2017 May/June Pellet Mill Magazine

MAY/JUNE 2017

Feedstock Fundamentals

Producers on Raw Material Realities Page 20

Plus: Dutch Double

Down on Sustainability Page 10

AND:

Enviva’s Fiber Sourcing Finesse Page 16

www.biomassmagazine.com/pellets

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oin us this summer for two days of educational sessions, industry exhibits, extensive networking opportunities, and a golf tournament on a top-notch course. The PFI Annual Conference highlights the various applications of densified biomass, as well as trends and best practices within the densified biomass industry. Weâ&#x20AC;&#x2122;ll see you in Stowe!

Contents »

MAY/JUNE 2017 | VOLUME 7 | ISSUE 3

Pellet Mill Magazine

Advertiser Index

27 2018 International Biomass Conference & Expo 22 Andritz Feed & Biofuel A/S 28 Astec, Inc. 9 BinMaster Level Controls 15 Bliss Industries, Inc. 23 Christianson PLLP Biofuels Financial Conference 13 CPM Global Biomass Group 14 GreCon, Inc. 18 Idaho National Laboratory 12 IMALPAL Group 8 Industrial Bulk Lubricants (a Dansons company)

FEATURES 10 MARKET Stimulating Sustainability Certification in North America

The Dutch are making investments to enable direct certification of small U.S. forest owners, based on the premise that it's essential to ensuring a sustainable fiber supply.

By Ron Kotrba

16 TECHNOLOGY A New Level of Transparency

2 Pellet Fuels Institute 5 SonicAire

Enviva is collecting and sharing fiber-sourcing data online, via a proprietary tracking system.

By Anna Simet

19 Varco Pruden Buildings

COVER

PLAYING A ROLE: Woody biomass utilization creates important markets for loggers, and adds to the overall economic vitality of sound forest management.

PHOTO: TIM PORTZ

20 LOGISTICS Maintaining the Fiber Flow

Pellet producers discuss the daily discipline of feeding a facility with quality, on-spec material.

By Tim Portz

CONTRIBUTION 24 POLICY Feedstock Sustainability Regulations in the EU

Resulting in new and evolving policies, sustainability of biomass continues to be a topic of discussion within the European Union.

By Hannes Lechner and John Dawson-Nowak

04 EDITOR’S NOTE

The Sustainability Standoff

By Tim Portz

COPYRIGHT © 2017 by BBI International

05 INDUSTRY EVENTS 06 HEATING MATTERS

Airlines Overbook—Should Bagged Pellet Producers?

By Stan Elliot

07 TESTING GROUNDS

Keeping the Forests as Forests

By Charlie Niebling

TM

Please recycle this magazine and remove inserts or samples before recycling

08 BUSINESS BRIEFS 26 MARKETPLACE MAY/JUNE 2017 | PELLET MILL MAGAZINE 3

The Sustainability Standoff

Editorial PRESIDENT & EDITOR IN CHIEF Tom Bryan tbryan@bbiinternational.com

Three or four years ago, a producer remarked to me that the pellet business was really a very simple business. “It’s a feedstock business,” he said. “You buy some feedstock, add some value to it by densifying it, and then sell it for a premium that pays for that densification and leaves a little profit,” he said. Written here, the true spirit of his comment is not conveyed, Tim Portz however. The twinkle in his eye that day sugVICE PRESIDENT OF CONTENT & gested it would be folly to think of this business EXECUTIVE EDITOR tportz@bbiinternational.com as simple, precisely because it is a feedstock-dependent business.

The story I wrote for this issue of Pellet Mill Magazine reveals why feedstock management is anything but simple, and outlines the kind of complexities my producer colleague held in his mind when he was teasing me about the simple nature of this business.

The two other stories in this issue point toward a feedstock complication of an entirely different nature, one that emerged with the rise in the cofiring of wood pellets in power stations in Europe. Ron Kotrba’s page-10 story, “Stimulating Sustainability Certification in North America,” explains the latest chapter in the story of certifications European pellet buyers are requiring from North American producers.

Despite urgings by other European power providers and the industry in North America, the Dutch government has decided that, in order for power produced from pellets to qualify for SDE+ reimbursement, the pellets burned must be certified to a standard satisfactory to them. Ultimately, Dutch policymakers want to see certification of wood pellets reach all the way back to the parcel where the materials were harvested from, instead of the regional assessments available to producers in other certification schemes.

The enormity of this challenge cannot be overstated. Commercial forests in the Southeast are owned by millions of private individuals and families who are currently struggling to see the value in taking on the cost of certification, particularly when they feel strongly that their forests are managed sustainably now, certified or otherwise. Further, selling wood fiber to pellet mills is just one aspect of most private forest management plans, and is certainly not the driving economic force. Kotrba’s story makes it clear the ongoing debate about feedstock sustainability in the U.S. is far from settled. The Dutch, he finds, are doubling down on certification of feedstock as a foundation to any state support for biomass cofiring.

4 PELLET MILL MAGAZINE | MAY/JUNE 2017

VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz tportz@bbiinternational.com MANAGING EDITOR Anna Simet asimet@bbiinternational.com SENIOR EDITOR Ron Kotrba rkotrba@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 Raquel Boushee rboushee@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 CIRCULATION MANAGER Jessica Tiller jtiller@bbiinternational.com MARKETING & ADVERTISING MANAGER Marla DeFoe mdefoe@bbiinternational.com

Industry Events »

2017 National Advanced Biofuels Conference & Expo

JUNE 19-21, 2017

Minneapolis Convention Center Minneapolis, MN

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 petroleumderived products.

(866) 746-8385 | www.advancedbiofuelsconference.com

Christianson PLLP Biofuels Financial Conference

SEPTEMBER 27-28, 2017

Radisson Blu Minneapolis Downtown Minneapolis, Minnesota

Produced by Christianson PLLP and organized by BBI International, this year’s Biofuels Financial Conference is focused on the best ways to explore new options in today’s changing ethanol and biodiesel industries. By understanding risks associated with various technology and marketing initiatives, and by exploring various options for making the best use of capital and resources, attendees will learn how to create a well-managed plan for growth and change—a plan that maximizes profitability while ensuring future stability and meeting the expectations of all stakeholders (866)746-8385 | www.biofuelsfinancialconference.com

2018 International Biomass Conference & Expo

APRIL 16-18, 2018 Cobb Galleria Centre Atlanta, Georgia

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

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 701-746-5367. 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 email to asimet@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

MAY/JUNE 2017 | PELLET MILL MAGAZINE 5

« Heating Matters

Airlines Overbook—Should Bagged Pellet Producers?

BY STAN ELLIOT

Over the past few months, we have all watched news stories of airline passengers being removed from overbooked flights. While these stories provide exciting videos of anguished customers, the news rarely explains why airlines overbook. No airline wants to bump passengers, but financially, they do try to reach 100 percent capacity in order to maximize their profits, and keep fares as low as possible.

