INSIDE: RESPONSE TACTICS DEVELOPED FOR WOOD PELLET SILO FIRES
Fall 2011
Export Enhancement U.S. Prepares to Meet Growing Global Wood Pellet Demand Page 12
Plus:
Canada Positioned to Increase its Market Share Page 38
How Pellet Exports Could Impact U.S. Trade Deficit Page 30
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Contents »
FALL 2011 | VOLUME 1 | ISSUE 2
FEATURES
12
EXPORTS
18
SAFETY
24
USE
30
POLICY
34
BUSINESS
38
CANADA
42
INTERNATIONAL
DEPARTMENTS
Exporting Expertise
Inaugural North American Pellet Export Conference zeroes in on the growth potential for exports to the European Union and Asia. By Lisa Gibson
04 EDITOR’S NOTE
Pellet Industry Gears Up for Rising Demand By Rona Johnson
06 INDUSTRY EVENTS 07 STANDARDS STEWARD
Two Ships Passing in the Night By John Crouch
08 TESTING GROUNDS The ‘End of an Era’ By Chris Wiberg
09 MAINE-LY PELLETS
Maine Removes a Roadblock to Pellet Heating Systems By Bill Bell
10 INDUSTRIAL INSIGHT
The Case for Importing Sustainable Industrial Wood Pellets from the US By M. Seth Ginther
11 BUSINESS BRIEFS
CONTRIBUTIONS 46 PROCEDURE Silo Fires Require Specific Response Tactics
As the wood pellet industry grows, it is becoming imperative for those involved to understand the nature of pellet silo fires and learn the appropriate response tactics. By Henry Persson
For Safety’s Sake
The Wood Pellet Association of Canada has enlisted the help of the British Columbia Forest Safety Council and Aon to lower insurance rates for pellet mills. By Lisa Gibson
Conference Addresses Burning Questions
The Pellet Fuels Institute Annual Conference covered everything from pellet mill safety and plant optimization to government affairs and quality standards. By Lisa Gibson
Trade Talk
The U.S. has recognized wood pellets as an export growth sector and has tasked various government agencies to gather information and produce reports about export opportunities. By Matt Soberg
A Pellet Maker’s Successes, Solutions and Challenges The owners of Equustock Virginia Inc. credit their success with their ability to serve a variety of markets in the U.S. and overseas. By Debbie Sniderman
Positioned for Growth
With its 981 million acres of forest, Canada is a leader in the wood pellet industry, producing 1.5 million metric tons in 2010. By Matt Soberg
Big in the Baltics
Estonia, Latvia and Lithuania are quietly becoming major supply hubs for wood pellets. By Peter Taberner
FALL 2011 | PELLET MILL MAGAZINE 3
« Editor’s Note
Pellet Industry Gears Up for Rising Demand
Rona Johnson
Editor rjohnson@bbiinternational.com
This is the second edition of Pellet Mill Magazine and, as usual, the editors had no trouble coming up with content. A new addition to this issue is a regular column (see page 10) from Seth Ginther, executive director of the U.S. Industrial Pellet Association. Although we cover all aspects of the pellet industry, all eyes are currently on global demand and how that demand is going to be filled. Word on the street is that the global demand for wood pellets, which is currently estimated at 10 million metric tons, could increase sixfold by 2020, with much of that growth anticipated in the European Union. The U.K. has several biomass power plant projects in development and there are many coal-to-biomass conversions taking place, including one that’s being billed as the largest conversion of its kind in the world. The Rodenhuize Biomass Power Station in Belgium now produces 180 megawatts of biomass-based power, enough to run 320,000 households for a year. The plant is owned by Electrabel, a subsidiary of GDF Suez, and Ackermans & van Haaren. This growth potential has prompted Anglo-Dutch power and gas exchange APX-Endex and the port of Rotterdam, Europe’s biggest port, to start a biomass exchange. The wood pellet futures contracts are listed on Trayport’s Global Vision Trading Gateway. Asia is also starting to get into the market, with South Korea calling for a 30 percent reduction in greenhouse gases, which has some estimating that the country’s wood pellet demand could increase from 0 to 5 million tons in the next 10 years. With new demand expected in the European Union and in Asia, there are plenty of plants being developed all over the world. The latest announcement came out of Brazil, where Suzano Energia Renovavel, a subsidiary of Brazilian pulp and paper company Suzano Papel e Celulose, plans to build two pellet mills with total production capacity of 2 million tons per year. Projects have also been announced in the Southeast U.S., and you can bet Canada is preparing for industry growth as well. In the U.S., the USDA recently announced payments to more than 160 bioenergy producers in 41 states, which included several pellet mills (Rocky Mountain Pellet Co. Inc., Appling County Pellets LLC, Rocky Canyon Pellet Co. LLC, Southern Kentucky Pellet Mill Inc., Enviva LP, Corinth Wood Pellets LLC, Geneva Wood Fuels LLC, Maine Woods Pellet Co. LLC, New England Wood Pellet LLC and others.) The individual grants to pellet mills ranged from $1,193.26 to $240,837.45. Of course, there is room for caution here as many countries are experiencing budget shortfalls, which could lead to reductions in support for renewable energy. Let’s hope world leaders understand the economic benefits and job creation opportunities involved in all aspects of pellet production before they start the budget cutting process.
For more news, information and perspective, visit www.biomassmagazine.com/pellet-mill-magazine
Associate Editors
Lisa Gibson
Associate Editor Lisa Gibson attended the Pellet Fuels Institute Annual Conference in July and the North American Biomass Pellet Export Conference in September and writes in detail about both of them in this issue. She also reports on a collaboration between the British Columbia Forest Safety Council and the Wood Pellet Association of Canada to improve safety conditions at pellet mills.
4 PELLET MILL MAGAZINE | FALL 2011
Matt Soberg
Associate Editor Matt Soberg writes about the Canadian pellet industry, how much it has expanded and what it is doing to prepare for increased global demand. Soberg also delved into the U.S. National Export Initiative to see what, if anything, the federal government has done or is doing to increase U.S. pellet exports since they have been identified as one of the most promising export markets.
Editorial EDITOR Rona Johnson rjohnson@bbiinternational.com ASSOCIATE EDITORS Anna Austin aaustin@bbiinternational.com Lisa Gibson lgibson@bbiinternational.com Matt Soberg msoberg@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 Kelly Kilgore kkilgore@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.
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COPYRIGHT © 2011 by BBI International
FALL 2011 | PELLET MILL MAGAZINE 5
« Industry Events Southeast Biomass Conference & Trade Show NOVEMBER 1-3, 2011
Hyatt Regency Atlanta Atlanta, Georgia With an exclusive focus on biomass utilization in the Southeast —from the Virginias to the Gulf Coast—the Southeast Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers. (866) 746-8385 www.biomassconference.com/southeast
Pacific West Biomass Conference & Trade Show JANUARY 16-18, 2012
Biomass Event Hotspot: Atlanta in November
11/01
If you go to one event in the Southeast this year, make it BBI International’s Southeast Biomass Conference & Trade Show, produced jointly by Biomass Power & Thermal and Biorefining Magazine. The Southeast Biomass Conference & Trade Show returns to Atlanta this year and will be held Nov. 1-3 at the Hyatt Regency Atlanta. The conference, one of three distinct regional offshoots of the International Biomass Conference & Expo, will feature more than 60 speakers in four tracks: • Feedstocks • Biomass power and thermal • Biorefining • Biomass project development The Southeast Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power and advanced biofuels, with: • Waste generators • Aggregators • Growers • Municipal leaders • Utility executives • Technology providers • Equipment manufacturers • Investors • Policy makers The Southeast Biomass Conference & Trade Show is designed to help biomass industry stakeholders, identify and evaluate solutions that fit their operations. It’s time to improve your operational efficiencies and tap into the revenue generating potential of sustainable biomass resources in the region. Register today at www.biomassconference.com/southeast. 6 PELLET MILL MAGAZINE | FALL 2011
San Francisco Marriott Marquis San Francisco, California With an exclusive focus on biomass utilization in California, Oregon, Washington, Idaho and Nevada, the Pacific West Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers. (866) 746-8385 www.biomassconference.com/pacificwest
California Biodiesel & Renewable Diesel Conference JANUARY 16, 2012
San Francisco Marriott Marquis San Francisco, California Presented by the California Biodiesel Alliance and Biodiesel Magazine, CBA will kick off its first statewide conference on Jan.16 in downtown San Francisco. This one-day event, with evening reception, will take place as part of BBI International's Pacific West Biomass Conference & Trade Show to be held Jan. 16-18 at the Marriott Marquis. Details are being developed now and will be posted as they become available. (866) 746-8385 www.biomassconference.com/pacificwest
International Biomass Conference & Expo APRIL 16-19, 2012
Colorado Convention Center Denver, Colorado Organized by BBI International and coproduced by Biomass Power & Thermal and Biorefining 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. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries. Presentation ideas are now being accepted online. (866) 746-8385 www.biomassconference.com
Standards Steward »
Two Ships Passing in the Night BY JOHN CROUCH
Ships that pass in the night, and speak each other in passing, only a signal shown, and a distant voice in the darkness; So on the ocean of life, we pass and speak one another, only a look and a voice, then darkness again and a silence.—Henry Wadsworth Longfellow Somewhere out in the Atlantic Ocean, two ships pass in the night. Both loaded with energy, bound to a distant port. Both voyages a result of government policies and incentives designed to encourage the energy market in a particular direction. But, the sad news is that only one of these cargoes is sustainable, and it is not going to my country, but is leaving my country. The cargo bound for my country, is not from my friends, but may, in some cases, be from the country of my sometimes and future enemies. The cargo from my country, and my friends in Canada, is full of renewable wood pellets, but it is bound for Europe and the U.K. The cargo bound to my country, especially to the Northeast of my country, and to Eastern Canada, is crude oil. One cargo represents the energy future, and one, the energy past. One represents a sustainable future, and the other does not. Our two countries in North America are just not confronting the obvious, which is that for heating oil (and propane), one of the characteristics
that make them so useful—the ability to transport them long distances, and store them for long periods—is also their long-term vulnerability. In the case of heating oil, we are dealing with a product similar to diesel fuel. Known as a “midlevel” distillate, it comes from the same portion of the refinery column as diesel. Every day, thousands of new diesel-burning trucks roll off assembly lines all over the world. Households, schools and businesses that burn fuel oil for heat are competing with every trucker in the world for this fuel. Who do you think will ultimately win? At some point in the future, our children will be incredulous that we used this transport fuel for heat. “Didn’t you have anything else to burn,” they’ll ask? Of course the answer is, “yes, actually, we did have something else to burn that is reasonably stable, easy to store, burn and transport, but we shipped most of it, wood pellets, to Europe.” The bottom line is that the ships of oil will not always come our way, at least without changes in the cost structure. In the case of natural gas, we are already seeing some of the license applications for imported liquid natural gas terminals of the past decade, being altered and resubmitted as export terminals. There may even be a few propane cargoes headed “outbound” in special circumstances and times of the year. Certainly the idea that we in the U.S. and Canada can
use any fuel for heating we wish, and set the price of that fuel on the world market, is either dead, or will soon be. The two key fossil fuels that heat most of North America not connected to natural gas, are increasingly part of a tightening global market, which must inevitably impact all other sources of thermal energy, including biomass. I am indebted to Charlie Niebling of New England Wood Pellet for the image of the two ships passing in the night. He used this during the exporting session at the Pellet Fuels Institute Annual Conference in July, and it’s stuck with me ever since. When I think of my children’s future, I can only hope that someday North America will come to its senses, and stop encouraging the use of oil for heat, and instead, use wood pellets. It will be interesting how many dollars we send to the Middle East and Venezuela before we come to our senses. Someday, we will take the right path toward sustainable, biomass, pellet heat, and as a result, the ships will no longer pass in the night. Author: John Crouch Director of Public Affairs Pellet Fuels Institute crouch@pelletheat.org www.pelletheat.org
FALL 2011 | PELLET MILL MAGAZINE 7
« Testing Grounds
The ‘End of an Era’ BY CHIS WIBERG
As I write this column, the Pellet Fuels Institute and the American Lumber Standards Committee are nearing completion of an agreement that will dramatically improve the quality of pelletized fuels throughout the United States. This agreement is the direct result of nearly seven years of hard work carried on the backs of dozens of volunteers, thousands of man-hours, and ultimately the heavy hand of the U.S. EPA. During this period, the European Union developed numerous standards for solid biofuels that are now being converted to ISO standards for use around the world and the European Pellet Council has developed and implemented the EN plus certification scheme on an international basis. Finally, many of the largest European wood pellet buyers have come together to develop a standard specification for industrial wood pellets. This process is also nearing completion. We are nearing the end of an era where consumers have had to question “what is in the bag” and where producers take great risk selling into markets with requirements that may be poorly defined, but carry great penalties for noncompliance. I, personally, take great pride in having been part of making this transition a reality. At times, these efforts have been highly conten-
