Japan. GEG’s first challenge was creating its own formula for pelletizing bagasse, believing no one in the market had yet perfected a cost-effective, high-standard option that’s on par with the energy content of wood pellets. Bagasse pulp is full of impurities and hash, and its fibers are

FINICKY FIBERS: Bagasse fibers are longer and more uneven than other feedstocks.

SPRING 2011 | PELLET MILL MAGAZINE 21

« International ‛I think bagasse pellets are promising, but those mill owners are making so much money right now with sugar and ethanol, I don’t think they’ll focus on anything else. Pellets are a cheap product with potentially big transport costs, one more reason why mills aren’t focusing on it.’ —Paulo Costa, director, First American Scientific

longer and more uneven than other feedstocks. GEG wanted a pellet that would meet the highest export market standards, to avoid tying their hands if domestic market demand didn't pan out. They came up with a cylindrical pellet that’s 6 to 10 millimeters in diameter, and four to six times that diameter in length. It has a low calorific value at 4.0 kilocalories per kilogram (kcal/kg) (or 4.5 kilowatt hours per kg), and an energy equivalent of 0.4 kg of oil per pellet. Because it produces roughly 1.5 kg of ash per 100 kg burned, these pellets likely won't qualify for residential use, and will be limited to industrial clients for now. To pelletize, 2 kg of bagasse (with 50 percent humidity) produce 1 kg of pellets (at 8 to 10 percent humidity). Essent Trading, a Dutch energy trader owned by German utility RWE, has certified GEG’s bagasse pellet as meeting European Union standards for solid biofuels. The company is close to finalizing a $45.5 million loan through the Inter-American Development Bank, which would provide twothirds of the financing needed for plant construction this year in the city of Votuporanga, northern São Paulo state. With an initial

22 PELLET MILL MAGAZINE | SPRING 2011

production capacity of 40,000 tons per year, the plant is located in the heart of Brazil's cane country, near multiple mills to provide bagasse, and within 300 kilometers (186 miles) of a huge market of potential industrial customers.

Competing Interests The sugarcane industry is developing new ways for mill owners to utilize excess bagasse, via cellulosic ethanol and year-round energy cogeneration. The former remains years away in terms of cost-efficiencies, and for mills interested in cogeneration, entering the power business is often cost-prohibitive. Around 100 Brazilian mills currently produce surplus electricity consistently for sale to either the grid, or contracted buyers. Cane mills may need to retrofit their turbines and electrical systems to tap into the local grid, a costly endeavor that most hesitate to pursue unless they are guaranteed energy contracts. Those contracts are tough to get. Stiff competition from wind and hydropower producers at a public energy auction in late 2010 left the cane industry with just 16 percent of 1,159 megawatts in

International »

BURN BASICS: Because bagasse pellets produce roughly 1.5 kg of ash per 100 kg burned, the pellets probably won't quality for residential use and will be limited to industrial customers.

long-term contracts. Many cane millers have grown bitter with the auction system, believing tax breaks for wind put biomass at a disadvantage. Connecting to the national electric grid may also raise costs beyond a competitive advantage for small cane mills and their limited megawatt potential. Brazil's Ministry of Energy has stood behind the cane industry's aggressive goal to double its cogeneration capacity by 2020, but the government only projected a small increase in biomass’ slice of the 2020 national matrix—from 4.8 to 5.1 percent. Transport costs in Brazil are among the highest in the world, due to poor roads and infrastructure. Cane mills in São Paulo state can be as far as 500 kilometers from the nearest port, adding cost that could up-end export options while the Brazilian currency remains strong against the U.S. dollar, according to Paulo Costa, Brazil director for First American Scientific, which makes machines that pulverize organic waste material. “I think bagasse pellets are promising, but those mill owners are making so much money right now with sugar and ethanol, I don’t think they’ll focus on anything else,” Costa says. “Pellets are a cheap product with potentially big transport costs, one more reason why mills aren’t focusing on it.”

Making the Choice Easy

Most industrial thermal power users have hesitated with bagasse pellets because of a total lack of experience with the fuel source, and upfront costs they’d face for boiler changes. GEG has adapted for doubters, splitting the company into two branches that promise clients all of the savings of biomass fuel with none of the risk. Under the BrasPower label, GEG will cover all the costs of installing and maintaining new pellet boilers and power equipment at a client’s factory, just to hook them on buying fuel from the company’s other branch, BrasPellet. GEG has three clients signed up in the textiles and food and beverage markets to install boilers and start burning bagasse pellets in the first quarter of 2012. The company plans to produce 520,000 tons of pellets per year by 2015-’16, which would generate 2,030 gigawatt hours of power annually. “We'll manage everything if they wish, and we're offering this turnkey solution now just to develop successful examples to help build this market,” Zannoni says. Author: Bob Moser Freelance Writer bobmoser333@gmail.com

SPRING 2011 | PELLET MILL MAGAZINE 23

« Exports

PELLET PATRON: RWE npower’s Tilbury, England, Power Station will be one of the first customers of RWE Innogy’s Georgia Biomass pellet plant in Waycross, Ga. Both RWE Innogy and RWE npower are subsidiaries of German utility RWE. The Tilbury Power Station is a 1,100-megawatt coal-fired facility that uses 10 percent biomass, but is expected to burn 100 percent biomass by the end of 2011. PHOTO: RWE NPOWER

24 PELLET MILL MAGAZINE | SPRING 2011

Exports »

Pellet Pitfalls German utility RWE Innogy is building a wood pellet mill in the Southeast U.S. to supply fuel for its parent company’s power plants in Europe. The move could be an indication of the challenges in consistently shipping high-quality pellets overseas. BY LISA GIBSON

SPRING 2011 | PELLET MILL MAGAZINE 25

« Exports

Supply, Quality, Price Many pellet mills, not just in the U.S., are privately funded and may not be wellcapitalized, Kang says. Mills with thin margins or those that are kept afloat shipmentby-shipment can’t always provide security of supply, one of three main reasons RWE is constructing its own mill. Pellet mills with credit problems can run out of cash, putting their off-takers at risk of insufficient fuel supply. “[Essent has] had instances when people don’t deliver because the price of sawdust or shipping went up, for instance,” he says. “Little things like that happen and we just don’t want to be open to that.” The next reason for an internal pellet plant is no surprise: quality. “Quality is very important and is one reason we did invest

26 PELLET MILL MAGAZINE | SPRING 2011

SITE SEEING: Georgia Biomass will produce 750,000 metric tons of pellets annually at its Waycross, Ga., site.

PHOTO: GEORGIA BIOMASS

ties are shipping their pellets overseas to better-developed markets in Europe that incentiveize industrial biomass use. While the U.S. pellet export market seems to be evolving and more companies are trying to break into it, one particular European utility has opted to come halfway around the world and operate its own pellet plant, shipping its product to its own European utilities. Georgia Biomass in Waycross, Ga., is in its precommissioning phase and expects to begin shipping pellets in the second quarter of this year, according to Chief Financial Officer Sam Kang. The mill will produce about 750,000 metric tons of pellets per year for internal use by subsidiaries of German utility RWE, including recently acquired Dutch utility Essent, one of the largest pellet users in the world. With the marriage of Essent and RWE, Georgia Biomass—a subsidiary of RWE Innogy— completes the loop. Of course the Southeast has ample resources and strict, reliable sustainability codes, but why not just purchase the pellets from U.S. producers already operating there?