What about U.S. bagged pellet producers? Should they risk overbooking their production, thus irritating retail partners, in order to maintain the lowest possible costs? As any production analysis will tell you, the best way to keep your cost per ton down is to keep your plant running at, or near, full capacity. A 50,000-ton-per-year plant has many fixed costs that must be covered, whether the plant produces 25,000 tons or 50,000 tons. Unfortunately, if it only runs 25,000 tons, the average cost per ton may increase $10 to $15 per ton, since you have fewer tons to absorb the plant’s fixed costs. In a price-sensitive market like heating pellets, this cost difference can be the difference between making money and losing money.

Let’s take a look at the past few seasons to see if a case can be made for overbooking. Most pellet producers try to line up a long list of retail accounts whose commitments, or sales history, closely matches the producer’s production capacity. If you can produce 50,000 tons, you try to find the right mix of retailers that will purchase those 50,000 tons.

The Northeast pellet heating market is the largest in the U.S. The winters of 2013 and ‘14 were record-setting years with much colder-than-normal weather throughout the Northeast states. Pellet manufacturers struggled to keep up with demand, and many companies added capacity in order to capitalize on growth opportunities. Unfortunately, the winters of ‘15 and ‘16 were both much warmer than normal, and sales plummeted as homeowners required fewer tons to heat their homes. Several pellet producers have reported drops in sales of 25 percent in 2015, and an additional 30 percent drop in 2016. When demand drops so dramatically, production must also drop. Many companies were forced to run at 50 percent capacity, or less.

As the industry looks ahead to the 2017 heating season, many producers might ask themselves, should we overbook? If you sold your full capacity of 50,000 tons in ‘13 and ‘14, but sales dropped to 37,500 in ’15, and then

6 PELLET MILL MAGAZINE | MAY/JUNE 2017

dropped again to 22,500 in ‘16 with the same retail partners, how do you plan for ‘17? If the cold weather patterns of ‘13 and ‘14 return, you may not need additional retailers. If the winter weather is again mild, however, you may want to try to overbook (i.e. add new dealers) in order to cover the potential shortage.

In the western states, the situation is reversed. The winters of ‘13 and ‘14 were very mild El Niño years, and pellet sales were down. However, the winter of 2016 was colder than normal, and sales exceeded everyone’s expectations. Western pellet producers were caught off-guard, and some minor shortages occurred. Demand has continued to be stronger than normal into mid-spring, which has delayed the ability of most producers to start building inventories for next season.

One example can easily demonstrate the difficulties that pellet producers face. Our company received a nonbinding commitment from a multistore retailer for the upcoming ‘17 heating season, for 5,250 tons. Along with the commitment, the retailer shared some store pellet sales over the past several years. These stores had sold as high as 5,000 tons during a recent harsh winter, and a low of 2,268 tons during a mild winter. So, do they decide to reserve the entire 5,250 tons for this account, or try to find another retailer to commit to 1,000 to 2,000 tons, in case this dealer only needs 2,268 tons this season?

Since neither the retailers, nor the pellet producers, can predict the weather, we must all face the fact that weather is the No. 1 factor in determining sales.

Like the airlines, if we overbook, we may be forced to deal with unhappy customers. If you disappoint your customers, you risk losing them. If we underbook, we face the prospects of higher product costs, and loss of income. Like the airline business, the pellet business runs on thin margins, so no company can face many bad years.

In the end, communicating honestly with your customers and planning for a variety of outcomes seems to be the best option.

Author: Stan Elliot Chairman-elect, Pellet Fuels Institute stan@pcpellets.com 360-462-2801

Testing Grounds »

Keeping the Forests as Forests

BY CHARLIE NIEBLING

Across the Northeast U.S. and much of the country, markets for low-grade wood resources have fallen off dramatically. In this context, “low grade” is used to describe wood feedstocks that have few, if any, higher-value markets. Here in the Northeast, this generally means roundwood chips used for pulp, energy or pellet feedstock, or sawmill residues used for pulp or pellet feedstock and firewood.

The forestry trade press has reported widely on the decline in pulp and biomass energy markets, estimated to have dropped some 4 million tons in just the past few years across northern New England and New York.

Some of this decline is cyclical and will return. But most of it reflects a fundamental change in how we use wood, and will not return.

The practice of sustainable forestry is absolutely dependent on these markets. Strong demand and high prices will probably always be there for high-quality veneer and sawlogs to make premium lumber, but if these are the only products that have markets, what stays behind in the woods after harvest? That’s right—the poorer-quality, misshapen or unhealthy trees that otherwise have no markets. They become the future forest.

Pulpwood and energy chips from logging residuals, while low in value, are often 70 percent or more of harvest volume. The money is in the premium logs, but steady markets for low-grade wood are what drive productive and scientifically responsible forestry operations.

Years ago, this was a tough concept to get across to lawmakers during debates about renewable biomass energy policy. But that’s changing. In Maine, New Hampshire, Vermont, New York and elsewhere, opinion leaders are beginning to understand that without robust markets for low-grade wood, forestry is threatened as a viable land

use. Without timber harvest to generate income for landowners, they are forced to consider alternatives to forest ownership and management. That usually means subdivision, fragmentation and development.

The values society places on our forests—wildlife habitat, clean water, recreation, carbon storage and wood products—depend on them remaining as forests. That’s why esteemed organizations such as the Nature Conservancy and, closer to home, the Society for the Protection of New Hampshire Forests and New York Audubon, have been preaching the value and importance of productive forestry for decades. They know that good markets are necessary for good forestry, and good forestry means healthy forests that stay productive and undeveloped.

Lawmakers are beginning to realize the public interest in biomass energy policy is about much more than renewable electricity and heat displacing demand for high carbon, nonrenewable fossil fuels. The value of productive healthy forests is incalculable to society. Policies that support these markets sometimes come with a cost to taxpayers or ratepayers, such as state renewable portfolio standards or federal tax credits. But the economic, social and environmental benefits far outweigh the costs. This message is finally resonating with our elected officials, and it’s high time. Improved markets will return for lowgrade wood, but in the meantime, public interest in keeping our forests as forests is well-served by these policies.

Author: Charlie Niebling Consultant and Partner Innovative Natural Resource Solutions LLC 603-965-5434 niebling@inrsllc.com

MAY/JUNE 2017 | PELLET MILL MAGAZINE 7

Business Briefs

PEOPLE, PRODUCTS & PARTNERSHIPS

Brent Cheshire

Matthew Wright

DONG Energy UK changes leadership DONG Energy U.K. Country Chairman Brent Cheshire retired in June, after 13 years with the company. Cheshire was DONG Energyâ&#x20AC;&#x2122;s first U.K. employee in 2004. Under his leadership, the business expanded rapidly, with over 850 employees in the U.K. Prior to joining DONG Energy, Cheshire worked for Amerada Hess Corp., filling a number of senior positions, latterly as senior vice president for E&P Worldwide Technology. Previously, he spent 14 years with Shell International Petroleum.

Matthew Wright has been appointed as Cheshireâ&#x20AC;&#x2122;s successor. Wright, most recently CEO of Southern Water, became the new managing director of DONG Energy U.K., effective June 1. Wright brings 20 years of experience in the energy business.

