Canadian Pellet Industry Poised to Profit

By Anna Simet | August 17, 2012

The Wood Pellet Association of Canada just released a new report on what might be in store for the country’s wood pellet industry, and my conclusion after reading it is that it appears to be positioned to reap the benefits of the federal government’s policy to lower carbon dioxide emissions from coal-fired power plants.

Why? Mainly because of coal plants’ limited options. Due to lack of economics, carbon capture and storage isn’t going to happen in the near- or medium-term future (and the law goes into effect beginning in 2013), the report says, and if plants aren’t located near natural gas pipelines that really isn’t an economical option, either. So that brings them to option three: wood pellets (or torrified wood when the market develops), which fit quite well with existing coal plant infrastructure, compared to wood chips.

 Canada is the leading wood pellet exporter to Europe, and there’s a great amount of potential for expanded production. According to Biomass Magazine’s most recent U.S. & Canada Pellet Production Map, which can be accessed here, there’s over 3.4 million tons of existing and developing wood pellet capacity.

On the flipside, to give you a brief perspective on what the Canadian coal power industry looks like, it currently has 21 coal-burning power plants with a total of 53 units in operation, 60 percent of which will reach the end of their useful life by 2025, according to the report, though some may make some modifications to extend their lives a bit.

Based upon that data, the average unit size is about 314 MW. Calculating the theoretical market for corifing, the report says that based on a cofiring rate of 20 percent, by 2015 there would be a demand of nearly 4.7 million tons of pellets annually.

That's already bigger than the existing market.

As more plants make the transition and utilize wood pellets, by 2025, there could be a demand of over 14 million tons of wood pellets annually.

The report points out that for the wood pellet industry to respond to the potential demand, it is imperative that it be part of the planning process, as it would be a challenging scenario requiring extraordinary planning and allocation of fiber resources in Canada.

 And perhaps what I found the most interesting is that the report says this would essentially eliminate all exports of pellets.

Meaning European buyers would have to look elsewhere for their supply. Makes me wonder if I should have titled this, “U.S. Pellet Industry Poised to Profit”...from Canada’s carbon reduction policies. It’s just too bad we would be capitalizing on our neighhbor's initiatives to clean up its act, rather than our own.

Access the report here.