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Trade Talk

The U.S. government is pooling its resources to tackle the nation’s trade deficit, and wood pellets may be the solution.
By Matt Soberg | October 31, 2011

The U.S. imports more products than it exports and the Obama administration has been vocal about the importance of enhancing export opportunities. The president directed the National Export Initiative in 2010 seeking to double U.S. exports within five years, aimed at putting more Americans to work. 
“Creating jobs in the United States and ensuring a return to sustainable economic growth is the top priority for my administration,” Obama said. “A critical component of stimulating economic growth in the United States is ensuring that U.S. businesses can actively participate in international markets by increasing their exports of goods, services and agricultural products. Improved export performance will, in turn, create good high-paying jobs.”


As governments in Europe and Asia initiate policies to reduce greenhouse gas emissions, those regions need renewable fuels and technology. That has prompted a flurry of activity in the U.S. pellet industry, and the U.S. government has zeroed in on the potential for pellet exports as one way to make up for its trade deficit.


Subsequent to the NEI, the Renewable Energy and Energy Efficient Export Initiative (RE41), a coordinated effort to promote renewable energy exports in the U.S., targeted wood pellets as one of the most promising export markets and indicated that the USDA would expand its analysis of exporting wood pellets and chips in relevant countries. The purpose of the analysis was to provide U.S. industry and policymakers with information on the sector’s growth, export opportunities in emerging markets and policy updates. 


The government’s emphasis on wood pellet exports was good news for the biomass industry. As a result of the NEI, seven federal agencies, including the U.S. DOE, USDA, Department of Commerce and others, collaborated on the RE41 project. 


With various government agencies involved in producing pellet-directed reports, multiple sources exist for company research and information. The questions now are, what happened with the NEI, what are agencies doing and where can the information they have generated be found?
National Export Initiative
The NEI created a national export cabinet to develop and coordinate its implementation. This cabinet includes the secretaries of state, agriculture, commerce and other officials. According to the NEI, various department officials continue to be engaged in interagency coordination of export promotion efforts.


When launching the NEI, the president noted that 95 percent of the world’s customers and fastest-growing markets are outside U.S. borders. He mentioned that our exporters have faced the obstacle that the federal government, frankly, just hasn’t done a good enough job advocating for them abroad—at least compared to the advocacy that other countries are engaging, and that is why the U.S. must go to bat for businesses.


Understanding the need to focus on energy, in light of the NEI, the Trade Promotion Coordinating Committee’s Renewable Energy and Energy Efficiency working group was formed. Sally Klusaritz, USDA director of public affairs and executive correspondence, says the group’s mission is to support the NEI by developing an export strategy to guide the U.S. government programs that support U.S. renewable energy and energy efficiency companies wishing to compete for sales abroad.


The TPCC is an interagency task force formed to coordinate and develop a government-wide export promotion plan. Made up of 20 agencies, the core partners include the Department of Commerce, Export-Import Bank, Overseas Private Investment Corp., U.S. Trade and Development Agency, Small Business Administration, Department of State and the USDA. The working group’s main initiatives include training specialists, marketing exports, integration of export programs and education to provide U.S. companies with the most accurate service and information quickly.


As mentioned earlier, the working group’s export strategy, RE41, which was released in December, demonstrates the commitment started by the NEI, and is the country’s first-ever attempt to coordinate U.S. government programs in support of renewable energy exports, according to U.S. Secretary of Commerce Gary Locke. The initiative was launched with 23 commitments from eight different U.S. government agencies and was modeled to proceed without any further funding or taxpayer cost.
A specific example of the RE41 commitments includes an online portal for RE41 access, which provides news, events and market research at www.export.gov/reee.


Pellet Policy


Subsequent to the NEI, the wood pellet industry achieved government exposure in the RE41, when it targeted wood pellet exports as a high-growth sector.


In the RE41, the USDA pledged to support the efforts of the working group as follows: “USDA will also expand its biofuels annual reports to cover biomass in the form of wood pellets and wood chips in relevant countries so as to provide much-needed information to the U.S. biomass industry and policy makers. This reporting will provide information on the sector’s growth, export opportunities in emerging markets, and policy updates.” 


In addition, the RE41 provided that the USDA would “seek to identify an appropriate U.S. wood pellet industry partner to undertake foreign market development and export promotion activities under the Foreign Agricultural Service’s Market Access Program and Foreign Market Development programs.”
The government’s target of wood pellet exports seems to be well-timed, if not overdue. Since the publication of RE41, Klusaritz says the USDA has fulfilled its commitments by improving the reporting guidelines for the “Biomass for Heat and Power” section of the annual biofuels report of the USDA Foreign Agricultural Service Global Policy Analysis Division. 