Boivin named president of Northeast Wood Products Mohegan Holding Company LLC has named Mark Boivin president of Mark Boivin Northeast Wood Products. In this position, Boivin will act as corporate liaison to the Northeast Wood Products board of directors and will develop, implement, monitor and measure strategic plans; identify opportunities to improve projected returns; develop and manage budgets, and negotiate company agreements. Boivin succeeds Guy Mozzicato, who has been named managing director of the organization.

8 PELLET MILL MAGAZINE | MAY/JUNE 2017

Boivin brings to the role over 14 years of experience in leading manufacturing, chemical, and renewable energy businesses. Most recently, he served as CEO of WoodFuels Companies in Quincy, Massachusetts, for three years, where he merged and led two companies to launch a renewable energy business focused on supply chains of biomass from the U.S. to Europe. Prior, he served as vice president at Ensign-Bickford Industries, Inc. in Waltham, Massachusetts.

Urania

Louisiana

Drax completes Louisiana pellet plant acquisition Drax Group plc announced it has completed the acquisition of substantially all of the assets of Louisiana Pellets, at a price of $35.4 million. Louisiana Pellets, commissioned in early 2015, will provide additional biomass pellet capacity in the region of 450,000 metric tons annually, according to Drax, which said the new capacity will play an important part in its strategy to build a flexible supply chain capable of providing 30 percent of its generation requirement.

KEPCO, Mitsubishi joint venture focuses on Japan biomass power Mitsubishi Corp. Power Systems Inc., a wholly owned subsidiary of Mitsubishi Corp., and Kansai Electric Power Co. Inc. (KEPCO) have established a new joint venture. The JV, Aioi Bioenergy Corp., is being set up to promote and develop biomass power generation business in Japan.

The new venture will have an initial capital of 450 million yen ($4 million), with 40 percent being invested by MCP. The project is aiming to facilitate the conversion of fuel used at the second unit

1HHG 9ROXPH $FFXUDF\" of KEPCO's 375-MW Aioi Power Station in Hyogo Prefecture from its current heavy oil or crude oil sources to woody biomass. The project will also contribute to controlling overall carbon dioxide emissions, due to its use of naturally derived pellet fuel.

have been truly amazing. Itâ&#x20AC;&#x2122;s a very exciting industry to be in.â&#x20AC;?

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South Carolina

Allendale

Kirk Duffy, Alex Adome and Tim Portz

Highland Pellets wins Groundbreaker of the Year Award BBI International and Biomass Magazine named their annual industry award winners as J. Richard Hess of Idaho National Laboratory and Highland Pellets of Pine Bluff, Arkansas.

The awards were presented by Tim Portz, Biomass Magazine executive editor, prior to the general session of the International Biomass Conference & Expo held in Minnesota, Minneapolis, April 10-12.

Hess received the Excellence in Bioenergy Award, which recognizes individuals who demonstrate the drive and effort to clear financial, technological, or political hurdles that impact the bioenergy industry. Highland Pellets was named recipient of the Groundbreaker of the Year Award, which recognizes a project team that has persevered through the multitude of challenges to bring a project to fruition.

Accepting the award on behalf of Highland Pellets were Kirk Duffy, media director, and Alex Adome, director of finance. â&#x20AC;&#x153;Thank you very much to BBI for this very prestigious award,â&#x20AC;? Adome said. â&#x20AC;&#x153;About a year ago, we had nothing on the ground. To have gone from that, to a production facility today, has been quite a daunting task. Behind me was a representing team, partners and a community that

Thunderbolt Biomass to build South Carolina wood pellet plant Thunderbolt Biomass Inc. is launching new processing operations in Allendale County, South Carolina. The company is planning to invest $6 million in the project, creating 35 new jobs.

The plant will have an annual capacity of 60,000 tons, and besides pellets, it will produce horse and animal beddings, and more.

Hiring for the new positions is projected to begin in the second quarter of 2017.

The Coordinating Council for Economic Development has approved job development credits related to this project. Allendale County was also awarded a $100,000 Rural Infrastructure Fund grant to assist with costs related to this project.

"We are very happy to be building this plant in an area of abundant forestry resources, infrastructure and with the active support of the S.C. Department of Commerce and the Southern Carolina Economic Alliance, whose personnel and expertise were critical in bringing this project to Allendale," said Thunderbolt Biomass President Knox Grant. "We intend to be good partners in developing our business here, to hire locally as much as we can and look forward to many profitable years in this community."

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.

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MAY/JUNE 2017 | PELLET MILL MAGAZINE 9

Market »

STIMULATING SUSTAINABILITY CERTIFICATION IN NORTH AMERICA

The Dutch are motivated buyers of North American wood pellets, but the lack of sustainability certification of small forest owners in the U.S. and Canada has created an intense need for intercontinental collaboration.

BY RON KOTRBA

T

he fact that the Dutch have created a program to earnestly foster sustainability certification of small, North American forests is a testament to how important Canadian and U.S. wood pellets are—or will be—to cofiring operations in the Netherlands. The Dutch want certified wood pellets from North America, up to 3.5 million metric tons per year, and they are spending at least 3 million euros to ensure small landowners across the pond understand that, unless certification by one of the several existing schemes is undertaken, wood pellets manufactured from their raw materials will likely be excluded from this emerging European market.

In 2013, following the Dutch Parliament’s adoption of a national energy transition agreement coordinated by the Social and Economic Council of the Netherlands—an advisory body to the Dutch government—47 stakeholder groups signed what’s known as “the Dutch Energy Agreement.” Signatories to the agreement include industry, environmental groups, government and others. By signing the agreement, these stakeholder groups committed themselves to reaching a 14 percent share of renewable energy in 2020, and 16 percent in 2023. In addition, ancillary objectives of the agreement include an annual energy savings of 1.5 percent and the creation of at least 15,000 fulltime jobs.

In late 2015, what’s referred to as “the Covenant” was finalized. The Covenant is an

agreement between four Dutch power utility companies and five environmental organizations that defines sustainability criteria for biomass used in cofiring. The five Dutch nongovernmental environmental organizations that have signed the Covenant are Greenpeace Nederland, Milieudefensie, Natuur & Milieu, Natuur en Milieufederaties and Wereld Natuur Fonds. The four energy companies are ENGIE (previously GDF-Suez), Uniper (previously E.ON), Vattenfall/Nuon and RWE. Development of the Covenant arose once wood pellets for cofiring were identified as a promising way to help Dutch energy companies reach the 14 percent renewable target by 2020, with the maximum subsidy budget available.

The Stimulation of Sustainable Energy Production, referred to as SDE+, is the Dutch subsidy program that promotes renewable energy production. The SDE+ is an operating grant. Producers receive financial compensation for the renewable energy they generate.

As the Dutch government explains it, “Production of renewable energy is not always profitable because the cost price of renewable energy is higher than the market price. The difference in price is called the unprofitable component. SDE+ compensates producers for this unprofitable component for a fixed number of years, depending on the technology used.”

The SDE+ contribution level is dependent on market prices. When energy prices are high, SDE+ payments are less, with con-

sumers paying more. Conversely, when energy prices are lower, SDE+ payments are higher as consumers pay less. “The correction amount is the average energy price per category during the year of production,” the Dutch government states. “The base energy price is the lower limit for the correction amount. The maximum grant is reached when the correction amount is equal to the base energy price.

