In early 2012, while moderating a focus group investigating consumer attitudes about a new, green HVAC product, the staff at the Illinois Institute for Rural Affairs at Western Illinois University made a handful of discoveries about consumer attitudes that warranted more inquiry. The group suggested that biomass residential heating solutions were certainly a more natural and environmentally benign way to heat homes, but were ultimately&nbsp; too laborious to maintain.&nbsp; This premise prompted follow-up research that revealed that the biomass heating industry&rsquo;s marketing communications were not addressing the ease-of-use issue. In business, correct strategy is more important than correct execution. If the strategy is wrong, then everything that follows&ndash;&ndash;product, advertising, and pricing&ndash;&ndash;is likely to be wrong too.&nbsp; To research the business strategies of the biomass residential heating sector, the research team at the IIRA approached the USDA&rsquo;s Federal State Marketing Improvement Program with a research proposal to address marketing strategy issues in the biomass heating appliance industry.&nbsp; FSMIP agreed to partially fund a market segmentation study.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marketing Segmentation Segmentation involves separating the total group of potential buyers of a product into two or more subgroups.&nbsp; In today&rsquo;s big data environment or networked world, it has become fashionable to talk about individual, micro, or segment-of-one marketing.&nbsp; We believe that this approach to mass customization is not yet scalable for most, if not all, businesses. Consider the difficulty of profiling millions of &ldquo;other-brand users&rdquo; or competitors&rsquo; customers and non-users of the product using Web intelligence such as social media, and then tailoring offerings to each one of them.&nbsp; The enormity of such a project dictates that it will never be undertaken. In fact, a true mass customization strategy would require a company to secure access to the most valuable data (for example, salesforce feedback, current and past customers&rsquo; feedback, potential customers&rsquo; needs, etc.), and develop unique or competitive advantage-generating insights by combining advanced analytics with creativity.&nbsp; The reality, however, is marketing executives largely report that their companies have access to only basic demographic information on each customer, and fewer than 4 percent say that they have the analytical skills to gain marketplace insights from big data analysis (Harrysson et al 2012).&nbsp; In short, if companies don&rsquo;t group potential buyers into segments, their marketing efforts would regress toward a theoretical &ldquo;average&rdquo; customer and thus would fail to deliver results in the marketplace. Research To understand and generate customer segments for the biomass residential heating sector, the team at IIRA&nbsp; engaged in three types of research: situation audit; qualitative research, and quantitative research. A situation audit consists of background or secondary research into all factors that could affect company or industry performance.&nbsp; Qualitative research or, more specifically, interviews with potential and actual customers of biomass home-heating products, is completed to gain information about people who use those products and their opinions about the product category.&nbsp; Adding quantitative research, in this case, a consumer survey, to the prior qualitative research allowed the research team to classify more precise target market subgroups or market segments, and profile those market segments. Briefly, the situation audit revealed that: &bull; The pellet stove product category is in the growth stage of its life, and biomass-furnace category (central heating) is in the introductory stage of its life. &bull; The industry&rsquo;s expenditure on advertising and marketing is a low 0.5 percent. In general, for products in the introductory or the growth stage of life cycle, not only must the product be readily available, but the buyer must be aware of the product and its benefits. Given a 0.5 percent sales-to- advertising ratio for the industry, it is doubtful that customers are being educated about biomass home heating. The qualitative research consisted of 30 husband/wife interviews.&nbsp; It helped the team learn that: &bull; Biomass home heating is a new form of a product in a familiar product class, namely home heating. &bull; The consumer evaluates biomass heating products as better or worse on these choices or purchase criteria: safety, cost and labor intensiveness. Results The survey revealed&nbsp; two customer segments. Group 1, or the biomass-loyal segment includes respondents who reported they had a higher than 80 percent probability of buying a biomass heating appliance. Group 2,&nbsp; or &ldquo;other loyal&rdquo; reported having&nbsp; &ldquo;very slight possibility&rdquo; (10 percent chance) or lower of purchasing a biomass heating appliance. The target cluster, the biomass loyal, has 32 percent female head of household compared to 40 percent females in the other loyal segment.&nbsp; The median age is 52 for cluster 1 and 58 for cluster 2.&nbsp; Education wise, a typical group 1 member has a bachelor&rsquo;s degree, works for pay and lives in a home built on or before 1970 valued at around $250,000.&nbsp; Based on the survey results, one-third&nbsp; of the households in the Lower 48 (44.3 million) can be classified as biomass loyal.