For Gordon Murray, mitigating climate change isn’t just a tagline for the wood pellet industry and his association members. To him, it’s personal—and it’s hitting home.The 2023 wildfire season was unmatched in Canada’s history, with 45.7 million acres burned and none of its 13 provinces and territories left unscathed. Murray, executive director of the Wood Pellet Association of Canada, sums up living through it in powerful words. “It was terrifying,” he says. “There were fires close to communities—my family got chased out of their homes in Kamloops and Blind Bay. Fortunately, that was a precaution, and no damage was done, but fires got very close to urban areas—a big one only about 10 kilometers from where I live. Every surface was covered with ash, and driving at nighttime, there was an orange glow everywhere. It was pretty tough to live through.”Sections of the Trans-Canada Highway—Highway 1 that travels through all 10 provinces from coast to coast—were closed for days at a time due to the fires, which disrupted logging operations and put a strain on fiber supply, Murray says. “Fortunately, we got pounded by rains in the fall and into early winter, and now snow,” he says. “It’s all a distant memory ... until a few months from now when it starts again because of climate change.”Unprecedented wildfires are just one catalyst fueling the global race to decarbonize, which continues to gain momentum and offer new opportunities for wood pellets and biomass to play a role in the race to decarbonization.Contemplating Taiwan&nbsp;&nbsp; While Europe, Japan and South Korea have continued to be major markets for wood pellet exports, new destinations are on the horizon—such as Taiwan. Although the country is roughly the size of Maryland, it is home to 23.5 million people. For context, that’s the equivalent of the population of all of New England plus New York state. In 2022, nearly 80% of Taiwan’s power was derived from fossil fuels, mostly natural gas and coal, and the country relies on imports for almost all its energy—approximately 98%, according to state-owned power utility Taipower, the independent power producer of the country.In late December, U.S. FAS Gain released a report indicating that Taipower would likely issue a tender for wood pellets in the coming year to convert its 500-MW No. 1 coal-fired boiler at Kaohsiung Hsinta Power Plant to wood pellets. A $300 million opportunity for producers should the investment decision be made. While the report is new to some, Murray says that WPAC has been exploring the opportunity for well over a year. “I got a call from our embassy, which alerted us to the Taipower conversion and connected us to Taipower and the Taiwan paper industry association, where they’ve got many operators who produce their own power from coal and have a need to convert. After some conversations, we decided we’d organize a trade mission, and we’re in the midst of planning that right now—we’ll start promoting it soon.”Murray underscores he believes opportunities to supply into Japan should not be a competitive situation. “It’s potentially a massive new market that I see as on the same scale as South Korea or Japan,” he explains. “Taiwan has that same feel to it. We’ve been talking to their bioenergy association and have been given a list of dozens of individual companies, IPPs, that are using in some cases pulverized coal boilers, and stoker and circulating fluidized bed boilers, and there seems to be pressure—government pressure, momentum to change—and motivation on the part of companies. We’ve just started putting pen to paper, I can’t give you exact tons, but it’s millions of tons of potential.”Gordon says the Taiwan government seems cautious of biomass and whether enough is available. “I think they’re just uninformed, so we’re working with our embassy and the bioenergy association to put on a one-day conference and a one-week trade mission to go visit potential customers and power plants, port facilities and so on. I know that there have been a couple U.S.-based companies over there investigating as well.”If the broader wood pellet industry were to make something happen in Taiwan, it would take everyone to come together for that supply. “It’s no good if one country or one supplier holds the opportunity to themselves, and then they don’t have enough critical mass to make the thing take off—I think it’s going to take all of us,” he says. “There is nobody sitting around with millions of tons of unsold pellets—everybody’s out there chasing deals, and our industry is largely based on long-term contracts. This isn’t something we can turn on tomorrow. It’s going to take a collective will of a lot of people to make it happen, and convince their government that the risk [of] converting from one fuel type to the other is worth taking and the environmental benefits are worthwhile. Hopefully, a few of our US-based colleagues will find this interesting and want to come and join the conference.”Statements provided by the U.S. Industrial Pellet Association indicate that the trade organization has an eye on Taiwan as well. “Asia is currently the primary driver of global wood pellet demand, with the region experiencing about a 20% year-over-year increase in 2023,” says Elizabeth Woodworth, interim executive director of USIPA. “U.S. suppliers have adapted to meet this rapid growth by expanding operations and supply chains across the Pacific. In 2020, the first shipment of U.S. wood pellets arrived in Japan, and today, we