The final payments are calculated per year on the amount of energy produced and the actual energy price.”

Subsidies are allocated for periods of eight, 12 or 15 years, depending on the technology used. Biomass cofiring is eligible for the eight-year subsidy. In the Dutch Energy Agreement, a maximum of 25 petajoules (PJ) of biomass cofiring was agreed upon. Two rounds of SDE+ applications for wood pellet cofiring were available in 2016. Tenders for those rounds were submitted, reaching the 25 PJ maximum. This equates to roughly 3.5 million tons of wood pellets per year for eight years, the duration of the subsidy program for cofiring. All told, upward of 28 million tons of wood pellets are at play here. The catch is that 100 percent of the biomass used as part of the Dutch Energy Agreement, Covenant and subsidy program must be certified sustainable—and while North American wood pellets are often sustainably produced, certification of such, particularly of pellets made from biomass procured from small forest owners, is less than desirable.

PHOTO: TIM PORTZ, BBI INTERNATIONAL

MAY/JUNE 2017 | PELLET MILL MAGAZINE 11

« Market According to the National Climate Assessment’s 2014 data, a slim majority of U.S. forestland ownership—56 percent—is privately held by an estimated 11 million individual landowners. Of that privately owned 56 percent, 18 percent is owned by corporations while 38 percent is owned by noncorporate entities, what NCA characterizes as “an aging demographic.”

“Sustainable forestry on U.S. forest lands is largely assured by the strong rule of law in place in the U.S. and highly successful implementation of voluntary best management practices,” states a recently published white paper titled “Sustainable Forestry and Certification Programs in the United States” by the American Forest and Paper Association.

“Thus, direct certification of these lands is not necessarily essential to ensuring a sustainable fiber supply.” Perhaps not, but to qualify for markets where certification is required is another story.

The Foundation

The U.S. and Canada are important exporting countries for wood pellets supplied to the Dutch and wider EU markets. An or-

Schouwenberg

ganization, named the Dutch Biomass Certification Foundation, was established under the Covenant to promote and accomplish sustainability certification of small forest owners in North America. The DBC Foundation’s minimum budget is 3 million euros, and this is funded by the four utility power companies that have signed the Covenant and have biomass cofiring capacity.

The foundation’s executive board is comprised of those same four utilities. The

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five environmental organizations that signed the Covenant also have the right to appoint a member to the executive board “in order to contribute and advise effectively,” the DBC Foundation states, “but as of today, they have decided not to make use of this right.”

In a March 20 press release, the DBC Foundation notes that “most of the biomass that Dutch energy companies cofire is in wood pellet form and originates from North American forests. Many of these forests are owned by small landowners and, while sustainably managed, often are not certified.”

The DBC Foundation commissioned an extensive scoping study last year to define bottlenecks, drivers, intervention options and conditions for stimulating sustainable forest management certification of small forest owners in North America, says Peter-Paul Schouwenberg, chairman of the DBC Foundation executive board.

Small forest owners are defined in the Covenant as those who own less than 1,200 acres. “This study reports an estimated 5 percent of all small forest owners in the United States are certified today,” Schouwenberg tells Pellet Mill Magazine. “DBC will need to col-

The DBC Foundation Stimulation Program

The program is a framework for activities that support reaching the DBC Foundationâ&#x20AC;&#x2122;s objectives and runs until 2023, when full certification is scheduled to be achieved.

laborate closely with local organizations in the United States and Canada. To enhance this, DBC will appoint a representative in North America. Also, collaboration with existing certification schemes and seeking an active dialogue with relevant stakeholders on the DBCâ&#x20AC;&#x2122;s work have been highlighted in DBCâ&#x20AC;&#x2122;s Stimulation Program. In March, DBC started a data research study to obtain further insights to optimize the design of a tailor-made and most effective program of activities under the Stimulation Program. Wood & Co. Consulting was selected to lead this study.â&#x20AC;?

Activities planned for 2017 include: â&#x20AC;˘ Execution of a detailed data research on small forest owners in North America. â&#x20AC;˘ Appointment of a representative in North America. â&#x20AC;˘ The development of quick wins (e.g., through collaboration with existing certification schemes). â&#x20AC;˘ Seeking an active dialogue with relevant stakeholders on the DBC Foundationâ&#x20AC;&#x2122;s work.

Stimulation Program

Last yearâ&#x20AC;&#x2122;s scoping study, along with two workshops in Rotterdam and Miami, emphasized the value and need of engaging with local stakeholders in North America, Schouwenberg says. â&#x20AC;&#x153;DBC has an ambitious and challenging objective that cannot succeed without intensive collaboration,â&#x20AC;? he adds. â&#x20AC;&#x153;DBC also faces an extremely diverse playing field. This is why DBC aims for appointment of a representative in North America and seeks an agile and tailor-made program of activities.â&#x20AC;?

â&#x20AC;˘ The development of a communication plan.

For 2018 and beyond, a provisional set of activities has been drafted. The foundation will elaborate and adopt a detailed annual plan of activities yearly.

The DBC Foundation describes its Stimulation Program as â&#x20AC;&#x153;a framework for activities that support reaching its objectives.â&#x20AC;? The program runs until 2023 when full certification is

scheduled to be achieved. For 2017, activities under the program include execution of the aforementioned detailed data research on small forest owners in North America; appointment

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« Market of a North American representative; development of quick wins, for example, through collaboration with existing certification schemes; seeking an active dialogue with relevant stakeholders on the DBC Foundation’s work; and the development of a communication plan.

“The Stimulation Program is written as a framework to provide flexibility in adjusting its activities over time based on the evolution of the program and any new information and insights obtained along the way,” Schouwenberg says. “For example, the data research study underway now should provide further information to help DBC identify the best possible quick wins. Examples of quick wins might concern collaborations with existing certification programs that already implement initiatives to promote small forest owner certification.”

According to AFPA, there are four primary certification systems in the U.S.: the Programme for the Endorsement of Forest Certification; the Sustainable Forestry Initiative; the American Tree Farm System; and the Forest Stewardship Council.

“All relevant certification standards, including the Sustainable Biomass Partnership,

The U.S.’s Four Primary Certification Systems*: • The Programme for the Endorsement of Forest Certification • The Sustainable Forestry Initiative • The American Tree Farm System • The Forest Stewardship Council The DBC Foundation says all relevant certification standards, including the Sustainable Biomass Partnership, NTA 8080, and those mentioned above, were part of the discussions that led to the biomass sustainability criteria described in the Covenant. *According to the American Forest and Paper Association

NTA 8080, FSC and other available programs, were part of the discussions that led to the biomass sustainability criteria as described in the Covenant,” Schouwenberg says. “The criteria have now been incorporated in the Dutch government subsidy program (SDE+) that promotes biomass cofiring. To demonstrate compliance with these criteria by the power

14 PELLET MILL MAGAZINE | MAY/JUNE 2017

utility companies, the Dutch government is expected to benchmark existing certification schemes, including SBP, for eligibility still this year.” Schouwenberg explains that, while the name “the Dutch Biomass Certification Foundation” may imply otherwise, the foundation is not a certification scheme in itself. “The establishment of DBC is a specific agreement

Market Âť under the Covenant,â&#x20AC;? he reiterates. â&#x20AC;&#x153;DBC thus supports reaching the agreed goal in the Covenant of 100 percent certification of woody biomass, at the forest level, used in cofiring in the Netherlands.â&#x20AC;?