8 PELLET MILL MAGAZINE | FALL 2011
tious and, believe me, supporting standardization hasn’t always been a good political position to be in. However, as these initiatives have progressed, I have witnessed a large shift in the attitudes of many people from vehement rejection to acceptance and even ultimately embracing standardization. This transition has been most apparent when I speak at conferences and is manifested in the tone of the audience. Years ago, other standards developers and I would kid each other over who gets to wear the bull’s eye this time, when deliberating who would give the next standards update at a conference. By contrast, in the past year I often find myself on the podium defending why the standards aren’t stricter. I consider this a welcome transition and the end of an era where we need to convince people that standardization is a necessity. This is also the end of an era for me personally. As many of you know I have been a long-time figure at Twin Ports Testing in Superior, Wis. After 12 years of service, I have moved on to the next phase of my professional career. I am now the manager of Biomass Energy Laboratory, which is a joint venture between Timber Products Inspection and Control Union USA. I will also be managing all biomass energy services for Timber Prod-
ucts Inspection including auditing and quality management consulting services. The purpose for my transition is to develop a model for the industry that provides biomass fuel producers and users with all of the services they need to comply with any of these standards and/or certification systems, both domestically and internationally. This is being developed under the umbrellas of BEL, Timber Products Inspection and Control Union USA and includes third-party testing, inspection, auditing, quality management consulting, QA/QC sampling, logistics and sustainability. I will still maintain my role as co-chair of the PFI Standards Committee as well as my participation on the U.S. Technical Advisory Group for ISO TC 238 and other various initiatives I have been part of in the past. I have enjoyed being part of the development of this industry and look forward to continuing my involvement long into the future. I, for one, am ready for the end of an era and the beginning of a new one. Author: Chis Wiberg Manager, Biomass Energy Laboratory (218) 428-3583 cwiberg@tpinspection.com
Maine-ly Pellets »
Maine Removes a Roadblock to Pellet Heating Systems BY BILL BELL
The recent annual meeting of our Maine Pellet Fuels Association brought forth unanimity on an important point: the economic success of the four pellet manufacturing firms in our state is to considerable extent dependent upon the success of the firms installing pellet heating equipment. Our manufacturing firms are therefore fully behind association efforts to open more doors for installers One effort has already met with significant success, and is of national significance. As of late September, Maine law now prohibits the state Commissioner of Public Safety from having any rule which would disallow “the connection of a solid-fuel burning appliance to a chimney flue to which another appliance burning oil or solid fuel is connected.” In other words, it is now, in Maine, OK to have a pellet stove or central heating system hooked into the same chimney flue as an oil burner. The earlier law prohibiting dual connections exists in many states, and is based upon a model law set forth in the mid-1990s by the National Fire Protection Association. Since that time, the technology surrounding heating systems has changed markedly, particularly with regard to high-efficiency pellet heating systems. Maine’s fire marshal, while opposing the change in Maine law, was unable to come up with any instance in which an accident could be attributed to dual connections
involving pellet heat. The new law, of course, contains safeguards, such as assurance of sufficient draft, a carbon monoxide detector in or near any bedroom, and—most important to our industry—approval of pellet heating appliances by Underwriter Laboratories Inc. or a similar organization, and installation according to manufacturers standards. This means that manufacturers will need to modify their current prohibitions, set forth in their manuals in accordance with the National Fire Protection Association model, against installation into an existing oil burner flue system. Some manufacturers are now doing so, in view of Maine’s new law, and others will no doubt follow suit if requested by the heating firms installing their equipment. In many instances, this change in Maine law considerably reduces the cost of installing a pellet heating system. Another barrier to conversions is, of course, the huge question of financing. Many states have enacted a Property Assessed Clean Energy or PACE legislation approach, whereby the financing takes place through the municipality and is rolled into the homeowner’s property tax bill. However, this mechanism has come up against many roadblocks, with lenders and regulators having all-too-vivid memories of the 2008 meltdown in homeowner financing instruments. Our Maine Pellet Fuels Association is working to find ways around the roadblocks.
A third roadblock to residential and small commercial conversions from oil to pellet heat is the pellet distribution system. The distribution dilemma is classic to the introduction of many new technologies. Bulk delivery is clearly the cost-efficient system of the future, but how to get to that point? It’s our understanding that in Upper Austria—our best model— pellet heat was first installed in large facilities taking bulk deliveries, so that a distribution network was readily established to serve homeowners as well. Not so in Maine, although we are being helped by having a number of public buildings converted thanks to $13 million in federal Recovery Act financing provided through the Maine Forest Service. We’re looking to new delivery and pellet storage technologies to help solve distribution questions. And who has a superb system, with the confidence of homeowners, and trucks going into every neighborhood? Our friends selling home heating oil, of course, and we are welcoming increased collaboration with those oil dealers now thinking of their firms as fuel suppliers, delivering pellets as well. Author: Bill Bell Executive Director Maine Pellet Fuels Association feedalliance@gwi.net
FALL 2011 | PELLET MILL MAGAZINE 9
ÂŤ Industrial Insight
The Case for Importing Sustainable Industrial Wood Pellets from the US BY M. SETH GINTHER
Firing industrial wood pellets in traditional coal-fired power plants in Europe is an environmentally sound means of reducing the amount of greenhouse gases produced by electricity generation. Wood pellets are also economical, efficient and available on demand, meaning they can be used to generate dispatchable, firm-capacity power. Empirical analyses of the carbon footprint of wood pellets manufactured from woody biomass harvested and processed in the United States and transported to Europe, including all leakage within the supply chain, manufacturing operations and shipping logistics, demonstrate that electricity produced from wood pellets can reduce greenhouse gas emissions by approximately 80 percent when compared to electricity produced from coal. Most recently, a study published by the University of Washington comparing biomass power to coal power shows biomass emits just 4 percent of the carbon dioxide emitted by coal. Many pellet manufacturing facilities are located in the Southeastern United States. This region is advantaged in a number of ways, most notably the density of raw materials and the well-established forest products and timber industry that, for more than 100 years, has developed this sustainable and rich wood basket. Wood fiber is abundant in this region, and the growth-to-drain ratio (the amount of new tree growth compared to the
10 PELLET MILL MAGAZINE | FALL 2011
amount removed for use in paper mills, sawmills, biomass energy, etc.) has remained greater than one. Data from the USDA Forest Service confirms the quantity of timber growing in the Southeast United States has roughly doubled over the past 60 years, and this trend continues today. A key driver of this growth has been the development of the robust system of sustainable forestry practices applied throughout the region. Sustainability is not a new concept for U.S. foresters; it is a method of growing and managing timber and fiber resources developed over decades. This ensures that more U.S. forests will exist tomorrow than do today, and that careful and precise silviculture practices preserve and protect the environment, including water and air quality. This can only be done when a commercial outlet exists for healthy forest products to ensure wildlife and biodiversity, and to help reduce the risk of wildfire, disease and infestation. The use of woody biomass for energy creates an economic value that secures the continued existence of forests, without which the likelihood of conversion of such timberland to nonforest use would be high. Many U.S. pellet facilities will be Green Gold Label certified to ensure the sustainability of the biomass sourcing. In addition to GGL, there are several other wellrespected groups that work to protect, preserve and ensure the health
and future of the forest, including the Sustainable Forestry Initiative, Forest Stewardship Council and Programme for the Endorsement of Forest Certification. Industrial wood pellet manufacturers embrace these stringent third-party standards and certifications, which are achieved through rigorous audit processes and build upon existing U.S. forestry sustainability initiatives such as those in their own operations and supply chains. As the conversation about energy and the environment grows alongside demand for industrial wood pellets, we must consider the facts about the role these environmentally beneficial fuels play in forest health and diversity, in addition to the substantial improvements in the greenhouse gas emissions profile of energy generation. The United States Industrial Pellet Association was formed in early 2011 to address, among other topics, the importance of environmental sustainability of our industry from forest to furnace. We understand the fundamental need to ensure the continued healthy development of our forests as an integral part of our environment and a way to help meet our current and future energy needs. Author: M. Seth Ginther Executive Director U.S. Industrial Pellet Association (804) 771-9540 www.theusipa.org
Business Briefs
PEOPLE, PRODUCTS & PARTNERSHIPS CPM and Pellet Technology form strategic alliance CPM and Pellet Technology LLC, have formed a strategic alliance to help bring sustainable, renewable energy to electric utilities and biofuels producers. Pellet Technology has developed a complete supply chain solution for biomass users that includes feedstock supply contracting, harvest management and patent-pending production technology to turn corn stover into PowerPellets. Under the agreement, the two companies will work together to market Pellet Technology’s biomass engineering processes along with CPM’s hammermills and pellet mills. Together, they will implement a “field-to-fuel” program that provides electric utilities and biofuels producers with an affordable and reliable source of renewable energy.
Jennifer Hedrick appointed PFI executive director The Pellet Fuels Institute board of directors has appointed Jennifer Hedrick as its executive director. Hedrick's appointment marks the first time in its 26-year history that PFI, a trade association dedicated to advancing Jennifer Hedrick has the use of densified been appointed to biomass fuel, will have serve as the firstever full-time PFI a full-time executive executive director. director. Hedrick has been with PFI since 2008, serving first as the association manager before being appointed acting executive director in July 2011. As association manager, Hedrick was the point person for PFI's standards program, as well as the PFI annual conference. She played a key role in the association's overall management, strategic development, and membership outreach. Prior to joining PFI, Hedrick worked for a public policy initiative at Georgetown University Law Center that focused on workplace flexibility.
CBI introduces new equipment
Buhler acquires pelleting die manufacturer Tijdhof The Buhler Technology Group acquired Tijdhof Persmatrijzen with headquarters in Oldenzaal, Netherlands. This manufacturer of dies and rollers for feed pellet mills will be integrated in the Feed & Biomass business unit. Tijdhof Persmatrijzen, which was set up 30 years ago, specializes in the manufacture of pelleting dies and rollers, which it supplies to the animal feed and biomass industries worldwide. The management and roughly 20 employees will be retained in the company, which will be continued under the Buhler Tijdhof product brand. The acquisition allows Buhler to supply its customers with all the wear and spare parts of a pellet mill from its own single in-house source, including consulting services.
PHOTO: CBI
Timber Creek Farms to Partner with CellMark Energy in Brazil Timber Creek Farms Industrial has signed a marketing agreement with CellMark Energy (division of CellMark AB, Gothenburg, Sweden) for 100 percent of the output of its upcoming wood pellet manufacturing facility in Pien, Brazil. CellMark Energy will handle the sales and marketing functions for TCF as well as provide all logistic solutions for the company. Pien is currently the site of intense activity as TCF finalizes the construction and installation of pellet equipment that will transform wood resources from the Paranagua region into renewable fuel. The company expects shipments at the 90,000-ton facility to begin in the first quarter of 2012. CellMark Energy is finalizing sales agreements with major European utilities.