are the country’s third-largest supplier. Like Japan, Taiwan is an island nation rapidly transitioning to a more secure and cleaner energy mix. U.S. wood pellets represent an ideal solution, and our members are well-positioned to support Taiwan in these goals.”Murray adds that within Taiwan, additional promising sectors include plastic, petroleum and paper. “They’re producing their own process electricity and heat with a variety of different sizes and types of boilers—the smaller-scale ones can use a multitude of fuel types like palm kernel shells, chips and pellets. There is pressure [from] the Taiwan government for all these guys to stop using fossil fuels. They’re working on solar and wind solutions as well, but increasingly looking at biomass, and it’s up to us to take advantage of this opportunity.”Rachael Levinson, associate director at Hawkins Wright, says that although the market intelligence firm has its eye on Taiwan, no final investment decisions have been made yet. “It’s definitely interesting, they’ve got quite a bit of coal and there seems to be government support,” she says. As for other markets on the horizon, Levinson says heavy industry is quickly unfolding.Heavy Industry&nbsp; “[Heavy industry] has been keeping us busy—in the past two years, we’ve seen more interest from both sides of the market, particularly the metals industry, but also lime producers,” Levinson says. “There is a need to replace fossil fuels in producing heat and steam, and so for many of them, wood pellets or biomass in general make sense. Wood pellets make sense when talking about big volumes being transported over long distances. It’s very early days still, but we know that it’s happening.”While potential is huge, she says, it’s difficult to quantify at this point, and all decarbonization options are being looked at. What’s particularly interesting, Levinson adds, are the drivers. Rather than government subsidies as common in the energy sector, it’s carbon prices and self-set company decarbonization targets. “But longer-term, I think they’re hoping that they get a green premium for products produced without using fossil fuels,” she says.The metals industry, including steel and silicon producers, needs a fossil-free carbon molecule, particularly blast furnace steel producers, which is most common and uses coke and pulverized coal. “Biomass is a good option to replace that because you can use it in the existing blast furnaces,” she explains. “However, you need a high fixed carbon content, which normal wood pellets or biomass can’t offer—but black pellets, biocoal or biocarbon do. Even with electric arc furnaces, carbon reduction is needed—a much smaller volume than with the blast furnace, but again, there are limited options. How do you get carbon that’s not from fossil fuels? The only solution really is biomass.”Levinson points out that ArcelorMettal commissioned a waste wood-to-biocoal plant in Ghent, Belgium, in early January. The facility will produce 37,500 tons of biocoal per year to be used in the blast furnace process, a first for the European steel industry, according to the company. Biogas will be produced during the process and converted into ethanol to be jointly marketed by ArcelorMittal and LanzaTech. “It’s exciting for black pellets,” Levinson says. “Maybe now that market will finally take off, but there are still a lot of challenges and technical barriers in terms of producing this high fixed-carbon production.”As for other country-specific developments, Japan continues to have a large pipeline of new power plants coming online, according to Levinson.Other Markets&nbsp; Around 10 or so new Japanese biomass plants are due to start up this year, but there have been some technical and start-up issues. For example, although two of Renova Inc.’s 75-MW wood pellet and palm kernel shell-fueled plants began operations at the end of 2023, adding to its four already in operations, the company announced delays for both its Omaezakikou and Ishinomaki Hibarino biomass power plants, both now expected to begin commissioning in March. “So, much of that demand is delayed a bit, but we’re still confident it will come online,” Levinson says. “It’s locked in, and they’ve got a subsidy.”Japan’s total pellet demand was around 6 million tons in 2023 and is expected to double by 2026, according to Hawkins Wright’s latest numbers. Total global demand for heating and industrial wood pellets was about 46 million tons in 2023.Moving to Europe, things are currently in a bit of a limbo, Levinson says. “We have subsidies to 2027 in the U.K. and Netherlands, and the focus now is definitely on BECCS [biomass energy carbon capture and storage],” she says. “Drax recently got government approval for a planning application for BECCS at their power station, and that’s a positive sign. We’re expecting them to announce a new subsidy in the next week or two—they call it a bridging mechanism—for when the current subsidy ends in 2027 to when the BECCS units come online in 2030. There will be three years in there where Drax and Lynemouth wouldn’t want to go offline—for a number of reasons, but one of the big ones, I think, is that they don’t want to lose that supply that they’re getting now. We expect a subsidy to be available for [those] three years until they can convert their units to BECCS.”Levinson adds that the subsidy for BECCS is still not finalized so there is some uncertainty in the U.K., but Hawkins Wright is positive about it and believes it will