&nbsp;&nbsp; Gaining social approval, living an active or exciting life, and a mature understanding of life or wisdom are the primary motives that influence the biomass loyal segment to engage in purchases that satisfy their life goals of competency and affection.&nbsp; Indeed, research by Athiyaman (2013, 2014a) shows that households with biomass heating tend to have members with do-it-yourself mentality (capable members) and often, the love for their family influences biomass heating appliance purchases.&nbsp; Additionally, it was discovered that the primary heating equipment (that is, the heating equipment that provides the most heat for the home) for the biomass-loyal segment is electric or natural gas-powered central furnace with ducts to individual rooms (48 percent), followed by heating stove that burns wood or biomass pellets (29 percent). Practically, these findings boil down to one simple conclusion for the biomass heating sector: To increase topline revenue, target group 1 households (biomass loyal) with 10-plus years-old primary heating equipment (Athiyaman, 2014b), would, at a high likelihood (80 percent chance), need to buy a biomass heating appliance to replace their old central furnace.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In general, the biomass-loyal segment relies more on interpersonal sources of information.&nbsp; Among commercial sources, newspaper and magazine ads are consulted to gain information about biomass heating: Home service-type magazines are read by 33 percent, and 45 percent subscribe to an area newspaper. Online App As mentioned the heating appliance industry would be wise to target biomass-loyal households that have 10 years or older primary heating equipment.&nbsp; To identify such households in the lower 48 states, we developed an interactive computer application based on the heuristic algorithm shown in Figure 1.&nbsp; The heuristic program highlights that not all geographical locations are attractive markets for the biomass residential heating sector.&nbsp; Using this heuristic in screening potential markets allows&nbsp; the retailer&nbsp; to concentrate on the one-third of the households in the Lower 48 that are biomass loyal. Their&nbsp; time is put to much better use in screening and evaluating a finite number of concentrations of demand.&nbsp;&nbsp; To insure targeting that segment of the households producing the greatest revenue, the program evaluates N micro segments or clusters of households that have 10-plus&nbsp; years-old primary heating equipment; N ranges from 1 = heat pump, to 8 = hydronic heaters.&nbsp; Then, it eliminates from consideration clusters that do not meet or exceed profit objectives; of course, the profit objective has to be input by the manager.&nbsp; Finally, the bumped micro clusters are assessed for their potential to increase sales of residential heating products of different forms, for example, electric or gas central furnaces.&nbsp; Think of it as a scenario analysis of lost sales to competitors. The interactive app is available online at www.instituteintelligence.com. At the moment, it is available only for Illinois,&nbsp; however, anyone with knowledge of object-oriented programming can calibrate the heuristics model for any state.&nbsp; The app starts with geographical input.&nbsp; Once the county is chosen, the manager will be asked to input the expected sales revenue per customer or household in the geographical region.&nbsp; For demonstration, we use $1,500 as the expected revenue per household, which, according to the Alliance for Green Heat, is the selling price of a pellet stove. Then, the manager will input the cost of sale per customer.&nbsp; Again, we use $42 as cost of sales per customer (Athiyaman, 2015a). Based on these two numbers, the application will compute expected profit margins for a set of eight segments, the eight segments are shown in Sidebar 1.&nbsp; Finally, based on the managerial input of profit objective, the program will list the attractive segments, and highlight the implications of bumping segments. Summary And Conclusion Our research has shown that the biomass residential heating industry operates in a marketplace populated by two different groups of customers: one who likes biomass heating and the other group with little or no intention of adopting biomass heating.&nbsp; Without our research, the biomass industry will be targeting the average of these two groups and in high likelihood waste resources on average customersand might imagine positioning the product as a low-cost alternative to home heating when the actual benefit sought is &ldquo;ease of use&rdquo; of the product.&nbsp;&nbsp;&nbsp; To insure that the industry targets this segment, we have developed an interactive computer application that highlights households that would produce the greatest revenue for the industry. The program evaluates eight microsegments or clusters of households that have 10 plus years-old primary heating equipment ranging from heat pump, to hydronic heaters, and eliminates from consideration clusters that do not meet or exceed company profit objectives.&nbsp; In conclusion, this research facilitates the biomass residential heating sector to target the right customer.&nbsp; It is now up to the industry to utilize the tools and optimize the marketing program.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Author: Adee Athiyaman Professor of Marketing, Illinois Institute for Rural Affairs 309.298.2272 a-athiyaman@wie.edu