HEAVY METAL: CBI's new chipper and flail were designed to maximize production and lower operating costs.
Adding to its line of portable grinders and chippers, Continental Biomass Industries Inc. has introduced the Magnum Force Disc Chipper 754 and the Flail 604 debarker/ delimber. This integrated, high-capacity chipping system was designed specifically for logging contractors who want to maximize throughput, minimize downtime, increase production and lower operating costs. The Magnum Force Flail 604 is a four-roll flail design that has been engineered for highvolume debarking while reducing fiber loss, chain wear, and fuel consumption. The heavy-duty units were designed to work together as one in the field and built to be legally transportable.
Viridis begins shipping pellets to Europe Viridis Energy Inc. has begun shipping wood pellets to Italy via an off-take agreement arranged through its strategic alliance with Abellon Clean Energy Ltd. that was signed recently. The agreement marks Viridis’ second major off-take agreement in Europe. In addition, the Viridis/Abellon joint alliance is scheduled to begin shipping wood pellets to Switzerland. Abellon Clean Energy is an integrated sustainable energy solutions provider based in Ahmedabad, India, with operations in the U.S., Canada, Europe, U.K., India and Africa. Viridis commenced its collaboration with Abellon in August to identify and secure supply agreements for the company’s existing production, partner on the proposed acquisition of Monte Lake property and the development of a production facility, and to provide a strategic investment in Viridis by Abellon.
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.
FALL 2011 | PELLET MILL MAGAZINE 11
« Exports
12 PELLET MILL MAGAZINE | FALL 2011
Exports »
Exporting Expertise September’s North American Biomass Pellet Export Conference offered valuable insight into the global pellet industry and connected buyers and sellers. BY LISA GIBSON “Come on in. The water’s fine.” The phrase was a warm welcome to prospective wood pellet exporters, uttered by Harold Arnold, president and CEO of Georgia-based pellet producer and exporter Fram Renewable Fuels, at the inaugural North American Biomass Pellet Export Conference in New Orleans. “I think it’s a great business to be in,” he added. The event, held Sept. 8-9, was a learning tool for stakeholders in many aspects of the pellet industry, from mill building and raw material supply, to production, quality standards and sales. Focused for the most part on exporting to European industrial pellet users, the conference also offered insight into Asia’s emerging pellet market, as well as predictions from industry experts about how and where the markets will develop in the future. Relevant topics and speakers chosen by the U.S. Industrial Pellet Association, the event’s organizer, helped paint a clear picture of the global market opportunities, challenges and facets of the pellet business.
Supply Side “I see you as the supply side,” Henry Pease, in biofuels development for RWE Supply & Trading in Geneva, told the crowd of about 200 people during the event’s first panel, a roundtable of European utilities and other experts. Utility representatives such as Pease offered an invaluable take on what they and their industry expect from producers and in product quality. RWE has a multitude of power plants using biomass in Europe, and Pease said the continent sees biomass power generation as a low-cost, reliable and 24/7 renewable energy source. “We like it in Europe because the price is right,” he said, adding that baseload power is crucial. “We see a huge role for [all renewables] but biomass is very important.” Speaking from the end-user’s perspective, Pease said Europe’s utilities will buy what the U.S. producers manufacture. “We can commit to buying what you supply,” he said. “But we can’t trust you’ll make it,” he said later, drawing laughter from the crowd. The export conference wouldn’t have been possible a year earlier, Pease said, because of the lack of a solid pellet industry infrastructure in the U.S. Today, however, a number of pellet companies are working the market, he added. “The U.S. is on the map in a way that it wasn’t before.” FALL 2011 | PELLET MILL MAGAZINE 13
And wood products group The Westervelt Co. is adding itself to that map, with a business plan to produce 1 million tons of pellets from existing byproducts of forestry thinning and harvesting operations on its 520,000 plus acres, as well as residues from saw and timber mills. “Pellets are an obvious choice for us,” said Mike Williams, director of strategy for Westervelt. The company plans to sell its pellets to European utilities. And it isn’t alone. Biomass is expected to play a sizeable role in the tremendous renewable energy growth anticipated in Europe, according to Nicolas Denis, partner with consulting firm McKinsey & Co. “Most but not all European regions theoretically have sufficient biomass to fulfill their mandates domestically,” he said, adding that it is unlikely much of that biomass can be successfully mobilized. North America and Brazil are best situated to supply Europe’s growing demand, he said. Not surprisingly, utility Danish Oil and Natural Gas (DONG) Energy had a presence at the show, as 60 percent of all energy consumption last year in Denmark came from biomass. But the demand there is still growing and resources in the small country cannot
support it, said Niels Bojer Jørgensen, head of procurement for DONG Energy. In 2009, 90 percent of biomass consumption was imported, he said, from the Baltics, North America and Europe. “I think we’re in all markets,” he said. Although the Baltics represent an ideal location to supply all Denmark’s biomass needs, icy waters during Pellets destined for the export market are poured Denmark’s prime biomass use SHIPSHAPE: into a ship's holding area at the Port of Vancouver. months can interrupt the supply chain, he said. For Baltic producers, major markets in- all of this is sustainability, and that means clude the U.K., Scandinavia, the Netherlands nothing and everything at the same time,” and Belgium, said Simon Rodian Christensen, said John Keppler, CEO of Enviva LP. principal for commodity broker Copenhagen Sustainability was a theme throughout Merchants Group. Different buyers have dif- the event and was the focus during the final ferent product parameters, he said, and even panel. It is the core of pellet production, accolor can be a significant aspect in some resi- cording to Morten Neraas, CEO of Floridadential markets. “As a producer, you should based pellet producer Green Circle Bio Entry to meet and understand all the specs pos- ergy Inc., and without it, the business is not sible,” he told the conference attendees. successful. Arnold added that sustainability But with globalization of the biomass in- here in the U.S. is even a growing concern in dustry, issues such as sustainability will come the sought-after European pellet markets. into play, Denis said. “The headline against
PHOTO: FIBRECO EXPORT INC.
« Exports
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Exports » Reliability and Accountability Ensuring the reliability of producers is yet another crucial supply issue addressed by many of the event’s speakers. “We are going to hold you accountable for delivering on your promise,” Pease said. Reliability, along with sustainability, is among the key criteria for “culling the herd” of pellet manufacturers, according to Carl Williams, principal of private equity firm Riverstone Holdings. Ranking up there with it are health and safety, and product quality. “When you say a shipment of pellets will show up, it sure as hell better show up,” Williams said. He and Justin DeAngelis, a director for Denham Capital Management LP, offered conference attendees the view from a crucial vantage point: private equity firms. Pellet exporting is a difficult business, they both agreed. The two were not the only speakers who referred to the pellet export industry as nascent and fragmented. Economies of scale and scope are crucial, and it’s difficult to realize “cash-on-cash” returns, according to Williams. “I will tell you that it is possible to do that in this business, but it is extremely difficult,” he said.
To be completely successful, the pellet industry needs to become a mini coal industry, DeAngelis said, because power companies want to burn coal. In addition, pellets need to become a real commodity, instead of the nascent product it is today. “Basically, people want to deal with coal at the end of the day,” he said. The survivors in the industry will be those that look like coal companies, he added, saying he wouldn’t be surprised if coal companies are making pellets 10 years from now. DeAngelis added that a global strategy for a pellet business provides for the highest potential value. “We believe if you have a truly global footprint … it allows you to supply current demand, but also to switch when the market picks up elsewhere.”
Opportunities in Asia And that switch, or at least some rapid growth, could be coming out of Asia. Todd Bush, of Pöyry Management Consulting Inc., shifted the focus from European to Asian pellet market potential. Bush briefly addressed conference attendees during lunch the first day of the conference, discussing the sometimes overlooked potential for pellets in Asia. He singled out
Korea, saying plans are uncertain for Japan after the Fukushima disaster, and China has ample agricultural residues to feed its biomass power plants. Dedicated biomass power, as well as cofiring with biomass are both incentivized in Korea through renewable energy certificates, he said, calling bioenergy Korea’s “low-hanging fruit.” Pellets, he assured, will be a large portion of bioenergy generation in Korea. Currently, Malaysia, Canada and Chile are supplying biomass pellets to Korea, he said, but demand will grow rapidly. “Korea is going to become a competitive market,” he said.
