Pellet Mill Magazine - January/February 2017

JANUARY/FEBRUARY 2017

Denmark’s Demand Ascension DONG Energy’s conversion projects escalate Danish pellet imports Page 22

Plus: East Central Europe Market Overview

Page 14

AND:

Sustainable Biomass Partnership Q&A Page 18

www.biomassmagazine.com/pellets

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Contents »

Pellet Mill Magazine

Advertiser Index

JANUARY/FEBRUARY 2017 | VOLUME 7 | ISSUE 1

8 Andritz Feed & Biofuel A/S 28 Astec, Inc. 26 Biomass Magazine Webinar Series 27 BBI Project Development 24 BinMaster Level Controls 13 Bliss Industries, Inc. 12 CPM Global Biomass Group 10 Heating the Midwest 2017 9 Industrial Bulk Lubricants (a Dansons company) 21 International Biomass Conference & Expo 2017 25 NDC Technologies Ltd 5 Pellet Mill Magazine - Pellet Map 2017 11 Uzelac Industries 2 Weima America Inc.

PHOTO: VLADIMIR STUPAVSKÝ

FEATURES 14 MARKET Eastern Europe Exporters

Pellet markets in Poland, the Czech Republic, Slovakia, Hungary and Croatia are characterized by little domestic demand and small but growing production for nearby heating markets.

By Katie Fletcher

18 Q&A SBP: What’s New & Next

Eleven questions for Sustainable Biomass Partnership’s first CEO, Carsten Huljus.

By Katie Fletcher

22 DEMAND Denmark’s Biomass Reboot

DONG Energy’s conversion of three facilities from coal to woody biomass will dramatically increase Denmark’s demand for wood pellets.

By Tim Portz

04 EDITOR’S NOTE

Industry’s Adolescence is Behind Us

By Tim Portz

05 INDUSTRY EVENTS 06 OBSERVATION OVERSEAS

European Wood Pellet Market Potential

By Hannes Lechner

ON THE COVER

DEMAND DOMINANCE: New pellet imports flood Denmark to serve DONG Energy’s recent conversion of the country's largest power station, Avedøre Power Station, from coal to wood pellets.

PHOTO: DONG ENERGY A/S

07 INDUSTRIAL INSIGHT

Europe’s ‘Clean Energy for All Europeans’ Proposals

By Seth Ginther

08 BUSINESS BRIEFS 10 NEWS 26 MARKETPLACE JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 3

« Editor's Note

Industry’s Adolescence is Behind Us Perhaps it has to do with the changeover of the calendar, but it feels like we’re at the dawn of a new era in the wood pellet industry.

One of the last news items published in 2016 on our Biomass Magazine online news outlet was a report from RISI that the industry had doubled in the past five years. Clearly, the past five years have been eventful in the industry’s history, and 2011 to 2016 will be remembered as the era of the rise of industrial-scale pellet Tim Portz production and use. Throughout this issue are VICE PRESIDENT OF CONTENT & instances of companies, trade groups and cerEXECUTIVE EDITOR tification bodies turning the page and looking tportz@bbiinternational.com ahead to a new era in the industry. Our news section finds signs of industry consolidation, completed construction and the first iteration of the Energy Information Agency’s wood pellet production tracking efforts. After five astonishing years, the wood pellet industry, it can be said, is through its adolescence.

The next five years, then, will be defined by the industry’s ability to grasp the global opportunity that lies in front of it, and no less importantly, the world’s interest in deploying even greater quantities of low-carbon power and heat.

Without question, one of the priorities for the next half-decade is to make plain to policymakers, environmental nongovernmental organizations and the broader energy community that wood pellets can demonstrably help countries achieve their carbon reduction goals. I’d like to offer my personal thanks to incoming Sustainable Biomass Partnership CEO Carsten Huljus for his candor in an interview conducted for this issue on page 18. By his own admission, the SBP has been through some growing pains and Huljus addresses the industry discontent and offers his vision for the certification scheme’s next chapter. If our industry is going to continue experiencing growth in Europe, a program that harmonizes the sustainability requirements of existing and emerging pellet buyers must take root and win widespread recognition and acceptance.

Any industry that doubles in five years is bound to attract new market participants. Associate Editor Katie Fletcher’s page-14 feature is the continuation of our three-year effort to catalog pellet production from producers across Europe.

Fletcher found that while nascent, pellet production is growing rapidly in Poland, the Czech Republic, Croatia, Hungary and Slovakia. It is difficult to imagine the industry doubling again by the end of 2021, but it doesn’t seem likely that market growth will sunset with the industry’s teen years. Instead, the industry seems poised to evolve into a mature, globally established energy player.

Editorial

PRESIDENT & EDITOR IN CHIEF Tom Bryan tbryan@bbiinternational.com VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz tportz@bbiinternational.com SENIOR EDITOR Ron Kotrba rkotrba@bbiinternational.com ASSOCIATE EDITOR Katie Fletcher kfletcher@bbiinternational.com CONTRIBUTING EDITOR Anna Simet asimet@bbiinternational.com NEWS EDITOR Erin Voegele evoegele@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

Art

ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Lindsey Noble lnoble@bbiinternational.com

Publishing & Sales

CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT OF OPERATIONS Matthew Spoor mspoor@bbiinternational.com SALES & MARKETING DIRECTOR John Nelson jnelson@bbiinternational.com BUSINESS DEVELOPMENT DIRECTOR Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Chip Shereck cshereck@bbiinternational.com ACCOUNT MANAGER Jeff Hogan jhogan@bbiinternational.com CIRCULATION MANAGER Jessica Tiller jtiller@bbiinternational.com MARKETING & ADVERTISING MANAGER Marla DeFoe mdefoe@bbiinternational.com

Editorial Board Members

T.J. Morice, TNT Ventures LLC Stan Elliot, Pacific Coast Pellets Thomas Plaugher, Appalachian Wood Pellets Chad Schumacher, Superior Pellet Fuels Kelli Curran, Curran Renewable Energy Derek Nelson, Forest Business Network Subscriptions to Pellet Mill Magazine are free of charge—distributed quarterly—to Biomass Magazine subscribers.To subscribe, visit www.

BiomassMagazine.com or you can send your mailing address to Pellet Mill Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-7465367. Back Issues & Reprints Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or 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 email to kfletcher@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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COPYRIGHT © 2017 by BBI International

4 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

Industry Events » '($'/,1( 0$5&+ 2017 International Biomass Conference & Expo

April 10-12, 2017

Minneapolis Convention Center Minneapolis, Minnesota

Organized by BBI International and produced

by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop―the world’s premier educational and networking junction for all biomass industries.

866-746-8385 | www.biomassconference.com

2017 Biomass Preparation, Handling & Storage Workshop

April 10, 2017

Minneapolis Convention Center Minneapolis, Minnesota

The operation and financial success of any biomassto-energy facility requires its operators to utilize highquality, consistent biomass feedstocks. The Biomass Preparation, Handling & Storage Workshop agenda will allow producers to take an in-depth look at the latest innovations and strategies in biomass handling and compare it to their own. Whether producers are sourcing wood chips from a handful of trusted suppliers for a campus boiler or are gathering, storing and converting hundreds of thousands of tons of agricultural residues at a biorefinery, this agenda will offer practical value.

866-746-8385 | www.biomassconference.com

Heating the Midwest

April 10, 2017

Minneapolis Convention Center Minneapolis, Minnesota

The Midwest relies heavily on fossil energy for heating homes and businesses. Heating the Midwest is a network of thermal biomass advocates working to increase awareness and usage of renewable biomass for heat, which has the potential to greatly reduce the region’s dependence on propane and fuel oil for thermal energy.

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2017 National Advanced Biofuels Conference & Expo

Limited Advertising Spots

June 19-21, 2017

Minneapolis Convention Center Minneapolis, Minnesota

With a vertically integrated program and audience, the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels including cellulosic ethanol, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products.