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Putting Pencil to Paper: The interface developed as an extension of this research allows appliance retailers to pre-qualify selected markets. The application allows users to input both the anticipated sales price as well as the cost-of-sale. The appl

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Gauging Customer Likelihood Of Purchasing Biomass Heating

PELLET CHAMP: The Accentra 52i pellet insert is the top-selling pellet model by the Harman brand. Sales soared last year thanks to enhancements such as boosting Btu to 52,000 and cutting cleaning time in half. 

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BEAUTIFULLY ENGINEERED FIRE: The Harman XXV cast iron pellet stove, manufactured by Hearth & Home Technologies, has been a top seller the past 10 years, and demand has increased with the addition of more porcelain color options. Pellet stoves such as

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Companies and organizations speak out about U.S. EPA's new source performance standards for residential wood-fired appliances.

The Clean Warmth of an  Engineered, Regulated Fire

Price is key. No matter the purchase, ultimately, if the price is right a customer&rsquo;s inclination to make an investment escalates. This notion holds true when consumers consider their energy source options. Case in point, three years ago, the United Kingdom initiated an environmental program to support biomass-heat installations and other renewable heat sources through financial incentives. It opened a nondomestic renewable heat incentive (RHI) scheme for applications in November 2011, with a domestic RHI following last spring. The incentives created the right price for many consumers of biomass-heat that qualified under the nondomestic RHI in business, industry and public-sector organizations, and for homeowners, private landlords, social landlords and self-builders under the domestic option. The&nbsp; RHI, which traces back to the 2008 Energy Act, was introduced in the legislation principally to help meet the U.K.&rsquo;s goal of generating 15 percent of energy from renewable sources by 2020, as set out in the Renewable Energy Directive. The government has identified indicative contributions of renewable energy from the electricity, heat and transport sectors that would allow the U.K. to meet the overall target as cost effectively as possible. The Department of Energy and Climate Change identified that for heat, up to 12 percent could be generated from renewable sources by 2020, increasing from the approximate 2 percent reported in December. Although the RHI supports the installation of renewable energy technology other than biomass, biomass plants have achieved the quickest rate of uptake. Other incentivized technologies for both residential and commercial consumers include air-source and ground-source heat pumps and solar thermal systems, and in the commercial sector, water-source heat pumps, deep geothermal plants, biomethane production for injection and biogas plants. Consequently, the uptake has had a sizeable impact on the supply and demand for many of the plants&rsquo; sources of fuel, pellets and wood chips. &ldquo;The renewable heat incentive has caused the wood heating industry to explode in a way nothing else prior to that and probably subsequent is going to,&rdquo; says Julian Morgan-Jones, Wood Heat Association chairman and managing director of South East Wood Fuels Ltd. South East Wood Fuels transports predominantly wood chips and some wood pellets to commercial and institutional wood heating customers in the South East and London. The industry has grown from about 50,000 tons of A1-grade pellets in 2010 to 240,000 tons projected in the current year, according to Bruno Prior, managing director of Forever Fuels Ltd., a wood pellets supplier in the U.K., and a board member of the WHA with Morgan-Jones. Neil Harrison, co-founder of re:heat and WHA vice chairman, says the RHI is &ldquo;probably the most generous renewable energy support scheme, if not in Europe, probably in the world, at the moment.&rdquo; He adds, &ldquo;The economics are very strong for biomass as a result.&rdquo; The RHI can be regarded as one of the key reasons there was a need for the association. &ldquo;The WHA is there to grow and maintain the wood heating industry in the U.K., and to also do work to improve standards and improve the reputation of the industry,&rdquo; Harrison says. The WHA falls under the umbrella of the Renewable Energy Association, which was instrumental in lobbying for the RHI scheme. There was a need for an association that reflected the specific needs of the wood heating industry, Morgan-Jones says. Now, 140 representatives from various companies are members of the association. While the WHA helps support the wood heat industry as it grows under the RHI, the Office of Gas and Electricity Markets (Ofgem) serves as policy administrator. Ofgem E-Serve publishes guidance materials, receives and assesses applications, makes payments to approved applicants, ensures ongoing compliance with scheme rules and provides quarterly and annual public reports. Each RHI scheme has its own tariffs, but similar conditions, rules and application processes. Applicants must fill out online applications under both schemes. Installations for the nondomestic scheme are provided subsidies payable for 20 years to eligible renewable heat generators. These tariffs are available at a different rate depending on the size of the boiler. The tariff levels for boilers up to 999 kilowatts (kW) are based on a two-tier payment structure: tier-one payments up to 1,314 peak load hours of operation (15 percent annual heat load) and tier-two payments for operational hours above this. This tariff structure operates on a 12-month basis, starting with the date of accreditation or its anniversary. Small biomass boilers up to 199 kW receive 6.8 pence (p) (10 cents) per kWh for tier one and 1.9 p per kWh in tier two. These tariff rates will be revised on April 1, 2015. The eligible-sized medium biomass boilers between 200 kW and 999 kW receive a tier -one payment of 5.1 p per kWh and 2.2 p per kWh for tier two. A single tariff level of 2 p per kWh is available for boiler capacities of 1,000 kW and above. The residential RHI has a single tariff of 12.2 p per kWh, payable quarterly for seven years, although a recent reduction in the tariff to control the budget, or degression, decreases the payment to 10.98 p per kWh for applications submitted after the first of the year. The biomass technology covered includes biomass-only boilers and biomass pellet stoves with integrated boilers. Although there is no limit on the capacity of the product, it must be certified by the Microgeneration Certification Scheme or an