US Producers Talk Highs, Lows and Perseverance Page 14
Plus: Why Canada Could
Grow Domestic Demand Exponentially Page 20
Wood Pelletsâ€™ Allure to Trump and Coal Page 24
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MARCH/APRIL 2017 | VOLUME 7 | ISSUE 2
Pellet Mill Magazine
Advertiser Index 23 Andritz Feed & Biofuel A/S 32 Astec, Inc. 10 BinMaster Level Controls
30 Biomass Preparation, Handling & Storage Workshop 17 Bliss Industries, Inc. 29 CPM Global Biomass Group 24 Emerging Biomass Feedstocks Forum 12 Evergreen Engineering 2 Genesis III 16 GreCon, Inc. 27 Heating the Midwest 28 IMALPAL Group 22 Industrial Bulk Lubricants (a Dansons company) 5 International Biomass Conference & Expo 2017 11 NDC Technologies Ltd. 31 ProcessBarron 9 Pellet Mill Magazine 25 RUF Briquetting Systems 19 Timber Products Inspection/Biomass Energy Laboratories 13 Tramco, Inc. 18 Varco Pruden Buildings
PHOTO: GORDON MURRAY, WPAC
FEATURES 14 INDUSTRY Pressing On
Four pellet producers reflect on 2016, discussing challenges, bright spots and what the new year might bring. By Tim Portz
20 MARKETS Green Heat in the Great White North
Canada’s domestic wood pellet market holds incredible potential, especially in remote and indigenous communities. By Ron Kotrba
CONTRIBUTION 24 POLICY How Trump Could Save Coal with Wood Pellets
With ambitions to revive the dwindling coal mining industry and create jobs, the Trump administration could deliver exponential benefits by wood pellet cofiring. By William Strauss
04 EDITOR’S NOTE
A West Coast Rebound By Tim Portz
05 INDUSTRY EVENTS 06 HEATING MATTERS
Biomass Heating Recognition in Oil Dependent Northeast By Charlie Niebling
07 TESTING GROUNDS COPYRIGHT © 2017 by BBI International
Pellet Specification and Method Comparisons By Chris Wiberg
09 THERMAL TALK
Expanded Use of Modern Wood Heating and Improving Air Quality By Adam Sherman
10 BUSINESS BRIEFS 12 NEWS
Please recycle this magazine and remove inserts or samples before recycling
MARCH/APRIL 2017 | PELLET MILL MAGAZINE 3
« Editor's Note
A West Coast Rebound While in the final stages of producing this issue of Pellet Mill Magazine, I found myself on the phone with editorial board member Chad Schumacher of Superior Pellet Fuels, Alaska’s only pellet producer. After an unseasonably warm 2015-'16 winter, Schumacher and his team at Superior entered the 2016-'17 heating season with significant concern. Superior began the season with inventory on hand, fully aware that its customers, too, had invenTim Portz tory waiting to be burned. As Schumacher exVICE PRESIDENT OF CONTENT & pected, sales were slow to come. As the season EXECUTIVE EDITOR progressed, however, winter in Fairbanks felt email@example.com more like winter. During our conversation, he told me that every day in the 10-day forecast for Fairbanks included zero and below-zero temperatures. Schumacher’s customers are burning pellets, and buying more. The relief in his voice spoke volumes. A survey we conducted in the months leading up to this issue make it clear that, regionally speaking, he is not alone. Of our respondents from the Pacific Northwest, 90 percent reported that sales are up when compared to last season. Half of those classified sales as “up significantly.” The pellets Superior is producing now will be burned within days of their purchase, and Superior’s customers will exit this heating season with few, if any, pellets on hand. For Superior, this means that the slow start that plagued this year is unlikely, and challenges like wood yards full of material yet to be utilized can be avoided. Unfortunately, the wet and cold conditions that delivered good, or by some accounts, even great, years weren’t experienced all across North America. Producers in the Northeast endured another lackluster winter, and survey responses indicated everything one might expect from anyone in the business of delivering Btus: softer sales, reduced production and growing on-hand inventories. For producers with tenure, these are the realities of the pellet business. During a group interview, portions of which appear inside this issue, Ken Tucker, a 30year veteran in the space, emphasized the discipline required to weather the warm years, so that when weather patterns such as the one that has Fairbanks in a deepfreeze descend upon the market, a producer can be there to capitalize. For Tucker, priority one has been working closely with feedstock suppliers to ensure that when demand for pellets comes back, he has the raw material available to meet it. Tucker and Lignetics will be back next year, hopeful that prolonged, colder temperatures are widespread, and that the strong years posted by their plants in the West will do more than simply balance out the off-years of their sister plants back East.
4 PELLET MILL MAGAZINE | MARCH/APRIL 2017
PRESIDENT & EDITOR IN CHIEF Tom Bryan firstname.lastname@example.org VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz email@example.com SENIOR EDITOR Ron Kotrba firstname.lastname@example.org MANAGING EDITOR Anna Simet email@example.com NEWS EDITOR Erin Voegele firstname.lastname@example.org COPY EDITOR Jan Tellmann email@example.com
ART DIRECTOR Jaci Satterlund firstname.lastname@example.org GRAPHIC DESIGNER Raquel Boushee email@example.com
Publishing & Sales
CHAIRMAN Mike Bryan firstname.lastname@example.org CEO Joe Bryan email@example.com VICE PRESIDENT OF OPERATIONS Matthew Spoor firstname.lastname@example.org SALES & MARKETING DIRECTOR John Nelson email@example.com BUSINESS DEVELOPMENT DIRECTOR Howard Brockhouse firstname.lastname@example.org SENIOR ACCOUNT MANAGER Chip Shereck email@example.com CIRCULATION MANAGER Jessica Tiller firstname.lastname@example.org MARKETING & ADVERTISING MANAGER Marla DeFoe email@example.com
Editorial Board Members
T.J. Morice, TNT Ventures LLC Stan Elliot, Pacific Coast Pellets Thomas Plaugher, Appalachian Wood Pellets Chad Schumacher, Superior Pellet Fuels Kelli Curran, Curran Renewable Energy Derek Nelson, Forest Business Network
Subscriptions to Pellet Mill Magazine are free of charge—distributed quarterly—to Biomass Magazine 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 701-7465367. 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 firstname.lastname@example.org. 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 email@example.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 email to firstname.lastname@example.org. Please include your name, address and phone number. Letters may be edited for clarity and/or space.
Industry Events Âť 2017 International Biomass Conference & Expo
April 10-12, 2017
Minneapolis Convention Center Minneapolis, Minnesota
Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. Itâ€™s a true one-stop shopâ€•the worldâ€™s premier educational and networking junction for all biomass industries.
866-746-8385 | www.biomassconference.com
2017 Biomass Preparation, Handling & Storage Workshop
April 10, 2017
Minneapolis Convention Center Minneapolis, Minnesota
The operation and financial success of any biomassto-energy facility requires its operators to utilize highquality, consistent biomass feedstocks. The Biomass Preparation, Handling & Storage Workshop agenda will allow producers to take an in-depth look at the latest innovations and strategies in biomass handling and compare it to their own. Whether producers are sourcing wood chips from a handful of trusted suppliers for a campus boiler or are gathering, storing and converting hundreds of thousands of tons of agricultural residues at a biorefinery, this agenda will offer practical value.
866-746-8385 | www.biomassconference.com
Heating the Midwest
April 10, 2017
Minneapolis Convention Center Minneapolis, Minnesota
The Midwest relies heavily on fossil energy for heating homes and businesses. Heating the Midwest is a network of thermal biomass advocates working to increase awareness and usage of renewable biomass for heat, which has the potential to greatly reduce the regionâ€™s dependence on propane and fuel oil for thermal energy.
LARGEST BIOMASS CONFERENCE IN THE WORLD
866-746-8385 | www.biomassconference.com
Emerging Biomass Feedstocks Forum
April 10, 2017
Minneapolis Convention Center Minneapolis, Minnesota
866-746-8385 | www.biomassconference.com
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As the biomass industry continues to grow, so too does the opportunity for other feedstocks to capitalize on this market and generate real revenue. Whether grown intentionally to diversify a farm operation or available already to anyone who can figure out how to make their removal economical, feedstocks are the backbone of any biomass-to-energy operation. The Emerging Biomass Feedstock Forum will provide attendees an opportunity to hear about the efforts to bring new material streams to plant gates for conversion into power, thermal energy or renewable fuels.
