Pellet Industry Gears Up for Rising Demand

By Rona Johnson | October 31, 2011

This is the second edition of Pellet Mill Magazine and, as usual, the editors had no trouble coming up with content. A new addition to this issue is a regular column (see page 10) from Seth Ginther, executive director of the U.S. Industrial Pellet Association.

Although we cover all aspects of the pellet industry, all eyes are currently on global demand and how that demand is going to be filled.

Word on the street is that the global demand for wood pellets, which is currently estimated at 10 million metric tons, could increase sixfold by 2020, with much of that growth anticipated in the European Union. The U.K. has several biomass power plant projects in development and there are many coal-to-biomass conversions taking place, including one that’s being billed as the largest conversion of its kind in the world. The Rodenhuize Biomass Power Station in Belgium now produces 180 megawatts of biomass-based power, enough to run 320,000 households for a year. The plant is owned by Electrabel, a subsidiary of GDF Suez, and Ackermans & van Haaren.

This growth potential has prompted Anglo-Dutch power and gas exchange APX-Endex and the port of Rotterdam, Europe’s biggest port, to start a biomass exchange. The wood pellet futures contracts are listed on Trayport’s Global Vision Trading Gateway.

Asia is also starting to get into the market, with South Korea calling for a 30 percent reduction in greenhouse gases, which has some estimating that the country’s wood pellet demand could increase from 0 to 5 million tons in the next 10 years.

With new demand expected in the European Union and in Asia, there are plenty of plants being developed all over the world. The latest announcement came out of Brazil, where Suzano Energia Renovavel, a subsidiary of Brazilian pulp and paper company Suzano Papel e Celulose, plans to build two pellet mills with total production capacity of 2 million tons per year.

Projects have also been announced in the Southeast U.S., and you can bet Canada is preparing for industry growth as well.

In the U.S., the USDA recently announced payments to more than 160 bioenergy producers in 41 states, which included several pellet mills (Rocky Mountain Pellet Co. Inc., Appling County Pellets LLC, Rocky Canyon Pellet Co. LLC, Southern Kentucky Pellet Mill Inc., Enviva LP, Corinth Wood Pellets LLC, Geneva Wood Fuels LLC, Maine Woods Pellet Co. LLC, New England Wood Pellet LLC and others.) The individual grants to pellet mills ranged from $1,193.26 to $240,837.45.

Of course, there is room for caution here as many countries are experiencing budget shortfalls, which could lead to reductions in support for renewable energy. Let’s hope world leaders understand the economic benefits and job creation opportunities involved in all aspects of pellet production before they start the budget cutting process.