PHOTO: GEORGIA BIOMASS

The Southeast U.S. offers an abundance of wood resources for pellet manufacturers and several have taken up residence there to utilize that supply chain. Some larger facili-

PELLET TRAIN: The pelletizing island and railroad track are integral parts of Georgia Biomass's operation.

in our own pellet facility here in the U.S.,” Kang says. “We want to make sure we get the same consistent good quality.” Ash content, fines and calorific value are a few of the important elements, he says. “Yes, Essent has turned away shipments because of quality.” Contracts specify quality parameters for the delivered fuel and the buyer can and most likely will refuse a shipment if it does not meet those specifications. “Based on that, if there was any opportunity to renege on a contract, [the customer] would, and rightfully so,” says John Swaan, chief operating officer for Green Frontiers Energy Group. “If the criteria aren’t met, they have every

right to refuse a shipment.” “We’ve made tens of millions of euros in investments to convert existing coal plants to be able to cofire, so we want to be able to make sure that we will also be receiving those high-quality pellets so we get subsidies to repay our investments,” Kang says. Quality problems can arise when using poor raw materials or having inadequate cooling in the pelletizing, storage and handling processes, according to Swaan. “You cannot pile up residue, process it, bring it in and expect it’ll be magically altered and refined to something that’s suitable,” he says.

Exports » North American Pellet Capacity 2003-2009

SOURCE: USDA

United States Pellet and Waste Wood Exports

SOURCE: U.S. INTERNATIONAL TRADE COMMISSION 2009

“Junk in is still junk out.” Management of the raw material is crucial, he adds, and handling it correctly, in the case of forest residues, means avoiding scraping it through the forest floor and pushing it into piles. “As soon as you contaminate it with dirt, obviously you’re going to have some issues.” While the problem isn’t common in U.S. pellet mills, it has happened in the past and is a lesson today’s manufacturers can learn from others’ mistakes. “What the industry has to learn … in North America is that even though it’s an industrial pellet, it still means that you need quality residues,” Swaan says. The final major driver in RWE’s decision to develop Georgia Biomass is price risk. “Part of vertical integration is that

then you would be insensitive to large price movements,” Kang explains. But supply, quality and price aside, Georgia represents an ideal location because it has sustainably grown and harvested desirable trees as crops for decades. “We specifically chose Georgia in the Southeast U.S. for the southern pine,” Kang says. The tree is abundant, and has ideal calorific value for RWE’s processes. “More trees are grown than cut down each year,” he says. “We’re looking for long-term production here.” It goes without saying that not all U.S. pellet manufacturers are guilty of supply and quality issues, and many are successfully shipping pellets to Europe fairly frequently, such as Green Circle BioEnergy

SPRING 2011 | PELLET MILL MAGAZINE 27

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« Exports ‛Wood pelleting is not a get-rich-quick scheme. It is capital intensive and dirty, dusty manufacturing at its best.’

―Harold Arnold, president, Fram Renewable Fuels LLC

Inc. in Florida and Fram Renewable Fuels LLC in Georgia. Some say success in export markets depends on proximity to wood supply and port access. “European buyers are the same as buyers the world over,” says Harold Arnold, president of Fram Renewable Fuels. “They want the product at the lowest possible price. Not every project in every location can be profitable. All have their unique problems and conditions.” Similarly, the hardships RWE and Essent have endured with suppliers are not attributable only to North America. “It can happen anywhere,” Kang says, adding that the economics, logistics, fiber sustainability and material quality in the U.S. simply represented the best opportunity for RWE and its internal pellet demand at the time it made its investment decision.

Disconnect? But while some European pellet customers might say suppliers and brokers aren’t following through on their quality, volume and price commitments, it’s possible they simply don’t understand the cost of delivering a consistent quality product overseas, says Pete Stewart, president and CEO of Forest2Market, a provider of market trend and industry information for forest products and bioenergy. “On one hand, European utilities say they can’t get consistent deliveries at a good price,” he says. “But on the other hand, they won’t pay the price to get a quality product over there.” Stewart doesn’t consider RWE to be one of those ill-informed utilities. “They pretty much understand the cost,” he says, adding RWE might not fully nail down exact cost figures until it begins shipping commercial quantities from Georgia. “Right now, their costs to manufacture and deliver a pellet is way in excess of market price, so they’ll certainly be losing on [Georgia Biomass], or they could easily re-

place the volume in that plant with marketbased product, but that doesn’t mean they can replicate the quality of their product in the market, or the timeliness of delivery,” he says. Timeliness and quality are major components of cost, he adds. “I would suggest the price right now doesn’t really take into account consistency or strict adherence to quality measures and that might be the disconnect between the markets and what it really costs to get a decent product to a location in Europe.” The U.S. is the No. 2 producer of wood pellets in the world, but only exports 20 percent of its product, according to the American Biomass Trade Cooperative (ABTc). In comparison, Canada exports about 80 percent of its product. International investors are indeed reluctant to work with American producers because of shipping hurdles and the inability to secure on-time and undamaged product, according to the cooperative. In accordance with RWE’s reasoning, that security of supply is the primary concern of foreign pellet customers, according to Scott Miller, founder and president of bioenergy marketing and consulting firm The Miller and De Wulf Corp., and marketing consultant for the ABTc. Among other initiatives, the cooperative seeks to serve as a middleman between American biomass product manufacturers and foreign customers, marketing and connecting the two. “We will definitely be trying to streamline communication across the pond,” Miller says. The possible pricing disconnect is one element of biomass exporting that the cooperative could tackle with its work. “It’s an understandable concern,” he says. In the thick of it, though, the view might be much different. “That’s just typical business,” Arnold says of the suggested pricing disparity. “I don’t think there’s a disconnect. I think it’s just the long-term situation in business.” The buyer will never

Exports »

Problem Solving in Progress

While challenges exist in the pellet export industry, as in any other, they are not insurmountable and the newly formed American Biomass Trade Cooperative (ABTc) is designed to assist organization and promotion of U.S. biomass exports, including pellets. Armed with a Market Access Program grant from the USDA Foreign Agricultural Service, the nonprofit organization will work to simplify the selling of suppliers’ and producers’ products by acting as a market resource for engaging foreign policymakers, shippers and potential customers. The announcement of U.S. President Barack Obama’s National Export Initiative helps the push, with the goal of doubling U.S. exports and supporting 2 million jobs. The ABTc and its foreign advisers are currently surveying the expectations of potential export clients. The goals of the cooperative include educating its membership and building a secure supply capacity based on sustainable best practices. It will work to reduce supply and shipping costs while helping oversee biomass feedstock certification processing. One of the main hurdles pellet manufacturers have to clear is cash flow, exacerbated by a minimum shipping load requirement of 30,000 tons. For some producers, that is a full year’s export production. Unified certification and cargo coordination are tasks the ABTc intends to tackle so members can comingle their product shipments throughout the year to lessen storage overhead and shorten billing cycles. ABTc also plans to have a members-only group site, which is currently being developed. It will provide an online portal and resource for learning what’s new, networking with colleagues, discussing key topics, accessing reports and guidelines, and monitoring the industry’s evolving calendar of international events.

Conference for the International Pellets Market October 4–5, 2011 International Congress Center Stuttgart (ICS), Germany

Call for Abstracts Deadline: May 31, 2011

SOURCE: SCOTT MILLER, FOUNDER OF THE MILLER DE WULF CORP. AND MARKETING CONSULTANT FOR ABTC.

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propose to pay more than the market price, he adds. “It’s capitalism at its best.” There is substantial risk involved in the pellet export industry, specifically for startups, which account for a significant portion of manufacturers in the U.S., Kang says. But Georgia Biomass avoids that risk by supplying its own internal demand, although Kang says selling to third parties is an option if excess supply exists after RWE’s demands are met. Even though RWE’s mill means reduced interest in the global pellet market, Kang is still hoping for the success of pellet producers because it builds stability in that market. “I would be very happy to see the success of all the pellet producers because it only helps the whole industry,” he says.