MARCH/APRIL 2017 | PELLET MILL MAGAZINE 5
« Heating Matters
Biomass Heating Recognition in Oil Dependent Northeast BY CHARLIE NIEBLING
Across the northeast U.S., making heat with biomass energy technologies continues to grow in attention, and gain interest and support among elected officials and policymakers. This is the case despite very challenging market conditions: a perfect storm of warmer-than-average winters, low fossil heating fuel prices (for the fourth consecutive year), and a U.S./Canadian dollar exchange rate that favors strong competition from Canadian manufacturers of pellet fuels. Policymakers and state energy agency officials are increasingly recognizing that greenhouse gas (GHG) emission reduction goals, and reducing the region’s historically high dependence on oil for heat, cannot be achieved without thoughtful policy support. In December, Maine’s legislature commissioned a highlevel biomass energy report that gave prominent attention to thermal energy, which my colleague Bill Bell has written about in Biomass Magazine. Among its top recommendations is a call to add renewable thermal to the Maine renewable portfolio standard (RPS). Mid-February, Rhode Island rolled out its Renewable Thermal Market Strategy. Rhode Island is not exactly known for its thriving forest product industry and biomass energy focus, but the report gave meaningful attention to advanced wood heating as a legitimate contributor to meeting the state’s ambitious long-term energy goals. In New Hampshire, advocates soundly defeated an attempt by a fringe group of legislators to repeal the state’s RPS. Over 200 people, largely from the biomass electric and thermal communities, came out to attend the hearing on this misguided legislation. The strong showing only reaffirmed support for the policy that provides thermal renewable energy certificates (RECs) for biomass heating, and funding for boiler rebate programs. Vermont’s comprehensive energy strategy has set a goal of achieving 35 percent of all thermal energy used in the state from biomass by 2030. That ambitious policy target has served to galvanize attention around development of a strategic plan for advanced wood heating. In Massachusetts, a recent Supreme Judicial Court decision affirmed that aggressive GHG emission reduction targets are, in fact, legal mandates that the state cannot ignore. As a
6 PELLET MILL MAGAZINE | MARCH/APRIL 2017
result, officials there have stepped up efforts to advance renewable thermal technologies, including pellets, chips, biogas and liquid biofuels. Massachusetts will soon become the second state with a comprehensive thermal renewable energy certificate incentive. In New York, the state Public Service Commission is exploring the feasibility of adding thermal technologies to those that qualify for RECs under the New York Generation Attribute Tracking System, starting with geothermal, but hopefully, biomass will soon be included. All of this activity suggests that state officials do not anticipate that fossil heating fuel prices will stay at the current historically low levels. They understand that there is a real public interest in diversifying and expanding renewable heating options for homeowners, businesses and institutions. They recognize that heat energy, as more than a third of total energy consumption in America, deserves the same focused policy support as renewable electricity generation, and renewable transportation fuels. And, based on early signals from the Trump administration, they have concluded that we cannot look to the federal government for meaningful leadership in advancing renewable energy market development. States must assume this leadership role. Without policy support and incentives, renewable heating technologies will languish in the current market conditions. With continued support, the market can sustain itself until the return of costlier fossil fuels. We all embrace a future where policy support is not necessary, and pure free market economics drive enlightened consumers to more sustainable energy choices. But until that day comes, we remain grateful to state energy policy makers—and to taxpayers and ratepayers that foot the bill—for the continued incentives and programs that support the advanced biomass heating industry’s growth. Author: Charlie Niebling Consultant and Partner Innovative Natural Resource Solutions LLC 603-965-5434 email@example.com
Testing Grounds »
Pellet Specification & Method Comparisons BY CHRIS WIBERG
Recently, I was asked to compare the methods and specifications referenced in the PFI standards with the seemingly similar ISO 17225-2 standard. Bear in mind that the PFI standards were developed for the North American wood pellet industry, while in most cases, the newly published ISO standards closely resemble former EN standards, which were written for the European markets. ENplus and CANplus now reference the specifications for quality classes A1, A2 and B, as outlined in ISO 17225-2, but producers primarily manufacture “A1 grade.” Also, while the PFI standards provide criteria for premium, standard and utility grades, the vast majority of producers manufacture premium grade. This exercise compares the requirements of PFI’s premium grade with ISO 17225-2 A1 grade. PFI specifications allow a bulk density range of 40 to 48 pounds per cubic foot, while ISO 17225-2 references a range of 600 to 750 kilograms (kg) per cubic meter. (37.5 to 46.8 pounds per cubic foot). The test methods are different in that they use different-sized containers, different methods of compaction and different pour heights. In addition to these differences, both methods inherently have a large degree of variability as a result of the test being dependent on individual technique. Despite all of these differences and the inherent variability, the two methods do seem to generate similar results. PFI’s diameter range is 0.230 to 0.285 inches (5.84 to 7.24 millimeters (mm). This is with the understanding that U.S. producers predominantly use a one-quarter-inch die and some slightly larger die sizes. ISO 17225-2 requires that producers declare 6 or 8 mm, each with a tolerance plus or minus 1 mm, allowing for a potential range of 5 to 9 mm (0.197 to 0.354 inches). Given that the 6 mm diameter most closely resembles the customary one-quarter-inch (6.35 mm) die size, it would be expected that producers would declare 6 mm. It is uncertain as to how the 8 mm diameter product would affect stove performance. Both test methods use calipers to measure the diameter where the mean value is reported. For durability, the PFI method follows the tumbler method, where the chamber dimensions are 12 inches by 12 inches by 5.5 inches (305 mm by 305 mm by 140 mm). The ISO method uses a similar tumbler that is just slightly smaller (300 mm by 300 mm by 120 mm). I have not found the differences in the box dimensions to cause a significant difference in test results, but in theory, the slightly larger box could suggest a slightly more aggressive test for the PFI method. PFI defines fines as material passing through a oneeighth-inch wire mesh screen (3.175-mm square hole). For ISO 17225-2, fines are defined as material passing through a 3.15-mm round hole screen. Even though the screen dimensions 3.175 and 3.15 seem similar, because the PFI screen has square holes and the ISO screen has round holes, the difference in aperture size is about 30 percent. As such, the PFI test classifies a larger portion of the material as fines making it harder to pass the PFI fines test, despite having a comparable
fines requirement for ISO (both reference a fines limit of 0.5 percent for bagged material). In addition, this causes the durability test result to be approximately 0.7 lower when tested via the PFI method. For ash content, both PFI and ISO use fairly similar temperatures for ashing, 580 to 600 degrees Celsius for PFI, and 550 C for ISO. I have not seen a significant difference between these temperatures, and I consider these two methods to deliver comparable results. The PFI limit for ash is 1 percent, and the ISO 17225-2 limit for ash is 0.7 percent. Regarding length, PFI does not allow more than 1 percent to be longer than 1.5 inches (38.1 mm), while ISO does not allow more than 1 percent to be longer than 40 mm (1.57 inches) and no pellets longer than 45 mm. When comparing 38.1 mm 40 mm, the PFI test is more rigorous, however, the ISO specification that no pellet can be longer than 45 mm can make the ISO specifications more rigorous. For the test method, the PFI test is more thorough, in that the test is performed on a minimum sample size of 2.5 pounds (1,134 grams) while the ISO test is performed on 30 to 40 grams. PFI and ISO use calorimeter methods for determining the heating value, and both referenced tests yield comparable results direct from the instrument. For ISO 17225-2, however, the specified limit for energy content is expressed as the net calorific value, also referred to as lower heating value. For PFI, the heating value is expressed as the gross calorific value, or higher heating value (HHV). These parameters are not directly comparable. ISO provides a limit that the A1 pellets need to be greater than or equal to 4.6 kilowatt-hour per kg (equivalent to 7119 Btu per pound). The PFI Standard requires the producer to disclose the minimum HHV as-received. The ISO method for chlorine references ion chromatography as the primary method, but has language for allowing several direct analysis techniques. PFI lists several accepted methods. All differ in their detection limits and instrumentation required. PFI’s limit for chlorine is 300 milligrams (mg), per kilogram (kg) and the ISO requirement is 200 mg per kg. PFI does not currently have metals listed in its standard, and no test method is specified. ISO has limits for eight metals, and references an ISO test method for analyzing metals. ISO 17225-2 also lists requirements for several additional parameters not included in the PFI standards, including deformation temperature, nitrogen and sulfur. While the PFI and ISO standards seem very similar in many ways, it is important to note the often subtle differences in the specifications and the referenced test methods, as PFI and ISO are not always comparable. Author: Chris Wiberg Manager, Biomass Energy Laboratory 218-428-3583 firstname.lastname@example.org
MARCH/APRIL 2017 | PELLET MILL MAGAZINE 7
« Thermal Talk
Expanded Use of Modern Wood Heating and Improving Air Quality BY ADAM SHERMAN