The sustainability criteria for solid biomass concern greenhouse gas emission reduction, forest management principles and chain of custody requirements, according to Schouwenberg. â&#x20AC;&#x153;An important aspect is that woody biomass compliance needs to be demonstrated at the level of the forest management unit,â&#x20AC;? he says. â&#x20AC;&#x153;Regional risk assessments or sourcing certifications at the pellet mill level are not accepted. For small forest owners, a temporary exception applies, allowing as a first data collection point â&#x20AC;&#x2DC;the first legal owner of the material after the business from which the biomass was sourcedâ&#x20AC;&#x2122;â&#x20AC;&#x201D;for example, the pellet mill.â&#x20AC;?

The clear goals for 2017 are delivery of the data research study by Wood & Co. Consulting, and appointment of a representative in North America. For 2018 and beyond, a provisional set of activities has been drafted, and the foundation will elaborate and adopt a detailed annual plan of activities yearly, Schouwenberg says.

Although the Dutch Energy Agreement allows for a maximum of 25 PJ of biomass cofiring equivalent to roughly 3.5 million tons of pellets, the amount of wood pellets consumed in the Netherlands for cofiring in 2015 was â&#x20AC;&#x153;nearly zero,â&#x20AC;? says Schouwenberg. â&#x20AC;&#x153;Due to the expiry of the former subsidies for cofiring, wood pellet use was near zero in 2015.â&#x20AC;? The precise amount was 1,417 tons. â&#x20AC;&#x153;The Dutch market reached around 1 million metric tons of wood pellets in cofiring under the former subsidy scheme,â&#x20AC;? he adds. â&#x20AC;&#x153;In late 2016, initial subsidy grants under the new SDE+ scheme had been granted. There is no official data yet, but it appears no significant cofiring volumes yet for 2016.â&#x20AC;?

The new subsidy scheme, SDE+, provides a single budget for all different forms of renewable energy production, Schouwenberg explains. â&#x20AC;&#x153;In a tender process, projects compete for approval in three subsequent phasesâ&#x20AC;&#x201D;with increasing Eurocent-per-kilowatt-hour compensationâ&#x20AC;&#x201D;within one SDE+ call for proposals,â&#x20AC;? he says. â&#x20AC;&#x153;As such, the most economical projects are rewarded first until depletion of the available budget.â&#x20AC;?

The Covenant presents two target dates for reaching 100 percent certification, Schouwenberg says, with 2020 as the ideal, and 2023 as the final deadline. While both targets are sufficiently aggressive, Schouwenberg adds that the obligation to reach 100 percent certification is with the individual power utility companies that cofire biomass and is incorporated as a condition in the SDE+ subsidy program.

Author: Ron Kotrba Senior Editor, Pellet Mill Magazine 218-745-8347 rkotrba@bbiinternational.com

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16 PELLET MILL MAGAZINE | MAY/JUNE 2017

Technology »

A New Level of Transparency Enviva's new Track & Trace system is unprecedented when it comes to documenting and sharing feedstock sourcing data.

BY ANNA SIMET

T

he South has some of the most dynamic, diverse, complex, and productive forestlands in the nation. Eighty-nine percent of the South’s 212 million acres of forestland is privately owned. These forests provide a significant measure of the nation’s demand for goods and services such as clean water, fresh air, wildlife, recreation, wood fiber and jobs.

The above description is taken verbatim from the U.S. Forest Service website, and as the majority of southerners and forest industry stakeholders know, it’s perfectly accurate. In the Southeast, just as in other regions with forestry-engrained economies, forests must remain forests in order for landowners to maintain their livelihoods, a concept that is widely misunderstood when it comes to managing and harvesting tree stands in various stages of growth, particularly when the some of the material end use is for wood pellets.

Helping disprove inaccurate mainstream media reports and environmental group claims of deforestation and clearcutting, as well as a range of other useful purposes, pellet producer Enviva has devised a solution to provide a much greater level of transparency into its fuel sourcing. A system that not only divulges to the public, regulators and customers the general location, landowner, forest and harvest type, as well as age class, harvested acreage and percent sent to Enviva, but also requires Enviva’s fiber suppliers to provide further data, a small portion of which remains undisclosed to protect landowner privacy. If a supplier chooses not to provide the information, Enviva won’t accept the fiber.

“They’ll be turned away at the gate,” says Jennifer Jenkins, Enviva vice president and chief sustainability officer. Jenkins’s career history makes her a good fit for her role at Enviva, having a technical background in land atmospheric carbon exchange focused on biomass estimation and forested systems, as well as employment history at the U.S. EPA, where she quantified biogenic carbon emissions from stationary sources, the U.S. Forest Service and the University of Vermont as a professor.

Jenkins and her team are responsible for the creation of a system and processes for sourcing wood that are consistent with forestry values, she says. “We manage the Track & Trace System and its publication, we manage our certification systems, and we maintain triple chain-of-custody systems, as well as Sustainable Biomass Partnership certification. And we have a team of sustainable foresters on the ground who interact with our fiber procurement team and support them in their work.”

Jenkins’s team is also responsible for interacting with regulatory agencies and policymakers in the U.S. and European Union, as well as Enviva target customer countries to stay abreast of sustainability policies as they are developed and updated. “We also communicate with our stakeholders, customers, potential customers, NGO groups, etc., about the work that we do,” she says.

Low-grade wood fiber, unsuitable for sawmilling and lumber industries because of small size, defects, disease, or pest-infestation, as well as tops, limbs, commercial thinnings and mill residues are sources of wood fiber Enviva tracks and utilizes to make wood pellets.

PHOTO: ENVIVA

MAY/JUNE 2017 | PELLET MILL MAGAZINE 17

Enviva’s online Track & Trace System allows users to select a region that the company sources wood from to view individual tract details, including information such as landowner type, forest type, age class and the harvest percent sent to Enviva.

SOURCE: ENVIVA

Data to Date

Enviva has six wood pellet plants at locations in Ahoskie, Northampton County and Sampson County in North Carolina; in Southampton County, Virginia; Amory and Wiggins, Missouri, and Cottondale, Florida. So far, the company has archived fiber sourcing data from January to June 2016, and from April to September 2016. That data reveals that from April through September, Enviva sourced wood from 1,100 different tracts, from 78

counties in five southern states. For material, 27 percent was residue purchased from sawmills, and the majority of the remainder from mixed pine and hardwood forests (38 percent), and southern yellow pine forests (27 percent).