Contract Considerations Pellet producers who have not gotten into export markets may not realize the multitude of factors they’ll need to specify in sales and shipping contracts. Roderick W. Simmons of law firm Hirschler Fleischer was on hand to address aspects of international contracts that concern producers. To begin, Simmons introduced the International Commercial Terms, or Incoterms, which define the roles and responsibilities of buyers and sellers, including the division of costs such as insurance. The two most com-
FALL 2011 | PELLET MILL MAGAZINE 15
« Exports mon sets of Incoterms Simmons said he’s encountered are free on board (FOB) and cost, insurance and freight (CIF). Under an FOB contract, sellers are only responsible for getting the pellets to the ship, the subsequent responsibilities of the transaction falling upon the buyers’ shoulders. Under CIF contracts, however, the seller maintains responsibility for the pellets until they are discharged off the ship at their destination. Simmons continued through a list of contract aspects, beginning with basic commercial terms that will need to be agreed upon between supplier and buyer. Those include tonnage, price, contract term, pellet specifications, and number and frequency of shipments over the life of the contract. “In the purely shipping mechanics arena there are a number of things that need to be ironed out,” he said, listing nomination of port and of vessel, loading and discharge rates, and several other factors. Delivery-related terms include weight determination, payment, sampling and analysis, and acceptance and rejection. Nonperformance aspects that need to be considered include remedies upon contract breach, termination provisions and credit support. Simmons also discussed the inclusion of
allocation of certain risks into contract negotiations. That includes sustainability criteria, warranty limitations and liability limitations. The panel also included Henrik Christiansen, president of shipping company Oldendorff Carriers Inc., who informed attendees about the shipping industry as it relates to pellet exports. “We are the biggest carrier, I believe, of pellets for the last five years,” he said. Pellets are still a “new” commodity, he said, and have experienced just in the past three years the weeding out of what Christiansen called “cowboys,” those who called themselves producers but were ill-equipped to enter the pellet market. It was commonplace for prospective producers to underestimate storage, logistics, construction and more, he said, adding that the industry environment has improved. “Today is much better,” he said. “People in the industry know what they’re doing and it’s much more professional.” Most of the 1.3 million metric tons of pellets Oldendorff has shipped in the past three years went to Europe, with the U.K. emerging as a strong pellet user. But pellet shipping can be tricky, Christiansen cautioned. “In the beginning, ship owners were scared of pellets,” he said. The stowage factor of pellets is larger than that of coal, he said, pellets can’t get wet,
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and the temperature in the cargo hold needs to be monitored. Much like the shipping aspect of the pellet export business, the supply side carries challenges, and Mike Williams of The Westervelt Co. focused briefly on them, including resistance from industries such as power, and pulp and paper. He also emphasized the continued resistance from environmental and other opposition groups, and the need to keep them properly informed about what’s really happening in the industry. “We can’t afford any major slip-ups,” he said. “The unfortunate thing is they’re more organized than we are and they have more funding than we do.” But a robust commodity futures market will emerge, Williams predicted. And that will open the doors for more profit possibilities in an industry already making a name for itself in clean energy. “Just because we’re doing something good doesn’t mean we can’t do it well and profitably,” Keppler said. “We have a fantastic, fact-based story to tell here.” Author: Lisa Gibson Associate Editor, Pellet Mill Magazine (701) 738-4952 lgibson@bbiinternational.com
Lend your voice to the Densified Biomass Industry
Join the Pellet Fuels Institute in 2012! PFI Members Receive: • Opportunities to speak on behalf of the industry to policymakers in Washington, DC • Guidance on grassroots advocacy • Reduced cost to participate in the PFI Standards Program • Opportunities to network with Industry Members • Discounted prices to attend and exhibit at the PFI Annual Conference And much, much more… To find out more about the benefits of joining PFI, visit the PFI website at www.pelletheat.org and click on Join PFI. PFI is a North American trade association promoting energy independence through the efficient use of clean, densified biomass fuel. Pellet Fuels Institute 1901 North Moore Street Arlington, VA 22209 pfimail@pelletheat.org 703-522-6778 Follow us on Twitter, Facebook
« Safety
18 PELLET MILL MAGAZINE | FALL 2011
Safety »
For
Safety’s
Sake
A collaboration between the British Columbia Forest Safety Council and the Wood Pellet Association of Canada could help reduce safety issues and incidents in the pellet sector. BY LISA GIBSON
In 2005, the British Columbia forestry industry had a fatality count of 43, well over its annual average of 20. The unacceptably high figure prompted a public outcry and the formation of a safety task force to evaluate and implement preventative measures. The industry has now been working under an independently audited safety certification program and has brought down its yearly fatality average to 10. So far this year, the number is four. The British Columbia Forest Safety Council, a not-for-profit group formed after 2005’s disturbing number of deaths in the forestry industry, is that auditing agency. The organization is funded through a levy collected from the industry and has played a pivotal role in the safety improvements of the sector. This year’s goal was zero forestry-related deaths, accord-
FALL 2011 | PELLET MILL MAGAZINE 19
« Safety of cascading responsibilities; and rigor2007 2008 2009 ous implementation: 11 16 4 creation of an imple2 5 2 mentation team. 2 0 0 The BC Forest 15 21 6 Safety Council has taken on the implementation team role and was integral in developing the audit and certification program, which begins with a basic audit questionnaire that includes eight elements. The first is management leadership, including many aspects such as company health and safety policies, and health and safety responsibilities such as the communication to workers of their specific safety responsibilities and evaluation by the manager of the company’s safety program. Next is hazard identification and risk control, which include inspections and risk management. Third, the audit questionnaire addresses standards, procedures and work instructions. Those questions draw information about a company’s safety rules, regulatory compliance and emergency response. Training, education and certification come next, evaluating, as the
Five Years of Fatalities in B.C's Forest Industry Direct Timber Harvesting Associated to Timber Harvesting Forest Products Manufacturing Combined Total
2005 39 0 4 43
2006 11 0 1 12
SOURCE: BC FOREST SAFETY COUNCIL
ing to Stephen Chaplin, director of training and program development for the BC Forest Safety Council, and while that won’t be met, the number is substantially lower than 2005’s because of the systems the safety council has put in place. “Things have gotten much better,” he says. “I wouldn’t say it’s a direct result of the BC Forest Safety Council,” he adds. “I would say it’s a shared responsibility with government, health and safety associations, and industry all working together putting safety in the forefront.” The 2005 safety task force’s action plan was based on four key pillars: cultural change: the development of sector-wide health and safety accord; assured capacity: the development of a sector-wide health and safety assurance; shared responsibility: promotion and implementation
name suggests, training, education, orientations and certification. Next on the questionnaire is the section dedicated to health and safety communication systems including safety meetings and documentation. Incident reporting and investigation systems follow, addressing recommendations and follow-up actions. Nonprime contractor management includes questions about selection criteria, as does the next section of the questionnaire about prime contractor management. The final questions concern injury management and return to work programs and include aspects such as return to work policy, management and leadership, and communications. Following the main audit areas are technical audit modules, where companies answer questions only relevant to their industries. With accidents such as explosions and fires on the rise in Canada’s pellet mills, could this all-encompassing safety action plan be broadened to include other forestry-related industries, such as the wood pellet sector? Chaplin is confident it can.
Addressing the Pellet Industry While the need for change in the forestry industry came about because of the high
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Safety » number of fatalities, the impetus in the pellet industry is high insurance rates resulting from an increase in the number of accidents, sometimes causing deaths. Most accidents are related to dust explosions and fires, self-heating and spontaneous combustion, and hazardous emissions. “They have wood dust explosions,” Chaplin says. “They're catastrophic. We don’t see a lot of fatalities, although there are some, but mostly we see explosions.” Because of a large number of incidents and insurance claims from Canadian pellet mills, two insurers have already left the pellet Forestry Related Fatalities
SOURCE: BC FOREST SAFETY COUNCIL
sector. “If that keeps going and other insurers follow their lead, we’ll be in trouble, won’t we?” says Gordon Murray, executive director of the Wood Pellet Association of Canada. The few insurers who remain, have implemented astronomical rates, restrictive terms and provide less capacity. Unless a best practices plan incorporating risk management and risk control is put in place, insurance may not be available to some Canadian pellet manufacturers, Murray worries. One letter to the Canadian pellet industry from the Lumbermen’s Underwriting Alliance, which has since pulled out of the pellet industry altogether, reads, “We have incurred an inordinate number of claims … causing us to pay out far more in settlements than we ever charged in premiums.” Such concerns prompted Murray to approach the BC Forest Safety Council, Chaplin recalls, wondering if its success in reducing accidents could be transferred and used just as efficiently in the pellet industry. “The answer is yes,” Chaplin says. “They’ve been through this
before in the harvesting sector,” Murray explains. “We have to decide as an industry that this is unacceptable and we have to change our culture here.” Development of a similar system for the pellet industry does include a whole new set of concerns and aspects, Chaplin cautions, including contractors, how the product is received and the different processes. So with the help of Canadian insurance broker Aon, the safety council and pellet association developed a pellet mill-specific audit questionnaire to accompany the basic audit already developed for the forestry industry. “We’ve developed these questionnaires through every part of the process from grinding through drying, pelletizing and cooling,” Murray says. The questionnaires convey the importance of measures such as spark detection and isolation of fire hazards. “It’s going to become an audit system and if [mills] pass, they’ll be certified as safe,” he adds. Just as it is in the forestry industry, the BC Forest Safety Council will be the safety auditing and certification body for the pellet mill industry. The pellet addendum to the program also includes an important insurability audit to help in the qualification for lower insurance costs. “So when folks build a new plant, they can
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« Safety take those measures into account,” Chaplin says. “Or if they already have an existing plant, if they follow those things … the hope is, if they’ve done the audit and they’ve done the insurability audit, that they’ll be able to have lower rates.” The insurance aspect, catering to wary insurers and developed with the help of Aon, asks specific questions, such as whether the fiber pile sits at least 30 meters away from any major building on-site, whether multiple fiber piles are at least 10 meters apart, and whether the maximum size of fiber piles is less than 150 meters by 100 meters by 20 meters. The questionnaire also includes inquiries about mobile equipment and their fire suppression systems and preventative maintenance systems for daily inspection and cleaning of mobile equipment used for transporting fiber. Process-related questions regarding primary building construction are accounted for also, including dust isolation, fire suppression systems, fiber in-feed, fiber sizing, fiber drying, pelletizing, cooling, finished product storage, and dust collection and ventilation.
Important technical audit subjects for pellet mills would also include off-gassing, hot works, lockout, working at heights, respiratory protection and combustible dusts, Murray says. The pellet mill safety system integrates both the safety and business models, Chaplin explains. “By doing that, you have high productivity, good morale, good culture, good safety and good business,” he says. SOURCE: BC FOREST SAFETY COUNCIL
Implementation Murray planned to present the finished system proposal, complete with estimated costs, to the Wood Pellet Association of Canada board of directors on Oct. 26. The board will make the final decision as to whether participation in the audit and certification system
will be required for Canada’s pellet industry. “So far, my board has been supportive of all this, but they’ve stopped short of making the absolute requirement for certification,” Murray says, adding that the October meeting could end with a vote on implementation of the system, or the board could decide to study it further and vote at a later date. “I just can’t say for sure,” he says. The safety program implemented in British Columbia’s forestry sector has indeed led to a decrease in insurance claims registered (see table above), while providing the even more necessary benefit of reducing deaths. With the pellet addendum, it could be used all over the world in both the forestry and pellet sectors, Chaplin says. “It’s about sharing of learning and partnerships and we’re happy to share anything. Potentially, I could see that it could apply anywhere.” Together, the BC Forest Safety Council, Aon and the Wood Pellet Association of Canada have identified their insurance and safety issues through pellet plant visits, and have gained grassroots support for their effort to create a meaningful and audited safety certification program. “It just makes you feel good in your belly when you can go out and help make a difference,” Chaplin says. Author: Lisa Gibson Associate Editor, Pellet Mill Magazine lgibson@bbiinternational.com (701) 738-4952
22 PELLET MILL MAGAZINE | FALL 2011
FALL 2011 | PELLET MILL MAGAZINE 23
« Use
24 PELLET MILL MAGAZINE | FALL 2011
Use »
Conference Addresses
Burning Questions The Pellet Fuels Institute Annual Conference drew pellet industry players to Florida to learn more about issues relevant to their industry, including PFI’s new fuel standards. BY LISA GIBSON About 240 pellet fuel industry stakeholders gathered at the Sawgrass Marriott in Ponte Vedra Beach, Fla., this summer to network and gain a stronger grip on the pertinent issues impacting their industry. The Pellet Fuels Institute Annual Conference provided a venue to discuss pellet plant safety, fire prevention, government affairs, plant optimization, and the ongoing development of PFI’s third-party verification standards system, among other topics. And of course, golf enthusiasts got a chance to play the famous TPC Sawgrass course, just a short jaunt from the PGA Tour headquarters. But getting down to business, the U.S., despite being years behind Europe in the commercial and industrial use of pellets for heating and power, is still under that continent's watchful eye. Players in Europe’s better-developed pellet markets are still interested in what the U.S. has to offer, curious about fiber and shipping costs. Some are looking for opportunities to build plants here, but their interest could also be yet another indication of the potential for pellet exports from U.S. producers.
FALL 2011 | PELLET MILL MAGAZINE 25
ÂŤ Use Exploring Exporting The pellet export market is in for a wild ride in the next 10 years, and Harold Arnold, president and CEO of Georgia-based Fram Renewable Fuels LLC, recommended industry stakeholders hold on to their hats. â&#x20AC;&#x153;The industry will see wild growth over the next few years,â&#x20AC;? he told conference attendees. â&#x20AC;&#x153;Expect the unexpected. For some, these changes will be good; for some, theyâ&#x20AC;&#x2122;ll be bad, but either way, weâ&#x20AC;&#x2122;re in for a wild ride.â&#x20AC;? Fram Renewable Fuels operates a 230,000-metric-ton pellet mill that uses about 460,000 metric tons of raw materials. Drawing from his export experience and observations, Arnold said the 2011 export market has been stronger than usual. That strength could be influenced by extreme cold in the Baltics and resulting difficulties in exporting from Estonia. Spot sales, however, are a different story and pricing is an ongoing struggle, he said, even though demand continues. Arnold referred to a PĂśyry study that estimates current worldwide demand for pellets at 16 million metric tons, but he added that the number is one of the more conservative. Not surprisingly, Western Europe dominates current use, but markets are growing in Asia. That doesnâ&#x20AC;&#x2122;t necessarily mean, though, that all Asian countries will begin to import massive amounts of pellets. Instead, it is likely that some, such as China, will use primarily their own materials, according to Arnold.
Global Pellet Consumption (in millions)
Western Europe China Japan/Korea North America TOTAL SOURCE: PĂ&#x2013;YRY
2010 10.8 0.6 0.2 3.4 15.0
2015 16.4 3.0 3.8 4.3 27.5
2020 23.8 10.0 5.5 5.6 44.9
citing problems encountered in the U.S., such as a lack of discounts, few suitable ports and limited port storage. Europe is a policy-driven market, fellow speaker Seth Walker, associate economist in timber and bioenergy for RISI, told attendees, and 75 percent of demand could come from the U.K. alone in the next few years. The growing European market opens up an enormous window of opportunity for pellet producers in the Southern U.S. That region is the largest timber producer in the world, Walker said, and also has port availability and a close proximity to Europe, relative to other regions of the world.