Over the past few years, a number of states in the northeast U.S. have launched new programs that incentivize the market to switch from oil and propane heating to modern wood heating systems. Increasingly, modern wood heating is recognized as an effective strategy for measurably reducing the use of fossil fuels, while stimulating local economies and creating local markets for low-grade wood. Yet, there remains serious apprehension from state policy and rule makers about increasing wood heating due to concerns about air quality—specifically, particulate matter (PM) emissions. Fear of worsening air quality is a real barrier to expanding the region’s modern wood heating market. But does increasing the use of wood fuels mean our air quality will get worse? To the contrary, we can use more wood and actually improve air quality. Over the past two decades, the State of Upper Austria has nearly doubled its use of wood to cut carbon emissions and reduce its dependence on imported fossil fuels. Today, Upper Austria meets over 40 percent of its heating needs with pellets, chips and cordwood. Yet, during that same time, ambient levels of PM were considerably reduced. How? Well, in addition to offering programs aimed at switching from oil to pellets, they offered programs to replace old, inefficient woodstoves and boilers that are a major source of air pollution. By linking equipment replacement programs with fuel-switching programs, use of wood heating and reduction of PM emissions were able to expand at the same time. How could this be applied in the U.S.? Simple. Based on EPA emissions data, a typical switch of a residential
8 PELLET MILL MAGAZINE | MARCH/APRIL 2017
oil boiler to a wood pellet boiler results in a net increase of just 1 pound of annual PM emissions. By comparison, the typical upgrade from an old, non-EPA certified woodstove to a new certified woodstove will yield a net decrease of nearly 200 pounds of annual PM emissions. In other words, for every 200 homes that switched from oil to pellet boilers, a single woodstove change out would completely offset the increased PM emissions. But that 200 to 1 ratio does not help improve air quality. So, what if the ratio was lowered to 100 to 1? In essence, this ratio would produce a 50 percent reduction in PM emissions. Of course this is an oversimplification, but it does illustrate the opportunity for coordination of state programs for fuel switching and woodstove change outs. As modern wood heating programs are expanded in an effort to make clear and measurable progress toward reducing dependence on imported fossil fuels, lowering carbon emissions, sustaining working forests and stimulating local economies, it is essential that it be done in a thoughtful way that delivers maximum benefits including cleaner air quality. Integrating fuel-switching programs with woodstove change out programs and regulating the ratio of boiler fuel switches to woodstove change outs can yield net air quality benefits over time—an essential element to securing long-term public and political support. Perhaps we can have our cake and eat it, too. Author: Adam Sherman Manager, Biomass Energy Resource Center 802-658-6060 email@example.com
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PEOPLE, PRODUCTS & PARTNERSHIPS
of Kingwood, West Virginia, into the PFI Standards Program. Appalachian Wood Pellets was qualified by accredited auditing agency Timber Products Inspection.
PFI welcomes 20th qualified producer The Pellet Fuels Institute Standards Program has welcomed Fiber Energy Products as the 20th qualified pellet fuels manufacturer, with its facility in Seymour, Missouri. Forest Energy Corp.â€™s Columbia Falls, Oregon, facility also qualified. Both facilities were qualified by accredited auditing agency Timber Products Inspection. As of mid-February, the program had qualified 33 producers.
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Emerson awarded contract to help convert Lynemouth to biomass EPH Lynemouth Power has awarded Emerson a contract to help convert the 44-year-old, coal-fired Lynemouth Power Station to a biomass-fueled power plant. As main automation and electrical contractor, Emerson is responsible for helping the project come online within budget and on schedule. When the conversion is complete in late 2017, the plant, near Newcastle in the U.K., will be fueled by approximately 1.4 million tons of wood waste per year, supplying the national grid with up to 390 MW of electricity. Appalachian Wood Pellets qualified into PFI Standards Program The Pellet Fuels Institute has announced the qualification of pellet fuel manufacturer Appalachian Wood Pellets
10 PELLET MILL MAGAZINE | MARCH/APRIL 2017
MHG Systems announces e-commerce service Finnish IT provider MHG Systems and its spin-off company Wuudis Ltd. have introduced e-commerce service service Wuudis. The Wuudis service provides a way to network and ask for deals from contracting companies. It provides forestry operation services to timber and biomass buyers, making forestry management and timber sales easier and more profitable. For contracting companies, the service allows a direct connection with forest owners. Wuudis has just started piloting of the e-commerce service with contracting companies, timber and biomass buyers and forest owners. During the pilot stage, ending next spring, functionality of the service will be tested and developed based on end-user feedback. Enviva Partners completes Sampson drop-down acquisition Enviva Partners LP has completed the previously announced acquisition of the Sampson plant and associated offtake contracts from Enviva Holdings LPâ€™s joint venture with affiliates of John Hancock Life Insurance Co. The Sampson acquisition includes a wood pellet production plant in Sampson County, North Carolina; a 10-year, 420,000-metric-ton-per-year (MTPY) offtake contract with an affiliate of DONG Energy Thermal Power A/S; a 15-year, 95,000 MTPY offtake contract with the Hancock JV; and matching thirdparty shipping contracts. The Sampson plant is expected to produce approximately 500,000 MTPY of wood pellets in 2017, and to reach its full production capacity of approximately 600,000 MTPY in 2019.
7KLQN6ROXWLRQ PFI qualifies New York, Maine pellet plants The Pellet Fuels Institute has announced the qualification of two more pellet fuels manufacturers to the PFI Standards Program. Ligneticsâ€™ Strong, Maine, facility, which joins four of the companyâ€™s other facilities in the program. New York-based Instantheat Wood Pellets also qualified. Both facilities were qualified by accredited auditing agency Conway & Robison LLC. Bathan AG hires technical service engineer for pellets The Swiss lubricant manufacturer Bathan AG Langenhuysen announced the hiring of Jorg Langenhuysen in January to serve as another technical service engineer for pellets on Bathanâ€™s team, along with Andreas Kasper. Langenhuysen will join the companyâ€™s team of service engineers, bringing more than 15 years of experience with pellet mills. As a former CPM service engineer, he has a broad knowledge of the operational nuances of pelletizing and how to improve operational excellence. Bathan AG builds a strong and flexible team that is willing to get the best performance possible for its global customers. GB Railfreight announces contract with Lynemouth Power GB Railfreight (GBRf) has announced it has signed a rail haulage contract with Lynemouth Power Ltd., following a tender submission. The new service is expected to commence in the second half of 2017. Weekly, GBRf plans to run up to 27 trains, delivering over 37,000 metric tons of biomass. The trains will run between Port of Tyne and Lynemouth Power Station. The contract comes as part of a 10-year investment project for the power station. GBRf previously demonstrated its reliability along
this route, while running coal services to Lynemouth power station when it was owned by RWEST. The last coal train into the station was April 2015.
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Pinnacle, NORDEN sign contract for transport of wood pellets Dampskibsselskabet NORDEN A/S has announced a nine-year contract to transport pellets for Canada-based Pinnacle Renewable Energy Inc. Under the contract, starting in 2018, NORDEN will transport 3.5 million metric tons of wood pellets from Vancouver and Prince Rupert in western Canada to Europe. According to NORDEN, it will make eight shipments per year for Pinnacle using Supramax vessels. Each trip is expected to take approximately 65 days. Enviva launches wood supply tracking system Enviva Holdings LP has publicly released initial data from its groundbreaking Track & Trace program. T&T is a proprietary system that enables Enviva to track every truckload of wood the company procures from the forest back to its source, providing a detailed understanding of the characteristics of the wood the company uses. Enviva is making T&T information available to the public through a set of interactive maps updated periodically on the companyâ€™s website. T&T data is presented in two waysâ€”the Forest Trend Map and the Enviva Wood Supply Map. The first T&T public release includes Enviva wood purchases from January through June 2016. SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Pellet Mill Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to firstname.lastname@example.org. Please include your name and telephone number in all correspondence.
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MARCH/APRIL 2017 | PELLET MILL MAGAZINE 11
Pellet News Evolution Markets brokers residential wood pellet futures trade
PORT PROGRESS: Spencer Group is constructing pellet storage silos at the Port of Tyne for the Lynemouth conversion project. PHOTO: SPENCER GROUP
Spencer Group reaches milestone on Port of Tyne pellet project Three major silos have been erected as the centerpiece of large-scale wood pellet facilities at the Port of Tyne. The structures, each 36 meters (118 feet) tall and 45 meters in diameter, have been built by engineering specialist Spencer Group as part of a contract awarded by Lynemouth Power Ltd. Eventually, the silos will be topped off with “penthouse” structures housing the drive mechanism for the wood pellet conveyor system, taking the full height of the buildings to 45 meters. The facilities will handle up to 1.8 million metric tons of wood pellets annually to support the full conversion of Lynemouth Power Station from coal-burning to biomass. The project will enable wood pellets to be conveyed mechanically to one of the three silos, each capable of storing 25,000 metric tons of material. The pellets will then be discharged from the silos, via two conveying streams, to a rail-loading facility to take the material to Lynemouth Power Station by train. The project is now well on its way to completion, with the facilities due to be fully operational later this year. “The completion of the three silos is a major milestone, as we now enter the final phases of the project,” said Gary Thornton, managing director of Spencer Group.