equivalent scheme. Besides this certification, the renewable technology must be listed as eligible on the Product Eligibility List, have an Energy Performance Certification for the property and meter the heating systems to receive payments in certain situations, among a number of other credentials. RHI applicants for both schemes must also be below certain emission levels. As of September 2013, all applicants with a biomass boiler are required to submit an RHI emission certificate or environmental permit. The maximum levels for biomass boilers are equal to 30 grams (g) per gigajoule (GJ) particulate matter (PM) and 150 g per GJ nitrogen oxide (NOx). Doubling The Industry There is no denying that biomass installations have risen above other renewable energy technology covered by the RHI. According to a recent Ofgem E-Serve quarterly report, 7,258 installations are accredited in the nondomestic scheme and more are expected. Between September and December 2014, 1,203 new, full applications and three preliminary applications were accredited, or an increase of 130 percent since the same quarter in 2013. These installations and other RHI technologies amount to over 1 gigawatt (GW), which was the reported installed capacity as of Aug. 15 last year. Even with the exclusion of residential applications until last year, around 6,500 biomass installations have been approved as of mid-February, according to Ofgem accreditation reports. DECC releases forecast expenditures on a monthly basis based on data provided by Ofgem. DECC estimates the cost of RHI payments over the 12-month period following the assessment date, which assumes that all installations that were accredited or had registered full applications by that date would receive payments from the start of that 12-month period. As of Dec. 31, &pound;153.6 million (British Pounds) ($236.7 million) is the forecast expenditure for all nondomestic biomass applications, including combined-heat-and-power systems. Small boilers up to 199 kW account for &pound;110.5 million of the forecast amount. The total forecast expenditure, i.e., expenditure for the scheme as a whole over the next 12 months, is &pound;270.4 million. Biomass leads all other technology with these budget commitments by a ratio of 19 to 1, truly proving dominance within the scheme. A similar theme can be found in the residential market, with total forecast expenditure for biomass plants as of Dec. 31 at &pound;17.02 million, a staggering comparison to the combined total of &pound;3 million for all other technology under the domestic RHIs. Increased expenditures to biomass installations have naturally translated into growth in the wood fuel industry. Edward Billington grew his pellet distribution business, Billington Bioenergy, over the years, and now it has recently been acquired by the Drax Group. This partnership resulted as Drax hopes to help transform the U.K. heat market in the same way they've transformed the power market. Billington believes this opportunity will help develop the marketplace for the long term. Billington estimates that Billington Bioenergy serves about 2,000 approved RHI applicants. &ldquo;We have seen a good uplift in the industry this winter, with a good number of installations going in, both domestic and nondomestic,&rdquo; Billington says. &ldquo;The growth has been encouraging, and certainly manageable to date. However, it has been so slow in starting, and coming from such a small starting point, that the U.K. needs to sustain these growth rates at least for the next few years, or even to accelerate them a bit more, to build a truly sustainable wood pellet industry in the U.K. for the long term.&rdquo; A pellet producer in the space, Verdo Renewables Ltd., has pellet plants in Andover in Hampshire and Grangemouth, Scotland. Each U.K. plant has the capacity of 55,000 metric tons of wood pellets and 15,000 metric tons of wood briquettes per year. Richard Smith, managing director at Verdo and chairman of the U.K. Pellet Council, agrees with Billington in that the RHI has started to have a considerable impact this winter. &ldquo;It&rsquo;s really shown that the demand for pellets has grown dramatically,&rdquo; he says. Smith adds that everybody has seen significant growth, and although they haven&rsquo;t finalized their numbers, they estimate that &ldquo;the demand in 2014 was just under 150,000 tons, and demand in 2015 will be upwards of 300,000 tons.&rdquo; Smith says, &ldquo;Roughly, the sector has doubled for purely heating pellets, this does not include cofiring pellets at power stations.&rdquo; Policing The Cowboys Upon the onset of winter, biomass boiler installations are increasing at a fairly rapid rate, perhaps even too rapidly for the industry to keep up. Billington alludes to a potential concern when he says the growth needs to be sustained. Harrison&rsquo;s business, re:heat, provides a wide range of services to the biomass heat market. A lion&rsquo;s share of the business is the distribution of boiler equipment, but lately the company has been doing a lot of consultancy and remedial work for customers who have been left with an installation that isn&rsquo;t working properly. &ldquo;There is a growing body of that type of stuff, unfortunately, which is why we need to work together as an industry to put together proper standards and police the cowboys,&rdquo; he says. Cowboys in the U.K. are people, generally contractors, who don&rsquo;t do a proper installation job. &ldquo;As one might expect, a rapidly growing industry brings its own challenges in terms of available skills and expertise and problem resolution processes,&rdquo; Morgan-Jones says. &ldquo;Currently there are a fair number of poorly conceived and implemented boiler installations and so we&rsquo;re getting customers who have problems. The WHA is looking to help standards and training for all parts of the supply chain to improve this and maintain the reputation of the industry. Equally, installers and fuel suppliers need to learn how to work together to determine the cause of problems and solve them rather than blame each other. At the end of the day, we all need happy customers.&rdquo; Solving these problems is one of the three core objectives of the WHA to meet in this year and beyond, Morgan-Jones says.