But it is a tough business to be in, Arnold cautions. “Wood pelleting is not a getrich-quick scheme,” he says. “It is capital intensive and dirty, dusty manufacturing at its best.” He adds that the hype surrounding the wood pellet industry and its export potential has led many project developers to believe pellet manufacturing is a business with guaranteed profits. “Unfortunately it is not,” he says. “The same discipline must be applied to the pellet business as any other. You can make a little money at it, but there’s an awful lot of hard work to do it.”

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Author: Lisa Gibson Associate Editor, Pellet Mill Magazine (701) 738-4952 lgibson@bbiinternational.com

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« Supply

30 PELLET MILL MAGAZINE | SPRING 2011

Supply Âť

Making

Ends Meet North American pellet manufacturers talk about supply, demand and competition. BY ANNA AUSTIN

SPRING 2011 | PELLET MILL MAGAZINE 31

« Supply WOWP, which was started by Shar- that there is a lag time in putting the projIn the wood pellet industry there is ron and his brother in 1985, operates ect together—permitting and installing always competition for raw material and for making sales. It doesn’t two pellet plants in Banks and Columbia the equipment—and by the time they’re matter if you’re just a small guy, because in this industry, the small guys matter. One or two new small-scale producers in the right area can wreak havoc on the sales of a preexisting plant. That’s the perspective of Chris Sharron, owner of Western Oregon Wood Products. “A lot of the smaller ones can add up to quite a bit of tonnage,” Sharron says. And, they may have advantages over large-scale manufacturers, one being that they don’t have a lot of production to sell so lags in market demand don’t affect them as much. “A sawmill plant utilizing its own materials doesn’t have transportation costs to bring materials to the plant,” he says. “A lot of them are using their own byproducts that are kiln dried, so there are also no drying costs. They can be highly competitive although they aren’t very big, and they take little mouthfuls out of the market in a particular region that some former supplier was supplying into.”

City, Ore., which have a combined annual capacity of 80,000 tons. Seeing the industry evolve over the decades, Sharron says there was a period of rapid growth several years ago, but in the past couple of years things have become rather flat. “There’s been an increased demand over the years, especially in the past five years, but it hasn’t been real steady growth,” Sharron says. “It’s spiky. Fossil fuel costs go up, and if the economy is conducive to where people have jobs and disposable income, they might look at an alternative way to heat their homes, one being a pellet stove.” When that happens, demand can increase at a quick pace and there may be spot shortages of fuel, which potential developers can misconstrue as a beckoning opportunity. “[Shortages] hit the headlines and people decide pellet making is a business they should get into,” Sharron says. “What they don’t realize is

ready to turn the keys and start bagging fuel, the industry has cycled back the other way, and there’s an oversupply. That’s kind of what’s happened in the past few years. It’s highly competitive now, because the market hasn’t grown enough.” To put that into perspective, Sharron says that there were roughly 40,000 new pellet stoves sold in the U.S. last year, and a general rule of thumb is that on average, a stove uses 2 tons of pellets per year. That equals an additional demand of 80,000 tons annually. “There are a number of plants where just they by themselves are producing that or more,” he says. Charlie Niebling, general manager of New England Wood Pellet, says pellet demand was off the charts in 2008 because of the big run-up in fossil energy pricing, but things slowed down in 2009, and 2010 was a soft year for the company. Despite that fact, he says things are beginning to pick up again.

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Supply »

DEMAND ROLLERCOASTER: Charlie Niebling, general manager of NEWP, says pellet demand was off the charts in 2008, due to high fossil energy prices, and slowed down in 2009 and 2010.

Supplying Close to Home New England Wood Pellet operates three plants in Jaffrey, N.H., Schuyler, N.Y., and Deposit, N.Y., which have a combined capacity of about 250,000 tons per year when running at full tilt. Much like WOWP, most of the pellet volume produced at NEWP ends up in residential heating applications—about 98 percent. Despite the fact that U.S. pellet exports are being touted by the government as a great opportunity, Niebling says it is unlikely that the company will ever ship overseas, as long as the domestic market is strong enough. “Philosophically, we strongly believe in focusing our efforts on solving America’s energy challenges, not Europe’s, and from a practical standpoint it’s something that is very difficult to do viably from the Northeast U.S.” That’s because of the region’s high wood material costs, and its lack of port facilities set up for bulk cargo shipping of pel-

lets. “Our plants aren’t conveniently located near port facilities; we have a lot of inland freight,” Niebling says. “Where it works in this country is where there is less expensive wood feedstocks, and rail to get the product to a port, one that can stage a large volume for bulk cargo shipping. The Northeast just doesn’t have the circumstances that are well-suited to that, given the current pricing overseas.” Sharron says that with the nature of pellets—a relatively low value versus bulk and weight—freight is a big issue, so most pellet plants only have the ability to distribute regionally. “Being here in western Oregon, our markets are Washington, Oregon, California, Nevada and Idaho and Utah a little bit, but past that point we’re not very competitive due to that freight issue.” WOWP has looked at many opportunities to ship overseas and has had a lot of inquiries over the years, but it just doesn’t pencil out, Sharron says. “The value on

the other end will only bear so much,” he says. “By today’s standards, we’re not a huge producer, so we don’t have the economies of scale that some of the other exporters do have. Alongside that, the raw material costs in this area are not conducive to getting things to balance out, certainly not to Europe or the Asian markets, where some activity is starting.” For Pinnacle Renewable Energy in British Columbia, shipping overseas makes the most sense for the company for a number of reasons, one being the close proximity of its plants to rail and ports. Pinnacle has six plants in B.C. that produce a total of 1.1 million metric tons per year. The company ships about 90 percent of its product overseas to the large-scale industrial power generation sectors in both Asia and Europe, but mainly to Europe, according to Leroy Reitsma, Pinnacle’s chief operating officer. Reitsma says demand has slowed in advance of new legislation being defined and introduced in both Asia and Europe, but indications for future demand remain strong. The company’s plant development model has kept it from experiencing some of the obstacles other manufacturers are facing, such as stiff competition for raw materials and transportation costs. All of Pinnacle’s plants are strategically located close to Canadian sawmills, and have formed material supply relationships with them. “Fiber pricing is more a function of local economic factors, due to the high price of transporting raw residuals,” Reitsma says.

Competing for Raw Material In an industry that is a branch of the larger biomass power industry, wood resources of all kinds are sought after for different purposes. “We compete for our feedstock, there is no question about it,” Niebling says. “When our plants are at 100 percent capacity, we are dependent on round wood chips, and then we’re competing much more directly with the pulp and paper industry. Also to some extent, [we compete with] the biomass power plants we

SPRING 2011 | PELLET MILL MAGAZINE 33

PHOTO: NEW ENGLAND WOOD PELLET

ÂŤ Supply

STRONG SALES: Even if it were economically feasible, NEWP probably won't be shipping pellets overseas because the domestic market is strong at the moment.

have up this way, although we have a slightly different feedstock need than they have because they can use a much lower quality chip than we can to make a premium grade pellet.� Michael Curci, business development manager for Indeck Energy, says competition for feedstock is always a source of concern in the region where the company operates. Indeck has a two-year old, 90,000-ton pellet manufacturing facility in Ladysmith, Wis., that sells about 60 percent of its product for residential use, the rest commercial and industrial. “There are three pellet mills within close proximity to us, and there are some proposed biomass power plants in the area that are under review by the state, so it’s something we have to keep an eye on,� Curci says. “If prices go up with more competition, pellet prices will reflect that. That won’t be the case at any individual production facility, but across the board in our region.� The cost of raw material is a cyclical issue, Sharron says. “Our two plants rely on byproducts or residuals from sawmilling operations, for the most part,� he says. “In these past few years, with the housing and construction markets being soft, a lot of the area sawmills have curtailed production or even shut down completely, so there’s less supply on the market.� A big competitor for the materials WOWP uses is the composite/particle board industry, but it has been affected by the depressed wood product industry as well. “They aren’t as stiff a competitor as they have been at other times,� Sharron says. “On the other hand, pulp mills also use the same fiber, and their markets