12 PELLET MILL MAGAZINE | MARCH/APRIL 2017
Evolution Markets announced it has facilitated the first futures trade in residential wood pellets on the Euronext exchange. The trade between Swedish utility Vattenfall and a European energy company was arranged over the counter and executed on Euronext as an Exchange for Swap transaction. The trade was cleared by LCH SA. “Biomass market participants are seeking the means to hedge price risk, especially as it relates to the weather, and the Euronext futures contract offers this opportunity,” said Ben Gibson, vice president of biomass markets for Evolution Markets Ltd. “We are delighted to draw upon our deep knowledge of the biomass industry to arrange the first cleared EFS trade for residential wood pellets.” Recent cold weather has created tight supply chains and rising prices for wood pellets, which are traded internationally and then typically sold to consumers as bulk deliveries or via retail outlets in smaller 15-kilogram bags. The Euronext Residential Wood Pellet Future allows biomass market participants to manage forward price risk of ENplus A1 wood pellets, which are primarily used for domestic heating across Europe. As large utilities seek to add renewable heating products to their portfolios, the Residential Wood Pellet Futures Contract allows them to hedge price movements in this volatile, weather sensitive market.
Pellet News » DONG Energy to stop all use of coal by 2023
SETTING SAIL: Enviva announced in December its wood pellet domes at the Port of Wilmington are operational and the first shipment of pellets to Europe is being loaded. PHOTO: NORTH CAROLINA STATE PORTS AUTHORITY
Enviva begins exports at Port of Wilmington The Enviva wood pellet domes at the Port of Wilmington are operational, and began loading the first export shipment to Europe in December. The Enviva terminal, which includes two storage domes that can hold up to 45,000 metric tons of wood pellets each, is estimated to have a total impact on the local economy of more than $16 million per year, and ship more than 1 million tons of pellets annually. “The Port of Wilmington is a key nexus for global commerce and an economic engine for the state of North Carolina,” said John Keppler, Enviva CEO. “We are excited to be an important part of the port’s ever-increasing volume of trade.” Wood pellets can be delivered to the Port of Wilmington by both truck and rail. The rail link has the capacity to handle approximately 50 percent of the total volume with the remainder of the product arriving by truck.
DONG Energy has decided that by 2023 coal will no longer be used as fuel at the company’s power stations. Since 2006, DONG Energy has reduced its coal consumption by 73 percent, and the company has now decided its power stations will be replacing coal with sustainable biomass. “We’ve decided to take the final step and phase out the use of coal at all our power stations,” said Henrik Poulsen, CEO. “The future belongs to renewable energy sources, and therefore we’re now converting the last of our coal-fired power stations to sustainable biomass.” Since 2002, DONG Energy has used wood pellets and wood chips as fuel at both Herning Power Station and Avedøre Power Station, and over the years, the company has increased the share of biomass at the two power stations. In 2016, both Studstrup Power Station near Aarhus and Avedøre Power Station near Copenhagen were converted to run 100 percent on wood pellets and straw, and during the spring of 2017, Skærbæk Power Station near Fredericia will be able to run 100 percent on wood chips. With DONG Energy’s decision to stop all use of coal by 2023, a future solution must now be prepared for the company’s remaining two coal-fired power stations: Asnæs Power Station and Esbjerg Power Station. Denmark’s total annual emissions of greenhouse gases have been reduced by approximately 25 million metric tons of CO2 from 2006 to 2016, and DONG Energy’s share of the reduction amounts to approximately 53 percent. In 2023, the company will have reduced its annual CO2 emissions by almost 18 million metric tons compared to 2006 levels.
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MARCH/APRIL 2017 | PELLET MILL MAGAZINE 13
TIME IS MONEY: Pellet production facilities are designed to run around the clock. Doing so captures maximum efficiency from the facility, and yields the lowest overall production costs. When market demand is diminished because of unseasonably warm temperatures, producers must maintain some level of production to satisfy material offtake agreements, while limiting the amount of excess inventory they accrue. PHOTO: TIM PORTZ, BBI INTERNATIONAL
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A MIXED BAG As the 2016-’17 heating season winds down, producers across the country once again confirm that, in the pellet business, Old Man Winter determines the haves and the have nots. INTERVIEW BY TIM PORTZ
runching the numbers for the current heating season coming to an end, producers in the Pacific Northwest and Alaska report very strong years. For one producer who participated in a roundtable discussion with Pellet Mill Magazine, the 2016-‘17 heating season was the most successful season since the plant was commissioned. Contrastingly, producers in the Northeast have found themselves in the position of throttling back production, controlling costs and hoping that next year’s heating season brings colder temperatures and better market conditions. Producers who participated in the following discussion include: Chad Schumacher, Superior Pellet Fuels; Stan Elliot, Pacific Coast Pellets; Ken Tucker, Lignetics; and Stephen Faehner, American Wood Fibers. Collective insights from these pellet manufacturers underscore that the success of producers serving residential markets correlates tightly to the intensity and duration of the winter in their respective regions,
Compared to the 2015-‘16 heating season, how were sales this year? Schumacher: 2015 started off as a pretty good year for us, but the second half of the 2015-‘16 season was very bad—January through April were some of our worst months. The 2016-‘17 heating season, from
August through November were some of the worst months, compared to the same period of time in other years, that we’ve ever experienced. Since then, December through March have been very good, more representative of 2014, in terms of sales numbers. Elliott: For us, it was much better, it was really a spectacular year. We operate on a calendar year, so it is always a little more difficult to parse out how the heating season went, because of the big surge that hits before the end of the year, or afterward. We had a fairly slow start to the season in 2016, but basically, from August on, it was outstanding. I should preface that we lost another local producer, a player in the Pacific Northwest. The retailers that producer serviced had to find other sources, so we were the recipient of a couple of really nice accounts. That, certainly, is a specific example of why our year was better than we would have expected. Tucker: We have six facilities that are pretty evenly split, three in the West and three in the East. The three in the East, two of them are in the mid-Atlantic, and the one in Maine would be considered in the Northeast. For our facilities in the West, our sales were great. We started out strong, and it just continued to be strong, which is good because we haven’t had a really good season in the West for the last couple of years. This year, the West was outstanding. However, our facilities in the East are down about as much as the West was up. In
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the East, compared to last year, our sales were down as much as 40 percent, while our sales out here [West] were probably up 40 percent. Faehner: We have two plants here in the East, one is in the mid-Atlantic, and one is more in the Midwest. I think our experience is very similar to what Ken described. Both of those facilities are off in a substantial way, maybe not 40 percent, but close to that. This follows a couple of other soft years in the mid-Atlantic. That said, the last part of this year has kicked in a little bit, but generally, the past few years have been very poor.
As this heating season wraps up, how does your carryover inventory compare to what you had on hand last year at this time? Schumacher: I look at carryover inventory from two perspectives. One, the carryover inventory in my yard. Second, I think about the carryover inventory our customers have. On a residential customer
basis, if they have carryover inventory, it means I’m not going to sell many pellets in August and September. That will not be the case this year. We are below zero, we’re actually 33 below zero right now, and we’re definitely seeing pellets be consumed, and they’re going out the door quickly. From the perspective of carryover inventory in our yard, we are going to be at roughly 20 percent of the inventory we had at the end of last year’s heating season. Some of that is due to changes we made to our production schedules—we significantly decreased our output, and ratcheted back from round-theclock production. That decrease has certainly impacted the amount of product we have in our yard, but we’ve actually had to ramp production back up here in February and March to ensure that we have enough inventory to make it through the next four months. Our operation remains seasonal, and we will not produce anything April through July, but in order to finish out the year, we’ve had to turn things back on and run in February and March. We’ll produce enough to get us through that time frame.