866-746-8385 | www.advancedbiofuelsconference.com

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« Observation Overseas

European Wood Pellet Market Potential

BY HANNES LECHNER

In 2016, the wood pellet market in Europe reached a size of 19 million tons per annum (Mtpa), while production capacity stood at 23.5 Mtpa, and consists of two largely independent sectors with only limited interaction. The industrial market is focused on large-scale bioenergy generation, while the premium market is focused on small-scale residential and commercial heat generation.

Industrial Markets The use of pellets for industrial-scale energy generation has not been widely adopted across Europe, with the U.K., Denmark, Belgium and the Netherlands leading the market.

Nevertheless, this sector accounted for 51 percent (9.7 Mtpa) of total pellet demand in Europe in 2016, and Pöyry expects further growth in this sector. Demand is likely to reach levels of between 12.4 Mtpa and 20.2 Mtpa by 2025, depending on some outstanding political decisions.

However, governments often do not regard large-scale biopower generation as a long-term option, and in the U.K. and the Netherlands support for these plants will begin to end in 2027 and 2028 as things stand currently. Governments should start recognizing the importance of this industry sector that is able to provide baseload power to electricity networks, compensating for an increasing share of intermittent energy sources. Support schemes should be extended at appropriate levels to avoid having most of these large-scale biopower plants become uneconomical.

Supply of pellets to the industrial market from directly within Europe is limited, with only the Baltics and Portugal playing a relevant role. In total, this European production capacity amounts to just 2.6 Mtpa, covering only a small portion of the demand in the industrial market. Future growth of the European industrial pellet capacity is limited, as raw material competition is often high for new large-scale pellet mills. For the foreseeable future, the majority of industrial pellets will continue to be imported from the U.S. Southeast and Western Canada. New supply regions such as Brazil could become prevalent if demand grows beyond a certain level.

Premium Markets European premium pellet markets usually have a strong regional character with highly seasonal demand patterns. The recent succession of warm winters has presented suppliers with an overall challenging business environment.

Nevertheless, total demand in Europe has grown steadily and reached around 9.4 Mtpa in 2016. This market segment is expected to continue growing as EU member states work toward achieving their heating and cooling targets under the European Commission’s Renewable Energy Directive. We expect demand for premium pellets to reach levels of between 10.1 Mtpa and 16.4 Mtpa by 2020 and 2021 as a result. We an6 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

ticipate this demand growth to be focused in the U.K., France, Italy and also Austria, while demand in countries such as Germany and Sweden is now stagnating, and may even decline as the focus of the renewable heating industry switches to alternative technologies.

Currently, most EU member states still have not yet formalized their renewable heat strategies out past 2020 and any demand predictions beyond then would be speculative in nature. It is clear, though, that biomass heating will continue to play a key role in meeting any future renewable heating targets.

To date, European premium pellet markets have been supplied by small- and medium-scale pellet mills (average 55,000 tpa), often through traders, wholesalers and distributors. This market segment has to cope with considerable overcapacity and low utilization rates across an estimated 20.9 Mtpa of capacity. Exposure to raw material price fluctuations is also of concern for many producers, especially those who are independent, with sawmills increasingly establishing their own pellet production capacity. Stark evidence of this challenging market environment has been the insolvency of Europe’s largest pellet producer, German Pellets, in early 2016.

Some producers are also concerned about the threat of pellet imports from overseas, as mills in regions such as the U.S. Southeast and Russia can supply at competitive price levels and, in many cases, have already gained ENPlus certification.

Russian mills, for example, supplied upwards of 450,000 tons into Europe in 2016 through independent traders who provided market access.

Opportunities for North American Producers The European pellet sector needs to be followed closely over the coming few years as it holds both threats and opportunities for North American producers. Besides further growth potential in the industrial market out to 2025, the likely further expansion of the premium sector post-2020 offers an opportunity for North American producers to soften the impact that the currently expected decline in industrial pellet demand post-2027 could have on their business. One of the key market entry barriers is gaining access to already well-established distribution networks and end customers within these European markets. Some producers, such as the Drax Group, have already made the first steps toward overcoming this challenge by acquiring a local supplier and distributor (Billington Bioenergy in the U.K.), and such convergence between the industrial and premium sectors could become more common.

Author: Dr. Hannes Lechner Senior Principal, Pöyry Management Consulting +44 7876 348 262 hannes.lechner@poyry.com Co-Author: John Dawson-Nowak Consultant, Pöyry

Industrial Insight »

Europe’s ‘Clean Energy for All Europeans’ Proposals

BY SETH GINTHER

In late November 2016, the European Commission released its highly anticipated “Clean Energy for All Europeans” package, which contains multiple energy proposals for post-2020, including a proposed revision to the EU Renewable Energy Directive and accompanying proposed criteria for bioenergy.

The proposals include increasing the share of renewables in energy consumption to 27 percent by 2030, 50 percent of which must be in renewable electricity, and increasing the energy efficiency target to 30 percent by 2030. One major difference in the revised RED is that the share of renewables is not set at the member state level, whereas the current targets for 2020 include specific binding targets for each member state. Instead, the 2030 targets are set for the EU as a whole.

The revised RED also introduces new sustainability and efficiency criteria for biomass. The proposed approach to ensuring greenhouse gas reductions, while also minimizing any negative environmental impacts, is a risk-based approach, using national and international certification and verification schemes, such as the Sustainable Biomass Partnership standard. The proposals allow member states flexibility in developing sustainability criteria or using current national laws and regulations for compliance.

Carbon emissions from woody biomass will still be considered under land use change provisions in the country where the biomass is produced. U.S. forests currently serve as a carbon sink, thereby indicating that the forestry sector (including biomass) provides a positive carbon benefit. Emissions during production and transport of biomass will continue to be reported to each member state’s regulatory body and accounted for under national emissions levels.

On efficiency, the proposal requires biomass installations over 20 megawatts to comply with higher efficiency standards, limiting the biomass industry to combinedheat-and-power projects only. The policy intention of this proposal is unclear, as biomass-to-power generation projects already surpass current 2020 biofuel efficiency targets, making this limitation seem arbitrary. This proposed requirement will not apply to current projects and exemptions are allowed if a member state can provide substantiated evidence of electricity supply risks without biopower installations.

Overall, the energy package presents a positive outlook for the biomass industry. The proposals acknowledge that biomass “plays a key role towards delivering the EU climate and energy objectives, and this role will continue in the future.” Additionally, the proposals recognize the positive impacts that sustainable biomass can have on forest operations and that biomass offers substantial greenhouse gas savings.

However, these proposals are far from final. Over the next 18 to 24 months, EU Parliament and the EU Council will review and vote on these proposals and we will likely see multiple changes and edits as each member state and stakeholders across multiple industries and sectors voice their opinions. We look forward to working with these multiple parties and legislative bodies to ensure that bioenergy remains an important part of Europe’s climate strategy.

Author: Seth Ginther Executive Director U.S. Industrial Pellet Association 804-771-9540 sginther@hf-law.com

JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 7

Business Briefs

PEOPLE, PRODUCTS & PARTNERSHIPS

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Morbark appoints CEO Morbark has appointed David Herr as CEO. In addition to being an active member of the current Morbark board, he has more than 30 years of relevant Herr experience in operations, supply chain management and executive management with major companies, including Navistar, GE Aircraft Engines and BAE Systems. He has diverse business experience in heavy-duty truck manufacturing, commercial avionics, commercial ship repair, munitions production, and information and intelligence analysis. In his most recent role as executive vice president at BAE Systems, Herr was responsible for one of the largest government service sectors in the U.S. with more than 19,000 employees. He also currently serves as a board member for MHI Holdings, a ship repair contractor for the U.S. Navy.

Talaga

Barko adds product manager Steve Talaga has been appointed product manager for forestry equipment manufacturer Barko Hydraulics LLC, part of the Pettibone Heavy Equipment Group. In his new position, Talaga is responsible for product line development, market analysis, and general support and interaction with Barko dealers and customers. Talaga previously worked for sister company Pettibone/Traverse Lift LLC for more than four years, first as a service technician and then as a design engineer.