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:DOQXW$YHQXH 6XLWH 34 PELLET MILL MAGAZINE | SPRING 2011 ‡

PHOTO: INDECK ENERGY

Supply »

FEEDSTOCK COMPETITORS: Indeck Energy's plant in Ladysmith, Wis., is in an area where there is potential competition for feedstock from three nearby pellet mills and some proposed biomass power plants.

have been relatively strong, so there’s always something, depending on the cycle.” Niebling says raw material prices float, according to what fossil fuel prices are doing. “If oil and propane prices keep going up, and there’s enough margin for the retailer, the distributor and manufacturer to operate profitably even with higher wood costs, that price threshold can be higher than it is today.” Some plants can afford to pay more for their raw materials than others, Sharron says. “That depends on a lot of things, such as debt service,” he says. “If it’s a new plant, it probably has a higher debt load and it might not be able to afford as much as an older manufacturer who doesn’t carry as much debt. It’s all relative to what the value of a finished product is at a given time.” When competition for wood fiber material is fierce and prices are high, looking for alternative feedstocks is an appealing idea on the surface, but it isn’t as easy as it sounds.

Searching for Alternatives “We’ve looked at [alternative feedstocks], but never seriously, because when you design and build plants like we have, you do it to handle one type of feedstock,” Niebling says. “The handling, conveying, refining and processing of biomass is unique to each individual type of feedstock. When you start to introduce different types of materials it changes your plant performance. You have to understand how those different feedstocks affect operations.”

Furthermore, the residential market is still the major market in the U.S., and there aren’t many appliances or pellet stoves that can handle the quality characteristics of an ag-based pellet, which has higher ash content and is more prone to clinkering. “You may not even be able to manufacture a lower grade pellet that you would have to sell for less, because some lower quality materials are more expensive to turn into a pellet, unless it’s offset by the cost of the raw material at the gate,” Sharron says. “That might be less of an issue on a commercial or industrial basis, but no matter what the pellet is made of, we’re competing with coal and it’s extremely difficult to compete with the cost of a Btu of coal.” Those in the industry know that making pellets is a low-margin proposition. “There’s not a lot of profit in it and there isn’t a lot of room for inefficiency, so we’ve been reluctant to consider blends or to make different types of pellets from other feedstocks,” Niebling says. “We want to get really good at doing one thing, but that doesn’t mean that won’t change in the future. If wood gets really expensive and suddenly hybrid willow or poplar starts to look more attractive, we’d consider that. I don’t see it any time soon, but if this industry grows the way we believe it will, we might all be looking at a variety of feedstocks.” Author: Anna Austin Associate Editor, Pellet Mill Magazine (701) 738-4968 aaustin@bbiinternational.com

SPRING 2011 | PELLET MILL MAGAZINE 35

ÂŤ Feedstock

TAKING OVER: Fast-growing cattails can displace native plant populations that support wildlife habitat and prevent erosion. PHOTO: RICHARD GROSSHANS

36 PELLET MILL MAGAZINE | SPRING 2011

Feedstock Âť

An

Unconventional

Pellet

Feedstock

Researchers at the University of Manitoba are proving the potential of cattails as a fuel pellet feedstock. BY ANNA AUSTIN

SPRING 2011 | PELLET MILL MAGAZINE 37

« Feedstock

everywhere, they are displacing native plant populations that support wildlife habitat and prevent erosion, in addition to hindering swimming and boating activities in recreational areas. Though generally considered a nuisance, cattails do provide a benefit to the health of a watershed by filtering out excessive toxins and nutrients, such as phosphorous and nitrogen, before they reach a lake. That’s the case in Lake Winnipeg, the sixth-largest freshwater lake in Canada. The Red River, which flows north into the lake through the Netley-Libau Marsh, is nutrient rich and is the main source of the high phosphorous and nitrogen levels in the lake. Too much phosphorous promotes the uncontrolled growth of pesky plants such as algae, which then grows too quickly and thickly and absorbs much of the oxygen and sunlight needed by other plants and fish. While cattails help mitigate nutrient loads, they can only absorb so much phosphorus until they are saturated, says Richard Grosshans, a researcher at the University of Manitoba, Canada. “Some nutrients such as nitrogen naturally break down, but phosphorous is stored in the sediments, so over time it can actually accumulate to the point of complete saturation,” he says. Several years ago, Grosshans and his team began a project to evaluate how much phosphorous could be permanently removed from the lake by harvesting marsh grasses. They hoped to understand the effects it would have on the health of Netley Marsh, a coastal wetland on the south end of the lake, as well as the health of Lake Winnipeg. Since the 1970s, the marsh has seen a significant loss of habitat. “We ended up mostly focusing on cattails, as it is pretty effective as a wastewater treatment plant,” says Grosshans, who also works for the International Institute for Sustainable Development, a project co-partner. “Our cattails were loaded with phosphorous, which is one of the things we’re interested in taking out of the marsh, and cattails have a really high energy value.

38 PELLET MILL MAGAZINE | SPRING 2011

PHOTO: MICHELLE PAETKAU

Cattails are extremely fast-growing and competitive plants. In lakes

CATTAIL BALE: Researchers harvested two bales of cattails from the summer harvest site in the Netley-Libau Marsh—each bale weighed approximately 850 pounds.

It’s bound in the biomass, and we found it to be valuable as a biomass fuel.” Unwanted nutrient removal, coupled with the benefit of bioenergy production, creates the greatest economic feasibility of harvesting the cattails.

A Match for Wood Pellets When the research project began four years ago, the idea was to harvest and bale the cattails. “We were working with a company that has a gasifier with an automatic bale feeder, and they were going through about six bales a day,” Grosshans says. “About halfway through the project we were exploring different funding sources, and Manitoba Hydro expressed interest in funding the concept of densified fuel.” Starting out with 1-inch by 1-inch

cubes, the team first determined that no binder was needed. “Just heat,” Grosshans says. “There’s enough lignin in the cattails so it naturally binds itself. We did a trial with a binder and then with no binder, and found that they had the exact same durability—about 97 percent.” Moving on to other pellet sizes, the researchers found that the cattail material compresses and binds efficiently in standard pelletizing equipment. And, energywise, the cattail pellets are comparable to standard wood pellets. “We worked with the Alberta Research Council, and they did pellet trials and all of the tests and comparisons for us,” Grosshans says. “They found that the calorific value [of the cattail pellets] was anywhere from 16 to 20 megajoules (MJ) per kilogram (kg), about same value of

PHOTO: ALBERTA RESEARCH COUNCIL

Feedstock »

MEASURING UP: Cattail pellets are comparable in durability and calorific heat value to standard wood pellets.

the standard wood pellets that they were comparing, which ranged from 17 to 18 MJ per kg. So they actually have the same energy value, if not more.” The only superior characteristic of wood pellets was its low ash content, compared to the cattail pellets. “Cattail has about 6 percent ash content, compared to wood pellet standards which are less than one-half of a percent to 3 percent,” Grosshans says. “So we determined that the best option would be to produce mixed pellets. We're working with a company right now that produces mixed-fuel pellets from forest and ag waste, to integrate the cattails in on a commercial scale.” Feedstock availability and sustainability are not an issue with cattail pellets, Grosshans says. “When we harvest, we leave about a foot of stubble above the water level, only harvesting in about 1 to 6 inches of water.” Cattails grow fast, and are extremely competitive and resilient, he adds. Properly harvesting them facilitates their health. “We found that after the first year of harvest—because initially there was so much dead stuff out there—the following year, the plants were coming up two weeks earlier because the sunlight could get to them easier.” Nearby areas not harvested were neg-

atively impacted. “Growth of cattail per square meter was about half that of our harvested site,” he says. “Leaving the stubble allows the plants to breathe and come up again next year, and we’re getting about 14 to 19 tons per hectare (2.47 acres), with 90 days to maturity. It does depend on weather and the area because there are different varieties, but we have a hybrid variety up here that produces an amazing amount of biomass—we had cattails upwards of 12 feet tall in some areas.” The real challenge to the entire scheme is getting the cattails out of the water, and harvesting when they have the lowest moisture content.