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Elliott: We anticipate having no inventory, or as close to none as you can get. We make 200 tons a day, which are typically gone at the end of the day. As orders slow down, we’ll tie our production to that. We started 2016 in March with maybe 2,000 tons on hand, and we kind of shifted our inventory plan. After we get all of our commitments in late spring, I make the sales projection of what I think we’ll need, and we factor in what we can about the weather and our own optimism. In essence, we take a sales forecast and we add 10 to 15 percent, and then we try to produce 50 percent of that to have on hand by the first of August. We are more than happy to operate through the early fall and winter months, and if the weather doesn’t pan out, or negative market conditions occur, then we simply stop producing—say, in the middle of December. The hope is that we’ll never end up with more than 3,000 to 4,000 tons on the ground on March 1. This year, we made our projections, and the weather and the customer response were better—we should have been more optimistic. That would
have given us a few more opportunities in January and February. To answer the question, we will have no inventory at the conclusion of this heating season.
Ken, with multiple plants can you balance production loads at all? Tucker: Itâ€™s pretty difficult, due to the geographic nature of where the plants are located. The plants in the West can take care of one another, because they are only about 400 miles apart. As far as inventory at our western operations, we have zero at all three locations. In retrospectâ€”and driving these facilities in the rearview mirror is very difficultâ€”we went into this season with what we thought was ample inventory, based on what weâ€™ve needed over the past three years or so. It just didnâ€™t work out this year. Weâ€™ve looked back historically, and it seems that every five or seven years, weâ€™re short, like we are this year. But we run these plants based on historical averages. We will be running harder through the spring and summer to replenish our inventory, which
is good, because that will lower our overall production costs. As far as what is happening in the East, weâ€™ve got inventory on the ground in all three locations, but we are controlling that. The challenge is, controlling that means running fewer hours, which means higher operating costs. In the East, we are in a market where there is a lot of downward pressure on pricing, but at the same time, our costs are going up because weâ€™re spreading them over fewer units. As far as being able to ship into each otherâ€™s markets, thatâ€™s pretty tough. Itâ€™s difficult to ship anything more than 300 or 400 miles and remain competitive, unless itâ€™s an upset situation. We did have that a few years ago, but it didnâ€™t get to that this year. Our costs are going to be up in the East, but down in the West, due to running more. Faehner: Weâ€™re very similar, in that we set our plan according to what weâ€™ve done over the past couple of years, and I appreciate what Stan said about trying to figure in all these variables, and how optimistic one can be in this market. And like Ken said, with multiple plants, there is some sharing
that you can do if the proximity is right, but most of us have figured out that you donâ€™t want to put plants on top of one another. Our inventory is up significantly over the past year, weâ€™re probably 25 percent over where we were last year, and we were carrying inventory that was pretty substantial last year as well. Like Ken mentioned, you have this conundrum, in that you are caught between the units you are producing and the units that you are selling, and the challenges of holding on to that inventory for longer than youâ€™d like. That is a scenario that has affected all of us, these cycles that have hit in different areas at different times. Had we even had a relatively normal winter, this would have been much different. But like Chad mentioned, you have to look at it several ways. You canâ€™t just look at what is in your yard, you have to look at what is in the channel, and what is in the consumersâ€™ hands, and all of those things have created a situation where, here in the East and certainly in the Midwest, there are inventories on the ground, and that is creating some interesting challenges.
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How do producers weather the lean times? Tucker: All of our plants are built to run 24 hours a day, seven days a week. All of us on this call, if we aren’t running seven days a week, we are still trying to run 24s, but it might be five days, it might be four days, or it might be three days. The first thing we look at—because we can’t control the weather, and we can’t control the market—is spending. You confine your spending to what it is going to take to run. Then, we look at what we can do to be the most efficient. A couple of our facilities run at night only right now, because that is the cheapest time to buy electricity— after 9 or 10 p.m. It’s not a very nice way to run a railroad, so to speak, but it does save money. We have to control what we can, tread water, and wait for better times. We’ve done that successfully for about
30 years. I have been in situations where we have taken a couple months off, but that is very painful. Most of us don’t have the opportunity to simply shut down and walk away, because of our raw material commitments. In many instances, our raw material is driving our business. If we shut down for three or four months, we run a real risk of that material not being there when we come back, so we’ve just got to weather it, whether we like it or not, at a reduced level.
What kind of an impact does carryover inventory have on your operations? Is it significant? Faehner: Carryover inventories have a huge impact. We would all like to find ourselves in a market nirvana where our production and sales all line up, but they never do. They never do, or they rarely do. It has a big impact on your cash flows. It has a big
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impact on operating costs. It forces you to do stuff with people that you often don’t want to do. It also challenges you to look at your business in new ways. Tucker: Excess inventory is also code for not being able to run efficiently in the following year. So what that means, just like Stephen said, is that you’ve got to make some tough choices. You might have to adjust staffing. You’ve got to run shorter hours. Often times, energy costs go up, because you are not as efficient as you’d like to be. Your heating costs go up, your electricity costs go up. The first thing you look at is capital expenditure. In a down market, you operate your facility on a maintenance mode only. You are just trying to get through the down cycle, awaiting better times. It’s tough. We don’t just keep running, and I know some folks do, but that ties up a lot of cash. Another challenge with building up inventory is not being in a position where you can protect it from the elements, so you’ve got to manage the risk of spoilage. It’s a big deal, and something that you’ve got to manage and keep from getting away from you. Schumacher: Carrying a lot of inventory really impacts our ability to purchase raw material. This last year, with a high level of carryover inventory, we had to stop purchasing inbound raw material, because our yard was 100 percent full.
Stan, would you categorize this year as the best year you’ve ever had? Elliot: It certainly was, by a great measure. That being said, we’ve got a six-year history only, not a 30-year history like Ken. I would attribute about a third of our success to a local competitor exiting the market, a third to the weather, and another third to the fact that our brand within our market is still growing. I think we’re finally starting to see some traction in the marketplace as a relatively new player.
What is the impact of one strong year, then? Elliott: I think our philosophy has been that, absolutely, you put some steaks in the freezer. I don’t expect that we’ll have another year like the one that we’ve had
this year. So, you do the necessary repairs that maybe you’ve put off in the dry years, and you take advantage of the windfall that you have. But you can’t anticipate that you’ll have the same kind of year the following year, because we’ve all been through it. We all know that as soon as you start planning on a good year, you’re likely to have the worst winter ever.
Steven, how important is the diversity in your operations and product lines to the overall success of your organization? Faehner: I’d have to say that diversity is really a saving grace for us. I am impressed, and somewhat in awe, of folks who are only in the pellet business. I know Ken has been at this a long time, and he has been involved with some other products as well. Other product lines are definitely a major balancer for us, but we really look at our pellet operation independently of our other businesses. It has to stand on its own—we can’t afford to subsidize it with the rest of our businesses. It’s good to have some other things in your arsenal. Additionally, pellets have a number of different uses. Most all of us are doing some kind of bedding product with pellets. We’ve all probably played around in the absorbent world a little bit from time to time, and there are other applications we are trying to explore and develop. We also have to keep in mind the response from folks outside the industry, when they observe the up years like the kind that Stan and Chad experienced this year. I think one of the things our trade associations need to do is give very good information about the markets. We’ve now teamed up with the U.S. Energy Information Agency to generate better production information, and we’re trying to help enlighten people about the realities of our market. This is an industry largely populated by small businesses and entrepreneurs who have been at this for a long time. They have put a lot of sweat equity into this, and have survived the challenging market cycles to be there when the lucrative years come along. There are pellet plants that don’t make it, and there are pellet mills that change hands. As an industry, we have to do a good job at sharing the whole story, and not just pieces of it.
What kind of discipline is required to achieve success in a heating business in this era of unpredictable weather patterns? Tucker: It’s been little bit different for us for the past few years, as we now have a presence on both the east and west coasts. In terms of keeping the bankers happy, most of the time we haven’t had a bust on both coasts in the same year. This year, our western plants are certainly carrying the freight. In the few years prior to that, the East was carrying the freight, and the West was down. So how do we weather that? We make tough decisions. We control costs. We have to exert strong financial discipline, which is what we’ve done for 35 years. There really isn’t a magic formula. Elliott: In this industry, I think it is unique that we have a lot of commitments with plants and raw material suppliers, and we just can’t turn our backs on them. Like
Ken says, we have to be willing to make the hard decisions when we find ourselves in situations where we have to weather a tough year. We are always hoping for higher fossil fuel prices or an incentive program to boost our industry, but in the meantime, it really is a matter of business discipline.
