Hopeful Takeaways From Miami
I’m sure you’ve seen my byline in the pages of Biomass Magazine, and as someone who has managed its bimonthly sister publication Pellet Mill Magazine over the past year, I’m pinch-hitting Biologue this week because I wanted to tell you how pumped I am to attend the 6th annual (my first) USIPA conference in Miami!
Just yesterday, we sent the last of Pellet Mill Magazine’s 2016 issues to print, and I couldn’t think of a better way to celebrate another great year, then hopping on a plane to come face-to-face with many of the people who have graced the pages of the title and make it what it is today.
As I prepare for my frighteningly early 5 a.m. flight on Sunday (thank you daylight savings time for the extra hour!), I wanted to share some takeaways I hope to bring back with me to North Dakota’s chilly fall air from my few days in the balmy Florida sunshine.
First, the timing of our 2016 issues wrapping up couldn’t be better. Like last year, we dedicated the November/December issue to content about Asian production and consumption, and many of the pages this year are devoted to Japan. I had the opportunity to speak with Sumitomo and Mark Lyra at Cosan Biomassa about their joint venture to bring Cosan’s Brazil-based commercial sugarcane bagasse and straw pellet production to potential markets in Europe and Japan.
Needless to say, with Japan as a major portion of the Nov/Dec issue, I’ve been focused on understanding the opportunity there and, luckily, so is USIPA’s conference agenda. I hope to come back with a better understanding of what’s the opportunity for U.S. pellet producers in Asia, specifically Japan. An entire panel at this year’s conference is dedicated to discussing the question: Is Japan Next? USIPA executive director, Seth Ginther, shared in his recent column for the magazine that upon returning from a trip to Japan, “This market potentially holds a great deal of opportunity for our industry here in the U.S.”
Potentially…will it? Why haven’t we seen U.S. pellet volumes making their way into Japan? We’ve seen shipments from Canada, as British Columbia producers have a locational advantage compared to the perhaps prohibitive shipping distance for pellet producers of the U.S. Southeast. However, BC producers are selling to Drax, so this begs the question: If it's economical to ship from Vancouver to the U.K. via the Panama Canal, wouldn’t it also be economical to ship pellets from say, Baton Rouge to Japan via that same route?
Yesterday’s Q&A during Enviva’s Q3 results shed some light on this. Japanese government has set a target between 6 and 7.5 GW of biomass-fired capacity by 2030. Enviva’s chairman and CEO, John Keppler, shared that Japan is not only short on meeting its binding renewable expectations, but also on capacity due to the outcome of the Fukushima nuclear disaster. He said, companies like Sumitomo and Mitsubishi are investing alongside independent power producers and major utilities in new distributed generation across the Japanese islands under its 20-year feed-in tariff system. According to Keppler, these are new builds and projects, some of which are already online, and are principally procuring pellets from BC, as well as some volumes from Southeast Asia. However, he stated, “the preponderance of that growth is expected to come from the Southeast U.S., with a very stable marginal cost curve for the growing demand, one that is expected to receive roughly about 10 million tons per year in an as-built set of capacity.”
Keppler added that Enviva delivers at cost parity today. “That’s principally driven by the relative fiber advantage in the Southeast U.S., and the robust forestry sources that provide for that stability on a long-term basis and, frankly, driven by the ability for us to deliver under long-term contracted positions with our shipping partners into Asia,” he said. Enviva expects to describe more fully the opportunities and the specified contracted positions they anticipate during the first half of next year.
The opportunity in Japan is optimistic, and I look forward to learning more.
Second, I hope to come back from this year’s conference with a better handle on how Brexit may impact European power generation. I attempted to grasp at this in an article I wrote recently, and I hope to find more clarity in Miami. There are exciting projects expected to come online in the near-term. Two major ones in the U.K. are the Lynemouth and MGT biomass power generation projects. How will these projects contribute to the industry growth in the near future? How have they managed to overcome financial- and market-related hurdles, and can other projects do the same? The case study discussions of these projects at USIPA will be interesting, and may hold promise as story ideas for the “European production and consumption” themed January/February issue.
On the other side of the Atlantic, a third takeaway I’m hoping my time in Miami can provide is an update on the legal and regulatory issues surrounding the EPA’s Clean Power Plan and biogenic accounting in the U.S. How does this impact the U.S. forest supply chain? How will the upcoming election (which coincidently I’ll have a new president before my trip home) impact these issues? What will it take for a domestic market to develop? Our coverage of this subject is ongoing, and although I don’t expect solid answers, there will be those there to provide an update.
If you’ve managed to read this far, thank you for reading what I hope we can learn together in Miami! Those of you unable to attend the conference, check back on our website, as I’ll share some thoughts upon my return. You can also follow @BiomassMagazine on Twitter for onsite coverage.
I’d also like to encourage those attending who might be interested in contributing to the content we produce for Pellet Mill Magazine to come introduce yourself! I have a few column openings for our 2017 issues, and I’m always open to inviting someone new to join our editorial board. This board of industry professionals joins our content team on conference calls that I host prior to each issue. We pitch story ideas and get feedback from people engaged in the industry during these meetings. Even if you’re not going to Miami, I’m only a phone call or email away.
I hope to see you in Miami!
P.S. I heard there was an opening montage for the James Bond movie Goldfinger that featured the Fontainebleau Miami Beach hotel, where the conference is taking place, so that’s definitely another takeaway.