8 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

SBP announces directorate changes The Sustainable Biomass Partnership has announced Dorothy Thompson has retired as a director and chairman of the board. Thomas Dalsgaard, who has been a director of the company since 2013, succeeds Thompson as chairman.

Thompson

Dalsgaard

Eastern Instruments introduces flow meter Eastern Instruments has introduced the CentriFlow BWS, an economical and accurate gravimetric in-line mass flow meter that serves as an alternative to impact flow meters and belt scales for the dynamic measurement of solids while in process. The BWS can be used to measure granular solids such as grains, pellets, beans, wood chips, pet food along with free-flowing granular powders, such as sand.

Rentech adds CFO Paul Summers has been appointed as chief financial officer (CFO) of Rentech Inc., replacing Jeffrey Spain. Summers will be responsible for overseeing the finance, treasury and accounting functions of the company. He served as Rentech’s vice president and treasurer immediately prior to his appointment as CFO and has held various finance related roles at Rentech since 2006.

Prior to joining Rentech, Summers held positions at Salomon Smith Barney, Citigroup Inc. and Allied Capital Corp.

American Biomass acquires Okanagan Wood Pellets American Biomass Corp. Inc. has completed its purchase of Okanagan Wood Pellets from Viridis Energy Inc. American Biomass began offering Okanagan brand high-quality softwood pellets to retailers immediately, just in time for the peak demand in wood pellets.

Baringa Partners to lead ETI biomass logistics project The Energy Technologies Institute recently appointed energy consultancy Baringa Partners to lead a new ETI bioenergy project, alongside renewable energy consultancy Ecofys and supply chain management software provider LLamasoft. Together, the companies will examine the future of biomass logistics in the U.K. The project will model the logistics requirements of different future bioenergy scenarios, identifying commonalities and differences, key decisions and actions required to ensure logistics infrastructure in the U.K. can support a growing bioenergy sector through 2050.

Colombo Energy qualifies under PFI Standards Program The Pellet Fuels Institute recently announced the qualification of pellet fuel manufacturer Colombo Energy of Greenwood, South Carolina, into the Pellet Fuels Institute Standards Program. The PFI Standards Program is a third-party accreditation program providing specifications for residential- and commercial-grade pellet fuel, now representing 17 pellet manufacturing companies with a combined 29 facilities.

Drax Biomass helps protect wetlands Drax Biomass Inc. marked National Bioenergy Day by declaring the cypress and tupelo stands found in forested wetlands, including the Atchafalaya Basin, to be off-limits for its timber purchases. The “river of trees,” noted for its magnificent cypress-tupelo swamps, has been eyed by logging operations, some illegal, for mulch and lately for wood pellets. A collaborative effort between Drax Biomass and Atchafalaya Basinkeeper (ABK) aims to provide greater protections for these and other valuable forested wetlands. The two organizations have worked together to agree on a set of sourcing practices that will strengthen environmental protection and promote sustainable use of forest resources. By committing to these sourcing practices on National Bioenergy Day, DBI and ABK hope to encourage other bioenergy companies to follow suit.

BTEC adds board member Dane Floyd, president and CEO of Biomass Engineering and Equipment, has been elected to serve on the Biomass Thermal Energy Council board of directors. Biomass Engineering and Equipment designs and manufactures machinery for the biomass and wood processing industries, while BTEC advances the sustainable use of wood and agricultural biomass for clean, efficient heat and combined heat and power to meet America’s energy needs and strengthen local economies.

Pinnacle, NORDEN sign contract Dampskibsselskabet NORDEN A/S has announced a nine-year contract to transport pellets for Canada-based Pinnacle Renewable Energy Inc. Starting in 2018, NORDEN will transport 3.5 million metric tons of wood pellets from Vancouver and Prince Rupert in western Canada to Europe.

NORDEN is expected to make eight shipments per year for Pinnacle using Supramax vessels. Each trip is expected to take approximately 65 days.

Enviva acquires North Carolina plant Enviva Partners LP has completed the acquisition of a pellet plant in Sampson County, North Carolina, and associated offtake contracts from Enviva Holdings LP’s joint venture with affiliates of John Hancock Life Insurance Co. The Sampson plant is expected to produce approximately 500,000 metric tons of wood pellets in 2017 and to reach its full production capacity of approximately 600,000 metric tons in 2019. In addition to the plant, the transaction includes a 10-year, 420,000 metric-ton-per-year offtake contract with an affiliate of DONG Energy Thermal Power A/S, a 15-year, 95,000 metric-ton-per-year offtake contract with the Hancock JV, and matching third-party shipping contracts.

SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Pellet Mill Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

You may also email information to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence.

JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 9

Pellet News U.S. densified biomass fuel manufacturing facilities Annual capacity (million tons per year)

East

2.29

South

10.82

West

1.15

U.S. total

14.26

Currently operating/temporarily not in operation

11.52

Planned/under construction

2.74

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

EIA launches pellet data reporting The U.S. Energy Information Administration has published the initial results of a new survey launched in January 2016 to gather information on wood pellets and other densified biomass production, sales and inventory.

The survey gathers data from operating pellet plants in the U.S. Facilities with an annual capacity of 10,000 or more tons report data monthly, while smaller facilities file annual reports.

The data shows the U.S. currently has 11.52 million metric tons of existing pellet production capacity, with an additional 2.74 million metric tons planned or under construction. Facilities required to file monthly reports had a combined annual production capacity of 11.4 million tons.

During the first half of 2016, the EIA noted U.S. manufacturers produced approximately 3.3 million tons of wood pellets and sold 3.1 million tons, mostly into foreign markets. Over the same time period, approximately 82 percent of pellet sales were utility pellets sold into export markets, with more than 85 percent of that volume sold to the Drax power plant in the U.K. The remaining 18 percent of pellets sold were sold into the U.S. heating market.

Grant supports Kentucky pellet project A proposed 75,000 ton-per-year pellet project in Harlan County, Kentucky, is expected to benefit from a $2.52 million grant. The funds will be used to leverage an additional $10.5 million in private investment from Harlan Wood Products LLC. The project is to be located at a previously reclaimed abandoned mine lands site in Yancey, Kentucky. Kentucky Gov. Matt Bevin recently announced that the Harlan County Industrial Development Authority Inc. received preliminary approval from the U.S. Office of Surface Mining and Reclamation Enforcement for the grant.

While Harlan Wood Products will provide the investment to purchase and install the equipment used in the manufacturing process, the Harlan County Industrial Development Authority will use the $2.52 million to ensure that the site has the necessary water, natural gas and electric, foundation work and shell facility to house the equipment and access road upgrades.

Pellets produced at the facility are expected to be exported to Europe, primarily Italy and Denmark, for sale into the residential and commercial markets. Feedstock for the plant is expected to consist of cull timber and branches greater than 4 inches in diameter that remain from area logging operations, as well as sawdust from nearby wood processing facilities.

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Pellet News »

MESys opens new pellet distribution facility

Draft CfD administrative strike prices (£/MWh, 2012 prices) Projects deploying in 2021/22

Projects deploying in 2022/23

Offshore wind

105

100

Advanced conversion projects (with or without CHP)

125

115

Anaerobic digestion (with or without CHP (>MW)

140

135

Dedicated biomass with CHP

115

115

Wave

310

300

Tidal stream

300

295

Geothermal

n/a

SOURCE: U.K. DEPARTMENT FOR BUSINESS, ENERGY & INDUSTRIAL STRATEGY

UK announces plans for next CfD auction On Nov. 9, the U.K. Department for Business, Energy & Industrial Strategy released details of the next Contracts for Difference auction, noting companies will compete for £290 million ($352.8 million) worth of contracts.

The application process for the next CfD allocation round is set to open in April and is open to offshore wind, advanced conversion technologies, anaerobic digestion projects greater than 5 MW, dedicated bio-

mass with combined-heat-and-power, wave, tidal stream and geothermal projects that begin operations from 2021-’22 or 2022-’23. The auction is not open to wind, solar and biomass conversion projects.

According to the DBEIS, the CfD auction will result in enough renewable electricity to power approximately 1 million homes while reducing carbon emissions by approximately 2.5 million metric tons per year from 2021-’22 onward.