Any final thoughts? Tucker: The things we’re all looking forward to are when fossil fuel prices go up, and we get a string of consistently cold weather. Challenging years like this one will be a distant memory. Author: Tim Portz Executive Editor, Pellet Mill Magazine firstname.lastname@example.org 701-738-4969
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BAGGED AND TAGGED: Italy’s Adriacoke bags Vancouver, British Columbia-based Premium Pellet’s product featuring the Canadian maple leaf. A vast majority of Canadian wood pellets are exported, and this won’t change until its own domestic market for wood pellets matures. PHOTO: GORDON MURRAY, WPAC
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GREEN HEAT in the Great White North Stakeholders discuss how to build out the domestic wood pellet heat market in Canada. BY RON KOTRBA
ast year, Canada produced 2.7 million tons of wood pellets from more than 40 mills, but the cold, northern nation with a reputation of environmental stewardship only consumed about 200,000 tons for its own grand heating needs, with another 100,000 tons used in the domestic power market. The remaining 2.4 million tons of wood pellets produced in 2016 was shipped to Asia and Europe. “Quite frankly, it’s a little embarrassing that we have to export to Europe and Asia when our own power plants and heating systems here use coal, natural gas, oil and propane,” says Gordon Murray, executive director of the Wood Pellet Association of Canada. “It seems crazy that we have a huge demand potential for wood pellets, and if we as a nation did convert, we could use every wood pellet we produce here in Canada. But thus far, we haven’t had that political will.” Murray says Canada consumes 40 million tons of coal a year for power. “If you took just a small percentage of that and converted it to wood pellets, it’d be a boon for our industry,” he says. Most of Canada’s 35 million citizens live near the U.S. border, notes Jan Larsson, a founder and partner of Energy North Corp., a company specializing in biomass heating installations in the harshest of climates—the Northwest
Territories. But a third of Canadians live in smaller, more remote communities with no access to natural gas. Canada’s gas grid covers “pretty much all of western Canada, and runs into the main cities through Ontario and stops at Quebec,” Murray says. “And there’s another gas line from Sable Island off the East Coast of Nova Scotia that runs through main cities like Halifax and Monkton and south to Massachusetts.” All things equal—and without government subsidies—natural gas is by far the cheapest fuel. Murray says if gas is available, it is unlikely wood pellets would gain any appreciable momentum beyond ambiance. “But then there’s all those areas where there’s no natural gas,” he says. Canada’s annual nongas commercial and residential heat and hot water energy consumption surpasses 1 trillion gigajoules, Murray says. “This is equivalent to 71 million tons of wood pellets,” he explains. Jonathan Levesque, vice president of sales and development for New Brunswick-based Groupe Savoie Inc., points out that with this huge potential for wood pellet consumption, and with less than 3 million tons of annual production, no one is pushing for 100 percent conversion. “Right now, if all the pellets produced in Canada were used domestically, that’s clearly not sufficient supply to convert everything,”
Levesque says. “The market is big enough to handle our industry without any issue.” The advantage for wood pellets in Canada, Murray says, is that—just like in the Northeast U.S.—large parts of country are not covered by the natural gas grid. But with that edge comes a downside. “Many of these communities are remote,” he says, “so that will be challenging for obvious reasons.” Instead of natural gas, oil fulfills many of the rural communities’ heating fuel needs. But this may soon change.
For the decade prior to 2015’s federal elections, Canada’s government in Ottawa was run by “more right of center conservatives,” Murray says. “They talked a lot about climate change, but they didn’t do anything about it.” In 2015, Justin Trudeau of the Liberal Party of Canada was elected, and since then, the government has developed the Pan-Canadian Framework on Clean Growth and Climate Change. Agreed to in 2016 by the federal government, provinces and territories, the framework proposes to reduce greenhouse gas emissions by 30 percent from 2005 levels by 2030. The government plans to do this by taxing carbon pollution, which will be priced at $10 per ton in
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« Markets 2018, rising to $50 per ton in 2022. The plan intends to phase out coal power generation by 2030 and eliminate diesel power generation in remote communities. “The Pan-Canadian Framework hasn’t been written into legislation or policy yet, it’s more a declaration of intention,” Murray says. “It’s a step above what the previous federal government was willing to do. We do have to see some concrete policy to mortar that legislation. But people are not going to be willing to pay more for heat just because it’s green— it’s got to make financial sense too.” Larsson says, “I don’t think they know what they’re doing so far. There are no nuts and bolts yet. There will be a scramble to make it happen by 2018, but it will definitely have a big impact on the future of wood pellets here in Canada.” He says big companies that own large complexes they have to heat, such as apartment buildings, would be highly motivated to convert to wood pellets vs. paying a pricy carbon tax. “This is a step in right direction,” Levesque says, “because in the end, if you’re doing the right thing for the environment and then fossil prices go down, it jeopardizes all the progress we’ve made in green energy. Over the past few years, with low oil prices, we saw some impact in Canada. But in Maine, we saw the pellet market collapse because fossil prices are so cheap. People say, ‘Why bother? I just have to order more oil.’ It’s easy. You can try to be nice to the environment, but you need a stick. It’s a nice stick to have regulations that say, ‘If you want to burn dirty fuel, then you have to pay more than the guy next to you who wants to help the environment by using the right fuel.’ Since that announcement, people are saying, ‘Okay, 10 months from now, we’re going to see some action happening.’ The end result is hard to predict, but people realize if they’re going to burn oil, they’ll have to pay more with yet another tax on it.” In February, the Canadian Broadcasting Corp. reported that the federal government is earmarking $50 million in the next budget to help remote, indigenous communities develop renewable projects to decrease their dependence on fossil energy, specifically diesel fuel. “Biomass is going to be the best solution for that,” Murray says. “There will be people who think using solar panels up there in northern Canada, where it’s dark for 20 hours a day in the wintertime, is a good idea, but that doesn’t make sense. And building new hydro dams for small communities will not work, so
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it’s going to be biomass. Importing pellets is an attractive solution there.” Larsson says the $50 million to wean 200 remote Canadian communities off fossil fuel will be “the most important” aspect of the Pan-Canadian Framework to date. “Once we get wind, solar and biomass into those communities, there’ll be a spillover effect.” Larsson knows about spillover effects. It’s what has made the Northwest Territories one of the biggest success stories for wood pellet conversions in Canada.
With slightly more than 40,000 people occupying 442,000 square miles—a land mass equivalent to the combined U.S. states of New Mexico, Texas and Louisiana—the Northwest Territories is about as remote and isolated a region as any. “For bulk pellet deliveries, we have nine delivery trucks servicing five regions,” Larsson says. “That’s not a lot, but last summer the whole province of Ontario only had one.” While Northwest Territories is remote and sparsely populated, the region is well-served with wood pellets through a variety of means: pallets of bags; bulk delivery by trucks, which often traverse ice roads from isolated distribution centers using farm silos; railway cars; and river barges. How could such a remote area develop wood pellet usage that rivals the most developed regions of Europe on a per-capita basis? Larsson explains. “About eight years ago, before people started talking about carbon credits, the government of Northwest Territories said we were spending too much money on home heating fuel installations,” Larsson says. “The risk is high, with ship and truck spills left and right—and oil spills are expensive—so to change this, it was decided to turn over the biggest government installations to biomass. All the big consumers of heating fuel—hospitals, schools, airports, correction centers— were converted to biomass, mostly wood pellets. And in doing this, we would get private companies to establish bulk delivery infrastructure. Once this happened, there was a spillover to commercial and home owners.” Larsson says the government began with the big installations and realized a savings in heating fuel costs every year, so it put those savings in another fund to invest in additional, smaller installations down the road. “It had a snowball effect,” he says, “and it kept rolling.” The second driver was the territorial government’s installment incentive program. “Homes receive up to $5,000, and commercial
MILESTONE INSTALLATION: 10-56kW Maine Energy Systemsâ€™ wood pellet boilers at Trumpeter Camp in Norman Wells, Northwest Territories, in a cascade installation performed by Energy North partner company Green Energy. According to Energy North, this is the largest cascade wood pellet boiler installation in North America.
