Torrefied Pellet Pursuit

In the U.S., commercial supplies of torrefied wood pellets are difficult to secure. What’s holding up market development?
By Chris Hanson | April 04, 2013

Francisco Pizarro explored South America for the golden city of El Dorado. Juan Ponce DeLeon journeyed Florida for the Fountain of Youth. Patrick Mohney and Philip Barner are in pursuit of torrefied pellets. But unlike the lost cities and ancient relics, torrefied pellets exist. Finding a domestic, commercial-scale supply, however, has become a crusade among consumers.

“I’ve become exasperated after multiple different phone calls with people who have these huge biomass plants, finding out they are in bench-top scale right now, and won’t be able to supply until they get more grant funding—or something similar—to build their plant,” says Mahoney, CEO of SEA Biofuels, which  is looking to use torrefied pellets for its cook stoves for developing countries.

Barner’s experiences, as director of energy services at the University of North Carolina, have been similar. “It’s been a series of hopeful-that-we-get-something, and then it goes away,” he says. He has been investigating on behalf of UNC, working to secure test samples large enough to burn in the campus boilers.

Currently, torrefied pellets seem to be the most suitable option for coal-based operations, as they have more benefits than regular wood pellets, according to those working with the technology. Torrefied pellets are hydrophobic, do not decompose, are more than 70 percent easier to crush, weigh less, and have similar caloric values to coal, but with fewer emissions. Additionally, in a pelletized form, shipping costs are lower because they are less bulky than biomass feedstocks, such as wood chips. Considering the numerous benefits torrefied biomass offers, it doesn’t come as a surprise that some forestry consulting agencies, such as Hawkins Wright, have predicted the global demand for torrefied biomass to reach more than 70 million tons a year by 2020.

But with so much potential for the torrefied market, why does it seem there is still little supply for domestic consumers? Hiroshi Morihara, CEO of HM3 Energy, said four main factors have slowed growth of the domestic market: a lack of commercial-sized torrefaction projects, additional startup expenditures, a lack of consensus on best practices, and lack of government support.

Market Inhibitors

With many new products, there comes the standard chicken-or-the-egg scenario that creates a cumbersome beginning for the market. While demand is growing and is present on a small scale, it isn't enough to give many producers confidence to invest in commercial-scale facilities.
As Morihara says, there currently are no commercial-sized producers of torrefied pellets in the U.S. There are large operations in the country such as New Biomass in Quitman, Miss., and the planned Thermogen Industries in Millinocket, Maine, but they are producing only enough for test burns or selling them overseas.

New Biomass Energy’s plant currently has a capacity of 80,000 tons of torrefied wood pellets, which are only for sale for test burns or lab analysis. Alison Hunt, vice president of development for New Biomass Energy, says of the biggest issue, companies have difficulty financing large plants without offtake contracts from credit-worthy buyers. “Buyers generally will not issue a firm off-take agreement without having a burn sample, generally more than 1,000 tons,” she says. “Until recently, there were no ways to get that quantity of torrefied wood.”

Richard Cyr, president and CEO of Thermogen Industries, says that supply, power costs and existing infrastructure can deter new torrefied pellet producers from entering the market. “Thermogen has tackled all of those issues with our first facility strategically located in the heart of Maine’s wood basket, utilizing inexpensive hydroelectric power,” he says. “Transportation is also not an issue for us with deepwater ports easily accessible by rail to ship our product overseas.”

Thermogen projects it will produce 110,000 tons of torrefied wood per year, but its supply isn’t aimed at U.S. consumers—the company plans to ship the torrefied wood to power plants throughout Europe.
Financial risk is another reason why new and growing torrefied producers are taking longer to meet demand. Morihara says that since the market is so new, it’s hard for companies to secure investments. According to international power consultant Poyry, torrefied pellet plants are 25 to 30 percent more expensive than a traditional pellet plant, and torrefied pellet production costs are 15 percent higher than standard pellets.

And without larger, more successful industry leaders to serve as an example, existing and new torrefied pellet producers will have a more difficult time trying to build trust among investors. To address this, Morihara says some companies are looking into partnerships with more established organizations to foster profitable relationships and reputations.

Although torrefaction method and feedstock diversification are crucial in fostering ingenuity to create the perfect torrefied pellet, a lack of consensus hampers the market. Without an industry-wide agreement on the best torrefied material and process, investors and creditors hesitate to provide financial support to existing and emerging operations.

Like coffee, torrefied pellets are diverse in types of “roasts” and “flavors.”  Heating pellets to various temperatures for various lengths of time produces different types of light to dark roasts. Darker roasts are more preferable for coal replacements and co-firing, as they are much easier to grind than standard pellets. The problem with the darker roasts of torrefied pellets is they begin to lose their natural glue that holds standard pellets together during the extended roasting process, forcing producers to find binders, such as corn products and even carpet fibers.

On the other hand, lighter roasts of torrefied pellets are not as hydrophobic as the darker roasts, thus more care and energy is needed to store and grind. “You have to reach the point where you do not destroy lignin too much,” Morihara says. “But at the same time, you have to roast it enough so that it grinds easily. You have to find the sweet spot”

Politics is perhaps the most significant factor that is affecting the domestic torrefied market. International markets, such as the European Union and China, have mandates and programs that are driving demand overseas for both torrefied and regular pellets.

Morihara says the issue may lie with the varying distinctions of biomass’s environmental footprint. In Europe and China, for example, power from biomass is considered carbon neutral because the carbon dioxide released is absorbed later in trees. The U.S.’s philosophy on biomass carbon profile is vague, however. “The U.S. has not effectively defined regulations, at least not as well as Europe,” Cyr remarks. “So it’s difficult to project domestic market growth.”

Without incentives from federal and state governments to influence coal power plants to utilize torrefied pellets, foreign markets become a more lucrative business environment. Therefore, more producers are shipping their torrefied pellets overseas, to countries in Asia and Europe, where larger profits can be made. “Domestic power plants are insufficiently incentivized to reduce coal consumption,” says Hunt.

Market Future

Until newer and larger torrefied facilities come online, buyers have been adapting their needs to cope with the lack of supply. Mohney says after spending lots of time contacting producers, SEA Biofuels is considering buying the equipment and producing torrefied pellets itself.

Until torrefied pellets become more available, Barner says UNC is looking at other forms of feedstock such as dry wood pellets. He noted torrefied pellets might still be the preferred fuel source, as the campus would still be able to utilize their coal silos instead of building special housing for wood pellet storage.

From Morihara’s perspective, the future torrefied market looks promising. He feels more coal plants will be shut down due to special interest group involvement in emission concerns, and more states, especially those in the West, will be or are passing laws requiring certain percentages of energy to come from renewable sources. Since solar and wind energy costs are still high, torrefied biomass stands to be a very viable replacement.

Cyr believes that adequate demand for torrefied wood pellets in the U.S. still isn’t there, but when it is, the market will grow to meet it. “Right now, there is little to no domestic demand for torrefied pellets, and there isn’t a product that’s been proven to consistently perform,” he says. “When there is a demand, driven by [U.S.] EPA regulations, the biggest problem will be lack of supply.”

It still appears to be a few years out, but when the U.S. torrefied market finally becomes established, domestic consumers will likely be able to secure plentiful supplies of affordable torrefied pellets for everything from woodstove fuel to heating an entire university.

Author: Chris Hanson
Staff Writer
Pellet Mill Magazine