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Maine Energy Systems celebrated the opening of its new wood pellet distribution facility and heating equipment showroom in November with a ribbon-cutting ceremony held at the project site in North Oxford, Massachusetts. The new location joins MESys’ original pellet distribution facility in Bethel, Maine.

According to BJ Otten, chief operating officer of the company, the project was built with the intention of expanding the availability of pellet fuel to a marketplace in Massachusetts and supporting the efforts of the commonwealth. “They are certainly promoting wood pellet central heating with their grant programs and clean energy initiatives,” Otten said. “This was a side piece to validate and support that program.”

MESys received an $806,000 grant from the state’s Department of Energy Resources’ Renewable Thermal Business Investment Financing Program to support development of the facility.

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« Pellet News

rounding areas. The plant is expected to produce district heating for approximately 106,000 Danish homes, along with enough electricity to serve approximately 230,000 homes annually.

According to DONG Energy, the conversion took approximately two years to complete and is the largest conversion to green energy completed in Denmark to FIRING UP WITH BIOMASS: The Denmark-based Studstrup date.

Power Station recently completed a two-year conversion from coal Earlier this year, a storto wood pellets. age silo with the capacity to PHOTO: DONG ENERGY store 65,000 metric tons of wood pellets was constructed at the power Studstrup Power Station station site, along with the installation of begins burning pellets more than 800 meters of closed conveyor In Denmark, the Studstrup Power belts to transport wood pellets from the Station celebrated its conversion to wood harbor to the silo and into the boiler. In pellets in October. The large-scale com- May, DONG Energy noted the first shipbined-heat-and-power plant provides dis- ments of pellets had begun to arrive at the trict heating to the city of Aarhus and sur- site.

Arkansas pellet plant begins operations Highland Pellet’s 600,000 metric-ton wood pellet plant in Pine Bluff, Arkansas, officially opened in late 2016 and was undergoing commissioning in December.

The facility was expected to begin producing pellets by the end of the year.

Plans for the $229 million, four-line plant were initially announced in August of 2014. The company engaged Astec Inc. as engineering, procurement and construction contractor. It is Astec’s second major wood pellet plant project.

Andritz and Progress Industries provided pellet mill and wood yard equipment.

Once fully operational, the facility will take in approximately 1.4 million tons of wood feedstock annually, mostly southern yellow pine. Pellets produced at the facility will be transported by Union Pacific on mainline rail to the Port of Greater Baton Rouge, Louisiana, for export to Europe.

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Study analyzes GHG impact of pellet heating The Northern Forest Center recently released a study that analyzed the greenhouse gas (GHG) emission impacts of heating buildings with state-of-the-art wood pellet boilers.

According to the study, on day one, using wood pellets for heat in the Northern Forest reduces GHG emissions by more than 50 percent compared to oil and natural gas.

At the 50-year mark, GHG emissions from pellets dropped to 62 percent less than oil, 67 percent less than natural gas and 56 percent less than propane. The study found heating with oil produces 357 grams of GHG per kilowatthour (kWh) with no reduction over time, whereas heating with pellets

Avedøre Power Station converts to biomass

GHG emission data Grams of C02 per kWh Wood pellets

135

Propane

304

Heating oil

357

Natural gas

403

SOURCE: NORTHERN FOREST CENTER

produces 165 grams per kWh initially and drops to 135 grams per kWh by year 50. â&#x20AC;&#x153;Now we can say unequivocally that heating with high-efficiency wood pellet boilers in the Northern Forest reduces greenhouse gas and helps us fight climate change,â&#x20AC;? said Rob Riley, president of the Northern Forest Center. â&#x20AC;&#x153;When we use local, renewable wood pellets to heat, weâ&#x20AC;&#x2122;re reducing greenhouse gases emissions and supporting our regionâ&#x20AC;&#x2122;s forest economy.â&#x20AC;?

Denmarkâ&#x20AC;&#x2122;s largest power station has completed its conversion from coal to biomass. In December, DONG Energy announced its Avedøre Power Station combined-heat-and-power (CHP) plant is now able to produce electricity and heat based on wood pellets and straw, rather than coal and gas.

The conversionâ&#x20AC;&#x201D;part of a heat agreement between the Danish energy companies Vestegnens Kraftvarmeselskab (VEKS) and DONG Energyâ&#x20AC;&#x201D;aims to provide green district heating to VEKSâ&#x20AC;&#x2122; customers in the Greater Copenhagen area. The change from coal to wood pellets also contributes significantly to the cityâ&#x20AC;&#x2122;s climate targets. Avedøre Power Station expects to reduce its CO2 emissions by about 500,000 metric tons of CO2 per year, equivalent to the annual emissions from 255,000 cars.

According to DONG Energy, the facility is expected to produce biomass-fueled district heating to approximately 215,000 Danish homes in Copenhagen along with enough electricity to power 600,000 Danish households annually.

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%/ ( LQGG

30

Denmark

East Central Europe

Lithuania

Pellet Market Snapshot

Poland

Germany Czech Republic

Slovakia Austria

Ukraine

Hungary

Switzerland

Romania

Croatia Bosnia Serbia

Italy

Bulgaria Macedonia

14 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

Market »

Geographical Size & Population (2015) Poland 120,726 sq mi (approx. New Mexico) 38 million (approx. California) Czech Republic 30,450 sq mi (approx. South Carolina) 10.5 million (between Michigan and Ohio) Slovakia Maryland and 18,933 sq mi (between West Virginia) 5.4 million (approx. Minnesota) Hungary 35,919 sq mi (approx. Maine) 9.9 million (approx. Michigan) Croatia 21, 851 sq mi (approx. West Virginia) 4.2 million (approx. Kentucky)

Wood Pellet Production (in 2015, metric tons)

600,000 - 1,000,000 99,999 - 300,000 0 - 99,999 Exports SOURCE: EUROPEAN PELLET COUNCIL SURVEY

Eastern Europe

EXPORTERS Although a number of East Central European countries lack domestic demand, exports continue to climb, fueling demand in neighboring heating markets.

BY KATIE FLETCHER

W

ood pellet production in the European Union grew 4.7 percent between 2014 and 2015, with 14.1 million metric tons produced in 2015, according to the European Biomass Association’s (AEBIOM) 2016 European Bioenergy Outlook.

Production was spread throughout member states with the largest volumes coming from Germany (2 million metric tons) followed

by Sweden, Latvia, Estonia and Austria. The EU consumed more pellets than it produced, reaching 20.3 million metric tons of pellet consumption in 2015. A majority was for heat production at 12.9 million metric tons, a 4.2 percent increase between 2014 and 2015, even despite consecutive mild winters and low oil prices. Pellets used for heat consumption can be divided into three markets—residential heating (42.2 percent), commercial heating (15.7 percent) and heat generated from combined heat and power (CHP) (6 percent).

Italy, Germany and France were the highest pellet-consuming countries in 2015 for the residential heat market. Denmark and Sweden also made the list of top five countries consuming pellets for heat, but a majority of pellets in Denmark are used in CHP plants and in Sweden, commercial heating installations.

Although far from making the list of top five countries for pellet production or consumption, member states found in East Central Europe have increasingly supplied nearby, mostly residential, thermal markets. Insignificant domestic demand and small but growing pellet production largely characterizes pellet markets found in this territory. Increasing Eastern European pellet production comes from a few large-scale producers, a handful

of medium- to small-scale producers and the rest is accounted for through varying levels of decentralized micro production in each country. A number of these countries export the bulk of their production to more developed pellet markets, but the demand side, at least in some countries—like Poland—could eventually approach levels found elsewhere for both residential and industrial use of pellets.

Poland

Poland’s pellet market beginnings date back to 2003 when almost all production was for export. Since then, production has increased, as has wood pellet consumption with the exception of slight fluctuations. By 2008, installed pellet production capacity already amounted to 674,000 tons and production to 340,000 tons. Around 20 pellet producing companies were operating in Poland at the time, most with capacities below 30,000 tons. During that time, total domestic consumption was estimated around 120,000 tons, making Poland an export dominant country, which it continues to be today.