The expanded report now includes production, consumption and trade statistics for wood pellets. FAS analysts in Europe, Canada and Russia have reported on wood pellets in the past, but the new instructions will harmonize and expand the knowledge of the biomass industry, and the wood pellet industry in particular, according to Klusaritz.


The USDA reports that in 2010, the U.S. exported $128 million (736,000 metric tons) of wood pellets, which was a 37 percent increase from 2009. USDA representatives in foreign countries submit reports on biofuels developments in their countries, which are called Global Agricultural Information Network reports. 


For example, the 2011 GAIN report on Canada, published in July, provided information on wood pellets under its analysis of biomass for heat and power. The analyst in Canada recognized the country’s plan to take advantage of Europe’s current pellet demand. According to the report, “there is interest in exporting wood pellets from Canada to Europe to meet the increased demand for biofuels in European countries.  The E.U. has increased funding for renewable production, including doubling the financial contribution to renewable energy in 2007 for 2010 targets.”


The report continued by providing statistics on Canada’s pellet production, stating the wood pellet industry in Canada, especially in the West, has grown at an annual average rate of more than 20 percent over the past five years due to a steady supply of wood residues, and increasing demand from Europe. In 2010, Canada’s plants produced about 1.3 million metrics tons of pellets per year, the USDA said.


The GAIN reports analyze specific export and import statistics for each country researched. Canada imported more than 365,000 metric tons of pellets from the U.S. in 2007 compared to 531,000 in 2010, which was approximately 98 percent to 99 percent of its total imports. For 2007 exports, Canada shipped more than 1.2 million metric tons of pellets, with 647,000 to the U.S. (51 percent) and 245,000 to Europe (19 percent).  Things changed in 2010, however, with Canada exporting a total of 1.6 million metric tons. Of the total, Canada now sends 368,000 to the U.S. (22 percent) and 1.1 million metric tons to Europe (71 percent). 


Although the USDA has reported on pellets in the past, and intends to follow through with the NEI, it appears limited current information exists about pellets. It is likely increased reports will be published now that the global market is more active. U.S. companies can use GAIN reports to track trends of competitors and follow market opportunities once the information is available. A GAIN report search engine exists that is particular to countries, topics and time frames and can be found at www.gain.fas.usda.gov/Pages/Default.aspx. 


In addition to GAIN, the USDA welcomed its first biomass energy cooperator into the Cooperator Program in 2011, according to Klusaritz. The American Biomass Trade Cooperative, a new agricultural marketing group representing domestic producers of biomass energy products, received its FAS Market Access Program startup on Jan. 1. 


The ABTC is a nonprofit trade association comprised of commercial biomass growers, manufacturers and industry specialists from all across the U.S., with the primary purpose of promoting common interests in those engaged in the industry, and more particularly those in the woody biomass and wood pellet industry. The ABTC adds that it is solely focused on the development of biomass as a major staple in America’s export portfolio. This year, the group was charged with conducting market research activities in the EU to better understand that growing market. 


“The European Union is the primary market for U.S. biomass pellet exports,” Klusaritz says.


Practical Effect


With the launch of the export initiative, and agencies such as the USDA trying to follow through with commitments in 2011, the practical impact of the pellet policy for U.S. exports cannot yet be sufficiently determined. Sometimes the wheels of government turn slowly. 


Well-established U.S. companies are exporting significant amounts of pellets overseas. For example, Florida-based Green Circle Bio Energy is producing at capacity, approximately 500,000 metric tons of wood pellets annually, and exports 100 percent of its production, according to president and CEO Morten Neraas. The company targets European markets, primarily utility companies in the U.K., Holland, Belgium and Scandinavia. 


Neraas says that for the most part, wood pellet exporters are already aware of market trends and pellet market opportunities worldwide.


Other considerations, such as the current exchange rates between currencies, could significantly impact expansion plans of pellet exporters and existing European plants, according to Neraas. He says that government help for pellet exports would best be in the form of information on where to find export-friendly financing, lowering tax rates for manufacturers or providing education for the workforce to improve quality and efficiency. Companies are not seeking subsidies, but they are looking for assistance with financing opportunities.


The National Export-Import Bank is the official Export Credit Agency of the U.S. government and its mission is to promote and finance the export of U.S. goods and services and to increase jobs. The bank has a mandate to support renewable energy and tripled its support in 2010.

 
The bank does not compete with private lenders, but assists projects and fills in the gaps left open by trade financing. The bank provides working capital guarantees (pre-export financing), export credit insurance, and loan guarantees and direct loans (buyer financing). 


The bank provides financing for various exporters, including bioenergy companies, and further information can be found at www.exim.gov/index.cfm.

Author: Matt Soberg
Associate Editor, Biomass Power & Thermal
msoberg@bbiinternational.com
 (701) 746-8385

 

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