Global Pellet Production (in millions) Western Europe China Japan/Korea North America TOTAL
2010 7.7 0.6 0.1 4.9 13.3
2015 10.7 3.0 0.4 8.5 22.6
2020 13.0 10.0 1.1 11.0 35.1
SOURCE: PĂ&#x2013;YRY
The final speaker on the panel, Joanne Littlefair, international trade specialist with the U.S. Department of Commerce, discussed three main goals of the department related to exporting: trade advocacy and promotion, access to financing, and reducing trade barriers and enforcing trade laws. The department has 107 global U.S. Export Assistance centers to promote trade and answer questions producers may have, Littlefair said. Reducing trade barriers and enforcing trade laws is crucial, she emphasized, to ensure that global export market participants are â&#x20AC;&#x153;playing by the rules.â&#x20AC;? And as always, financing is a vital aspect of exporting and Littlefair named a few helpful programs the Department of Commerce operates, including Export Express loans, the Export Working Capital Program, and the International Trade Loan Platform. Littlefair also mentioned the Export-Import Bank, and the financial assistance it can offer.
Global capacity is around 32 million metric tons, and both global production and demand are expected to grow. Still, that doesnâ&#x20AC;&#x2122;t mean all pellet mills will enter the On the Web: export sector. â&#x20AC;&#x153;Many facilities may websites and contacts: never get into exporting because Financing Joanne Littlefair: (202) 482-4855 or joanne.littlefair@trade.gov of logistics,â&#x20AC;? Arnold said. He refers Department of Commerce: www.export.gov to logistics as â&#x20AC;&#x153;the great equalizer,â&#x20AC;? Export-Import Bank: www.exim.gov 26 PELLET MILL MAGAZINE | FALL 2011
Use » An important new export market development Arnold emphasized is the European standards expected to come out within the next year. As sustainability is a growing concern for European Union utilities, a buyers group is currently working to develop a sustainability certification program. Arnold recommended that pellet manufacturers looking to export plan how they source, track and certify their pellet fuel.
A Standards Update In forming its standards, PFI will keep a close eye on the European standards, leaving as few gaps and discrepancies as possible in the major areas, according to John Crouch, PFI’s director of public affairs. And the process hasn’t come without an enormous amount of work. When speaker Chris Wiberg, co-chair of PFI’s Standards Committee, was introduced it was said that he has spent thousands of hours on the ongoing project. Taking the stage, Wiberg, who currently manages the Biomass Energy Laboratory in Conyers, Ga., said he wished it were an exaggeration. During his presentation, Wiberg outChris Wiberg, lined changes to the manager of the standards that have Biomass Energy come about since their Laboratory, has initial draft release in been integral in the development of October 2010. That PFI's wood pellet draft outlines three standards. fuel grades: premium, standard and utility. It specifies parameters for a number of properties including ash content, diameter, durability, fines, moisture and chloride content, among others. But perhaps the most important aspect of the system is the third-party audit of those parameters. PFI proposes a threelevel verification system, beginning with the pellet mill itself. The second verification comes from on-site visits by inspectors who are well-versed in the timber industry, doing other forest product inspections such as lumber grading. Finally, the inspectors’ assessments will be audited by the accreditation body, which Wiberg announced at the annual conference will be the American Lumber Standard Committee. “I’m feeling
confident that they are the right body,” he said. The internationally recognized group is experienced in such dealings, he told conference attendees, and already accredits several auditing agencies. Also, internal laboratories at mills are no longer required, he announced, the standards specification document has been restructured, and the inspection and re-inspection criteria have been altered. Now, a product must be within 95 percent compliance for grade qualification. Undoubtedly, pellet producers will wonder how much it will cost them to comply, but Wiberg said it will differ mill by mill. Influential factors include the PFI enrollment and operations fee, internal lab quality assessment and quality control program development, third-party lab and testing services, auditing services and ALSC’s cost to administer the program. Roughly, though, Wiberg estimated it will cost 50 to 70 cents per ton. The last portion of the conference was a four-hour symposium detailing the standards and compliance for pellet manufacturers. Eventually, PFI hopes that the standards will be adopted by appliance manufacturers who will outline the use of certain grades and void warranties where the specifications aren’t followed. In the future, the standards committee will finalize the language in the formal agreement with ALCS; and ALCS and PFI boards will need to review, approve and sign the agreement. With such involved process steps still on the horizon, a timeline for the release and implementation of the standards is hard to nail down.
Optimization and Efficiency Besides broad industry topics such as standards and export markets, the conference also touched on more specialized areas such as individual pellet plant efficiency and optimization, crucial factors that received input from two speakers. Plant optimization and efficiency can hinge on multiple factors, not the least of which being raw material variances and the use of proper machinery. In his 30-minute presentation, Clyde Stearns, vice president of engineering for Zilkha Biomass Energy and biomass and wood pelleting expert for equipment manufacturer Buhler Inc., emphasized minimizing raw material variance. “You have to have FALL 2011 | PELLET MILL MAGAZINE 27
« Use really intimate knowledge of your raw material,” he said. Showing a map of the U.S. and the varying available wood types, he explained, “The U.S. is not homogenous at all for wood species.” The external selection of raw material is important, making it crucial for a pellet company to understand the different types of wood it will use, and what form it will be in. Subsequently, internal homogenization requires constant material supply characteristics. Stearns included in his presentation a fact-versus-fiction element of pelleting, saying that contrary to popular belief, a complicated and expensive mixing system is not essential in a mixed-species wood pellet plant. A basic system is sufficient, he assured, but chip size and variance need to be relatively uniform. He also addressed minimizing moisture and equalization in a pellet mill, discussing drying time and predrying. “In an ideal world, I would recommend covered chip storage,” he said. “If that can be done, it dramatically improves the drying operation.”
Stearns also discussed wet material sizing, complemented later by the presenter who followed him. Cole Martin, sales manager at Dieffenbacher Inc., described the company’s two new sizing technologies being used in Europe today. The first, The Eco Pulser, is a noncontact sizing machine that uses shock waves designed to minimize the wood size, he said. The material is fed into the machine through the middle, and into the counter-rotating motors. Any sand, stone or similar material is powdered, and contaminants such as plastics and metals are detected through frequencies within the process and released for disposal. The system, which has installations in Germany, uses less power than traditional sizing equipment, emits no pollutants and makes little noise, he said. The Eco Pulser, however, is not for absolute sizing. Dieffenbacher’s ClassiSizer is a better fit for that. While it is an impact sizer, it uses no hammers, knives or flakers, Martin said. The system has been used in wood chip processing
and residential wood processing and is breaking into the pellet mill market with one installation already and another in the near future. “It’s used in a number of different industries,” Martin said. Because there is no cutting of the chips, the system experiences little wear. It is also insensitive to contaminants and is low maintenance. It functions through a rotor that throws the wood at a screen, Martin explained. Some goes through and is sized, while other material comes back to be thrown again. The process requires half the energy of a traditional hammermill and can handle frozen material. The presentations were crucial for prospective pellet manufacturers, as they offered an overview of efficiency factors, as well as an explanation of the equipment that can enhance them. Overall, attendance at the conference was similar to past years, and offered wellbalanced content and extensive networking opportunities, according to Jennifer Hedrick, PFI’s executive director. “We were quite pleased,” she said. “From the staff perspective and from the comments we received from members alike, [there was] a lot of feedback on the balance of the conference.” The program’s “nuts and bolts” aspects in topics such as plant safety nicely complemented the big picture topics regarding industry status, she said. “People really PFI Executive Director want to know that type Jennifer Hedrick says the PFI Annual of information.” Conference offered Attendees also ap- attendees wellpreciated the network- balanced content and ing opportunities such opportunities to network. events offer, to bolster business. “People really use this as a place of business to grow and develop,” Hedrick said. “This provides an opportunity for that.” For more information on the conference and speakers, visit the PFI website: www. pelletheat.org. Author: Lisa Gibson Associate Editor, Pellet Mill Magazine lgibson@bbiinternational.com (701) 738-4952
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« Policy
30 PELLET MILL MAGAZINE | FALL 2011
Policy »
Trade Talk
The U.S. government is pooling its resources to tackle the nation’s trade deficit, and wood pellets may be the solution. BY MATT SOBERG
The U.S. imports more products than it exports and the Obama administration has been vocal about the importance of enhancing export opportunities. The president directed the National Export Initiative in 2010 seeking to double U.S. exports within five years, aimed at putting more Americans to work. “Creating jobs in the United States and ensuring a return to sustainable economic growth is the top priority for my administration,” Obama said. “A critical component of stimulating economic growth in the United States is ensuring that U.S. businesses can actively participate in international markets by increasing their exports of goods, services and agricultural products. Improved export performance will, in turn, create good high-paying jobs.” As governments in Europe and Asia initiate policies to reduce greenhouse gas emissions, those regions need renewable fuels and technology. That has prompted a flurry of activity in the U.S. pellet industry, and the U.S. government has zeroed in on the potential for pellet exports as one way to make up for its trade deficit. Subsequent to the NEI, the Renewable Energy and Energy Efficient Export Initiative (RE41), a coordinated effort to promote renewable energy exports in the U.S., targeted wood pellets as one of the most promising export markets and indicated that the USDA would expand its analysis of exporting wood pellets and chips in relevant countries. The purpose of the analysis was to provide U.S. industry and policymakers with information on the sector’s growth, export opportunities in emerging markets and policy updates. The government’s emphasis on wood pellet exports was good news for the biomass industry. As a result of the NEI, seven federal agencies, including the U.S. DOE, USDA, Department of Commerce and others, collaborated on the RE41 project. With various government agencies involved in producing pelletdirected reports, multiple sources exist for company research and information. The questions now are, what happened with the NEI, what are agencies doing and where can the information they have generated be found? FALL 2011 | PELLET MILL MAGAZINE 31
« Policy National Export Initiative The NEI created a national export cabinet to develop and coordinate its implementation. This cabinet includes the secretaries of state, agriculture, commerce and other officials. According to the NEI, various department officials continue to be engaged in interagency coordination of export promotion efforts. When launching the NEI, the president noted that 95 percent of the world’s customers and fastest-growing markets are outside U.S. borders. He mentioned that our exporters have faced the obstacle that the federal government, frankly, just hasn’t done a good enough job advocating for them abroad—at least compared to the advocacy that other countries are engaging, and that is why the U.S. must go to bat for businesses. Understanding the need to focus on energy, in light of the NEI, the Trade Promotion Coordinating Committee’s Renewable Energy and Energy Efficiency working group was formed. Sally Klusaritz, USDA director of public affairs and executive correspondence, says the group’s mission is to support the NEI by developing an export strategy to guide the U.S. government programs that support U.S. renewable energy and energy efficiency companies wishing to compete for sales abroad. The TPCC is an interagency task force formed to coordinate and develop a government-wide export promotion plan. Made up of 20 agencies, the core partners include the Department of Commerce, Export-Import Bank, Overseas Private Investment Corp., U.S. Trade and Development Agency, Small Business Administration, Department of State and the USDA. The working group’s main initiatives include training specialists, marketing exports, integration of export programs and education to provide U.S. companies with the most accurate service and information quickly. As mentioned earlier, the working group’s export strategy, RE41, which was released in December, demonstrates the commitment started by the NEI, and is the country’s first-ever attempt to coordinate U.S. government programs in support of 32 PELLET MILL MAGAZINE | FALL 2011
renewable energy exports, according to U.S. Secretary of Commerce Gary Locke. The initiative was launched with 23 commitments from eight different U.S. government agencies and was modeled to proceed without any further funding or taxpayer cost. A specific example of the RE41 commitments includes an online portal for RE41 access, which provides news, events and market research at www.export.gov/ reee.