On average, the forests on harvested tracks were 35 years of age at final harvest. “As we approach [fiber sourcing], our goal is to make sure that, for every tract we purchase, harvesting was the right thing to do for that tract, at that time,” Jenkins says. “It begins at the sup-

plier, who provides information about the tracts to an Enviva forester. That information includes the GPS coordinates, specific latitude and longitude coordinates, basic information about the forest characteristics on that site, forest type, stand age, and what proportion of the volume from that tract will be delivered to Enviva—the rest of it will go to other local forest products markets.”

Details about the tract are stored on the T&T data base, and if the supplier arrives at a facility before the information has been added to the system, they will be turned away.

“We developed this on our own,” Jenkins says. “We started the process years ago, and we had to work closely with our suppliers to encourage them to give us this level of information. They aren’t used to sharing trackable data with their customers, and as far as we know, there is no other forest products company that has gone to this level of detail or made this kind of commitment to tract-by-tract information gathering.”

Enviva began by communicating early on with suppliers what the intent of T&T was, and that the data would be published. “We have good relationships with our suppliers, and haven’t had any pushback from that community,” she says.

Suppliers are provided privacy, however, as detailed tract locations aren’t given away.

“The online map coordinates are fuzzed, so someone wouldn’t be able to locate the tract

Bioenergy Research from the Ground Up Biomass Feedstock National User Facility Services and Products • Toll processing • Toll piloting • Biomass characterization • Third party validation, consulting • Techno-economic assessments (feedstock supply & logistics)

18 PELLET MILL MAGAZINE | MAY/JUNE 2017

For More Information Mr. Quang Nguyen quang.nguyen@inl.gov bfnuf.inl.gov

Enviva Track & Trace System Required Data • Timber vendor that purchased stumpage and harvesting rights.

• Logging contractor/crew to perform harvest.

• Landowner who sold harvesting rights to supplier.

• Tract name or identifying feature.

• State and county, tract location.

• Landowner type.

• Age class: 10-year range estimate of forest age.

• Harvest type: Final harvest, thinning, selection harvest, or other.

• Estimated acres to be harvested.

• Intent to reforest: Yes, no, or N/A (in case of thinnings). If ‘no’ is chosen, transaction is aborted.

• GPS coordinates: Tract geolocation in decimal degrees.

• Estimated percent of total volume from harvest that is sent to Enviva.

• Majority forest cover type.

• Certification type, number and description.

just based on the map, though the general location is shown,” she says. “That was important to us—we didn’t want to compromise our ability to continue to work with our suppliers by inundating their privacy.”

A full year’s worth of data is available and published online. As far as findings go, Jenkins says nothing particularly surprising has been discovered on the sourcing side, but the data has been useful in a way that Enviva hadn’t necessarily anticipated. “In terms of what we’re sourcing, it’s very consistent with what we expected, but what we learned is that we’ve been able to demonstrate and underline the way our operations fit within broad context of the Southeast U.S. industrial landscape,” she says. “We’ve been able to use that data to help tell a story.”

Part of that story is that since Enviva established operations in its supply regions, forest area and forest inventory have increased in

Technology »

some areas. “There are a lot of factors that go into changes in forest area and inventory, but we’re pretty confident that we’re contributing to a positive development,” she says. “The mid-Atlantic region, in which we established our first mill in 2011, since then, the trends have only been positive in forest area and inventory, and that’s demonstrated and made clear and transparent—we hope—on our T&T mapping system.”

And, data from the T&T system, which was shortlisted for a 2017 Innovation Award by the U.K. Renewable Energy Association in April, has been of interest to the academic community, according to Jenkins. “We’ve gotten a lot of positive feedback, as the data has removed some of the guesswork and certainty about how we fit within the larger forestry landscape. Answering questions and criticisms with data, we believe, is a very powerful tool.

Clear-cuts just for the pellet industry are not taking place—not for biomass hardwood for

the pellet industry. We’ve been able to show that.”

And, response from customers has been very positive. “To date, the bar for the pellet industry has been certification,” she says.

“That’s been what the customers require in order to endorse, from a third-party perspective, the sustainable, responsible sourcing of the wood that goes into the pellets. With T&T, we’ve been able to take it a step further, going beyond certification. It’s not just a tract-level, data management tool for us, it’s a transparency tool that has been very valuable. I have to believe that, in the future, this kind of datadriven transparency will be required. We encourage it, and we think it’s a good thing for the industry overall.”

Author: Anna Simet Managing Editor, Pellet Mill Magazine asimet@bbiinternational.com 701-738-4961

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« LOGISTICS

MAINTAINING the Fiber Flow

Producers outline their philosophies and strategies for feedstock procurement, illustrating the critical importance of developing strong and long-lasting relationships.

BY TIM PORTZ

F

or the past 13 years, Dave Fetzer procured wood for Energex America’s Mifflintown, Pennsylvania, pellet facility, where the material arrived in 20-ton truck loads. At full song, the plant consumes more than 4,000 tons of sawdust, chips or shavings per week, and it was Fetzer’s job to make sure each of 200-plus truckloads of material that arrived at the plant met its tight quality specifications. “We test each load for ash content and moisture content,” Fetzer says. “Our purchase order asks for about 35 percent for green material, and about 7 percent for the dry, and both need to be around 1 percent ash content.”

Ensuring that one or two suppliers’ loads met these parameters would be one thing, but Fetzer, like many of his fiber procurement colleagues across the industry, oversees material deliveries from a long roster of suppliers. In Fetzer’s case, while 80 percent of his annual volume comes from his top 20 suppliers, over 80 different suppliers will make a delivery to the Energex plant in the course of the year. Adding to the complexity, Fetzer must manage the variety of suppliers. “We have a lot of Amish mills in our area, and we also have some very high-producing mills,” he says. “I’ve got a mill in this area that produces a million feet of lumber a week.”

Managing all of this, and ensuring the plant gets the quality material it needs, all boils down to relationships. Fetzer makes a point of visiting his top suppliers on a quarterly basis, and in some instances, he visits suppliers more frequently. The simple math shows that Fetzer spends as much time in the field with his suppliers as he does at his own plant. “It is the only way to fully understand what is happening with

your suppliers,” he says. “You never know what might change at their plants.”

After a decade in the business, Fetzer’s eyes are constantly scanning his suppliers operations.

Experience has taught him that something as minor as a new operator on a debarker machine, or a new front end loader operator, can have a profound impact on the quality of the supplied material. “I showed up at a potential supplier one time and most of the logs that came out of the debarker looked like barber poles,” Fetzer says. Fetzer knew that the bark that remained on the logs would ultimately end up the chips, raising the ash content of the material to an unacceptable level. “I explained to my contact at the plant that, unless the debarking process got better, it was unlikely that his material would satisfy our quality requirements. He then explained to me that the guy running the debarker was his father-in-law, and that correcting him might be more difficult than correcting someone else,” says Fetzer.

Fetzer also spends a great deal of time watching how his suppliers move material through their operation, and keeps a sharp eye out for any instances where material is simply placed on the ground. Overall plant cleanliness typically translates into clean material, Fetzer offers. “One half bucket full of mulch that gets mixed in with the material we want can throw a whole load out of our ash content tolerance,” he says. “It is important that our suppliers know that.”

A Family Affair

Mark Faehner, vice president at American Wood Fibers, is celebrating his 30th year in the wood fiber business, and his family’s connection to the industry reaches back nearly a century.