&nbsp; The first objective is funding&ndash;&ndash;the government funding for the RHI is committed only until March 2016. The U.K. has an upcoming election in May, so it is essential for the industry to get the best possible deal from the new government for the RHI beyond this point. The second objective is to raise awareness about the WHA, and promote wood heating to a larger audience in the marketplace. The third big focus is quality and standards. &ldquo;We need to professionalize the industry, make sure we have the right training and best practices, and do it effectively,&rdquo; Morgan-Jones says. Harrison believes the real crux of the issue is that biomass heat is still fairly new technology in the U.K. He recalls just five years ago he could name most of the companies and individuals in the space, and now there are new companies entering the industry almost every day. &ldquo;They don&rsquo;t always enter it with the right level of skills and knowledge to actually execute a successful project, so that is a critical issue,&rdquo; he says. &ldquo;It doesn&rsquo;t take a rocket scientist to work out the kinds of things that can happen when you have lack of barriers to entry, low-skill levels and a very generous tariff support regime.&rdquo; Another critical issue is the disproportionate awarding of funding. Prior says, the RHI has encouraged the installation of many small biomass boilers, but there are many things that need to be done to improve the program. &ldquo;We have a very cost-effective technology that is being encouraged in some ways cost ineffectively,&rdquo; Prior says. For example, a critical issue is the disproportionate awarding of funding to sub-200 kW boilers (furnaces), which creates unintended consequences, encouraging boilers to be both oversized and undersized for the requirement leading to inefficiencies and/or under-powered systems. He adds that even if the budget is extended after the upcoming elections, it will only be available for a few more years. &ldquo;Beyond that, we are going to need to be pretty cost competitive, because we&rsquo;re not going to be in the same world of generous financial subsidies,&rdquo; Prior says. Yet another challenge with the RHI is the the tension between the need for change in the future and the fear of change in the future, creating uncertainty amongst potential applicants. &ldquo;The RHI could be improved after the general election,&rdquo;&nbsp; Prior says. &ldquo;However, the new government will need to strike a careful balance between correcting the worst failings in the design, and creating further uncertainty and complexity that inhibits investment. There is no time to be lost if the U.K. is to get anywhere near its 2020 renewable heat commitments.&rdquo;&nbsp; Billington believes changing the program has made it difficult to understand for some. &ldquo;My personal opinion remains that it was too complex, and the rules were altered and tinkered so much that few truly understood it or could trust in its development,&rdquo; Billington says. &ldquo;Had they made it simpler and made a clearer commitment to it, then it would have been better understood and more effective, and you might have achieved more at a lower cost. Hence, it is crucial now that they don't keep tinkering, but rather allow the policy to settle down and have a stable run for the time being.&rdquo;&nbsp; Some changes coming this year will impact biomass installations. One change is degression, which, according to Prior, has been 30 percent over the past 12 months. One big change in autumn, subject to parliamentary approval, is associated with government plans to introduce sustainability criteria for using biomass fuels. The easiest way for applicants to comply with the criteria will be to source an approved fuel from the Biomass Suppliers List, a pre-approved list of fuel suppliers. An Unknown Future The stability of the program is called into question with policy stagnation due to the election in May, not to mention current low oil prices. &ldquo;It is crucial that they come back to seeing the bigger picture for the election, that biomass heating represents a sensible and sustainable alternative to using fossil fuels, improves our energy security, and that the RHI represents good value for money to develop this technology quickly in this country,&rdquo; Billington says. Another question is whether there will be an opportunity for North American producers to take advantage of the growing market. The schemes have clearly created the opportunity for expansion in the U.K. wood-heat industry, but when it comes to the U.S., as one of U.K.&rsquo;s largest biomass suppliers for industrial power, the opportunity is less clear. Based on conversations with players in the industry, the general sentiment is that the opportunity isn&rsquo;t there at the moment, but could certainly be in the future. This potential opening for U.S. producers seems to circle back to &ldquo;if the price is right, then the opportunity is there,&rdquo; Harrison says. Billington thinks that North America&rsquo;s involvement will become very important and actually help make the U.K. market fully robust and sustainable. &ldquo;The key, however, is to get the quality right,&rdquo; he says. &ldquo;Achieving the EN-plus quality standard fully and consistently is more difficult than it might initially appear, especially when transporting over distances. The U.K. producers have done a superb job at this, and very much set the level which others must achieve.&rdquo; Smith with Verdo Renewables says that there is still a mindset change that North American producers must make to hit the U.K. heat market. &ldquo;They are used to supplying large shiploads to power stations, and the power stations are traditionally near ports, and have significant dock sites,&rdquo; he says. Smith adds that the distribution network in the U.K. is significantly smaller than the power-pellet demand, so there is a limited ability to import 15,000-metric-ton shipments and store the pellets. The financial cost to ship is high for the still relatively small market, and the quality of the pellet once it arrives is not always ideal in terms of fines, which is probably the main challenge for U.S. and other exporters targeting the U.K. market. Time was needed for the RHI to make an attention-worthy impact, but now that it is catching hold, people in the industry hope funding can continue until at least the end of the decade to help create a sustainable market for the future. &ldquo;There is a certain amount of inertia in getting these markets to move,&rdquo; Morgan-Jones says. &ldquo;The RHI has done this, but it has taken a while for the momentum to build, and now that it has we need to ride the wave while it&rsquo;s here. That wave could go flat on the beach if the budget is not supported beyond 2016 and it would be a huge shame not to use this momentum to achieve the government&rsquo;s carbon reduction targets for 2020. My hope is certainly that for the next four years the wave continues to grow until it hits the beach in 2020, and then the hope there is that by 2020 there is some other scheme in place to be able to make sure it is sustainable on an ongoing basis.&rdquo; Author: Katie Fletcher Staff Writer, Pellet Mill Magazine 701-738-4920 kfletcher@bbiinternational.com