Prepping for Pelletization “There’s a lot of moisture in cattails,” Grosshans says. “We’ve harvested at different times of the year, and found that a winter harvest is next to impossible.” Summer is the best time to harvest relative to nutrient removal because that’s when cattails have the highest amount of phosphorus in them, but that’s also when nutrient reserves in the ground are the lowest. “If you keep doing that over time—and it would take a long time—it could negatively impact your community,” Grosshans says. “In the fall, cattails send these nutrient reserves back into the ground, into the

SPRING 2011 | PELLET MILL MAGAZINE 39

PHOTO: MICHELLE PAETKAU

« Feedstock

MARSH MACHINE: Researchers harvested the cattails in May using a custom-designed and built wetland harvester.

roots and rhizomes, so they can survive until next year.” Without enough stored nutrients, the cattails wouldn't be able to survive the long winter. Harvesting in the spring is the best option if it is being done specifically for bioenergy purposes, because the cattails are dry and easy to harvest right after the snow is gone and the ground is still frozen. “But it has very little nutrient value in it still; it’s lost about all but 5 percent of its phosphorus remaining,” Grosshans says. Therefore, from a nutrient management perspective, harvesting in the spring is completely useless. “We found that a good compromise is to harvest in the fall, because the plant has put some of its nutrients back into the soil

40 PELLET MILL MAGAZINE | SPRING 2011

to survive, and they’ve lost about 30 percent of moisture naturally,” Grosshans says. “You also avoid wildlife effects because most of the ducks and geese have gone south by that time.” Most importantly, the cattails have a significant amount of phosphorous in them to make it worthwhile. To harvest the cattails, the team initially built a custom-designed small, wetland harvester, but it was designed when the focus was specifically to make bales. “It cuts it and leaves it in a swath, and then we moved the swathes to allow them to dry naturally in the sun,” Grosshans says. “Later, we had a farmer come along and bale it.” In the next phase of the project, which the researchers are just beginning, some significant funding from the Manitoba government will be used to develop a commercial

cattail harvester.

Moving Ahead “As the project has developed, we have decided just to make pellets rather than bales and we’re working with companies to develop something similar to a corn forage harvester,” Grosshans says. “It can drive in there, cut the cattails, shred them and store them in a hopper all in one shot. Then we’ll transport the shredded material to wherever we’re going to pelletize it.” Besides completing the design of the new harvester, the next phase of the project will take the research to a pilot-scale harvest of 300 hectares of cattails, looking at how much phosphorous is removed as a result, how much bioenergy could be created, as well as the carbon offsets that could

Feedstock »

PHOTO: RICHARD GROSSHANS

Pride in Every Pellet

Announcing our New State-of-the-Art Manufacturing Facility in Deposit, NY Opening Spring 2011

CATTAIL PELLETS: One of the steps in the project was to densify shredded cattails into pellets or cubes.

be generated. Canada has a new carbon offset system, where the government will issue credits for greenhouse gas emissions reductions and removals. “We’re interested in nutrient management and the bioenergy part of it, but somebody came to us with a proposal to buy carbon credits,” Grosshans says. “So a big driver of the next phase of research is on the end of the process—selling the carbon offsets from burning the cattail pellets.” Overall, the real driver of the project was to try to understand the value of net removal of marsh to the health of Lake Winnipeg, while working in multiple cobenefits such as bioenergy production, Grosshans says. He adds that it’s not economically feasible to harvest cattail only for bioenergy

purposes. “You can do it though, especially if you have areas where you are already growing them such as at storm water treatment plants or wastewater treatment plants, and you can manage the water levels,” he says. “If you combine bioenergy with nutrient management and carbon credits, then it is a lot more economically viable. The great thing about cattail harvesting is that there are no inputs, and it grows everywhere, and it absorbs stuff that causes problems in the environment.” Author: Anna Austin Associate Editor, Pellet Mill Magazine (701) 738-4968 aaustin@bbiinternational.com

As the largest manufacturer of wood pellet fuel in the Northeast, we are committed to sustainable growth of the industry, to innovation in technology and to manufacturing a consistently high quality product. Corporate Headquarters PO Box 532 Jaffrey NH 03452 www.pelletheat.com

SPRING 2011 | PELLET MILL MAGAZINE 41

« Demand

42 PELLET MILL MAGAZINE | SPRING 2011

Demand »

Burgeoning Biomass Importer Biomass is sure to play a significant role in the U.K.’s energy portfolio as about 163 biomass power stations—ranging from 1 to 400 megawatt hours of capacity—are either in operation, under construction or awaiting approval. BY HUW KIDWELL

SPRING 2011 | PELLET MILL MAGAZINE 43

« Demand Currently, the solid biomass market in into small, medium and large installations that The face of power generation in the U.K. consists of two areas: domestic will receive payments estimated at 7.6 pence the U.K. is rapidly evolving. With the U.K. government committed to generating heat and power from renewable resources as part of the European Union Renewable Energy Directive, there is a target of increasing renewable energy use seven-fold from 2008 levels. Certainly by 2020, the U.K. target is to generate 20 percent of its power using renewable sources (the U.K. government has actually set a target of 30 percent for power and 12 percent of heat from renewable sources). Another moot factor is an aging U.K. power generation infrastructure, with a significant number of U.K. coal-fired power stations coming to the end of their operational lives under the EU Large Combustion Plant Directive (closures due in 2015). Since 2006-’07, there has been a new focus on alternative energy sources to fossil fuels such as biomass, wind, solar, tidal and nuclear. The future of energy in the U.K. will contain elements of all these with a common goal of minimizing carbon production and encouraging renewability.

The Importance of Biomass According to the 2007 U.K. biomass strategy document, renewable energy should come from sustainable biomass sources including newly managed woodland, rapidgrowth willow coppice, waste wood from the timber industry, waste biomass (straw and vegetable material), organic slurry, manure, blue-green algae slurry and biofuel crops. The Directory of U.K. Biomass Generation Plants released a report in June 2010 (compiled by Enagri), which estimated that large-scale biomass power production could provide 15 to 17 percent of U.K. anticipated electrical demand by 2020 (about 60 terawatt hours (TWh)) and that the biomass fuel market could be worth £5.3 billion ($8.5 billion) in 2020 requiring 50 million to 60 million metric tons of feedstock each year (depending upon calorific value). Biomass will surely play a significant role in the future of U.K. energy with around 163 biomass power stations (1 to 400 megawatt hour (MWh) capacity) either in operation, under construction or awaiting approval.