Production capacity in 2015 climbed to approximately 1.2 million tons from an estimated 70 producers, only half of which produce more than 5,000 tons per year. Poland has six large pellet producers with production capacities greater than 50,000 tons per year, 25 to 30 producers above 5,000 tons per year, and more than 35 producers with capacities less than 5,000 tons per year (a majority below 2,000 tons), according to data collected by the Baltic Energy Conservation Agency, a regional energy agency situated in northern Poland’s Gdańsk Pomerania region.

The big pellet producing companies include Barlinek Inwestycje, IKEA, PPUH Fa-

JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 15

« Market

bich, Stelmet and Tartak Olczyk. Poland producers mainly utilize sawdust from coniferous species as their raw material to produce pellets almost exclusively for heating markets. Approximately 80 percent of pellet production is certified within Poland to either DINplus, ENplus or both standards. “Certification has become more important during the past three years,” says Ludmila Wach, director of development with the Baltic Conservation Agency. In 2013, nine certifications were held by five producers.

Now, 39 producers are certified with 27 DINplus and 18 ENplus certificates. Poland’s pellet production is mainly distributed to Germany, Denmark and Italy. In 2015, Poland exported 36,012 tons of pellets to Italy for nearly $7 million, according to the UN Comtrade database.

Poland imports around 90 percent of its pellets from the Ukraine, with a limited amount coming from Lithuania, Belarus and Russia.

Certification and production aren’t the only numbers on the rise. Since 2008, consumption has more than doubled to around 300,000 tons per year with a majority (250,000 tons) consumed residentially for heat. The remaining 50,000 tons were consumed in Polish CHP plants and power plants in 2015. Wach notes that there are no CHP installations dedicated to pellets only, but there are several small—200 to 300 kilowatt (kW)—district heating projects.

Poland’s domestic market is still relatively small, as coal remains the main source of heat.

“The pellet market isn’t doing too well due to low coal prices,” Wach admits. “And Polish policy on lowering emissions has not been strong.

Last year, a new anti-smog regulation came into force and is slowly kicking in.” She adds that there are green certificates for green electricity, but during recent years, certificate prices dropped drastically and this is no longer an incentive. EU funding for biomass heat sources is available, and, according to Wach, some municipalities try to financially support the exchange of boilers in order to reduce emissions.

Consumers in Poland usually buy 15-kilogram (kg) bags of pellets, and the price of pellets is approximately €210 ($220) including valueadded tax (VAT) per ton.

Czech Republic

Bordering Poland to the southwest, the Czech Republic’s pellet market holds a number of similar attributes. The country began producing a small amount of pellets in 2004 (11,000 metric tons), ramping up to 60,000 metric tons in 2007. According to Vladimír Stupavský, chairman of the Czech Pellets Cluster,

2007 has been followed by rapid growth, and 2015 production of ENplus pellets reached 232,000 metric tons (98 percent ENplus A1, 2 percent ENplus A2) with an additional 30,000 to 40,000 metric tons of uncertified production. Although production data for 2016 hasn’t quite been released, Stupavský says, “I’m 100 percent sure we reached 300,000 metric tons of wood pellet production in 2016.”

The Czech Republic supports approximately 20 stable producers, only five with production capacities over 20,000 metric tons—the top three ranging between 50,000 and 80,000 tons per year—and the rest falling between 5,000 and 10,000 metric tons annually. Stupavský shares that the big pellet players within the country include Mayr-Melnhof, Stora Enso, Pfeifer and Biomac. Pellets are mainly made from clean spruce sawdust without bark (80 percent) and the rest is a mix of hardwood, softwood with bark and microchips. “The biggest producers are pellet plants directly adjacent to sawmills,” Stupavský says. “We also have about 10 pellet plants with 5,000-ton capacity on greenfield—they are forced to buy sawdust on the open market and faced with the variable quality of sawdust.”

Fifteen pellet companies are ENplus certified. “Without ENplus, our producers cannot sell their pellets on western markets,” Stupavský says. “Only a few small pellet plants have not been certified. They only sell in their neighborhood.”

The Czech Republic has three times more production than consumption. In 2014, of the 199,000 metric tons of production, 138,000 tons were exported mainly to Italy, Denmark and Austria. In 2014, the Czech Republic exported 56,815 tons of pellets to Italy for a little over $15 million and, in 2015, doubled its exports to Italy to 116,776 tons for over $25 million, according to UN Comtrade. Also, the Czech Republic has several thousand metric tons exchanged with Germany every year. The country imported 25,000 tons in 2014. Imported pellets come mainly from the Ukraine and Belarus, usually uncertified and of poor quality, Stupavský notes. He says these pellets are bought by those who wish to save money and don’t mind a dirty boiler.

In 2015, pellet consumption reached around 95,000 metric tons, almost doubling in five years from approximately 50,000 metric tons consumed in 2010. During 2010, the country had around 10,000 pellet boiler installations. Almost all wood pellets consumed are for heating purposes. Wood chips and agropel-

16 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

PACKING MACHINE: Pellets are being filled at Enviterm Inc.’s 7,000 ton-per-year plant located near the small town of Ždírec nad Doubravou in the Vysočina region of the Czech Republic.

PHOTO: VLADIMIR STUPAVSKÝ

lets are used in larger installations like CHP and district heating units. There is some assistance for pellet installations. “We are the first country from Europe where the Ecodesign for small heating sources was integrated,” Stupavský says. “We also have reduced rate of VAT for pellets and briquettes.”

When asked about competing heating sources, Stupavský says, the biggest competitor is coal, as it’s about 30 percent cheaper than pellets currently. Prices vary from season to season; in the summer, pellets can cost €190 per ton with VAT and distribution and in the winter, up to €230 per ton with VAT and distribution.

Overall, the Czech Republic’s pellet market is strengthened by its independence on imports, but the market is weakened by cheap coal and natural gas.

Slovakia

Slovakia is situated in Central Europe bordered by Poland, Ukraine, Hungary, Austria and the Czech Republic. Much of the country is forested, making it an ideal market for developing biomass energy, however, environmental awareness in Slovakia is still fairly low, leaving little demand domestically. The Slovak pellet market was established toward the end of the ’90s and is still relatively small, according to a regional report put together by the information platform FOROPA Biomass to the Masses. The report finds that pellet production is unstable and dependent upon the state of the international market (demand prices). In 2012, pellet producers within Slovakia produced 80,000 metric tons and exported around 30,000 tons to Italy, the Netherlands and a few others. Like Poland and the Czech Republic, Slovakia uses dry sawdust from the wood processing industry as a base for much of its feedstock for pellet production. Based on a recent European Pellet Council survey,

Market »

Slovakia’s 2015 pellet production falls between 100,000 and 300,000 metric tons.

Hans Comberg is the CEO of one of Slovakia’s largest pellet operations, myWood Pellets, with a production capacity around 15,000 metric tons. The majority of the pellet operation belongs to myWood Polomka Timber s.r.o., a manufacturer of EN13377-certified formwork materials and three-layer structural panels. The pure softwood shavings from its board production serve as the raw material to make pellets. “To produce our wooden formwork beams, we only use dry wood so we don’t have to waste any energy to dry our raw material for pellet production,” Comberg says.

The use of this dry raw material coupled with on-site pellet production saves the company in transportation and energy, resulting in a lowcarbon footprint, he adds.

According to Comberg, most pellet production is located adjacent to a wood manufacturing business. “Almost every big wood producing company in Slovakia by now has its own pellet production,” he says. “That’s why it’s very difficult to expand the business because all of the good spots are already taken by someone else.” He adds that only a few production sites don’t have an adjacent sawmill where they get their material from because transportation and logistics costs are very high.

Comberg says there are maybe five or six big producers within the country, but the rest consists of very decentralized micro production. Even so, Slovakia’s pellet industry is developing at a very fast scale, he says. “We started with our production at the end of 2012,” Comberg notes. “We were the first producers certified with ENplus certification and now we already have nine ENplus-certified producers in Slovakia. Comparative to the size of the country and its inhabitants, that’s quite a lot.”