Pellet Fleet: Distributer Forever Fuels has seen an increase in pellet demand due to the renewable heat incentive uptake. Bruno Prior, managing director, says the companyâ€™s growth is about 80 percent year-over-year by volume and 90 percent year-ove

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Biomass Booms:  As of September 30, 2014, 73 percent of the accredited installed capacity for all technology installations under the nondomestic renewable heat incentive scheme is located in England; Scotland is the next highest at 19 percent. The to

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Ready for Dispatch: Domestic pellet boilers are lined up for shipment at a manufacturerâ€™s facility in Austria last December. Both pellet fuel and boiler demands have grown since the nondomestic and domestic renewable heat incentive schemes became a

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STAYING INLAND:  Verdo Renewables produces pellets in the U.K., and Richard Smith, managing director, says since the market has grown in response to the renewable heat incentive. The company cut back on exports, and other manufacturers have stopped e

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Incentives help pellet use gain traction in the UK, funneling products and services, at least for now, into the heat market. 

Renewable Heat Wave

Rentech announces new leadership Rentech Inc. has announced that D. Hunt Ramsbottom has resigned as CEO and president of Rentech and CEO of the general partner of Rentech Nitrogen Partners LP to pursue other opportunities. Ramsbottom has also resigned as a member of the board of directors for both companies. Keith Forman, a member of Rentech Nitrogen&rsquo;s board since October 2011, has been appointed CEO and president of Rentech and CEO of the general partner of Rentech Nitrogen. He has also joined the board of Rentech. Forman has a background in master limited partnerships. He previously served as chief financial officer of Crestwood Midstream Partners LP. He also served as senior vice president for El Paso Corp., and chief financial officer of GulfTerra Energy Partners LP. Forman currently serves on the board of Capital Product Partners LP. Viridis Energy renews agreement with Ekman Viridis Energy Inc. has announced its subsidiary, Scotia Atlantic Biomass Co., has renewed its distribution agreement with Ekman &amp; Co. AB for an additional three-year period. Ekman has served as Scotia Atlantic&rsquo;s worldwide agent, to arrange short-term and multiyear offtake agreements for its industrial wood pellet production, with European power generators that cofire with wood pellets or have fully converted to biomass. The renewal agreement provides for volume discounts on commissions and fees and expanded volumes in Nova Scotia. Drax appoints executive&nbsp; Drax Group plc has announced the appointment of Philip Cox as a nonexecutive director and chairman designate, effective Jan. 1. He will succeed Charles Berry as chairman following his previously announced retirement, scheduled for April. Cox previously served as CEO of International Power, where he led the growth and development of a substantial global power generation business. Schutte-Buffalo Hammermill under new ownership Martin Berardi has acquired Schutte-Buffalo Hammermill. Berardi, the incoming CEO, is a recent retiree from Moog Inc., where he served in a variety of roles over 34 years. Ownership of the company has transferred from Thomas Warne and James Guarino, who purchased the company in 2004 following a merger with Buffalo Hammermill Corp. Terex Environmental Equipment announces new products Terex Environmental Equipment is launching two new products in early 2015, the TDS 820 slow-speed shredder and the TTS 620 trommel screen. The TDS 820 is a versatile slow-speed machine for shredding all types of material utilizing the same shredding tool. The TTS 620 features an efficient engine and hydraulic drive system combined with advanced material-processing control. It is suited for screening compost, biomass, soil, gravel and waste. Vecoplan announces V-ECO series of shredders Vecoplan has introduced V-ECO shredders. Shredders in the V-ECO series feature VFD inverter drives, W rotors embedded with five rows of cutters, single or double rows of bed knives, pneumatic assist drop-down screen carriages, hydraulic lift-up cutting chamber floors, and externally adjustable cutting tolerances. DCT&rsquo;s quick-release manifold bracket aids dust suppression&nbsp;&nbsp; Dust Control Technology has introduced a new quick-release manifold bracket, engineered to limit worker exposure to harsh service environments and potential safety hazards, while minimizing process downtime.&nbsp; Designed to fit all fan-driven models of DustBoss atomized mist dust suppression equipment, the new bracket design allows removal and replacement of the manifold in about five minutes, with no tools required. Hurst Boiler launches online CAD solution&nbsp;&nbsp; Hurst Boiler has announced the launch of its new, user-friendly online CAD download solution, featuring the latest boiler models and plan view configurations. Hurst&rsquo;s new web-based CAD download solution makes it easy to search for and select the right boiler online. Featuring an extensive range of Hurst boilers available as BIM-compatible 2D and 3D CAD/Revit objects, users have the option to either download the object in the desired file type or directly import the object into their design/specification software. The application supports most popular file types and CAD software programs. Fecon adds team member&nbsp;&nbsp; Fecon Inc. has appointed Joe Cox as northeast regional manager. Cox has experience in business development and equipment sales within the mulching industry. He most recently managed facilities in the Southwest that provide right-of-way, land clearing, and related oilfield services. Cox&rsquo;s territory includes Pennsylvania, New York, New Jersey, Delaware, Maryland, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine. The previous northeast regional manager, Brian Kile, has accepted the position of western regional manager.