Solid Biomass Market Drivers

44 PELLET MILL MAGAZINE | SPRING 2011

heating using equipment imported from Europe, where the biomass heating market is more mature, and large-scale power generation where the majority of solid biomass is used for cofiring with coal. The driving force behind cofiring of biomass (split between pellets, wood chips and waste biomass from agriculture or industry) is the Renewable Obligation Certificate. In 2005, the U.K. government passed The Renewable Obligation Order 2005, which required energy companies to derive 6.7 percent of the energy they provide to their customers from renewable sources (rising to 10 percent by 2010). The law requires an energy provider to generate the required renewable energy itself, or offset by buying the energy from someone who has. Renewable power generators receive ROCs for each MWh of electricity generated and these can be traded on the open market (values have achieved £53.27 per MWh (April 2008 auction). Cofiring for coal power stations was a viable proposition until 2009 when the rules changed, meaning that the amount of ROCs a company could claim was reduced from the original figure of 2 ROCs per MWh down to 0.5 ROC per MWh. This has meant, since 2009, that the use of biomass for cofiring is less lucrative than previously (being much more dependent on the price of pellets or other biomass material). Of course, using biomass alone for energy production is eligible for different levels of ROCs, up to a level of 2 ROCs per MWh (firing biomass alone gains 1.5 ROCs, and biomass for generation with combined heat and power gives 2 ROCs). The 2011 Renewable Heat Incentive policy outlined on March 10 will revolutionize the way heat is generated and used in buildings and homes across the U.K. by providing a financial support scheme for generating clean heat and power (introduced for large power stations, commercial heating systems, and even domestic and small-scale business heat and feed-in systems). The scheme will provide a payable tariff for each kilowatt hour (KWh) generated using renewable sources. For biomass, the scheme is split

(12 cents) per KWh for small to around 2.6 pence per KWh for large. This scheme will be introduced by the U.K. government this summer and will be in use until 2020.

Biomass in the UK The U.K. is a small island with finite forestry resources and a rising demand for fuel from large-scale biomass energy plants is expected to leave the U.K. reliant on net imports of wood chips and pellets by 2012. A report titled “Wood Fibre Availability and Demand in Britain 2007-2025” from the Confederation of Forest Industries has highlighted the potential in the U.K. biomass market. The study predicts that demand for wood chips and pellets is likely to rise to about 27 million metric tons per year if the majority of new biomass plants in the pipeline are constructed and this will cause price rises in other timber-related industries such as furniture. The British wood fiber sector is set to expand rapidly to a production peak of just over 20 million metric tons by 2019 with production then declining. It is also estimated that by 2017 U.K. demand for wood chips and pellets will be 50 million metric tons, almost double the present size of the global wood fiber biomass trade. With recovered wood providing around 3 million metric tons per year, importation of wood pellets and chips into the U.K. is expected to be around 27 million metric tons. Pellets are preferred by many commercial users because of their consistent quality (Green Gold Certification) and ease of handling, but for commercial users price is key and other imported material such as peanut kernel, palm kernel expeller, shea or olive residue, or straw may offer better economics (dependent upon calorific value).

Imported Biomass The value of imported biomass in the form of pellets will be to support the biomass deficit in the U.K. via seven- to 10-year bulk supply “bankable” contracts. The majority of large biomass power stations are being built or planned near portside areas or near biomass sources (44 MWh Stevens

Demand »

EXPORT ENHANCEMENT: A report by the Confederation of Forest Industries predicts that by 2017 demand for wood chips and pellets in the U.K. will be at 50 million metric tons, double the present size of the global wood fiber biomass trade.

Croft in Lockerbie, which has large forest resources) and as such the transportation of pellets/biomass is simplified. Figures from the Wood Pellet Association of Canada have shown that transport costs between Vancouver and Rotterdam were about $100 per metric ton in 2007 and so this has to be taken into consideration when establishing a new biomass supply chain. The energy used by the shipping method of biomass may be of great concern to environmental organizations and also the government, but all is not lost as Irelandbased B9 Shipping is developing cargo vessels fitted with Rolls Royce spark ignition engines, which will run on biogas and a soft sail system (100 percent renewable energy). These new cargo vessels would placate the environmental lobby and probably be cost effective as well. Many advocates of biomass power continue to argue, however, that to maximize the carbon emission savings from wood-fired power plants, it is necessary to use supplies of wood chips and pellets sourced near to the facility.

Perspective from UK Industry According to John Bingham, chief analyst for the Forest Energy Monitor at Hawkins Wright, currently U.K. power generating companies are undecided about whether to use pellets or wood chips as their major imported biomass source. Bingham added “there are around 30 major biomass power generating projects that will go ahead in the medium term and a lot more in slower development or awaiting planning permission or finance.” Nigel Blandford is the senior sector development manager of the biomass project for Envirolink Northwest, which is designed to show potential biomass energy investors what grants and incentives are available to set up new projects in the region. Blandford reiterated Bingham’s view that U.K. markets are undecided about which biomass material to use and that it would probably come down to cost, quality and transportation, and for cofiring, the market price of bulk coal. Bingham adds his belief that pellets have more consistent quality, particularly for the domestic market, and if they can be supplied

“‘torrified,” the power stations find that they are more energy dense and that crushing and atomizing them to burn is much easier. “The U.K. biomass market is weak at the moment, with only modest growth in the past 24 months but a lot is expected in the coming years,” says Jon Westmacott, managing director of Land Energy, a leading U.K. pellet producer. “Capital grants have been pulled for biomass projects and this will make a big difference to timescales. I don’t deal with the cofiring market, as the pricepoint they expect is too low, and for this reason the domestic market is more lucrative ... new U.S. producers should remember there is a lot of competition from Europe as they have been leaders in fuel pellet technology for the past 15 years ... Although pellet prices have risen in the past 12 months, demand is still weak and the majority of our business will be with medium to small companies who are installing biomass boilers for heat.” Richard Smith, the managing director of Verdo Renewables, a pellet producer and renewable energy consultancy, points out that the U.K. market is not a bottomless pit and there is a lot of competition in the world pellet market. For example, a Russian pellet plant with a 1 million metric ton capacity will be on-line imminently. “Pellet production plants are going bust all over Europe because the demand is not there and it is cheaper to burn coal. Of course the renewable incentive scheme may make a huge difference but not immediately,” he says. The potential of the U.K. market as a net importer of biomass pellets cannot be denied with the number of biomass plants in planning or under construction. At the current time the pellet market in the U.K. is still maturing both from a power generation and domestic heating viewpoint. The U.K. market needs to be encouraged and relationships should be developed with the power generation companies to potentially supply the biomass they will certainly need in the near future. Author: Huw Kidwell Freelance Journalist huw.kidwell@dolffin.com

SPRING 2011 | PELLET MILL MAGAZINE 45

« Business

46 PELLET MILL MAGAZINE | SPRING 2011

Business »

The

Pellet Market

from

Different

Perspectives Feeding the residential pellet market requires suppliers to strike the right balance between feedstock supply, transportation costs and customer demand, and sometimes to look to others for inspiration. BY RONA JOHNSON

South Dakota’s Spearfish Pellet Co. LLC was built to add value to the byproducts—wood chips, sawdust and shavings—produced at the Spearfish sawmill. The plant was originally owned by Pope & Talbot Inc. and was purchased in 2008 by Neiman Enterprises Inc., which also owns three sawmills in the area. At full capacity, the Spearfish plant can produce 50,000 tons of pellets, which makes it an average-sized plant in the U.S. According to USDA’s “North America’s Wood Pellet Sector” report, the majority of pellet plants in the U.S. produced between 30,000 and 70,000 metric tons (33,000 and 77,000 tons) in 2009. Unlike some of the new industrial pellet mills being proposed in the U.S. that are being built to supply European biomass power and heating customers, the Spearfish plant, like other plants its size, sells most of its product to residential customers within a 300- to 400-mile radius of the facility, says Todd Carlson, plant manager for Spearfish Pellet Co. “For us to get to the East or West Coast and put pellets on a barge to go to Europe, that’s a long ways,” he says. Carlson says they do move pellets by rail to a few customers on the East Coast, but it takes a while to get the pellets to their destination.