Comberg estimates that in addition to the nine certified, there are 20 to 30 small producers who produce for their own purposes.

Certification is particularly important for export, and larger producers are mainly producing for those markets, as there are few customers in Slovakia. “Eighty percent of producers in Slovakia are mainly exporting pellets to Italy,” Comberg estimates. “We also have some customers in Austria, Germany and Slovenia.”

The UN Comtrade database shows that Slovakia exported 61,947 tons of wood pellets to Italy in 2015 for about $12.3 million.

European-wide certification helps overcome customer prejudices, which Comberg notes are getting better. “Pellets from Eastern

Europe have a bad reputation because, in the past, many producers put in things that they should not have, like plastics and other things, especially those from Russia, Ukraine and far East,” Comberg says. “These pellets came to the European market and people started not wanting to buy pellets that came from east of Austria, I’d say, they just didn’t trust it.”

Slovakia’s annual domestic consumption in 2012 was approximately 50,000 tons, according to FOROPA’s report. EPC’s 2015 survey indicates that pellet consumption for heating is still below 100,000 metric tons. The slow development of the market is attributed to the relatively high installation cost of boilers and the low prices of competitive heating fuels. What pellet consumption the country does have is confined to the residential (1,000 households) or about 100 small- to mid-scale installations with annual consumption up to 3,000 tons, according to FOROPA’s 2012 and 2013 data.

In spring 2013, pellets in Slovakia ranged from €170 to €210 per ton, based on seasonality and regional conditions.

Heating oil and gas are the largest sources of heat in Slovakia, and Comberg says this has strained the other heating markets they serve with their pellet production. “This is a huge problem, but more a problem for say Germany or Italy, and also Austria because many people who wanted to change their oil heating system are now waiting to see where prices go. Even if these systems are 30 years or older they are still waiting,” he says.

Croatia and Hungary

Further south, Hungary and Croatia pellet markets mirror other East Central markets in that they predominantly export pellets for heat within the EU. Croatia has a long coastline along the Adriatic Sea, making trade with Italy optimal. Croatia exported 176,890 tons of wood pellets to Italy in 2015 for nearly $30 million, according to the UN Comtrade.

In 2007, Croatia’s market was just beginning to develop with 150,000 metric tons of pellet capacity in the country, but only 40,000 metric tons actually produced, 95 percent of which was exported, according to Inteligentna Energija, a business network that promotes domestic renewable energy sources and efficiency. AEBIOM’s 2016 statistical report ranked Croatia in the 100,000-to-300,000-ton pellet production range. Currently, the country has 14 ENplus-certified producers. Some of the country’s main producers include Drvenjača, Energy Pellets, Mundus Viridis, Spačva and Šišarka.

Hungary is behind other Eastern European countries in using renewable energy sources such as biomass, according to a pellet report issued by the Hungarian Biomass Association.

Natural gas meets much of the national energy demand. Still, Hungary’s pellet market has gradually grown since it first got legs in 2008.

In that year, six plants started initial test runs, and began producing only for export. In the second half of 2009, the number of installed pellet stoves and boilers increased, which led to the beginning of the domestic market. By the end of 2011, 11 plants with small and medium capacity and two larger plants (exceeding 30,000-ton-per-year capacity) were operating with total capacity of 126,500 tons per year.

However, only about 40,000 metric tons of pellets were produced that year. Today, according to AEBIOM’s 2016 statistical report, Hungary’s pellet production still falls below 100,000 metric tons per year. Hungary currently has three ENplus-certified pellet producers: Hungarian Biomass Recycling Ltd., R.E. HEATING ZRT and Pellet International Kft. Plants are often located near available raw materials, near forests, but some producers in southeast Hungary use agricultural byproducts as raw material for their production. Wood pellets are mainly for export and agripellets are for local, domestic use. Hungarian wood pellet plants main target countries for export are Italy, Austria, Slovakia and Poland. In 2015, UN Comtrade data suggests Hungary exported 6,189 tons of wood pellets to Italy for around $1.3 million.

In 2010, about 15,300 tons of pellets were consumed, with about 5,000 tons coming from imports, according to the HBA report. Pellets are mostly imported from Ukraine and Romania. Also in 2010, the country had 300 residential boilers (less than 50 kW), 75 commercial boilers (more than 50 kW) and 2,150 pellet stoves. Eighty-five percent of installed appliances were pellet stoves in 2010, so pellets are typically sold in bags.

Unlike the power market, which remains fairly concentrated in a few member states, wood pellet use for energy has penetrated all heat markets across Europe. While not large, export-driven pellet industries in East Central Europe are increasingly fueling these demands as their own markets develop.

Author: Katie Fletcher Associate Editor, Pellet Mill Magazine 701-738-4920 kfletcher@bbiinternational.com

JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 17

Q&A

SBP: What’s New & Next

Appointing its first, full-time CEO, Carsten Huljus, is just one step in the Sustainable Biomass Partnership’s transition to an established certification system.

Carsten Huljus INTERVIEW BY KATIE FLETCHER

How did you come into this recently established SBP leadership role?

The position found me. I was managing director of a certification body (CB) focusing on Forest Stewardship Council and Programme for the Endorsement of Forest Certification schemes for the past 14 years, and it was clearly a good fit for me. I would no longer be a service provider for a certification system, but I’d change sides of the desk. You could also say, it’s a natural step in my career to move to an organization that is now using CBs to assess SBP standards compliance. In addition, SBP has taken a very innovative approach compared to many other certification systems out there. It’s not a closed box, but it’s integrated other forest certification systems into its own system, and it’s building on top of these. I think that is how certification

systems will work in the future, rather than doing everything by themselves.

The appointment of the CEO role marks the transition of SBP into a fully operational entity. Before, when SBP was founded in 2013, SBP was set up as a standard-setting body and now that the standards are established, it’s transitioning into an established certification system and it needs a strong leading role to kick it off.

If you move such an organization from a standard-setting body into an operational body, you need strong relationships with all of your stakeholders, particularly those who the standards impact; all of the biomass supply chain actors, trade associations, policymakers and environmental nongovernmental organizations (NGOs), and up to now, SBP didn’t really have a role dedicated to that. But now, through establishing the role of CEO, SBP does, and that has been very helpful over the past six months for interacting with the different players.

18 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

How is SBP ensuring that the voice of stakeholders is taken into account?

SBP appointed an independent advisory board in 2015, made up of 10 members who meet twice a year, and they help SBP and especially the SBP board to view what’s happening in the woody biomass sector.

In addition, during the course of 2016, we have completely revised our working group structure, taking on specific, technical challenges in implementing standards, for example. At the time I joined SBP, it was a very closed operation and we have opened it up to incorporate a variety of stakeholders from the supply chain. One result was that the SBP stakeholder committee was established to oversee the working group activities and the outcomes from these working groups before these go to the board for final approvals. The stakeholder committee

Q&A »

currently has representatives from pellet and wood chip producers, biomass traders, CBs and relevant trade associations and, of course, SBP member companies. We have also reserved seats for relevant international NGOs and, in the course of 2017, we want to invite NGOs to join.

SBP is very much willing to engage with all of its stakeholders and considers such engagement and exchange of views to be the essential part of our certification system and the process to maintain and to promote it. SBP has a very direct line of communication with active stakeholders.

In the worst case scenario, SBP also has a formal complaint procedure in place, so if any stakeholder is unhappy with anything happening or deemed happening with SBP, they can formally reach out to us and be heard.

derstanding of what multistakeholder governance actually means for us. If you talk to different people, they have very different answers to this, so our approach is to look at the existing certification systems that claim they are multistakeholder governed to compare and produce a white paper to discuss with our stakeholders, our advisory board and our board throughout the course of 2017.

It is the desire of SBP members for SBP to eventually transform into a multistakeholder owned and governed organization.

Can you speak to the future governance of SBP and the steps to get there?

