The Advance Of The Austrian Pellet Boilers
Austria is a biomass boiler manufacturing powerhouse. More than a quarter of the modern biomass boilers installed in the European Union are manufactured in the country’s northern state of Upper Austria, according to the Upper Austrian Energy Association. The country also boasts some of the greatest densities of small-scale heating systems in the world. Eyeing new opportunities, several Austrian pellet boiler manufacturers are looking at the U.S. market, but face the challenge of developing a product for a different market with different policies, more than 3,500 miles away.
OkoFen was the first Austrian company to enter the U.S. market with its Pellematic boiler product line and first to navigate the bureaucratic hurdles for international pellet boiler manufacturers. The first step is to get approval from UL Standards, explains Stefan Ortner, OkoFen CEO. “Four years ago, there were no standards for pellet boilers. So, we had to test to standards that were designed more for furnaces. There was a lot of discussion with the testers on what makes sense.” The biggest challenge, however, was getting certification from the American Society of Mechanical Engineers, Ortner says. To become certified in the Boiler and Pressure Vessel Certification Program, the ASME estimates the process takes roughly six months. OkoFen outsourced that hurdle, Ortner explains. “We decided to proactively get the pressure vessel manufactured in the United States to get in on the market faster.We found suppliers that could produce our vessel and shipped other parts from Europe to complete final assembly in Maine at Maine Energy Systems. In the long run, we think it makes sense that the products are manufactured in North America, but the volume is not enough now. It’s really the certification that forced us.” An added benefit of the units being assembled in North America is that it allows OkoFen the opportunity to converse with politicians and prove wood pellet heating is a benefit to the local economy in terms of production and manufacturing jobs, he says. “It helps quite a lot with things.”
Working The Sidelines
While OkoFen is establishing itself in northern New England, Austrian pellet boiler producers Hargassner and KWB await north of the border in Canada for more favorable conditions to enter the U.S. market. To make the U.S. a more attractive market for European pellet boiler producers, the country could accept European standards and norms, explains Florian Haslinger, area sales manager for Hargassner. “This would help a lot, especially with the ASME. The pressure vessel standard is a huge topic for us, because we have all tested our pressure vessels in Europe according to the EN 303-5 standard. The [European] standard is not accepted everywhere in the U.S.”
Other U.S. standards for electrical systems are an understandable concern, Haslinger says. “I do understand the electrical standards, [Canadian Standards Association] and UL standards are for pure safety concerns for electrical issues. But the pressure vessel [standard] is not clear. We developed and designed a state-of-the-art pressure vessel and now it’s just hard for us to do the ASME certification.” By having certain standards being accepted in some places, but not others, it complicates or eliminates grant funding opportunities and removes a degree of market protection, Haslinger explains. “The solution for that would be to accept the European pressure vessel standard.”
Hargassner Canada East is the distribution channel for the Hargassner company that began operation last year to complete the certification process. After becoming UL certified, the company was allowed to sell within the area, Haslinger explains, adding that the distribution partner provides full service for the boilers. “He’s importing the boilers, assembling the boilers, commissioning the boilers and maintaining and servicing the boilers after sale within the distribution network,” he says. Although Canada does not accept the European standard, the solution was to allow the boilers to operate within a certain pressure, Haslinger says. “In Canada, we can run the unit at 15 psi, and this is basically fine.”
After completing market research more than four years ago, KWB saw potential in the eastern Canadian and U.S. markets. It makes a lot of sense to replace oil boilers, which are prevalent on the East Coast, with biomass boilers because of the high costs of fuel oil. The existing oil storage area can be used to store pellets or woodchips, says Harald Krasser, area sales manager for KWB.
In mid-May, KWB was close to finalizing a business partnership in Canada for its boiler systems. “We think for a company of our size, it’s very hard to open our own office in North America, in Canada or the U.S.,” Krasser says. “It’s quite an investment and we don’t have a lot of experience on the market and not a whole lot of experience with all kinds of U.S. standards, such as production, safety, housing, pressure vessel standards. All these things we know very well in Europe, but sometimes in Europe it’s different from country to country. This is something we can’t learn just quickly, and that is why we are looking for business partners.”
Once the partnership is established, which is expected soon, KWB will have its 100 kW Multifire boiler modified to meet North American standards. “We have to exchange some electrical components and some of the pressure parts will be done in Canada,” Krasser says. The partner will help modify the boiler to meet local standards, he adds. “The whole confirmation process for North American standards takes several months and is very difficult. In my opinion, it can only be done by local experts. I think we in Austria would not be able to do that on our own.”
Like Haslinger, Krasser also feels the EN 303-5 standard acceptance issue is hindering pellet boiler growth. “This standard includes safety instructions and testing guidelines. This is how all the European countries work, and with this standard, hundreds of thousands of biomass boilers are used without any accidents. If I could wish anything, it would be to accept this standard.”
Product liability is another concept that makes some business developers and manufacturers uneasy about moving into the U.S. market, Krasser adds. “There are some companies that I know of that have constructed a very extended legal structure, such as founding a company that is legally disconnected from another company to minimize the risk of a product liability case.” For instance, if someone ignores labeled warnings and deliberately misuses a boiler, or an installer incorrectly installs a boiler unit, it seems that in the North America legal system, the person could still sue the manufacturer, Krasser says. “It’s only my opinion though. I’m no law expert, but it’s just what I learned.”
US Market Potential
For OkoFen, the trouble of jumping through the bureaucratic hoops was worth it. “In 2009, we went on a tour organized by the Austrian agency in the Northeast United States and Quebec, and we still believe that the potential for pellet boilers will be as big as in Europe. It takes a while, and I think the biggest barrier is the availability for bulk pellets,” Ortner says.
Maine Energy Systems was the only entity offering bulk pellet delivery services when OkoFen began its U.S. efforts. The lack of service providers creates a barrier for growth within the U.S. market, Ortner explains. “There are no more than 10 or 12 trucks in North America that are really designed to deliver wood pellets. This is the biggest barrier and slows down the process, but we have seen good growth and for us it is already worth it. I’m sure within the next four to five years, there will be a quite a big market, unless policy changes or the price of fuel oil drops dramatically,” he adds.
“You need government support to start the market. In the beginning, you really need to spread the word out and government support helps a lot,” Ortner says. Future market growth, particularly in the Northeast, will likely spread state by state. “One of the next states that we really hope picks up will be Massachusetts,” he says. “I think if that comes on, it could be a good market because Massachusetts is a wealthy state and there are a lot of houses not on gas.”
After speaking with competitors, Haslinger agrees the more promising markets lie within the New England states. “You will not find a system in the South and maybe a few in Washington, but only because I think British Columbia is pretty popular for biomass heating.”
Author: Chris Hanson
Staff Writer, Pellet Mill Magazine