Focus Must Remain on Industry Cornerstones
The U.S. exported 1.96 million metric tons of wood pellets in 2012, a 52 percent jump from 2011, according to RISI estimates. This compares to just a 4.2 percent growth in overall U.S. exports. Amid broader economic malaise, why are pellet sales growing at a rate an order of magnitude faster than the broader U.S. manufacturing base, and what can we do to unlock the market’s long-term potential? With wood pellet exports from the U.S. expected to surge to more than 11 million tons annually in 2017, the stunning 43 percent compound average growth rate expected over that six-year period is one that few industries in the world, emerging or established, can match.
The reasons for our industry’s growth are powerful, and its benefits are real. Power generators can reduce their carbon footprint by combusting biomass in lieu of fossil fuels, as well as improve their overall emissions profile with reductions of mercury, nitrogen oxide, sulfur oxide, and the risks of trace metals, including arsenic and lead. Equally important, biomass can provide firm, baseload capacity and dispatchable power to meet the variable demand profile of the modern-day electricity grid.
The benefits of biomass are also economic. Research firms like McKinsey cite that cofiring biomass alongside coal can cost as little as one-quarter of other renewable sources. Power generators can thus deploy combustion strategies without expensive conversion technologies or operational tradeoffs often associated with renewable energy. By utilizing existing assets and infrastructure, utilities can preserve both direct and indirect plant and supply chain jobs that may have otherwise disappeared. From the supply chain perspective, biomass energy, and the thousands of direct and indirect jobs it offers, preserves an economic way of life in rural communities often decimated by the decline in traditional forest products industries. Timberland and other forest owners once again see a market for biomass sourced as a part of a sustainable forest management program.
Finally, biomass energy gives policymakers the tools to deliver cost-effective energy, without defaulting on environmental commitments. As a result, governments have put in place solid regulatory frameworks for biomass that give power generators, forest owners, loggers, producers, terminal and storage operators, shippers and others the runway to invest in capacity to build and serve this growing industry.
But even with real, tangible environmental and economic benefits, the potential of the biomass industry’s worldwide growth can only become reality if our industry can attract the financial capital to support the necessary supply chain and combustion infrastructure investment. Without it, additional capacity that doesn’t exist today never will.
Here’s where we can learn a great deal from our conventional fossil fuel-to-energy colleagues, distinguishing the biomass industry as its midstream renewable energy analog:
• We need to be safe. The safety and welfare of the people who work every day to build this industry is paramount to all else and must be inherent in our culture.
• We need to be stable. The early years have not been without challenge, including interruptions in both demand and supply, and yet we must reach the necessary scale, operational excellence, and market liquidity to navigate interruptions and ensure that our customers’ customers keep the lights on.
• We need to be sustainable. Our industry is predicated on delivering the carbon benefits that biomass offers, and we must ensure that our raw material is managed and sourced sustainably, our commercial forests continue to thrive, and that we continue to reduce our carbon footprint.
• We need to be successful. Our success in securing and delivering high-quality biomass fuels safely and reliably under long-term contracts with electricity generators will ensure the success of every investor, industry stakeholder and participant throughout the supply chain.
At every level, our focus must remain on the cornerstones of our industry: safety, reliability, sustainability and quality. We must continue to innovate, modernize and seek efficiencies, find new ways to lower our cost profile, reduce our environmental impact, increase reliability and improve quality so that our customers can do the same. Doing so, we hold the keys to immeasurable success, which perhaps will make that forecast of 43 percent compound average growth rate look like an understatement. I look forward to working together to realize our collective potential as the next chapter of our industry’s story unfolds.
Author: John Keppler
CEO, Enviva LP