Demand for wood pellets grows

Published 12:04 pm Saturday, July 9, 2011

* Third in a series

FRANKLIN — With an expanding global market, the future for local wood pellet producers is burning bright.

A growing demand for fuel pellets in markets in Europe, Asia and the potential for an expanding market in the U.S. has led to a need for more producers, which could benefit local economies for years to come due to the area’s extensive wood basket and access to major ports.

Largely because of this, manufacturers have announced plans to build wood pellet production facilities in several area localities, including Franklin, Waverly and Greensville County in Virginia and Ahoskie in North Carolina.

Peter O’Keefe, a partner in Franklin Pellets, which is looking into repurposing a portion of the shuttered International Paper mill, said production of pellets in the U.S. Southeast is on track to continue expanding.

From 2008-2010 total U.S wood pellet exports to Europe alone grew from 85,000 tons to more than 600,000 tons per year. He added that the region is positioned to deliver even more than that next year.

“It’s exploding,” he said.

The increase in exports to Europe can be attributed to the European Commission’s 20-20-20 rule, O’Keefe said. This refers to a new law mandating that by the year 2020 all power generation facilities cut emissions by 20 percent and that 20 percent of power generation has to come from renewable sources.

Pellets have a higher BTU content than other renewable sources, like waste wood, which makes them better to co-fire with coal, O’Keefe said. Co-firing with pellets also cuts down on costs due to infrastructure.

“The infrastructure for coal doesn’t have to be changed dramatically for pellets because they’re almost like ground-up coal,” O’Keefe said. “That’s why it is so attractive to use to co-fire with coal.”

While Europe burned about 11 million tons of pellets last year, estimates for the coming years are much higher due to the new mandate. Estimates are that 50 to 100 million tons of pellets a year will be needed to fuel the European market in the coming years, O’Keefe said.

While the European market is growing it’s not the only continent that is seeing an expanded pellet market. Asia has also become a major player in North American exporting of wood pellets.

Stan Elliot, of Bear Mountain Forest Products in Portland, Ore., said the Asian market is growing, but few U.S. manufacturers are exporting to that market.

He said Canada, especially British Columbia, has been able to export to Asia easier. Elliot attributed this to lower transportation costs and better shipping facilities than the U.S.

Elliot also said there is a growing South American market for pellets, however they use bagasse, which is a by-product of sugar cane, rather than wood to produce their pellets.

Manufacturers, who are primarily focused on the European market, are also hoping for growth within the U.S. market, but political pressures could make the expansion of the market a long-term goal.

“We’re excited about the potential of the U.S. market and believe in the long run it is moving our way,” O’Keefe said.

While the wood pellet market is expanding globally, the use of wood pellets for home heating will remain slow, at least in this region.

John Belcher, owner of Belcher Enterprises in Courtland, said demand for wood pellet stoves for home heating is greater in markets north of this region, but the climate here makes it less cost effective to switch from electricity or gas to wood pellets.

“I wouldn’t say (the market) is good at all in this area,” Belcher said. “Up north where they use more heat it’s more beneficial.”

He said average wood stoves run cheaper than pellet stoves and produce more heat. Pellet stoves, whether freestanding or as a fireplace insert, run smaller than wood stoves.

However, Belcher said pellet stoves are supposed to be cleaner than woodstoves or fireplaces.