Report: Maine can benefit by encouraging switch to pellet heat

By Erin Voegele | March 19, 2019

FutureMetrics has released a new white paper that states Maine could dramatically improve its economy by enacting a policy that helps reduce dependence on heating oil by supporting the use of locally produced wood pellets as heating fuel.

The paper, authored by FutureMetrics President and Founder William Strauss, notes that the Northeast consumes approximately 84 percent of the heating oil used in the U.S. Of those states, Maine is the most dependent on heating oil, with more than 61 percent of homes using the fuel. The paper points out that Maine has a very low natural gas use for home heating due to the high proportion of homes in rural areas.

In the paper, Strauss cites data from the U.S. Energy Information Administration that shows, on average, about 68 percent of each dollar spent on heating oil does not remain in the state’s economy. He estimates businesses and households in Maine spend approximately $956 million per year on heating oil, with approximately $650 million of that leaving the state, which drains the state’s economy of potential commerce. “The multiplier effect of that loss of commerce is the loss of about 39,000 potential jobs in a state that has a total of 680,000 people employed,” he wrote in the paper.

According to Strauss, modern high-efficiency pellet boilers have allowed some western European nations to eliminate dependency on heating oil for heat and hot water. “While it is not feasible in the near term to replace every heating oil fueled boiler in Maine with a pellet fueled boiler, it is feasible to consider a transition over time to a lowered dependency on heating oil,” Strauss wrote. “Because heating oil is produced in distant refineries made from petroleum from distant oil wells, and pellet fuel is made in Maine, 100 percent, not 32 percent, of every dollar spent on pellet heating fuel stays in the state.”

If 15 percent of the homes and businesses in Maine that currently use heating oil change to pellet heat over the next decade, Strauss said it would keep an additional $133 million circulating in the state’s economy and result in approximately 8,000 new jobs being created. Additional economic benefits in the form of increase household disposable income would also result due to the lower cost of wood pellets relative to heating oil. Strauss estimates that a typical home in Maine would save $500 per year in heating costs by switching from heating oil to pellets. Economic benefits would also result from the construction and operation of new pellet production plants, along with the establishment of pellet distribution operations.

Overall, Strauss estimates that if 15 percent of current heating oil users would switch to wood pellets, the state would see an increase in income tax revenues of about $22.9 million per year. According to the paper, the net annual estimated increase in state and local tax income would be about $27.7 million. Not accounting for inflation, the paper estimates an additional $280 million would be accrued by the Maine treasury over a 10-year period.

The paper also addresses Maine’s ability to supply the 380,000 tons of pellets that would be needed annually if 15 percent of the state’s heating oil users transitioned to wood pellets. According to Strauss, permanent closures of pulp and paper mills in Maine in recent years has lowered demand for wood by at least 2 million tons per year, with some estimates as high as 3 million tons per year. The production of 380,000 tons of wood pellets per year would require approximately 830,000 tons of wood per year from the state’s working forests. Strauss said Maine’s landowners and loggers would welcome the return of at least part of the demand for raw materials that has been lost with the loss of pulp and paper production.

The paper concludes by noting that each year approximately 13,000 homes and businesses in Maine that use heating oil must replace their boilers. Only a small percentage of those homes and businesses have the option to switch to natural gas. If Maine can encourage a proportion of those who need to replace heating systems to install a modern pellet boiler, a variety of positive economic and environmental benefits will result.

A full copy of the 10-page white paper can be downloaded from the FutureMetrics website.