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PHOTO: ENERGY NORTH CORP.
buildings get between $10,000 and $50,000 in a check if they switch over, depending on whatâ€™s installed,â€? Larsson says. â€œCommunities could also receive up to $50,000. This has been going on for five to six years.â€? Thirdly, Larsson stresses development and utilization of a homegrown industry. â€œThis is very important,â€? he says. â€œIt means we have a homegrown industry of engineering companies that know how to define and propose installations that fit northern use, which is more demanding than whatâ€™s required in the south. I canâ€™t emphasize this enough. Weâ€™ve had some big flops here, in which southern engineering companies won the bid, completed the drawings, and the systems donâ€™t work because we have such extreme winter conditions up here. And then thereâ€™s the maintenance challenges. All this needs to be taken into account. My own company, Energy North Corp., trained and certified 21 installers in the Northwest Territories. Theyâ€™re certified from the factory. There are less hiccups that way.â€? In addition to training certified installers to set up pellet appliances made by manufacturers such as Maine Energy Systems, Larsson says he also lobbies. â€œWe have to change regulations and standards, and update them,â€? he says. â€œMost regulations are based on 1950s technologies.â€? While the U.S. has Underwriters Laboratories, he says Canada has the CSA Group (formerly the Canadian Standards Association), and regulations can be strict. Boilers must be approved for safety and each region needs approval, he says. Levesque buttresses this, saying boiler regulations between the provinces differ. Furthermore, the ASME certification process to approve European boilers for use in North
America is slowing development, Levesque emphasizes. â€œEurope has been doing this for 25 years,â€? he says. â€œThe problem is when you bring that technology here, it has to be suitable for our regulationsâ€”thereâ€™s a big differenceâ€”and the result is additional costs to all appliances.â€? To gain ASME certification in North America, Levesque says the pressure vessel inside boilers must be modified, adding 20 to 35 percent additional costs over models approved for Europe. â€œWe also realized that those people sitting on committees, they have no experience with a homegrown industry for pellet boilers,â€? Larsson says. â€œWe ended up getting two people to sit on the boards. Weâ€™re slowly changing things, but regulations are always behind whatâ€™s going on in the field.â€? Larsson says another area of concern is insurance companies penalizing pellet users. â€œThe insurance industry is really backwards,â€? he says. â€œSome dictate that policyholders canâ€™t use more than 1.5 tons of pellets in bags if theyâ€™re using a stove or a boiler, and if they do, then their home insurance premiums will balloon. As an industry, we advised owners to contact their insurance companies. Those who will listen and take our advice will find another company that doesnâ€™t penalize them for saving money.â€?
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Groupe Savoie Inc. is an innovative company that not only produces more than 90,000 tons of pellets a year, but has been instrumental in developing the domestic market in Atlantic Canada. â€œGroupe Savoie is exporting to Europe,â€? Levesque says, â€œand weâ€™re supplying local markets. Right now, the local market has a bigger share than what we export. But weâ€™re
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MARCH/APRIL 2017 | PELLET MILL MAGAZINE 23
READY FOR DELIVERY: Larsson says the Northwest Territories has nine bulk pellet delivery trucks compared to the much more populated province of Ontario, which he says only has one. PHOTO: ENERGY NORTH CORP.
always trying to supply here and Europe. Customers there want long-term commitments and thatâ€™s hard to do with demand on this side of the ocean up and down. It makes it tricky.â€? Groupe Savoie started pellet production in 2010. â€œFour years ago, we decided to develop the domestic pellet heat market by taking the bull by the horns and doing it ourselves,â€? Levesque says. The company partnered with Compact Appliances and started Biomass Solutions Biomasse to sell and install pellet appliances for small commercial and larger applica-
tions. â€œThe first question the customer had for us was, â€˜Where am I going to get pellets, and how?â€™â€? Groupe Savoie had long since partnered with third parties for transportation, but two years ago it bought â€œa real pellet delivery truck,â€? Levesque says, adding that other pellet trucks in Canada are converted grain trucks, but BSBâ€™s truck was the first in Canada specifically designed to deliver pellets. The companyâ€™s appliance installations over the past four years vary from residen-
tial units to large commercial applicationsâ€” schools, hospitals, apartment buildings, chicken broiler farms, potato warehouses, airports. â€œYou name it,â€? Levesque says. â€œThe reason why we started doing this, instead of waiting for someone else to do it is because weâ€™d probably still be waiting.â€? He says while BSB doesnâ€™t build appliances yet, itâ€™s not off the table for the future. â€œItâ€™s too early to go that step,â€? Levesque says, â€œbut Iâ€™m not saying itâ€™ll never happen.â€? BSB has installed a vast majority of its appliances in New Brunswick, with one installation in Newfoundland and its eye on Quebec and Nova Scotian markets. â€œThe government of New Brunswick is dedicated to retrofits or new installations for wood pellets,â€? Levesque says. â€œIt has a budget every year to convert schools, hospitals, government buildings, or for new installations. A crucial thing to keep in mind is, as we develop this industry, we have to develop distribution with it. Of course, itâ€™s easier for us to have a plant in New Brunswick and to develop customers around us. Sending a truck to drive 400 kilometers to deliver 5 tons is not a business model that will survive for long. We have to be strategic in how we develop the market.â€?
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9LVLW%LRPDVV&RQIHUHQFHFRP7RGD\ 24 PELLET MILL MAGAZINE | MARCH/APRIL 2017
Markets » Levesque says BSB is talking with four other mills in New Brunswick in collaboration. “If they have a pellet customer who wants to buy a boiler, we’ll sell the appliance, and they can use our truck to deliver their pellets,” he says. “After all, it doesn’t make sense to produce here and supply there. Pellet mills need to realize that collaboration is important to grow this industry.” Atlantic Canada is an ideal place to develop the domestic pellet market because, in addition to minimal natural gas grid coverage, the pellet mills are smaller scale and rather evenly distributed. “In my view,” Murray says, “plants scaled at less than 100,000 tons, unless they’re connected a with larger producer in a joint venture, it’s difficult for them to do bulk exports. They have to rely on heat markets because it’s more a local-type business.” In eastern Canada, plants are on average much smaller than those out west, and many are inland, farther from the ports. So even if they are big enough, they may not have good port access. “Those guys want to build the domestic market,” Murray says. “But in many cases, they don’t have the marketing budget. They may have one sales guy doing the best job he can. But to really educate the market, it takes a
combined effort—and more marketing. Getting the message out on behalf of the whole industry.” Murray says Canada’s pellet production will grow by a few hundred thousand tons this year over last, not from new mills, but from recently built plants becoming more efficient. Furthermore, he predicts domestic consumption will increase by 15 percent. “That’ll be attributed to local marketing and organic growth,” he says. “People are slowly becoming more aware, and that will snowball.” The environmental aspect of wood pellet conversions cannot be underestimated, but the economic impact and savings are perhaps the most human of motivations. “The total economic impact of burning what grows around you, rather than sending money to other countries, is important to highlight,” Levesque says. “That total impact is huge.” Larsson says many calls he receives are from people whose existing fossil-fueled appliances are reaching end of life. They don’t want to switch to go green, he says, but to save money. By using wood pellets compared to propane or oil in Northwest Territories, users can save 35 to 45 percent a year, Larsson says. “The main reason for wood pellet use in this
C AT C H T H E
part of Canada is not carbon or going green, hugging trees, but because it makes sense,” he says. “It makes them money, and they have more money to spend on other issues. Up here we have six to nine months of heating bills. It’s a big bill. So here comes a solution that makes sense, provides savings, and on top of that the government can help cover installation costs. It’s a good thing for Mother Nature too, and the younger generation wants to be green, but they don’t want to lose money doing it. You should be a good citizen of this community, but you can’t be stupid about it. It has to make sense.” Author: Ron Kotrba Senior Editor, Pellet Mill Magazine 218-745-8347 email@example.com
The Total U.S. Wood-Burning Appliance Market
(including fireplaces, freestanding stoves, and inserts)
13% Market Share Pellet Appliances*
87% Market Share Briquette-Friendly Appliances*
YO U ’ V E B E E N M I SS I N G
Versati wood and biomass briquettes are quickly becoming Versatile a go g go-to -to biofuel for consumers all over the U.S. They are clean, clea eaan, af affordable, and can be used in any wood-burning device from from fr m fireplaces fireplace and stoves to fire pits. Briquettes will open doors to new fi markets and d growth oppo opportunities for your business, and because they can be made from materials you already process (and then some), it’s simple to get started. Plus, with substantial savings on energy, maintenance, and labor, briquettes are cheaper to make per ton than pellets! What are you waiting for? For more information call 440-779-2747 or visit www.ruf-briquetter.com and catch the market share you’ve been missing! *Source: Hearth, Patio, & Barbecue Association – based on appliance shipments from 1998-2011.