Our focus is currently on quality decision making, and we’re already beginning to see that the time it takes from audit to issuing a certificate is reduced, so this is a positive step and there is scope for further improvement. In addition to this, our plan is to design, develop and implement a training program for auditors to also assist this quality approach.

I think one of the major activities to mention here is that in August 2016, SBP got into an agreement with Accreditation Services International, a third-party independent accreditation provider, and agreed that ASI will take over the management of the SBP accreditation and assurance program, which is a very helpful step to becoming fully independent, and it brings us in line with other well-recognized certification systems. In comparison to many other certification systems out there, and I’ve been in this sector for quite a long time, they’ve taken years—three, five, eight years—to establish where they are now and to implement a good working certification system. If you look at the track record of SBP, being founded in 2013 and one-and-a-half years later having issued the first standards, I can only say that SBP really has achieved a great deal in a very short period. Nevertheless, it’s clear that SBP is still in a startup position and that the first steps are always quite bumpy for all of the processes to work and to become fully embedded into a very routine system.

In October, the SBP board officially communicated its intent to transform SBP into a multistakeholder owned and governed organization. The ultimate aim is for the ownership and governance to become a balanced multistakeholder organization with its board comprising, corresponding and appropriating stakeholder representation in a balanced way. When the founding members set up SBP in 2013, it was established as a nonprofit company owned and fully funded by its members, all of whom use woody biomass for large-scale energy production. This was very convenient at the time because it removed all of the initial concerns about funding, leaving the SBP free to focus on establishing a fully operational certification system and, in time, taking steps toward becoming self-funded.

What happened on the SBP side is that the SBP’s independent advisory board recommended the board explore the possibility of opening the governance system and moving from where we are now into having a multistakeholder governance system.

What we now need to do is develop an un-

SBP has made some reality checks on its progress and established goals toward improving them in 2017.

Can you discuss bottlenecks currently being addressed that caused any under-goal realities?

What are the changes to the SBP assurance program, and how will these changes impact the role of SBP? The key changes in the SBP system result from the agreement that we have reached with ASI. The plan is that our six approved CBs have until the end of 2017 to transition over to the ASI accreditation program for SBP certification. Currently, they are approved by SBP, but ultimately, they will need to be accredited by ASI if they wish to continue to provide SBP certification services. Right now, I’m pleased to confirm that all six of our SBP-approved CBs have applied for ASI accreditation.

These are very positive changes to SBP and to the SBP system, especially enhancing the independence and credibility of SBP as a robust certification system. It gives us the opportunity to focus on our core mission, which is to engage with our stakeholders and to manage and to maintain the standards independent from the activities of accreditation and certification.

What can people expect from the upcoming publishing of SBP’s strategy and first annual report?

The strategy mirrors what we currently do. It mainly defines the scope of the SBP system and we divided this scope into specific subscopes, so we have defined that the feedstock we want to focus on is wood and the commodities that we want to focus on are woody biomass in the form of pellets and wood chips. The application of SBP certification is designed in such a way that it can be implemented worldwide so we are not limiting ourselves geographically. Any producer or any trader of pellets or wood chips anywhere in the world can be SBP certified.

One of the major reasons SBP was set up was to address regulatory compliance by providing a tool to demonstrate it. Our focus within the current strategy is that SBP standards cover regulatory compliance in Europe. The scope of certificate holders is set out for pellet and wood chip producers and traders. Other systems would also cover and certify the transport and maybe the

JANUARY/FEBRUARY 2017 | PELLET MILL MAGAZINE 19

« Q&A

retailers, but this is not yet our focus. SBP doesn’t limit the end use of SBP-certified material, so for example, SBP-certified pellets could be used by any person or organization. Another topic that we want to look at is trademarks. Right now, SBP is very strongly focused in business-to-business so there is no use of trademarks or logos in an on-product way, but it’s not excluded from our strategy. We plan to develop procedures to apply on-product claims and on-product trademarks. So, if, for example, you sell pellets per sack you could use the SBP logo on it. One of the last topics that the strategy covers is our relationship with other certification systems, such as FSC, PEFC, Sustainable Forestry Initiative and ENplus.

We would like to engage with these systems to find a mutual cooperation or at least to work together on a standard-setting level.

In addition to the strategy, we plan to publish an annual report. The idea is that the report will give an account of the operational performance of the SBP during 2016 and also address the reasons SBP is needed, how the system works, the future direction of SBP and a summary overview of the financial aspects of SBP.

SBP will begin collecting license fees from all certificate holders Oct. 1. Why was it decided to begin charging fees for certification under the framework?

How does SBP plan to incorporate the yet-to-be published Dutch, Belgian and EU regulations?

I can only confirm that we’ve heard the same concerns and that we’re in close communication with the relevant trade associations to work together toward addressing these concerns. We’ve already made improvements, like the transfer of the assurance program to ASI and reducing the processing time for certification and so on, so I think that we’re on a positive path. We have also established the SBP stakeholder committee that currently provides the producers with a voice, and we’re very keen to understand any concerns that producers may have. I think we’re quite up to speed on the ideas and the concerns that we currently hear from the market.

SBP is designed in such a way as to be flexible and incorporate any changes in the regulatory requirements that relate to woody biomass for energy production.

We’re in close and constructive dialogue with all of the relevant authorities and that will, of course, continue. In general, when we become informed that there is any change in the regulatory requirements, we analyze the impacts of these new regulations and requirements and, where necessary, redraft and update the standards to incorporate these new requirements. This follows an explicit procedure, however, part of which is consulting our stakeholders and our stakeholder committee and other players in the system before we just flip a switch and change the standards.

When creating revenue for a certification system and becoming financially selfsufficient, the use of license fees is the most common way to move forward. Other systems charge membership fees, licensing fees or a combination of both. It was the intention of the founding members of SBP from the beginning that they will fund SBP for a specific time until SBP finds its feet, and then as SBP becomes established it will become financially self-sufficient and selffunding.

Biomass producers have voiced a number of concerns (i.e. processing time, certification resources, multicertification, lack of input, etc.). Can you speak to these?

20 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

SBP has publically listed one organization as a suspended certificate holder and another organization as a terminated certificate holder. What does this mean regarding future participation in SBP?

A certification can be valid, suspended or terminated. Moving from a valid status to being suspended or terminated can either be voluntary—the certificate holder can choose—or it can be enforced by a CB making a certification decision. The reason we publish this information is that we want to prevent unsubstantiated claims entering the market. Every certification system out there has some kind of a certificate holder database where you can look up the validity of certificates, and that is important because papers can be copied and signatures can be falsified.

Generally, suspension or termination of a certificate holder does not limit their future participation, it just limits the path and the actions at that particular moment.

If a certificate holder is suspended or terminated, then the certificate holder is not allowed to trade commodities with SBP claims. Suspensions may be lifted, but if a certificate holder is terminated they must undergo the whole certification assessment process again with a CB in order to be recertified.

What else is SBP working on implementing in the upcoming year that pellet producers should be aware of?

The main workstreams that will impact the producers and the traders include the data transfer system being upgraded from version 0.5 to 1.0. Also, the implementation of a more interactive certificate holder database, with search functions and so on. Another is the SBP training program for certificate holders, auditors and CBs. I also mentioned earlier the introduction of the fee schedule for certificate holders, so I think those are the four major topics for this year.

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« DEMAND

Denmark's Biomass Reboot The smallest Nordic country is having a big impact on European pellet demand as DONG Energy, the country’s largest energy company, pivots away from coal and toward woody biomass.

BY TIM PORTZ

NEW DANISH DEMAND: In 2016, DONG Energy completed coal-to-biomass conversions at both the Avedøre and Studstrup combinedheat-and-power facilities, which, together, represent nearly 1 million tons of demand. North American producers are hopeful that this will provide them with an opportunity to gain a larger foothold in a significant pellet buying country in Europe that so far has proved elusive.