Pellet Policy Subsequent to the NEI, the wood pellet industry achieved government exposure in the RE41, when it targeted wood pellet exports as a high-growth sector. In the RE41, the USDA pledged to support the efforts of the working group as follows: “USDA will also expand its biofuels annual reports to cover biomass in the form of wood pellets and wood chips in relevant countries so as to provide much-needed information to the U.S. biomass industry and policy makers. This reporting will provide information on the sector’s growth, export opportunities in emerging markets, and policy updates.” In addition, the RE41 provided that the USDA would “seek to identify an appropriate U.S. wood pellet industry partner to undertake foreign market development and export promotion activities under the Foreign Agricultural Service’s Market Access Program and Foreign Market Development programs.” The government’s target of wood pellet exports seems to be well-timed, if not overdue. Since the publication of RE41, Klusaritz says the USDA has fulfilled its commitments by improving the reporting guidelines for the “Biomass for Heat and Power” section of the annual biofuels report of the USDA Foreign Agricultural Service Global Policy Analysis Division. The expanded report now includes production, consumption and trade statistics for wood pellets. FAS analysts in Europe, Canada and Russia have reported on wood pellets in the past, but the new instructions will harmonize and expand the knowledge of the biomass industry, and the
wood pellet industry in particular, according to Klusaritz. The USDA reports that in 2010, the U.S. exported $128 million (736,000 metric tons) of wood pellets, which was a 37 percent increase from 2009. USDA representatives in foreign countries submit reports on biofuels developments in their countries, which are called Global Agricultural Information Network reports. For example, the 2011 GAIN report on Canada, published in July, provided information on wood pellets under its analysis of biomass for heat and power. The analyst in Canada recognized the country’s plan to take advantage of Europe’s current pellet demand. According to the report, “there is interest in exporting wood pellets from Canada to Europe to meet the increased demand for biofuels in European countries. The E.U. has increased funding for renewable production, including doubling the financial contribution to renewable energy in 2007 for 2010 targets.” The report continued by providing statistics on Canada’s pellet production, stating the wood pellet industry in Canada, especially in the West, has grown at an annual average rate of more than 20 percent over the past five years due to a steady supply of wood residues, and increasing demand from Europe. In 2010, Canada’s plants produced about 1.3 million metrics tons of pellets per year, the USDA said. The GAIN reports analyze specific export and import statistics for each country researched. Canada imported more than 365,000 metric tons of pellets from the U.S. in 2007 compared to 531,000 in 2010, which was approximately 98 percent to 99 percent of its total imports. For 2007 exports, Canada shipped more than 1.2 million metric tons of pellets, with 647,000 to the U.S. (51 percent) and 245,000 to Europe (19 percent). Things changed in 2010, however, with Canada exporting a total of 1.6 million metric tons. Of the total, Canada now sends 368,000 to the U.S. (22 percent) and 1.1 million metric tons to Europe (71 percent). Although the USDA has reported on pellets in the past, and intends to follow
Policy » through with the NEI, it appears limited current information exists about pellets. It is likely increased reports will be published now that the global market is more active. U.S. companies can use GAIN reports to track trends of competitors and follow market opportunities once the information is available. A GAIN report search engine exists that is particular to countries, topics and time frames and can be found at www. gain.fas.usda.gov/Pages/Default.aspx. In addition to GAIN, the USDA welcomed its first biomass energy cooperator into the Cooperator Program in 2011, according to Klusaritz. The American Biomass Trade Cooperative, a new agricultural marketing group representing domestic producers of biomass energy products, received its FAS Market Access Program startup on Jan. 1. The ABTC is a nonprofit trade association comprised of commercial biomass growers, manufacturers and industry specialists from all across the U.S., with the primary purpose of promoting common interests in those engaged in the industry, and more particularly those in the woody biomass and wood pellet industry. The ABTC adds that it is solely focused on the development of biomass as a major staple in America’s export portfolio. This year, the group was charged with conducting market research activities in the EU to better understand that growing market. “The European Union is the primary market for U.S. biomass pellet exports,” Klusaritz says.
its production, according to president and CEO Morten Neraas. The company targets European markets, primarily utility companies in the U.K., Holland, Belgium and Scandinavia. Neraas says that for the most part, wood pellet exporters are already aware of market trends and pellet market opportunities worldwide. Other considerations, such as the current exchange rates between currencies, could significantly impact expansion plans of pellet exporters and existing European plants, according to Neraas. He says that government help for pellet exports would best be in the form of information on where to find export-friendly financing, lowering tax rates for manufacturers or providing education for the workforce to improve quality and efficiency. Companies are not seeking subsidies, but they are looking for assistance with financing opportunities.
The National Export-Import Bank is the official Export Credit Agency of the U.S. government and its mission is to promote and finance the export of U.S. goods and services and to increase jobs. The bank has a mandate to support renewable energy and tripled its support in 2010. The bank does not compete with private lenders, but assists projects and fills in the gaps left open by trade financing. The bank provides working capital guarantees (pre-export financing), export credit insurance, and loan guarantees and direct loans (buyer financing). The bank provides financing for various exporters, including bioenergy companies, and further information can be found at www.exim.gov/index.cfm. Author: Matt Soberg Associate Editor, Biomass Power & Thermal msoberg@bbiinternational.com (701) 746-8385
Practical Effect With the launch of the export initiative, and agencies such as the USDA trying to follow through with commitments in 2011, the practical impact of the pellet policy for U.S. exports cannot yet be sufficiently determined. Sometimes the wheels of government turn slowly. Well-established U.S. companies are exporting significant amounts of pellets overseas. For example, Florida-based Green Circle Bio Energy is producing at capacity, approximately 500,000 metric tons of wood pellets annually, and exports 100 percent of FALL 2011 | PELLET MILL MAGAZINE 33
ÂŤ Business
PELLET PRODUCERS: Lori Tiller, Equustock Virginia director, and Frank Perry, plant operations engineer, survey an incoming load of fiber at the plant. PHOTO: EQUUSTOCK VIRGINIA INC.
34 PELLET MILL MAGAZINE | FALL 2011
Business »
A Pellet Maker’s Successes, Solutions and Challenges Overcoming the challenges of an industry in its infancy involves understanding logistics, shipping, raw material supply, the art of manufacturing and entering the right markets. BY DEBBIE SNIDERMAN
Equustock Virginia Inc., a midsized wood pellet manufacturer in southern Virginia, produces five different types of pellet products at a single, unique manufacturing facility. Pellets for fuel, animal bedding and cat litter are produced for its marketing partner Equustock LLC, with customers mainly in the United States as well as export destinations in Italy, Australia, Korea, the U.K. and Taiwan. A can-do attitude, coupled with the partners’ unique backgrounds, perspective and approach, helps overcome never-ending issues. This pellet maker has not only survived in a time when neighboring mills were closing their doors, but has expanded capacity. Brenda Robinson, partner at Equustock Virginia Inc., spoke with Pellet Mill Magazine about the company's processes and products, reasons for its success, and challenges it has overcome and is still facing. FALL 2011 | PELLET MILL MAGAZINE 35
« Business Profitable Processes and Markets Equustock Virginia began operations in 2007 and recently doubled its capacity with the addition of a second milling machine. Now able to produce 80,000 tons of pellets per year, the company operates around the clock, in two 12-hour shifts. Robinson says that additional capacity was added in response to and in preparation for the markets they serve. Producing Big Heat Fuel Pellets at Equustock involves running raw materials through screens and hammermills, reducing the particles to a size that allows them to flow into a pellet mill, where they are extruded through a die to form the pellets. Robinson describes their proprietary milling processes as an art not a science, noting that how the raw materials are combined and how the equipment is used affects the pellets’ performance and quality.
In addition to fuel pellets, Equustock's diverse and complimentary product line includes Guardian Horse Bedding, Guardian Angel Litter for small animals, Guardian Angel Cat Litter, and Absorb&Clean, an absorbent used for spill cleanup. These are more than skilled artists who are doing something right. As Robinson discusses the reasons for her success, it becomes apparent that each story of overcoming a challenge has also been or continues to be an area of concern, where learning has occurred.
Location Offers Multiple Benefits Equustock Virginia's production facility is situated in the Sustainability Park on the James River in Chester, near Richmond in southeast Virginia. The Sustainability Park houses several business that turn recyclable waste or by-
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36 PELLET MILL MAGAZINE | FALL 2011
products into usable new products, including glass and construction recycling. Robinson attributes part of the pellet mill’s success to being located at this facility. As a tenant, the company fits the facility’s purpose, which is to support the creation of new products from recycled raw materials instead of filling landfills. The park’s 400,000 square feet of manufacturing space, loading docks, scales, and other infrastructure, which is needed for large-scale manufacturing at this 140plus acre plant that formerly housed an old Brown & Williamson tobacco plant, provides Equustock the opportunity for growth and flexible operations. The park also contains a water treatment system with 2 million gallons of water. Robinson says having water located onsite provides extra protection against the risk of fire, which pellet mill regulators are focused on minimizing. In addition to being a partner in Equustock, Robinson owns the Sustainability Park. Her background is in the environment and energy; Robinson came from the boiler world, where coal was used to make electricity from steam and used for domestic heat. She was attracted to the industry because of regulatory issues driving biomass as a coal replacement. There is no doubt that her “evolution” to wood products also has been a major factor to Equustock’s success.
Regional Sourcing and Feedstock Alternatives “Critical to our success has been learning how to manage our suppliers and transportation,” Robinson says. “It’s important that we learned how to receive and keep moving.” Equustock pellet feedstock is raw wood materials that would otherwise have been deposited in a landfill. The materials are delivered by tractor trailer and unloaded directly from a box trailer. “Since we are using byproducts, we’re dependent on the lumber and sawmill in-
Business » dustry and all of their links to the construction industry,” Robinson says. “We’ve got established suppliers and know where to pull from to manage the supply.” “Depending on how concentrated the mills are, it could be hard to get enough to feed everyone,” she says. “We source regionally; you can’t go 400 miles to bring it in.” Raw material supply has been a concern, and is one reason Equustock is evaluating alternate feedstock materials for producing pellets. Its current fuel pellets are produced with soft woods, such as pine, and also use some hardwoods and soft/ hard wood blends. Equustock has investigated using multiple materials for pellets. “Currently we are running initial evaluations and testing hardwoods for pellet making,” Robinson says. “Understanding the flexibility of what can be used is also key to our success.”
Other products milled at the facility also are packaged differently and may not be produced in pellet form. Loose wood absorbents for example, are packaged in plastic containers, and small animal litter in pellet or cobble form is packaged in buckets. Managing equipment and maximizing throughput with the complexities of running multiple processes, products, and packages at a single facility is also critical to their success, Robinson says.
Still to Understand Robinson says they are still working to understand many aspects of this emerging industry, such as the supply chain, the flexibility of what feedstock can be used, and regulatory issues. Shipping continues to be an issue in these uncertain economic times, she says. They have learned how to get their materials into containers and on to ships for ex-
port but notes that the cost of fuel for land deliveries and its volatility remains a challenge, making logistics costs harder to deal with and to predict. Equustock has seen individual truck drivers who offered price advantages over larger shipping companies go out of business in the recent economy, despite a higher demand for their services, Equustock Virginia recently completed a market survey, and successful testing and sampling rounds that have given Robinson confidence that their current capacity with their second pellet mill machine will soon be filled. She says the company is looking at a third machine, and sees “lots of domestic opportunity and ready, large, growing markets in Europe.” Author: Debbie Sniderman Freelance Writer Debbie.Sniderman@vivllc.com
Multiple Processes at One Location In addition to producing different grades of fuel pellets at the Virginia mills, Equustock also manufactures pellets that serve different needs from fuel pellets, including pellets for horse bedding. These pellets are designed to expand into soft, dry bedding when exposed to moisture and are more absorbent and durable than pellets used for fuel. Horse bedding pellets are made from soft wood pine shavings using different processing steps than fuel pellet production, including kiln drying, treating with high heat, double screening, aspiration, and vacuuming for dust and particle texture control before going through proprietary compression processes that form the expanding pellets. The bedding is also packaged differently from fuel pellets. To save space, they are ultracompressed in vacuum packages, in contrast to most fuel pellets, which are packaged in bags of various sizes for residential, retail and international customers, or super sacks or bulk delivery for industrial facilities, boilers or utility companies.