MARCH/APRIL 2017 | PELLET MILL MAGAZINE 25
How Trump Could Save Coal with Wood Pellets Cofiring pellets at coal-fired power stations would help achieve the new administration’s job-creating goals, as well as other positive impacts. BY WILLIAM STRAUSS
Business as Usual
Actual Coal Demand
25% of PC Power Plants Cofiring at a Ratio of 10% Pellets to 90% Coal
800,000,000 Short Tons
With cofiring Stategy
700,000,000 600,000,000 500,000,000 400,000,000 Policy yields a 148 million metric ton-per-year increase in coal demand in 2030 over business as usual.
source: Historical data from EIA; forecast and analysis by FutureMetris
Coal Demand for Power Generation Forecast with Business as Usual and with Cofiring Policy IMAGE 1 1,100,000,000
Business as Usual
Actual Coal Demand
100% of PC Power Plants Cofiring at a Ratio of 10% Pellets to 90% Coal
800,000,000 Short Tons
With cofiring Stategy
700,000,000 600,000,000 500,000,000 400,000,000 Policy yields a 547 million metric ton-per-year increase in coal demand in 2030 over business as usual.
source: Historical data from EIA; forecast and analysis by FutureMetris
Coal Demand for Power Generation Forecast with Business as Usual and with Cofiring Policy IMAGE 2
he use of U.S.-produced wood pellet fuel blended with coal in large utility power stations could sustain coal mining jobs, create tens of thousands of new jobs in another sector that is experiencing significant job losses—the forest products sector—and stimulate billions of dollars of new investment in new U.S. manufacturing plants. By supporting the blending of industrial wood pellet fuel with coal in pulverized coal (PC) power plants, policy will lock in the need for PC power plants, therefore guaranteeing significant demand for coal. This well-proven strategy, which is already in place in many other countries, can provide certainty for the need for U.S.-produced coal for decades, and certainty for U.S. coal mining jobs. This strategy, which the Trump administration could follow, is a win-win-win for the coal and forest products sectors, and the environment. It offers many advantages, including: use of existing power stations; much lower capital cost than new natural gas plants; reliability and no derating; flexible, baseload or on-demand generation; already demonstrated at scale in many locations; lessening of utilities’ dependency on natural gas; lower carbon emissions; creation and sustaining of jobs; and lower sulfur oxide, nitrogen oxide and mercury emissions.
Existing Power Plant Fleet, Shale Gas Revolution
The U.S. still hosts 435 operating coal-fueled power plants larger than 250 megawatts (MW), most of which use pulverized coal (PC) technology— about 97 percent, according to U.S. EIA data. PC power plants are easily modified to use a blend of
CONTRIBUTION: 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).
26 PELLET MILL MAGAZINE | MARCH/APRIL 2017
$7%,20$66&21)(5(1&(&20 coal and industrial wood pellet fuel, the modified plants are just as reliable, and they output the same amount of power as they did when running on 100 percent coal. Coal-fueled power stations still provide over 50 percent of the available large-scale utility electricity generation in the U.S., (excluding stations smaller than 250 MWs). That is changing rapidly, however. Not because of environmental rules, but because of low cost natural gas (NG). Hydraulic fracturing in shale formations has opened up massive reserves, and a flood of NG, resulting in very low prices. Shale gas production has increased more than eightfold in the past eight years, and as a result of current and expected future low-cost NG, the power sector has been shifting from coal to NG by building new, natural gasfueled power plants, and retiring older, coal-fueled power plants. The shift from coal to NG has created very challenging conditions in the coal mining industry. If current trends continue, and there is no reason to believe that they will not, employment in the sector is likely to further decline significantly. Furthermore, the U.S. coal-fired power plant fleet is aging. The median age of PC power plants larger than 250 MWs is 40 yearsâ€”90 percent of larger PC plants are 27 years old or older. As the coal generation fleet ages, given low-cost natural gas, there is little incentive to build new coal plants.
Policy to Change the Trend
Absent policy that influences the markets, the utilities will continue to shift into the low-cost NG that can be used in easyto-build, easy-to-run-and-maintain, combined-cycle NG power plants. The new Trump administration does not seem shy about potentially implementing policies that will influence the markets. The question is: What is the underlying goal of a policy? In respect to the power generation sector, the Obama administrationâ€™s goal of policy was to lower carbon emissions. The Clean Power Plan was created for that purpose, but it is highly unlikely that the CPP will survive the Trump presidency. In the Trump administration, a stated goal is to bring jobs back to the industrial heartland, with specific attention paid to the coal-mining sector. To achieve that goal, the administration will have to implement policy that changes the economics of power generation. There will have to be a reason that utilities will choose to keep the coal plants running. The following is a strategy that will save coal mining jobs and result in more jobs than firing on coal alone. The strategy also yields a much higher job sustaining and creation impact than shifting from coal to natural gas.
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MARCH/APRIL 2017 | PELLET MILL MAGAZINE 27
The total jobs resulting from cofiring a 400-MW coal-fired power plant with a ratio of 10 percent wood pellets creates about 1,757 total jobs, including multiplier effects (the indirect and induced jobs that are a result of the direct jobs,) compared to 100 percent coal, at about 1,686 jobs. The mining, refining, and transportation via rail and truck of coal are more labor-intensive than the extraction and pipelining of NG, which creates about 576 jobs. And there are zero jobs associated with fueling wind or solar power plants. If sustaining and creating jobs is the objective, then a policy that keeps some of the coal generation fleet running will help realize that objective. A policy that supports a cofiring strategy will guarantee a significantly higher demand for coal (and therefore for coal mining jobs) than business as usual. The cohort of PC power stations that do not cofire (business as usual) continue to see their markets taken over IMALPALGroup_PelletMill_2017_Mar-Apr.pdf 1 20/02/2017 by NG generation. But the cohort of 11:38:50 PC
power stations that do cofire remain running and, in the example used in Image 2, continue to demand coal at a rate that is 90 percent of what it would be if the plant ran on only coal. If PC power plants representing 25 percent of total coal demand cofire a blend of 10 percent pellets and 90 percent coal, coal demand in 2030 is estimated to be 148 million tons per year higher than a circumstance under which there are no policy incentives for keeping the coal plants running. A higher proportion would result in an even higher demand for coal in 2030, versus business as usual. Image 2 shows a scenario in which 100 percent of the PC power plants cofire. That scenario is not realistic for several reasons, but is shown to illustrate the impact that a cofiring policy can have on the coal demand. Of course, the policy could simply focus on a scheme for keeping coal power plants running on 100 percent coal. But there are two important reasons that the
Trump administration should consider a cofiring scheme. The first is more jobs, and significant manufacturing investment. Most PC coal plants and many of the coal mines are in states that also have significant forest products industries. The steady decline in the pulp and paper sector is closing pulp mills across the U.S., and with each closure, thousands of mill jobs and logging and transportation jobs are lost. Industrial pellet fuel can be made from the same feedstock that goes into pulp and paper mills. Every 500,000-ton-per-year (TPY) pellet manufacturing plant sustains about 800 direct, indirect and induced jobs across the forest projects supply chain. A policy that supports cofiring supports jobs in two large and economically important sectors: coal and forest products. In the Image 1 scenario, the U.S. would need to produce about 20 million tons per year of industrial wood pellets to provide the 10 percent blend in those power stations. This would be a significant long-term demand
that would generate billions of dollars of investment in new production capacity. Each 500,000 TPY fuel manufacturing plant costs, on average, about $125 million to build. The actual percentage of the PC power fleet that cofire will be based on an analysis of the age of the power stations, and the proximity to potential pellet fuel supply. Utilities would like to avoid stranding newer coal-fueled generating assets, and this strategy provides a pathway to keeping the newer plants operating over their useful life, while sustaining and creating needed jobs in two important sectors. The second reason a Trump administration should consider a cofiring scheme is lower CO2 emissions. Cofiring industrial wood pellet fuel with coal lowers carbon emissions versus 100 percent coal. While it would appear that the Trump administration will not make carbon emissions mitigation the foundation of any policy, in the case of a cofiring strategy, CO2 emis-
sions reduction is a byproduct of a job protection, job creation and manufacturing growth policy. Thus, the administration can take credit for advancing the U.S.â€™s role in lowering greenhouse gas emissions as a corollary to the actual policy objective.
For a policy that compensates the generators about $0.007 per kilowatt-hour, the Trump administration could save tens of thousands of coal mining jobs and create tens of thousands of new jobs across the industrial pellet supply chain. Growth of a U.S. cofiring market would spur billions of dollars of investment in new industrial pellet manufacturing plants in the heartland of the US. And, as a byproduct, the U.S. lowers the carbon impact of the coal generation sector. Using pellet fuel in PC power plants around the world consumed about 14 million metric tons of pellets in 2016. Most nations import their pellet fuel (the major-
ity is imported from the U.S. and Canada) as a part of their carbon reduction policies. It is a proven, low-cost solution for that purpose. For the pellet fuel producer nations, of which the U.S. is the leader, it is an important major industry that supports tens of thousands of jobs. The new administration could have a major win-win with the coal and forest products sectors, if it crafts a policy that allows the blending of pellet fuel with coal in some our nationâ€™s coal-fired generation fleet, a fleet that currently is, and could continue to be, the backbone of a secure and reliable power grid. Author: William Strauss President, FutureMetrics firstname.lastname@example.org 207 824-6702
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The Foreign & Domestic Heating Markets issue