PHOTO: DONG ENERGY A/S

22 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

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ate last fall, a floating crane was positioned near two hulking 180foot mega cranes in Kalundborg, Denmark, at the AsnĂŚs Power Station. In just a few weeks, the floating crane deconstructed the massive pair that had been a fixture on the skyline since 1984. Each capable of lifting and moving 32 tons of coal at a time, the cranes had outlived their usefulness and were decommissioned, deconstructed and recycled by their owners, DONG Energy. â&#x20AC;&#x153;In future, the coal-fired power station units at the power station will be either out of operation or in reduced operation, and weâ&#x20AC;&#x2122;ve therefore decided to remove the coal cranes,â&#x20AC;? says Niels Christian Kjaer, a regional manager at DONG Energy.

The decommissioning of the cranes is an apt illustration of the transformation DONG has been undergoing for over a decade. Since 2006, DONG Energy has nearly halved the carbon intensity of its delivered power and is well on its way to its goal of achieving 260 grams of CO2 per kilowatt-hour (kWh) by 2020.

For now, AsnĂŚs will continue to burn coal, but at volumes that have been reduced to the extent that two, 32-ton cranes no longer make sense to maintain and keep operational.

The downturn in coal consumption at AsnĂŚs is just one small facet in the decarbonization efforts DONG Energy has thrown itself headlong into. Coal consumption across DONGâ&#x20AC;&#x2122;s generation portfolio has fallen 74 percent since 2006 as the company ramps up the production of both wind- and biomass-derived energy. As 2016 drew to a close, DONG Energy concluded a massive conversion project at Avedøre Power Station near Copenhagen, marking the beginning of the biomass era in the countryâ&#x20AC;&#x2122;s capital city.

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Denmark is twice the size of New Jersey with a population similar to Wisconsinâ&#x20AC;&#x2122;s.

DONG Energyâ&#x20AC;&#x2122;s transition unfolds in parallel to the countryâ&#x20AC;&#x2122;s efforts to drive carbon out of its energy portfolio. Just four decades ago, the country generated the vast majority of its energy from imported oil. Now, the country generates nearly 40 percent of its energy from renewable sources and is aiming for 100 percent renewables by 2050. Alongside the

24 PELLET MILL MAGAZINE | JANUARY/FEBRUARY 2017

efforts to increase renewables, the country is hoping to reduce its greenhouse gas emissions by 40 percent compared to 1990 levels by 2020, a full 10 years ahead of European Union time frames. It could be argued that Denmarkâ&#x20AC;&#x2122;s lofty energy and climate goals pivot on the biomass strategy currently under deployment by its largest energy company.

Most recently, DONG Energy celebrated the conversion of its Avedøre combinedheat-and-power (CHP) facility to biomass, an 18-month project that transformed the already highly efficient facility to one of the most state-of-the-art biomass conversion facilities in the world. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re reducing our annual coal consumption at Avedøre Power Station by around 160,000 metric tons,â&#x20AC;? says Thomas Dalsgaard, executive vice president at DONG Energy. â&#x20AC;&#x153;This is very good for the climate and in line with the conversion of our power stations, which has been ongoing for several years.â&#x20AC;?

This conversion reflects a joint effort by DONG Energy and Vestegnens Kraftvarmeselskab (VEKS), Copenhagenâ&#x20AC;&#x2122;s installed district energy transmission system to deliver heat and hot water to nearly 215,000 households in the metro area.

VEKS, established in 1984, is responsible for delivering hot water and heat to 19 different local district heating companies, which then serve the households, businesses and institutions within Greater Copenhagen. â&#x20AC;&#x153;Choosing the right levers to curb the ongoing CO2 emissions and thereby global warming is a complex task,â&#x20AC;? says Steen Christiansen, chairman of VEKS. â&#x20AC;&#x153;However, using biomass at Avedøre Power Stationâ&#x20AC;&#x2122;s two units is a huge step toward achieving VEKSâ&#x20AC;&#x2122; goal of supplying fossil fuel-free district heating in 2025. Weâ&#x20AC;&#x2122;ve made a difference.â&#x20AC;?

All told, the conversion to biomass from coal will reduce the emissions associated with the Avedøre Power Station by 500,000 tons, the equivalent of taking nearly 255,000 cars off the road.

Studstrup Set the Stage

The story of the conversion of DONGâ&#x20AC;&#x2122;s Strudstrup facility is remarkably similar to Avedøre. The power station at Studstrup, like Avedøre, is relied upon to deliver hot water and heat to a nearby urban center. Aarhus is

DEMAND Âť 7(&+12/2*,(6

to the database, Denmark did not import any pellet volumes from Canada in Imported Trade 2016.

Partner Volumes Value Historically, Denmarkâ&#x20AC;&#x2122;s pellet de(in metric tons) (in US dollars) mand has been served by producers Latvia 599,074 $91,202,151 in the Baltics, most notably Latvia and Estonia 542,787 $83,293,626 Estonia. In 2015, Denmark imported 600,000 tons of wood pellets from LatRussian Federation 333,557 $36,713,125 via and 550,000 tons of pellets from Sweden 223,557 $36,713,125 Estonia, a combined value of nearly $175 million. The competition through Lithuania 47,260 $7,425,024 October of 2016 remained close beUSA 28,367 $5,063,402 tween these two Baltic producers; Estonia besting Latvia with 480,000 tons to Finland 20,320 $2,870,273 425,000 tons.

SOURCE: UN COMTRADE DATABASE The full impact of these conversions to North American producers should begin to show up in 2017. BeDenmarkâ&#x20AC;&#x2122;s second most populous city and, fore the new year, Enviva Partners LP anlike Copenhagen, is aggressively pursuing its nounced the completion of its acquisition of own decarbonization and renewable energy the Sampson plant owned by Enviva Holdgoals. ings LPâ&#x20AC;&#x2122;s joint venture with affiliates of John â&#x20AC;&#x153;Using wood pellets as fuel at Studstrup Hancock Life Insurance Co. in Sampson Power Station will mean a lot in terms of us County, North Carolina. Enviva also completachieving our climate targets,â&#x20AC;? says Kristian ed the acquisition of the associated offtake Wurtz, alderman for the Department of contracts, including a 10-year, 420,000-metricTechnology and Environment in Aarhus. â&#x20AC;&#x153;It ton-per-year offtake agreement with an affiligives us the incentive to go further with the ate of DONG Energy Thermal Power A/S. green transformation, something we intend to Whether this offtake contract is directly linked pursue to a greater degree together with resito new demand at Avedøre or Studstrup is bedents and businesses.â&#x20AC;? side the point. Denmark would be a welcome The facility at Studstrup will be capable new beachhead in Europe for North Ameriof heating over half the city, and another projcan producers. ect at nearby Lisbjerg will contribute an addiThe days of double-digit, year-over-year tional 20 percent of the cityâ&#x20AC;&#x2122;s heat needs. growth in pellet demand driven exclusively by Studstrupâ&#x20AC;&#x2122;s conversion from coal to the Drax Power Station will soon come to a wood pellets required changes to the fuel storclose. In order to maintain the kind of growth age silo, conveyance system and the boiler. in Europe that U.S. producers have grown The project took nearly 18 months to comaccustomed to, DONGâ&#x20AC;&#x2122;s two facilities will plete and cost DONG nearly 1.3 billion Danhave to result in a dramatic uptick in North ish Krone ($185 million).

American imports by Danish buyers. This is Together, Avedøre and Studstrup will far from certain, however, as Denmark has introduce nearly 1 million tons of wood pelstrong pellet trade relationships with some of let demand to the marketplace and industry the fastest-growing pockets of pellet producobservers think these conversions will finally tion in Europe. The conversions at Avedøre result in some contracts with North Ameriand Studstrup, together, have catapulted Dencan producers. Until recently, producers in mark onto the global pellet industryâ&#x20AC;&#x2122;s watch North America found themselves on the outlist and the battle for market share is sure to side looking in with regard to Danish pellet unfold in 2017. demand. In 2015, Denmark imported just 28,000 tons of wood pellets from producAuthor: Tim Portz ers in the United States, according to the UN Executive Editor, Pellet Mill Magazine 701-738-4969 Comtrade database. While complete data for tportz@bbiinternational.com 2016 is not yet available, the country imported over 30,000 tons through October. According

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