If We Build It, Will They Come?

By Tim Portz | July 16, 2013

Whether a customer intends to heat a small, regional hospital in rural Maine, or produce thousands of megawatts of reduced-carbon electric power in England, deliveries of pellets must be uninterrupted and relatively easy. This quarter, Pellet Mill Magazine examines how markets and delivery infrastructure affect and drive each other.

 In Anna Simet’s feature, “Maturing the Bulk Market” (page 17), she describes the efforts by industry professionals to conceive and deploy cost-effective bulk delivery to residential, commercial and light-industrial pellet customers. The article rightly describes bulk pellet delivery as a classic chicken-and-egg scenario—while producers and distributors would be more than happy to expand their businesses and serve additional customers, investing in bulk delivery equipment is capital intensive. Without the guarantee of an immediate increase in customers and demand, producers choose to continue to satisfy customers with bags of pellets sold through retail channels or in one-off bulk delivery situations. Producers are struggling to make robust bulk delivery systems fungible and many find distribution to be outside of their core focus—pellet production— and better left to other parties. Fortunately, there are parties working to tease out a bulk delivery model that can work for producers, distributors and consumers.

Examining the market and infrastructure from a different perspective is our feature “Preparing for a Pellet Tide” (page 28). It outlines how England’s port industry has responded to a customer need for infrastructure capable of unloading, storing and moving unprecedented pellet volumes. As more of England’s coal-fired power generation assets repower with wood pellets, its ports will have to build upon the experience of the facilities already moving significant pellet volumes, and develop deep expertise across the country’s port complex. As the story indicates, England’s ports are already well on their way to developing an infrastructure capable of handling the rapidly increasing volume of pellets being purchased by power producers there.

Market growth and delivery infrastructure are inextricably linked. It is clear that market demand being generated by power customers like Drax has necessitated massive investment in port infrastructure. What is not yet clear, and remains an open but crucial question, is can pre-emptive investment in bulk delivery infrastructure attract new pellet customers stateside?