Supply and Demand Because of byproduct commitments at its sawmill, high diesel prices and other forces impacting the wood products industry, the Spearfish Pellet plant is not currently looking to add many new customers. “We’ve nearly sold out the last several years, so for us to take in more market share, we would have to increase our production No. 1, and No. 2 somehow figure out how to get these diesel prices back down,” says Everett Follette, sales and marketing for Spearfish Pellet. “The diesel is having a huge effect on how far out I can ship right now.” SPRING 2011 | PELLET MILL MAGAZINE 47

« Business U.S. Pellet Plant Distribution by Capacity in 2009

SOURCE: USDA

PHOTO: EVERETT FOLLETTE

Spearfish Pellet shares its feedstock supply with a particle board plant and a pulp mill. “The other two plants have increased their production immensely and want more product than we have,” Follette says. “So right now we’re not able to expand because of contracts with these other two companies. Currently, we are producing at the same rate we did this past season so all our customers should be fine for next season if they don’t wait too long.” Business is up about 35 percent from a year and a half ago at the particle board plant, Follette says, and the pulp mill has more business because so many other mills have shut down or cut production. “I don’t know if their demand has necessarily gone up, but their supply of wood chips has gone down and maybe that’s why they have been asking us to supply even more.” If they were able to increase their feedstock supply and increase pellet production, Follette says they would probably look at supplying pellets to big box stores such as Lowes and Home Depot. Pellets from the Spearfish plant mainly go to lumber yards or wood stove shops. “At the time when [big box stores] got into the pellet business we were sold out so we don’t work with very many of the big box chains,” Follette says. Currently, Spearfish Pellet is holding its own against the big box stores because they provide quality pellets with a higher Btu per pound. “We might not have the cheapest pellets, but our quality will help you get more Btu from the pellets,” he says. Spearfish Pellet uses Ponderosa pine, producing pellets with an average of 8,631 Btu per pound, Carlson says.

VALUE ADDED: Most small pellet mills like Spearfish Pellet in South Dakota were built to use wood residue from sawmills and other wood products manufacturers.

Quality and Consistency Spearfish Pellet satisfies its customer base by providing a high-quality consistent product. When Carlson was looking to add a third pellet mill, he checked out several equipment manufacturers but in the end went with Amandus Kahl, the company that had supplied its other mills. Carlson says he had two major concerns when he was shopping for another mill: not having to spend a lot of extra money to double his parts inventory and making sure that the quality of the pellets produced was 48 PELLET MILL MAGAZINE | SPRING 2011

consistent. “Consistency is the name of the game for anything,” he says. “If something isn’t broke you don’t fix it.” Amandus Kahl uses a flat die pellet mill because it’s an efficient, quiet system and the cost to keep the machine operating is low, says Patrick Clark, vice president of sales and marketing. “Our die is flat and stationary in comparison to a ring die machine where the die obviously is a ring and it rotates and with their ring die machine the rolls are fixed and in our

Amandus Kahl flat die pellet mills our rolls rotate,” Clark says. “So it’s basically 180 degrees opposite of the other technologies. That allows it to grind even though our revolutions per minute (the shaft speed) are at approximately 62 revolutions per minute, what happens is the inside feet per minute or rate of travel is different than the feet of or rate traveling on the outside of that roll shell and as that goes across the die, it gives us the grinding action.” Clark says one of the many benefits of using their equipment is that he can take an

PHOTO: MAINE ENERGY SYSTEMS LLC

Business »

SPECIAL DELIVERY: MESys uses state-of-the-art trucks with pneumatic systems for bulk pellet delivery.

MESys also offers a product for pellet stove owners who want bulk delivery but don’t have a bulk storage bin and don’t want to lift the 40-pound bags of pellets. “It’s a free-standing bag that holds a little over a ton of pellets and will take bulk delivery,” Strauss says. “It takes up about the same space as a pallet of bagged pellets and it has a little gauge at the bottom where the homeowner can open the gate and fill a bucket full of pellets and then dump those in the pellet stove.” The company delivers bulk pellets by truck using a pneumatic pellet delivery system. “These trucks are state of the art,” Strauss says. “They are able to deliver rapidly and gently.” He says some companies use modified feed trucks to deliver pellets resulting in loss through breakage and dust creation. “They rip the pellets to pieces.”

Market Fluctuation inexperienced person, who has never been around their machines and teach them to change the roll head and die in less than 50 minutes. “A lot of our experienced guys are doing it in 20 to 30 minutes,” he says, adding that reduced down time, especially for plants that run 24 hours, seven days a week is important.

Building the Pellet Market While Spearfish Pellet’s mission is to add value to forest residue, Maine Energy Systems LLC (MESys) is working to increase the market share for pellet producers in the U.S. Northeast and it’s doing it European style. MESys has long-term contracts with premium-grade wood pellet producers and distributes the pellets in bulk to homes and businesses in Maine and New Hampshire. The trick is to make pellet heating as simple and seamless as heating with propane or fuel oil, with which people are already familiar. According to the “2011 State of the Hearth Industry Report,” only about 5 percent of the 1 million hearth appliances shipped out in the U.S. in 2010 were pellet-fueled, 70 percent were gas-fueled and the remaining 25 percent used cordwood. The study, which was conducted by the Hearth, Patio & Barbecue Association also pointed out that 34 percent

of wood or pellet stove owners viewed their stove as a major heat source, 50 percent considered it a secondary source of heat. MESys aims to increase the percent of pellet fueled heating appliances and to show residents and businesses how they can make pellets their primary heat source. The company has modeled its business after the pellet industry in Europe, and over a year ago partnered with an Austrian pellet boiler manufacturer ÖkoFEN, says William Strauss, who co-founded MESys with Les Otten and Harry “Dutch” Dresser. MESys chose to work with ÖkoFEN because the company is considered a pioneer in the pellet boiler industry and manufactures one of the leading models in Europe. “It’s the most modern, cleanest, trouble-free, efficient pellet boiler in Europe,” Strauss says. “The homeowner doesn’t even know it’s there, just set the thermostat and you’ve got heat. No bags to deal with no ash removal no cleaning. It periodically has to be serviced like any boiler that’s really it.” The company offers semi- and fully-automated wood pellet boiler equipment systems, which require bulk storage bins that hold 3 to 4 tons of pellets, a tube or hose that goes from the bin to the boiler and a pneumatic system that automatically moves the pellets to the boiler.

When MESys was founded in 2008 and oil prices spiked there was a flurry of interest in pellet heat, Strauss says. Then oil prices went down—equivalent to pellet heat and even lower—and interest died down. “But right now pellet energy is the equivalent of about $1.95 per gallon of heating oil and heating oil in Maine is about $2 to $3.75, it really is about half the cost for equivalent energy,” he says. A home that burns 1,000 gallons of heating oil in a season will use slightly less than 8 tons of wood pellets. At current prices, 1,000 gallons of heating oil is about $4,000 and 8 tons of wood pellets is about $2,000, cutting annual fuel costs in half. Strauss expects the pellet market will continue to fluctuate, however, until the public and policy makers understand, support and adopt pellet heating systems as they have in Europe. “In the U.S. 98 percent of pellets are burned in pellet stoves and in Europe 98 percent of pellets are used in pellet boilers,” Strauss says. “In Europe it’s normal to have a home heating system fueled by pellets. In fact, in Austria most new homes are built with pellet systems, but in the U.S. people don’t even know they exist. And they think it is primitive and dirty and requires a lot of attention and that’s just not true.” Author: Rona Johnson Editor, Pellet Mill Magazine (701) 738-4940 rjohnson@bbiinternational.com

SPRING 2011 | PELLET MILL MAGAZINE 49

« Event CONTRIBUTION

SHARING A VISION: William Strauss of FutureMetrics had an opportunity to learn from the Austrians, and to tell them about a vision to meet 25 percent of the Northeast U.S.'s heating needs with renewables by 2025.