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Business Briefs

The wood pellet industry is always looking for ways to grow and expand into emerging markets. While the pellet heating market in Europe is nothing new, it is emerging as an additional opportunity for North American wood pellet exporters. The market for pellets for heat in Western Europe has seen exponential growth, going from a 2 million metric ton market in 2004, to a projected 10 million metric ton market in 2014. Pellets provide a low-cost option in the face of increased heating costs across Europe. Pellets for heat are cheaper in comparison to other forms of space heating, such as natural gas, oil, and electricity. Europe&rsquo;s ability for domestic production to meet the demands of the pellet heat market is waning, however. Italy, the largest and fastest growing pellet heat market, had to import 70 percent (1.75 million metric tons) of its supply in 2013. Many markets import pellets from other member states with a surplus production, such as Germany, Austria, and many of the Eastern European countries. However, as the pellet heating markets continue to grow, these countries are seeing a reduced amount of surplus supply and are unable to meet the export demand. It is here that North American exporters see an opportunity for additional markets for their product. While the pellet heat market is not reliant on government subsidies, it is not without its own challenges and vulnerabilities. This winter has seen a major oversupply of pellets in this sector, making it difficult to enter the market right now. Additionally, some government regulatory uncertainty exists. For example, the Italian government saw a budget shortfall late last year and, within a matter of days, decided to double the value-added tax on the import of pellets and passed this measure into law, increasing the price of pellets by 30 to 35 euros per metric ton. There is a petition to repeal this move, which I encourage you all to sign. Challenges aside, North America has already established the supply chain necessary to deliver wood pellets to Western Europe. Further, industrial pellet producers in the U.S., such as ENPlus have shown increased interest in the pellet heat market by obtaining the necessary certifications to participate. Buyers of industrial wood pellets are also paying notice to this industry, with both Drax and RWE diversifying their interests and making recent investments in the pellet heating market. As an industry, we continually ask ourselves, what does the market look like after 2027 when European subsidies for renewable energies come to an end? The added optionality presented by this market provides additional investment security for producers and buyers alike and we view the pellet heat market as an important pillar in the foundation of the overall wood pellet industry moving forward. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Author: Seth Ginther Executive Director U.S. Industrial Pellet Association 804-771-9540 sginther@hf-law.com

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Industrial Producers Eye Global Thermal Markets