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« Canada
38 PELLET MILL MAGAZINE | FALL 2011
Canada »
Positioned for
Growth
With vast expanses of renewable resources and a well-established pellet industry, Canada is ready to fill the needs of an expanding global market. BY MATT SOBERG
It's no wonder Canada is a world leader in forestry and wood products. The country has 10 provinces, three territories and endless shorelines along the Atlantic and Pacific oceans. In between its coastal boundaries, Canada boasts 981 million acres of forest, making up 10 percent of the world’s wood reserves. The wood pellet industry has increased significantly over the past few years due to improved technology and export capabilities. The country’s pellet industry is represented by the Wood Pellet Association of Canada, which is funded largely by the pellet producers. WPAC’s mandate is to foster good working relationships between the pellet industry, government and the public, to provide safety certification and quality standardization and to research the enhancement of pellet fuel potential. Although forestry is a prominent business in Canada, pellet manufacturers are not clear-cutting trees and destroying the environment, says Gordon Murray, WPAC executive director, who stresses that pellet companies have created a sustainable industry out of material that was previously considered waste. The fuel is manufactured from forestry leftovers including fired logs, beetle-killed timber and residues. Vaughan Bassett, vice president of sales and logistics at Pinnacle Renewable Energy, says its facilities primarily use forest and sawmill residuals to produce pellets. Pinnacle is the largest pellet manufacturer in the world, according to Bassett, and operates six plants in British Columbia, where raw materials are abundant. Forests in British Columbia have suffered from a serious invasion of mountain pine beetles, which have devastated the pine tree population. Because beetle-killed timber tends to develop cracks, it cannot be used for sawmilling without creating significant waste wood, but it is suitable for pelletizing. When harvesting beetle-killed timber, the resultant cleared areas promote new timber growth and reduce methane emissions from the rotting residue. This is only possible if the extractFALL 2011 | PELLET MILL MAGAZINE 39
« Canada ed beetle-killed timber finds an economic home, which it can in the pellet mills. It is important to understand the environmental impact of the pellet combustion process. “The pellet industry has good green credentials,” Bassett says. Unlike coal, when wood is burned, the carbon released is recaptured by photosynthesis, thereby closing the loop sustainably without atmospheric change, he adds. The Canadian industry primarily sells pellets to utilities for power production, but pellets are equally useful in industrial or residential thermal applications. Bassett believes the pellet industry has the potential to replace hydrocarbons for heating purposes, especially in remote areas, or in areas that are off the gas grid. The bottom line is that, “energy policy means making tough decisions, weighing costs and benefits and even judging the next turn in the financial road,” according to Pinnacle. “Pellet fuel can put North America ahead in all those areas. It will encourage the economic and energy independence of your communities, reduce costs and clean the air.”
Robust Canadian Industry North America is leading the pellet export race, with Canada and the U.S. surpassing Sweden as leaders in pellet production capacity. With strong global demand
More
for wood pellets in Europe due to government initiatives, Canadian capacity has risen sharply. “Capacity has grown more than one-third over the last year, from 2 [million] to nearly 3 million metric tons,” Murray says. In 2010, Canada had 30 operating pellet plants and 24 in the construction or development phase. The country produced about 1.5 million metric tons of wood pellets in 2010, with British Columbia accounting for 64 percent of that total. Today, the country has 37 pellet plants in operation. An internal dichotomy exists between the pellet industries in Western and Eastern Canada. Plants in the West focus on industrial pellets for export from the British Columbia ports of Vancouver and Prince Rupert to Europe and Asia, and plants in the East market their pellets locally and in the Northeast U.S. Murray notes that a 1 million metric ton pellet capacity in the East competes for 100,000 metric tons in demand. Most of the product is bagged and used for residential heating. Only three of the 21 plants in Eastern Canada ship overseas from ports in Halifax, Nova Scotia, and Belledune, New Brunswick. Operating in the far western expanses of Canada, Pinnacle produces and exports 1.1 million metric tons of wood pellets annually, according to Bassett.
Than Just
Results
Policy and Pellets Pinnacle and other Canadian pellet manufacturers are well-aware that the new demand is being triggered by energy policy. Europe is leading the way, using sweeping national policies to reduce greenhouse gas (GHG) emissions, setting a goal of producing 20 percent of its energy from renewables by 2020. Meanwhile, North American governments have been slow to introduce national renewable energy policies. North America is highly reliant on fossil fuels and is resistant to change. “It is a lifestyle issue,” Murray says. The U.S. oil industry is huge, with large companies employing significant numbers of people. The companies also utilize serious lobbying power and dollars to expand their business. Government subsidies for fossil fuels alone substantially outnumber revenues from the pellet industry. Murray also believes many in North America don’t take global warming seriously. The Canadian government has recently taken steps in the right direction with a policy to reduce the use of coal and convert to biomass fuels and natural gas. To stay on top of technology, the WPAC has spearheaded an investigation and study into available coal alternatives such as cofiring and torrefaction. As Canada and the U.S. initiate sustainability directives, Murray predicts that de-
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Canada » mand for wood pellets will increase in domestic markets. Pellets may be the best way for countries to satisfy policy requirements in a cost-efficient way. They are also easy to transport and store, and require minimal technology and modification for coal conversion purposes.
Canadian Exports To satisfy government emissions directives across the Atlantic, experts have projected that European wood pellet demand could increase from nearly 10 million metric tons in 2009 to more than 50 million by 2020, according to the WPAC. Murray warns, however, that forecasting future European consumption may prove difficult because it’s not clear yet how the reduction in national deficits will impact renewable energy subsidies. What is clear, however, is that European demand is strong, and Canadian companies are trying to capitalize on their established export capabilities. Murray says Canadian pellet exports to Europe currently consist of 1.7 million metric tons annually. European countries use pellets for power and thermal applications with Belgium, the Netherlands, and England as the main power markets, while Scandinavia uses pellets for area heating, often in conjunction with power generation. Germany and Italy are large markets for residential heating applications.
Approximately two-thirds of Canada’s total pellet production capacity is in Western Canada, where manufacturers can take advantage of backhaul rates, filling empty ships with pellets for export. Backhauling allows western producers to export at only marginally higher costs than eastern companies from Atlantic ports. Because European pellet consumers prefer receiving small quantities at a time, pellets are transshipped, meaning they are off-loaded into smaller carriers, Murray says. The port of Rotterdam, Netherlands, Europe’s largest port, is one of the most popular transshipping locations. Murray says that significant amounts of cargo are processed at Rotterdam, specifically 430 million metric tons of dry and liquid bulk cargo, compared with the relatively small Canadian ports of Vancouver and Halifax at 75 million and 12 million metric tons, respectively. Transportation and handling make up the highest proportion of the total wood pellet cost for producers.
Expanding Markets By constantly targeting emerging markets such as Europe and most recently Asia, Canada is leading the pellet export race. The governments of South Korea and Japan recognize the need to reduce GHGs and are setting environmental policy that is more advanced than in North America, thereby fostering pellet demand.
Although China is behind in emission reduction legislation, Murray says that Canadian companies have had early discussions with the highly industrialized country, which could also provide potential sales for pellet producers. To stay on top of the market, Murray and the large wood pellet producers traveled to South Korea to promote and gauge the country’s interest in Canadian wood pellets. South Korea is committed to reduce GHGs 30 percent by 2020. The country’s energy target is 10 percent renewables by 2022, which could translate into more than 4 million tons of wood pellets. Korea is the 10th largest energy consumer in the world, ranking fifth in oil and second in coal imports. Its high coal consumption makes cofiring with wood pellets an excellent way to meet the country’s emissions directives. British Columbia is the closest province to Korea, and it is twice as far from the Vancouver port to Rotterdam than to South Korea. Pinnacle understands the potential for pellet imports to Asia, and Bassett expects increased trade activity in Korea, Japan and even China. Author: Matt Soberg Associate Editor, Biomass Power & Thermal msoberg@bbiinternational.com (701) 746-8385
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FALL 2011 | PELLET MILL MAGAZINE 41
« International
42 PELLET MILL MAGAZINE | FALL 2011
International »
BIG IN THE BALTICS
With an abundance of raw materials and easy access to export markets, Estonia, Latvia and Lithuania are major league players in wood pellet production. BY PETER TABERNER
In this not-so-talked-about part of Northeast Europe, the Baltic states—Latvia, Estonia and Lithuania—almost secretly possess a successful and burgeoning wood pellet industry, exporting to many major European pellet markets. “The ever-growing level of production capacity in the Baltic region was the key reason we decided at Argus to put together our weekly fob (free on board) Baltic index for spot deals,” says Brodie Govan, editor of Argus Biomass Markets. “The Baltics have become one of the major supply hubs in the wood pellet sector, along with Portugal in Europe and the West Coast of Canada and Southeast U.S. The region has long been considered a reliable exporter to end-users in Scandinavia but that reputation is changing as more buyers from mainland Europe sign up for supply deals.” Brodie estimates the Baltic’s current wood pellet production capacity at about 1.3 million metric tons per year. Latvia leads the way with 800,000 metric tons per year, Estonia at 450,000 metric tons and Lithuania at 120,000. “It’s difficult to put a figure on projected production growth in the region,” he says, “but if Baltic production is currently around 1.3 million metric tons per year, then we can expect this number to continue rising to meet ever-increasing demand.” The level of increase will depend on the cost of raw materials in the region, which, he adds, have been volatile of late and now account for more than 50 percent of the final pellet price for some producers, “forcing some to look elsewhere, to the likes of Belarus and Ukraine,” Brodie says. Producers in the Baltics are well-aware of the interest in their pellet production, but they need to consider their current production capabilities, logistics and raw material availability before they can make expansion plans.
FALL 2011 | PELLET MILL MAGAZINE 43
« International “Denmark and Sweden are our biggest export markets and we sell to Lithuania and Estonia,” says Daiga Markova, a spokesman for Latvia-based pellet producer Latgranula, which produces pellets using pure sawdust that it secures from domestic markets. “We export pellets packed in bags and in bulk by vessels from the port of Riga. There is big interest for pellets from such countries as Italy, Germany and Austria but they are using pellets in diameter of 6 millimeters, but we produce only 8 millimeter pellets so this market is closed for us at the moment.” Gatis Eglitis, director of Ekoliesma, also reports a significant export wave. “We export about 90 percent of our total yield, and the main markets are Denmark, Germany and also a significant portion to Italy,” he says. “For industrial products we have markets in the Netherlands and Sweden.” Ekoliesma would like to expand its export markets to developing ones such as the U.K., but because of transportation issues shipping to bordering European countries makes more economic sense. The domestic market in Latvia is a burgeoning one, but there are obstacles to overcome. “While the local market is growing, there are issues such as the scarcity of raw materials like sawdust,” Eglitis says. “There is also competitive pricing with heating pumps that pro-
44 PELLET MILL MAGAZINE | FALL 2011
duce heat and are about 30 percent cheaper than most other forms of electricity generation.”