Learning from Austria’s Biomass Thermal Success Story Austria’s renewable energy policies and biomass thermal technologies are a model the U.S. could follow in reducing its reliance on petroleum fuels. BY WILLIAM STRAUSS

In early March in Upper Austria, more than 100,000 people visited the three-day annual renewable home energy show in Wels. The show was complimented with a world-class conference called the World Sustainable Energy Days, where more than 750 experts from 56 countries shared information on how to efficiently heat homes and businesses with renewable energy. This year I was honored to be one of the keynote session speakers at the event.

50 PELLET MILL MAGAZINE | SPRING 2011

I talked about the vision of the Biomass Thermal Energy Council, the Northeast Biomass Thermal Working Group, and several other sponsoring groups. On behalf of these groups, I told the conference attendees about the U.S. biomass heating industry’s vision for meeting 25 percent of the Northeastern U.S.’s heating needs by 2025 with renewable energy resources. This goal was presented to the U.S. biomass heating industry at BTEC’s Manchester, N.H., conference, Heating the Northeast, a year ago.

My company, FutureMetrics, was one of the lead consultants for the analysis that is at the core of the paper that articulates the vision. If that vision is achieved, FutureMetrics estimates that it would keep $4.5 billion of Northeast heating dollars from being “exported” out of the region and it would create more than 140,000 new jobs1. The vision that I presented (more on that later in this article) is nothing new to the Austrians or to many other Western European nations. It is centered upon the

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Pellet Mill Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

Event »

use of renewable energy for heating homes and businesses and upon improving the efficiency of homes and businesses so that they require less thermal energy. Many of the presentations at the WSED conference showed how policy and the development of biomass thermal technologies have moved Austria away from reliance on petroleum fuels. Christiane Egger, the deputy director of the Upper Austria Energy Saving Association, presented a remarkable statistic. Of the new homes built in Upper Austria in 2009, more than 85 percent used modern Austrian wood pellet boilers coupled with solar thermal hot water collectors. The chart labeled The End of the Oil Era? shows the remarkable change from 1999. Egger also told the attendees about the three-pronged approach of the Upper Austrian sustainable energy strategy that has achieved such dramatic success. She characterized the policy as using a carrot, stick and tambourine. The “stick” represents legal measures such as emissions and efficiency standards, and a renewable heating mandate. The “carrot” is financial measures such as grant programs, regional research and development programs, and pilot projects. The “tambourine” represents educational efforts, training in the form of free energy advice, marketing campaigns, local energy action plans and a sustainable energy business network. Only two people from the U.S. were invited to speak at the conference. The other was Harry “Dutch” Dresser of Maine Energy Systems LLC (MESys). Dresser explained about how MESys has emulated the Austrian template in Maine and other Northeastern states. He recounted the history of how MESys has partnered with the most highly respected producer of modern pellet boilers systems, the Austrian company ÖkoFEN. ÖkoFEN and its president, Herbert Ortner, are considered the founders of modern pellet boiler technology and they continue to be the innovative leaders. ÖkoFEN has almost 35,000 pellet boiler systems in European homes and businesses.

The End of the Oil Era?

Ortner’s company also had a large display in the trade show featuring the most advanced, fully automatic and environmentally clean systems in the world. They are as clean and efficient as modern heating oil boilers and, as Les Otten, the MESys principal director who also attended the conference says, the fuel smells like pine trees. Dresser also spoke about how MESys has partnered with another Austrian company that is considered the leading expert in the design and manufacturing of pellet fuel delivery trucks, Tropper Machines and Systems GmbH. The attendees learned that MESys is currently the only company in the U.S. with American Society of Mechanical Engineers certified pellet boilers, and with fully pressurized pneumatic pellet delivery trucks with certified weigh scales onboard. But whereas Austria and other Western European nations have a mature market in biomass thermal systems and fuel delivery infrastructure for homes and businesses, the U.S. with companies such as MESys is where Austria was 15 years ago; just starting out. That is why I presented the 25x25 vision and told the attendees about how critically important it is for the heating oil dependent states to follow in their footsteps.

To illustrate the motive for this vision, I talked about how the Northeast states are uniquely and overwhelmingly dependent on heating oil for home heating. As a result, with the exception of Hawaii, these states, and especially the more rural states with limited access to natural gas, are some of the most petroleum dependent states in the U.S. Because of the Northeast’s dependency on heating oil, based on heating oil prices in mid-March, more than $16.2 billion are “exported” out of the Northeast economy every year2. I told the attendees that because this exported money does not circulate in the local economies, commerce and jobs are lost. We estimate that if the entire $16.2 billion were to remain in the economy, the direct, indirect and induced effects would create almost 950,000 new and permanent jobs. But given the current quantities of sustainable biomass available in the region, the 25x25 vision sets a more modest benchmark. It calls for 25 percent of thermal needs from renewables by 2025, of which about 18 percent would be from biomass systems so as to not exceed the sustainable supply of biomass. That assumes that the current demand for wood from the pulp and paper sector remains constant from

SPRING 2011 | PELLET MILL MAGAZINE 51

« Event

Petroleum Dependency*

*Proportion of total states' total energy use

SOURCE: EIA, ENERGY CONSUMPTION BY SOURCE AND END USE SECTOR, TABLE S1, 2010, ANALYSIS BY FUTUREMETRICS

now to 2025. In Maine alone, that amounts to 6.5 million to 8 million sustainably harvested tons per year that may or may not be in demand for pulp making by 2025. Unfortunately, the Northeast remains addicted to heating oil and as the price in-

creases, we export more money and jobs. Beginning with heating oil prices from just a few months ago and forecasting the effect of an increase to $4.50 per gallon, we estimate that the heating oil “tax” will destroy almost 390,000 jobs.

This economic assault is dire in the rural and poorer states which are the most dependent on heating oil because natural gas infrastructure is limited. The WSED was inspiring for those of us trying to implement an alternative to

Money Exported From the Northeast Economy

SOURCE: US ENERGY INFORMATION ADMINISTRATION, US CENSUS, 2010

52 PELLET MILL MAGAZINE | SPRING 2011

Event Âť

Jobs Lost When Billions of Dollars are Exported From the Northeast

SOURCE: ???

heating oil in the Northeast. It would seem that we have a situation in these states in which the penalties for not moving away from oil dependence for thermal needs would be sufficient to motivate home and business owners and policymakers to act (a stick). Certainly the fact that energy from pellet fuel is currently about 50 percent of the cost of the same energy from heating oil and is nearly one-third the cost of SOURCE: U.S. CENSUS BUREAU, 2005-2009 AMERICAN COMMUNITY SURVEY propane should be a carrot. But it is not sufficient. Finally, one of the interesting features What we need are carrot policies that of the conference was the remote devices encourage conversion (just as the Upthat were placed at every seat, allowing periper Austrian government has successfully done). And what is needed even more are odic instant feedback or voting on questions tambourines educating people and business- that arose. Near the end of the conference, es as to the maturity of pellet boiler systems after asking the more than 750 experts to and the economic benefits of using pellet vote on where the most growth in the pelfuel. There are reliable clean and hands-free let boiler business would be, the Northeast technologies that can replace oil boilers here U.S. was the top vote getter amongst the key now. But policymakers and the general pub- potential pellet heating locations in Europe, lic have for the most part never heard about South America and Asia. Let’s hope they are right. pellet boilers; or think that they are primitive and dirty and need constant attention.

The complete vision paper can be downloaded at www.FutureMetrics.com.

1

This is based on Energy Information Adminstration data, which shows that 78 percent of every dollar spent on heating oil leaves the region (and many of those dollars leave the country).

2

Author: William Strauss President, FutureMetrics LLC WilliamStrauss@FutureMetrics.com

SPRING 2011 | PELLET MILL MAGAZINE 53

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