20 PELLET MILL MAGAZINE | MAY/JUNE 2017

While Faehner’s roster of wood fiber suppliers at AWF isn’t as expansive as the Energex’s, he, too, points to the value of building long-term, lasting relationships. “Changes are not made quickly in the byproduct market,” he says. “It is not uncommon to have relationships with people for 15 years or more. The long term service implications are very important to both parties.”

Faehner explains that for primary and secondary wood product manufacturers, a reliable offtake partner for their residuals and byproducts can mean the difference between operating and not. “Some of our suppliers might have between 50 and 100 people working in a woodshop or sawmill,” he says. “All of the machines are connected to a central sawdust collection system and ultimately feed into a silo. If the silo fills up and there is no on there to take that material away, the shop has to shut down. For that reason, there is a high premium placed on trust and a proven track record with offtake partners.

Your truck has to show up, again and again as your supplier expects it should.”

Faehner has watched other offtake parties enter a new market and offer higher, sometimes

NEXT TO GODLINESS: High importance is placed on clean wood yards at pellet plants. This facility in the western U.S. manages its inbound material on a wood yard with a concrete pad, limiting the amount of ash content that ultimately enters their production environment.

PHOTO: TIM PORTZ, BBI INTERNATIONAL

significantly higher, prices for sawmill residuals. Ultimately, he notes, these new players don’t last, and sawmills have learned to be wary of these new parties. “Most companies don’t want to deal with them, even if their price is better, because there is just too much risk involved,” he says.

This year, both Faehner and Fetzer found themselves managing market conditions that curtailed their expected demand. The challenge for wood pellet producers and the primary and secondary suppliers who rely on them to take their residuals is that supply and demand in the wood products and pellet industries do not correlate. Managing this tension ultimately falls to people like Fetzer and Faehner.

Fetzer points to the advice he gives to all of his suppliers when he first engages with them and brings them aboard. “I urge people not to put all of their eggs in one basket,” he says. As tempting as it might be for Fetzer to take all of the material one supplier can offer— particularly if it is of high quality or a species or type that Fetzer covets—ultimately, it puts too much pressure on him and the Energex facility.

In the Energex market area, winter ended early this year, and pellet sales fell off dramatically.

Producers throughout the Northeast felt the same lull, and all of them went to work taking what they could from suppliers, but deflecting material and ratcheting down inbound volumes to the best of their ability. “We had to put suppliers on a quota system,” says Fetzer. He and the Energex team worked hard to take volumes from everyone on their supplier roster.

Fetzer explains that the volumes he took from suppliers was determined by a number of factors, including annual volumes, quality history and the length of the relationship between the facilities. “We worked really hard to take care of our biggest suppliers, and those with whom we had the longest relationship,” he says.

Faehner and AWF have a couple different options available to keep suppliers happy.

He points to AWF’s diverse product line as an operational pressure valve when pellet sales are soft. “We do a lot of animal bedding, wood flour and even some bundled firewood,” he says. “We do a good pellet business and market

conditions like the past two years really hurt, but pellets aren’t the only thing we do. We’ve got some other things that are doing better.

Part of our operational strategy is to equip our plants to produce a variety of products.”

Taking in material and storing it is also an option, Faehner notes. “If you deal in green material, you can just pile that material up in your wood yard,” he says. Faehner says that AWF is fortunate to have nearly 1,000 tons of indoor storage capacity. Here, he says, he can store raw material or finished product. The kiln-dried material that AWF procures cannot be stored outside, so indoor storage real estate is a convenient buffer that introduces some slack into AWF’s procurement and production relationship. For producers who aren’t fortunate enough to have that kind of indoor storage, producing pellets and storing them in bags outside becomes the only option available to them. For Faehner, this just isn’t a tenable situation. “That’s tough,” he says. The sun and weather are hard on pellets. The moment you store a pallet of product outside, it begins to lose quality.”

MAY/JUNE 2017 | PELLET MILL MAGAZINE 21

ÂŤ LOGISTICS

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For both Faehner and Fetzer, returning as quickly as possible to the offtake rates their suppliers have come to expect is a matter of very high importance. After managing the January downturn, Fetzer was able to lift the quotas he had placed on his suppliers, and Energex is once again able to take the volume of material its suppliers need them to. American Wood Fibers is also building inventory for the 2017-â&#x20AC;&#x2DC;18 heating season, and Faehner points to the late summer ordering season just a handful of months away.

Do It Yourself Demand

In at least one instance in the industry, producers of residual wood fiber material take it upon themselves to establish a pellet production facility as a means of filling in holes in their fiber demand. In 1976, Patrick Curran began a family logging business with little more than a couple of chainsaws and a logging truck. Since then, the business has grown into a major player in New York state, serving paper and board plants there and nearby Canada.

Curran, troubled by what he saw happening in the paper market, recognized that he needed to find a new demand center for some of the materials he was handling, and founded Curran Renewable Energy in 2009.

When running at maximum production, Curran reports that the pellet plant can consume 200,000 tons of the 500,000 tons of wood fiber that its sister company, Seaway Timber Harvesting, generates each year. â&#x20AC;&#x153;There really is no market here today for softwood chips, and 30 percent of what we harvest each year is softwood,â&#x20AC;? Curran says. â&#x20AC;&#x153;It just made for a really nice fit, and weâ&#x20AC;&#x2122;re mixing hardwoods and softwoods together in our blended pellets.

Curran never wonders where his next load of material might come from. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re vertically integrated,â&#x20AC;? he says. â&#x20AC;&#x153;I can take my wood yard down to one dayâ&#x20AC;&#x2122;s worth of material and I still know where my next material will come from.â&#x20AC;?

In some instances, Curran says, if a paper client calls and needs the material, he will reduce his material inventory to levels other producers wouldnâ&#x20AC;&#x2122;t be comfortable with. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve never backed away from a request from our paper customers,â&#x20AC;? he says. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;ve been good to us over the years, and being a partner to them is of the highest priority.â&#x20AC;?

Additionally, Curran says that quality is really nothing he or his pellet team ever have to concern themselves with, as they handle 100 percent of the material that eventually finds its way into the pellet operation. â&#x20AC;&#x153;If youâ&#x20AC;&#x2122;ve got 100 feedstock suppliers, you donâ&#x20AC;&#x2122;t have to have too many of them give you poor material before youâ&#x20AC;&#x2122;ve got a problem,â&#x20AC;? he says. â&#x20AC;&#x153;If your

22 PELLET MILL MAGAZINE | MAY/JUNE 2017

feedstock isnâ&#x20AC;&#x2122;t quality, the pellets you make will not be quality, either. There is very little room to have dirty feedstock in this spaceâ&#x20AC;&#x201D;very, very little.â&#x20AC;?

Vertical integration does not insulate Curran from a downturned market, however, and depressed demand from his own pellet facility generates the same challenge for Curran and his logging operation that confronts the suppliers who Faehner and Fetzer work with.