Estonia Exports A number of correlations exist between the Estonian and Latvian markets in the sense that while the domestic market is increasing, it’s the exports that make it all worthwhile. Figures from Statistics Estonia paint an interesting picture regarding its electricity “trade balance” with 1,100 gigawatts being imported, vastly outweighed by 4,354 gigawatts exported with wood pellets being a significant part of its overseas sales. The export market trail leads mainly to Denmark and Sweden, with Italy and Belgium also providing trade routes for pellets. “In Estonia, the traditional raw material—sawdust—is used by existing production units,” says Jaanus Roots, manager of Timber OU, in explaining the domestic market. “In addition, pellets are produced from pulp wood. The price of the pulp wood is, in turn, influenced by state [subsidies], therefore the raw material prices and sales prices are currently increasing. Guaranteed access to raw material is the key for opening pellet production in Estonia these days.” A special mention should go to AS Graanul, the Baltics’ largest pellet producer, one of the top five producers in Europe,
which has a foot in both the Estonian and Latvian markets. Total production from its six factories, with one of them operational in Alytus, Lithuania, has reached 500,000 metric tons of sawdust pellets per year, with volumes expected to increase by 25 percent over the next five years and ambition to be the continent’s largest producer. AS Graanul’s goal is to manufacture an additional 320,000 metric tons of pellets, and it hopes that will be achieved by raising its activity in Lativa with a new 180,000-metric-ton capacity plant it plans to have completed by the end of this year. Increased production is planned at AS Graanul’s two existing pellet plants, and finances are expected to be finalized soon. “Domestic markets in the Baltic states are growing quite fast, but it is still a fraction compared to the actual production here,” says Raul Kirjanen, head of sales for AS Graanul. “I think in 10 years, more than 50 percent of the pellets produced here will also be locally utilized.” “Our production is 50 percent residential quality and 50 percent industrial quality, which is flexible between markets, so we are able to produce the pellets that the markets need,” he says. “For premium pellets we use bark-free raw materials shavings, sawdust and chips. For industrial pellets, we use logs and industrial chips.”
International Âť The company has also received a boost from the European Bank of Reconstruction and Development, which is providing a senior corporate loan of 34.4 million euros (46.9 million) to fund two combined heating boilers in AS Grannulâ&#x20AC;&#x2122;s pellet mills. Another interesting development in Estonia is the decision by Swedish-based firm Stora Enso to build its own plant in Imavere Parish, a rural municipality in Estoniaâ&#x20AC;&#x2122;s Jarva County area. This is an unusual logistical move but Tomas Isaksson, director of pellet operations for Stora Enso, is unperturbed and believes the new plant will be a success providing more pellets for the Swedish market. â&#x20AC;&#x153;We plan to start in December this year and initially will look to produce 75,00080,000 [metric tons] but the maximum capacity will reach 100,000 after the first year, Isaksson says. â&#x20AC;&#x153;All of the pellets will be exported to Sweden and the produce will be for the domestic market.â&#x20AC;?
Lithuania Lags Despite having the widest land mass and the highest population at 3.3 million, Lithuania is the youngest sibling when it comes to the pellet market, as both Estonia and Latvia started manufacturing pellets earlier. Lithuania currently has four plants in full operation and total production stands
at 150,000 metric tons per year, with 5,0006,000 of those metric tons used within the domestic market, according to the Lithuanian Biomass Energy Association. As for exports, pellets are being shipped to Germany, Italy, Denmark and Sweden. There is room to grow the domestic market as 50 percent of the population receives heating through districts, which feed heating into small cities and rural areas via local boiler houses and they could be rebuilt into using biomass for heating. The district system is not unique in Lithuania as itâ&#x20AC;&#x2122;s also used in Sweden and Finland. Those who reside in private houses with individual heating plans are also interested in receiving biomass-based heating, the motivation perhaps stemming from high gas prices. â&#x20AC;&#x153;In Lithuania, the potential is there to grow the wood pellet market as gas prices here are the highest in Europe so pellets are more affordable to the consumer,â&#x20AC;? says Remigijus Lapinskas president of the Lithuanian Biomass Energy Association. â&#x20AC;&#x153;We have a lot of high-quality raw material and only the highest standards of pellets are produced.â&#x20AC;? Itâ&#x20AC;&#x2122;s debatable just how much of an advantage building a plant in the Baltics really is, however, despite the obvious geographical advantage for export markets into Scandinavia and Central Europe.
Eglitis and others argue that there is an abundance of raw material, while others warn of its finite volumes. The cost for labor is viewed as being more economical by some observers such as the International Energy Agency, but Lapinskas believes labor costs are higher in Lithuania than in many other countries. â&#x20AC;&#x153;Ten years ago, building and operating such a pellet plant as ours was something innovative in Latvia,â&#x20AC;? Markova says. â&#x20AC;&#x153;Now people are used to pellets as heating energy and have equipped their houses with pellet heating boilers. Now they are satisfied and see advantages for using biomass heating energy, but now when there are lot of pellet plants in Latvia, competition has been growing as well as a shortage of raw material such as sawdust. I am talking about high-quality, pure sawdust, as we are producing only premium class pellets. So nowadays for building and operating new pellet plants, I donâ&#x20AC;&#x2122;t see a big advantage.â&#x20AC;? Despite the concerns over the amount raw materials, the evidence suggests there is likely to be more talk about this corner of Northeast Europe in the future, as it would seem that the pellet markets can only escalate. Author: Peter Taberner Freelance Writer tabernerp@yahoo.co.uk
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ÂŤ Procedure CONTRIBUTION
Silo Fires Require Specific Response Tactics As the use of wood pellets for biomass and thermal energy increases, itâ&#x20AC;&#x2122;s important to learn more about how fires develop, are detected and extinguished in storage silos. BY HENRY PERSSON
The replacement of fossil fuels with renewable fuels impacts fire safety issues in many ways. In particular, the use
STEEL STORAGE: A 300-cubic-meter test silo was used for the gas distribution tests.
46 PELLET MILL MAGAZINE | FALL 2011
of solid biofuels presents new risks and challenges for the industry and first responders alike. One common type of refined solid biofuel is wood pellets, which are often stored in large silos after production or shipping. In the case of a silo fire, it is important to understand the nature of the fire and to use appropriate response tactics. In the past 10 years, the use of solid biofuels, and in particular wood pellets, has increased dramatically. In 2000, the annual production of wood pellets in Europe and North America was about 1.5 million tons, while the expected production for 2010 was about 16 million tons. Sweden is the largest wood pellet consumer with a consumption of about 2.3 million tons in 2010. The production of wood
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).
Procedure »
pellets in Sweden was about 1.65 Figure 1 million tons, while the remaining part is imported by ships, typically from North America and in the Baltic states. Pellets consumption is increasing dramatically in several other European countries as well, however, and as a consequence, handling and storage of wood pellets is also increasing. To improve the knowledge of fire development, detection and extinction techniques in silos, two main test series have been conducted at the SP Technical Research Institute of Sweden. Experience from these projects has resulted in recommendations HEATING UP: Visualization of the recorded temperatures inside the silo during one of the fire tests concerning proper extinguishing Figure 2 practices.
Silo Extinguishing Tests The main purpose of the first project conducted in 2006 was to study fire extinction techniques in silos and to provide a basis for guidelines concerning the tactics to be used. The project also provided valuable information about the initial fire development of a simulated spontaneous ignition in the stored material and the possibility for early detection of such fires. The silo used for the tests was 1 meter (3.28 feet) in diameter and 6 meters high. Close to the base of the silo, a ventilation duct was installed, which was used both to provide ventilation to the silo during the “pre-burn” phase and for infection of inert gas during the extinguishing phase. The silo was filled with wood pellets up to a AFTER BURN: Photos taken during dismantling of the silo showed that the pellets formed a congealed pile in height of 5 meters during the tests. the top part of the silo (left), and the pyrolysis zone about 1.5 meters below the ignition source (right). Local auto-ignition was simulated using a coiled heating wire placed extension of the pyrolysis zone was mainly less than 100 degrees Celsius (212 degrees in the pellets, located centrally in the silo. The experimental results from one of downwards, towards the air inlet, where a Fahrenheit), slowly moved upward (see four tests are summarized in Figure 1. The heat/moisture wave, with a temperature Figure 2). Although the distance from the
FALL 2011 | PELLET MILL MAGAZINE 47
ÂŤ Procedure
point of ignition to the pellet surface was only about 2.5 meters, it took about 20 hours before the fire could be detected by gas analysis in the top of the silo, clearly indicating the problems of early fire detection of smoldering fires in silos.
Gas Filling Tests The purpose of the second project, conducted in 2008, was to investigate how nitrogen should be injected into a real silo during extinction to achieve optimal gas distribution. The experiments were performed in a 300-cubic-meter steel silo with a diameter of 6 meters and a height of 10.5 meters and filled with about 260 cubic meters of wood pellets. In total, five gas filling tests were conducted where the gas was injected from the center of the base of the silo, or alternatively at one point along the silo wall. All tests were conducted in a cold (no fire) silo as the main focus was
volume of the silo. Approximately 35 tons of carbon dioxide were applied intermittently over a period of approximately 18 hours. The application seemed to control the fire but it was not possible to verify how much of the gas penetrated into the bulk. Consequently, it was not possible to determine when a discharge operation could be safely started. Nitrogen was therefore, injected close to the silo base according to the recommendations from the silo experiments in order to control the effect of the gas injection, temperatures and concentrations of carbon monoxide, carbon dioxide and oxygen were measured in the top of the silo. In total, nitrogen injection continued for almost 65 hours without interruption until the silo content was discharged. Approximately 14 tons of nitrogen was used, which gives total gas consumption of approximately 5.6 kilograms per cubic meter, well in line with the recommendations from the research project.
to study the gas distribution in the bulk material. The tests showed that the gas distribution was significantly influenced by the gas flow rate, the location of the inlet and the properties of the bulk, showing the need for several distributed gas inlets when inerting large diameter silos.
Real Fire Experience The results from the first silo project have successfully been applied to several real silo fires in Sweden. In one fire incident, autoignition occurred in a silo, 47 meters high and 8 meters in diameter, filled to about 40 meters with wood pellets. Elevated temperatures had been noted for some time and the plan was to empty the silo within the next few days. However, before such action could be taken, smoke was seen emerging from the top of the silo and the fire brigade was called. Initially, extinction was attempted using the application of liquid carbon dioxide to the top
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Procedure »
Summarized Guidelines Based on both the results of the research projects and practical experience of real silo fires, the following recommendations are given: • Make an initial risk assessment of the situation. Concentrations of carbon monoxide in indoor areas in the vicinity of the silo may be dangerously high. Further, consider the risk for dust and gas explosions in the silo and associated systems. • Close all openings to the silo and turn off ventilation so that air entrainment into the silo is minimized. A release hatch or similar opening in the silo top for gas and pressure relief should be present while still preventing any inflow of air. • Inject nitrogen close to the bottom of the silo. A large diameter silo will require several gas inlets. The nitrogen should be injected in gaseous phase, and an evaporator must be used. Assume an injection rate of
5 kilograms per cubic meter hour (crosssectional area) and a total gas consumption of 5-15 kilograms per cubic meter (gross volume) of the silo. • If possible, measure the concentration of carbon monoxide and oxygen at the top of the silo during the entire extinguishing and discharge operation. • Do not begin discharging the silo until there are clear signs (low levels of carbon monoxide and oxygen) that the fire is under control. • Be aware that the discharge capacity might be considerably reduced compared to a normal situation and that the discharge operation might take several days to complete. • The discharged pellets must be inspected for slowing or burning material and extinguished with water if necessary. • The gas injection should continue during the entire discharge process.
Some important things to remember are: • Do not open the silo during the fire fighting operation. This will cause air entrainment, which will increase the fire intensity and might cause dust and gas explosions and an escalation of the fire situation. • Do not use water inside a silo filled with wood pellets. Water application will cause considerable swelling of the pellets, which could both damage the silo construction and cause significant problems for the discharge operation. Author: Henry Persson Project Leader Fire Dynamics Section, SP Swedish Technical Research Institute Henry.persson@sp.se +46 10 516 5198
FALL 2011 | PELLET MILL MAGAZINE 49
Pellet Mill Magazine
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