US boiler manufacture and wood biomass pellets production are both blossoming in United States as well as UK legislation moves forward to increase co-firing. U.S. pellet producers who are selling into export markets in Europe are coming off an eventful year that’s seen demand continue to grow—though not as quickly as some had hoped—and some certainty gained concerning the UK market and its renewable energy utilization goals going forward. Meanwhile, industrial pellet capacity in the U.S. continues to zoom upward as new plants came on line last year, while even newer plant projects were announced. Exports of wood pellets from the U.S. to the European Union (EU) doubled from 2009-2011, and the EU took in an estimated 1.5 million tons of U.S. wood pellets in 2012, according to Wood Resources International (WRI). Projections for the future of EU pellet consumption vary, but all are pointing well upward, from a rough consensus among third-party observers of 15-20 million tons annually by 2020, to projections by some European interest groups of pellet usage in the 60-80 million ton range across the EU by that time.
But also residential consumption in US is increasing dramatically. EIA releases consumption, price data for wood and waste biomass. According to the EIA, California led the nation with residential wood biomass pellets consumption in 2011, with approximately 1.665 million cords consumed. A cord is roughly equal to 128 cubic feet of stacked wood material. California’s consumption equated to approximately 33.3 trillion Btu. Missouri was the second largest residential consumer of wood biomass, with 1.166 million cords, or 23.3 trillion Btu consumed in 2011. Pennsylvania rounded out the top three, with 1.076 million cords, or 21.5 trillion Btu, of residential consumption. Total U.S. residential consumption of wood equaled 22.5 million cords, which accounted for 450 trillion Btu of output. See full report of EIA here.
UNITED KINGDOM: In 2012, a big impact on North America’s industrial pellet industry came from the United Kingdom’s Dept. of Energy and Climate Change (DECC), which published a “consultation” decision on the direction of British renewable energy policy for the near future. As part of the decision, and because of inherently better energy utilization ratios, combined heat and power generating facilities (CHP) are exempt from the UK’s dedicated biomass generating cap once they receive certification under the DECC’s CHP Quality Assurance Program. In essence, the DECC’s decision going forward favors the continued growth of biomass co-firing and biomass conversion at existing UK coal-burning power plants, while placing a cap on generating capacity coming on line for new, dedicated biomass power plants. The non-legislative cap, which covers the next five years, is set at 400 MW for new, dedicated biomass generating capacity that will be supported under the country’s Renewable Obligation Certificate (ROC) system.By establishing the 400 MW cap on new, dedicated biomass generating capacity, DECC officials believe there will be more progress made in the process of taking coal-fired generating capacity off-line (or converting it), while at the same time upholding ROC value.
The Government may be convinced that there will be an equal split between technologies, or even a skew in favour of heat pumps, but history says that, if they genuinely want to deliver on renewable heat, they need to concentrate on biomass (as they understood was the case before heavy lobbying by the Big Six energy companies, who sell electricity and don’t sell biomass, persuaded them otherwise). Given the constraints on the native resource in the UK, they will need to rely heavily on imported biomass, which generally means pellets.
Production in countries like Canada, America, Russia and Brazil enjoys some advantages, particularly of scale, energy and feedstock costs, even over Austria, Germany and Sweden, let alone the UK. It is likely that high-grade pellets can be produced in these countries for around £110-120/tonne in 2012 money. And the scale of the resource and limited local demand suggests that they can supply tens of millions of tonnes sustainably. But at the moment, the pellet-heating market in the UK is too small to ship the pellets efficiently. If the market can only absorb a few thousand tonnes at a time, the size of boat involved will cost over £20/tonne for the shipping, plus £5/tonne at either end for the handling at the dock. Most of the pellet plants in these countries aren’t near the sea, so they have significant additional costs getting the pellets to the port. And boatloads of pellets have to be put into storage while the stock is gradually run down, adding another £10-20/tonne of cost. The businesses involved have to cover their overheads, and the supplier has to distribute the pellets to the final user. That puts the cost of importing these pellets above the cost of using British pellets in most circumstances at the moment. But as the delivered cost of British pellets rises above £200/tonne, and the size of the market enables the use of larger boats (which could save £10/tonne of shipping costs), imports should become competitive and import volumes should expand rapidly to supply the excess demand. That is why we anticipate that imports will prevent prices escalating beyond around £200-220/tonne (in 2012 money), even as demand exceeds native production.
The one threat to this scenario is if governments subsidise biomass power generation by so much that they start sucking up all the excess pellet production. For example, if half (1.5 GW) of Drax power station were converted to biomass (as is being considered) and run at a load factor of 68% (producing around 9 TWh or 2.5% of the UK’s electricity), it alone would need the equivalent of around 5,000,000 tonnes of wood pellets per year. That is enough to heat around one-third of the off-grid residential properties in the UK. The amount of the energy in the pellets that would be wasted up the chimney (15 TWh) would be enough to heat around 1,000,000 homes.
Fortunately, so far, biomass generation has not been subsidised sufficiently to enable it to pay more for pellets than biomass heat (quite rightly, given the relative efficiencies and carbon savings). It is in no one’s interest to encourage inefficient use of the biomass resource, so if governments place the interests of the economy and environment ahead of the interests of big business, they will hopefully maintain the differential that ensures that wood pellets are worth more for heat or CHP than for power. We need to keep the pressure on them to remind them where their priorities ought to lie.
Some good articles and publications on US and UK pellet markets can be found here:
- Developments in international solid biofuel trade—An analysis of volumes, policies, and market factors (2012)
- Analysis of U.S. residential wood energy consumption: 1967–2009 (2012)
- Evaluation of wood pellet application for residential heating in British Columbia based on a streamlined life cycle analysis (2013)
- Technical and economic assessment for the production of torrefied ligno-cellulosic biomass pellets in the US (2013)
- Economic impact of wood pellet co-firing in South and West Alabama (2013)
- Analysis of U.S. residential wood energy consumption: 1967–2009 (2012)
- Woody biomass outreach in the southern United States: A case study
- UK’s co-firing subsidies are reasonable options to promote cost-effective renewable electricity generation.
- Tilbury burning BC wood pellets in UK
- U.K. biomass facility for end of 2014
- Recent trends and future opportunities in UK bioenergy: Maximising biomass penetration in a centralised energy system
- Evaluating biomass energy strategies for a UK eco-town with an MILP optimization model
- National renewable energy policy and local opposition in the UK: the failed development of a biomass electricity plant
- A technical and economic analysis of three large scale biomass combustion plants in the UK
- Wood pellet supplies, demand and future prospects