While Curran Renewables has the ability to produce more than its current high-water mark of 107,000 tons of pellets in one production year, the past two winters have given Curran pause. â&#x20AC;&#x153;Like a lot of logging operations, weâ&#x20AC;&#x2122;ve got a lot of iron in the field, and the number of markets to sell into is getting smaller,â&#x20AC;? he says.

Demand Drives Prices

During the course of 13 years, Fetzer has seen residuals priced as low as $10 per ton for green material, and as high as $30 to $35 per ton in the middle of a particularly cold winter.

Fetzer signs purchase orders with a life-span of eight weeks, and if his suppliers want to introduce changes in price or volumes, they are asked to do that at the conclusion of the existing eight-week purchase order. â&#x20AC;&#x153;Lately, the pricing hasnâ&#x20AC;&#x2122;t fluctuated all that muchâ&#x20AC;&#x201D;it has really been holding pretty steady for about 18 months,â&#x20AC;? he says.

Fetzer is newly retired, having just recently received the last few fiber loads of his career.

Like both Faehner and Curran, he points to the importance of strong relationships when managing feedstock procurement. Before his career drew to a close, Fetzer says that he had arrived at first-name basis kind of relationship with all of his suppliers. â&#x20AC;&#x153;If I told someone I was going to do something for them, I did it,â&#x20AC;? he says. â&#x20AC;&#x153;Also, I think it important to tell people about things that involve them, whether it is good news or bad news.â&#x20AC;?

Finally, Fetzer points to a dramatic change in the way his suppliers regard the byproduct streams they produce. â&#x20AC;&#x153;What used to be considered a waste product is now a valuable byproduct,â&#x20AC;? he says. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s not even considered waste anymore. In the late 1990s or early 2000s, sawmills recognized they had a valuable commodity on their hands, and it started paying some of their peopleâ&#x20AC;&#x2122;s wages instead of just going into the kitty.â&#x20AC;?

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Feedstock Sustainability Regulations in the EU

BY HANNES LECHNER AND JOHN DAWSON-NOWAK

T

he sustainability of biomass fuels has been, and continues to be, a topic of discussion within the European Union. The United Kingdom, Netherlands, Belgium and Denmark have all introduced clear and proven sustainability criteria to cover this issue, but its repeated coverage in mainstream media highlights that the industry still has progress to make when it comes

to convincing the public of biomassâ&#x20AC;&#x2122; credibility as a sustainable energy source in large-scale power and heat generation. Going forward, the European Commission has proposed binding sustainability criteria that would apply across the EU, but it is not yet clear how such criteria will be implemented, which adds further uncertainty to the market.

Existing Regulations

Existing sustainability regulations largely focus on two key areasâ&#x20AC;&#x201D;monitoring of greenhouse gas (GHG) emissions, and ensuring biomass comes from wellmanaged and sustainable sources, with adherence to these regulations linked directly to eligibility for incentives. While the differences between regulations in the U.K.,

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

24 PELLET MILL MAGAZINE | MAY/JUNE 2017

Policy »

Netherlands, Belgium and Denmark may appear limited, they create some difficulties for the trading of pellet volumes, as individual shipments may meet the criteria in one country, but not in another.

Emissions from biomass combustion are considered to be carbon neutral, as they are reabsorbed by forest stands that are grown and managed on a sustainable basis to supply raw material for energy generation and other industries. The U.K., the Netherlands, and Denmark have supply chain GHG emission limits in place ranging from 200 kilograms (kg) of CO2e per megawatt hour (MWh) to 285 kg CO2e/ MWh of electricity generated. In Belgium, the number of Green Certificates awarded is directly linked to the energy balance of the biomass, or to CO2 savings achieved compared to a gas alternative with an emissions factor of 456 kg CO2e/MWh. In respect to the source of biomass fuels, Belgium has tight restrictions on the type of biomass that can be used, largely preventing the use of any feedstock that is being used by traditional wood-consuming forest industries in Belgium. In the U.K., Netherlands and Denmark, proof that the biomass comes from a well-managed and sustainable source can be verified through the provision of Forest Stewardship Council or Pan European Forest Council certificates. In cases where such certificates are not available, third-party audits or adherence to alternative criteria, such as those outlined by the Sustainable Biomass Program, can be used as evidence.

Suggested Changes to EU RED

A number of changes to the EU Renewable Energy Directive, including the introduction of EU-wide sustainability criteria for using solid biomass in power and heat generation, were proposed at the end of 2016. Similar to existing regulations in the U.K., the Netherlands, Belgium and Denmark, they would be comprised of two main elements covering GHG emissions and the source of the fuel used.

For GHG emissions, it proposes that biomass-consuming projects beginning operations from Jan. 1, 2021, will have to demonstrate supply chain emissions of below 132 kg CO2e/MWh, and projects starting operations from Jan. 1, 2026, will have to demonstrate supply chain emissions of below 99 kg CO2e/MWh. It is important to note that these changes will not apply to existing supply chains for plants that are already operating. They are also considerably tighter than any existing GHG limits, and may prove difficult for some international fuel suppliers to meet when supplying new European bioenergy plants from 2021 onward.

Regarding the biomass source, it has been suggested that it must come from a country that has laws, and monitoring and enforcement systems in place to ensure biomass production does not cause deforestation, degradation of habitats, loss of biodiversity or overharvest. However, it is not yet clear how this will be monitored, creating some uncertainty.

Additionally, the biomass must come from a country that has ratified the Paris agreement with land use, land use change and forestry emissions monitored, improved and accounted for in the country’s emissions targets. The U.S. is currently one of the main suppliers of industrial pellets into Europe, and while the Paris agreement was ratified by the U.S. under the Obama administration, the Trump administration has indicated that it may rescind this. If this happens, and the proposed changes to the EU RED come into effect, then U.S. supply chains developed after Jan. 1, 2021, would not be able to supply into the European market.

Criticism of Biomass as Renewable

There is a large catalog of scientific reports and studies verifying the validity of biomass as a renewable fuel. Nevertheless, the approach currently being taken toward accounting for GHG emissions, including the assumption that emissions from com-

bustion of sustainable biomass are effectively carbon neutral, have been a continual topic of both discussion and criticism.

Most recently, such criticism has come from a report published by the well-respected U.K. think tank Chatham House.

The report claims that subsidies awarded for large-scale biopower generation in the U.K. represent a misuse of tax payer money, as combustion of biomass can result in higher CO2 emissions than the combustion of coal.

Although this report has been rejected by the scientific community, which has pointed to more detailed scientific analysis with better understanding of forest management practices and the validity of such an approach, the fact that such analysis and reports are still appearing in mainstream media shows that the sustainability issue is still of importance to the wider public.

Sustainability of biomass supply is already a well-monitored, efficiently managed issue in some European countries, regarding supply chains for industrial-scale power and heat generation. The challenges ahead will require individual EU member states and all stakeholders involved to ensure they have a clear understanding of the subject matter, so that when binding, EUwide criteria come into effect, they are fully prepared. Additionally, the continued discussion of biomass sustainability in largescale industrial applications within mainstream media is evidence that the industry needs to do even more to effectively communicate the green credentials of biomass power, and the effectiveness and validity of current approaches toward regulation and criteria.

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

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