happen.In the Netherlands, RWE has indicated that it wants to convert its units to BECCS after the subsidy ends in 2027 but is waiting for government approval. “The Dutch government hasn’t been as vocally supportive about biomass and BECCS, so I would say there’s more uncertainty on that,” Levinson says. “In Denmark, Orsted’s plans are progressing, and they’re also looking at BECCS. They have started work on converting one of their straw-fired plants to install BECCS, and I think they’ll probably consider that for their other power plants as well. In Europe, the focus is really on carbon capture and the value it can bring to governments looking to get to net zero by 2050.”In December, Orsted announced it had begun construction of two carbon capture facilities—one at its straw- and wood pellet-fired unit at Avedore Power Station in Greater Copenhagen and another at its woodchip-fired Asnæs Power Station in Kalundborg. The company expects to begin capturing carbon in 2025 and at scale in 2026.While much of the activity and buzz around BECCS is outside of the U.S., USIPA believes there is now unfolding opportunity domestically as well. “BECCS is another bright spot where we are seeing continued progress,” Woodworth says. “In the U.S., the Inflation Reduction Act includes a tax incentive of $85 for every ton of CO2 sequestered, opening the door for wood pellet use in domestic coal-fired utility power plants.”As for domestic build-out in Canada, Murray says it’s similar to the U.S.—in areas off the gas grid—and that although the increase in biomass and pellet use is happening slowly, it’s steady, with some new opportunities on the table.Domestic Canada&nbsp;&nbsp; WPAC, which represents both the export and domestic sectors in Canada, has been focusing on growth in areas including the Northwest Territories, Yukon and Atlantic Canada, and Quebec. “They’ve got abundant electricity in Quebec coming out of Labrador and the north, but the Quebec government is able to export it down to the U.S. where they can make more money as opposed to selling it at a low cost to their citizens,” Murray says. “But we’ve found that there is support for policies within Quebec for the increased adoption of biomass.”WPAC’s big focus as an association is on New Brunswick and Nova Scotia, as the current gas line running through the provinces hits few of the main communities. &nbsp;“There are huge rural populations for which the only alternative is electricity or fuel oil,” Murray says. “We know the cost of those are going up and carbon taxes are being introduced, and with population growth and aging electricity-generating infrastructure, it’s putting in a good opportunity for pellets. There is a pretty dirty electricity grid there with lots of coal generation, so we’re just slowly making headway—organically, I would say. A school here and a hospital there. We’ve got some university campuses, swimming pools and government buildings, and we’re just slowly making progress on our own without any kind of policy support.”In Nova Scotia, discussions are ongoing with the government to replace aging boilers in government buildings. “We did a building study with them and looked at a range of options and what the greenhouse gas output would be compared to heating oil, the existing option or switching to electricity or pellets,” Murray says. “In some cases, for the largest buildings, we looked at wood chip options as well. In almost all cases, the best solution ended up being wood pellets. We have a soft commitment from the NS government that, as the budget allows when they start phasing out these aging boilers and replacing them, we’ll have the opportunity to get into those government buildings.”WPAC has also been collaborating with NB Power, the primary electric utility in New Brunswick, on a work plan to phase out coal. “There’s a couple of strategic options that they’re looking at—it’s early on yet, but for the first time, the power utility is seeing how we’re an ally and not a competitor.” Murray adds that NB Power has a large, single-unit power plant (450 MW) at Belledune that runs on coal and mainly runs to handle winter and peak loads. “The government is looking seriously at converting it from coal to 100% biomass, and at the moment, they’ve got an expression of interest out for black pellet supplies,” Murray says. “They’re looking at both torrefaction and steam explosion technology, as they want to try to avoid the capital cost of converting. We know there’s been endless talk about torrefaction, but they’re committed to seeing if they can make it work and are taking expressions of interest from technology suppliers. So far, our operators are watching and observing, but we’ll see where this goes. They may end up being fully committed to it—determined to buy the product and offering long-term contracts. Then, I suppose our guys would certainly look at creating capacities and supply.”If the project moves forward, it could become operational within five years, Murray adds. “That’s a million-ton-plus opportunity there, and it would probably be the largest conversion in North America to date.”Contact: Anna Simet&nbsp; asimet@bbiinternational.com&nbsp;

2024-03-04 - Opportunities Ahead (Biomass Magazine)

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From power plants to steel mills to hospitals, the continued global push to decarbonize may lead to new market opportunities for wood pellet producers.

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