Over the past several decades, controlling wood pellet quality for foreign and domestic residential heating markets has been very challenging.&nbsp; For nearly as long as there have been residential wood pellet burning appliances, there has been the knowledge that not just any pellet will yield the best performance of the appliance.&nbsp; Wood pellet burning appliances require fuel that is very consistent in properties such as moisture content, density, and dimensions such as length and diameter to yield well-balanced combustion for a clean and consistent burn.&nbsp; In addition, the pellets must be low in fines and durable to prevent the creation of fines in handling.&nbsp; It is also critical that ash content be as low as possible to assure ease of maintenance and that the pellets are free of contaminants that can corrode the appliance. Over the years, there have been numerous efforts to control the quality of wood pellets for residential use.&nbsp; In the U.S., the Pellet Fuels Institute developed its first standards in the early 1990s.&nbsp; Remnants of this original standard can still be seen today in the form of a guaranteed analysis block displayed on the bags of many manufacturers.&nbsp; This early standard provided guidance for properties such as moisture content, fines and ash.&nbsp; Several other countries also developed residential wood pellet standards between the late 1990s and the early 2000s.&nbsp; These include standards such as the Austrian &Ouml;norm, the German DIN and the Swedish Svenska standards.&nbsp; These early standards provided guidance for physical and chemical properties of the fuel, but they did not provide any guidance for quality management to achieve the standards and there was no enforcement of the standards. By the early 2000s it became obvious that more was needed to control the quality of the wood pellet supply for the residential heating markets.&nbsp; As a result, various quality management schemes have now been developed that include very robust guidance on chemical and physical properties, quality management, and third-party enforcement.&nbsp; The quality management schemes currently available and their primary areas of use are as follows:&nbsp;&nbsp; Established in 2002, DINplus was the first wood pellet quality scheme to enter the market.&nbsp; It was established by DIN Certco in Germany and gained much popularity in European heating markets.&nbsp; It was based on the German DIN wood pellet standards, which gave it a very regional emphasis, but has since adopted the European Union standards for wood pellets (EN 14961-2) and is now also referencing the newly developed ISO wood pellet standards (ISO 17225-2).&nbsp;&nbsp; DINplus is still used throughout Europe and Russia.&nbsp; The PFI Standards Program was first published in 2008 as a voluntary consensus-based program, but was revised in 2011 for use within the U.S. EPA&rsquo;s residential wood heating standard.&nbsp; The PFI Standards Program has since become the primary quality management scheme used for the domestic heating market, as it covers about half of the wood pellets produced and sold within the U.S. for home heating.&nbsp; To date, the adoption of this program has been largely market driven, however, with the recent prepublishing of the EPA&rsquo;s updated New Source Performance Standard for Residential Wood Heaters, it is anticipated that the PFI Standards Program will be much more widely adopted within the U.S. ENplus was established in 2011 as a collaborative effort by several European countries under the Pellcert project and is overseen by the European Pellet Council. ENplus is based on the European Union standard for wood pellets (EN 14961-2) and is anticipated to reference the newly developed ISO wood pellet standards (ISO 17225-2) with the next draft.&nbsp; ENplus is largely based on the needs of the European markets and now covers around 60 percent of the European production for residential heating.&nbsp; In addition, several U.S. producers have also certified to ENplus in order to sell production into the European residential heating markets. Canada has also developed a wood pellet quality scheme called CANplus.&nbsp; The CANplus quality scheme is essentially the same as ENplus in that wood pellet producers first certify to ENplus and then apply to the Wood Pellet Association of Canada for CANplus certification.&nbsp; The primary difference between ENplus and CANplus is that the CANplus quality mark makes use of the Canadian red maple leaf.&nbsp; In addition, both ENplus and CANplus have also been referenced in the U.S. EPA&rsquo;s prepublished NSPS for Residential Wood Heaters making it possible for producers that rely on these quality management schemes to also gain recognition within the U.S. markets. While controlling the quality of the residential heating wood pellet supply has been long in coming, we can finally rest assured that highly robust quality management schemes are finally in place.&nbsp; They have gained significant recognition within their intended markets and are now even supported by regulation, at least within the U.S.&nbsp; As such, all entities that operate in the wood pellet sector, both foreign and domestic can finally have a high level of confidence in the quality of fuel that will be available for their use provided they make use of the fuel produced under these various quality management schemes. Author: Chris Wiberg Manager, Biomass Energy Laboratory 218-428-3583 cwiberg@tpinspection.com

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Controlling Wood Pellet Quality For Residential Heating Markets

If you&rsquo;ve spent any time around the Biomass Thermal Energy Council&rsquo;s Executive Director Joseph Seymour, you&rsquo;ve likely heard him talk about how often thermal energy is overlooked and underrepresented in broader discussions about energy. I&rsquo;m paraphrasing, but Seymour reminds us that thermal energy is the third leg on the energy stool and our homes, businesses and industries cannot function without it. This phenomenon has certainly been evident in the pellet industry in recent years. For decades, hundreds of producers manufactured wood pellets to generate heat for private customers, but pellets had to be used to generate electric power before the general public really became familiar with them. Still, the first and, many would argue, the best use of wood pellets is to combust them to heat a space. The mainstream media, and even this publication, can and should be forgiven for focusing on the massive, sudden demand for wood pellets introduced into the marketplace when a single power station comes online that measures its annual demand in millions of tons. For comparison, a single residence transitioning to pellet-derived heat will likely consume less than 10 tons of pellets in a heating season. This edition of Pellet Mill Magazine illustrates that the gradual accumulation of residential, commercial and light-industrial pellet customers must remain a top priority because of the long-term stability these deployments bring with them. Katie Fletcher&rsquo;s page-16 feature, &ldquo;Renewable Heat Wave&rdquo; investigates how the United Kingdom&rsquo;s Renewable Heat Incentive is increasing opportunity for producers there. For her story, Fletcher interviewed a number of stakeholders, including Ed Billington, whom I met last year at the European Pellet Conference in Wels, Austria. At the time, the residential component of the policy was in flux and the growth Billington and others were hoping for was slow to come. The worm has certainly turned. Fletcher reports that, in the last third of 2014, more than 1,200 applications were received for the program representing over 1 gigawatt of new thermal demand. &ldquo;We have seen a good uplift in the industry this winter,&rdquo; Billington says. The United Kingdom is the largest user of wood pellets in Europe and, despite the momentum generated by the RHI, largely uses pellets to make electric power. Italy and Germany are a close second and third, and not 1 ton of the nearly 6 million they consume is used to produce power. As an industry we can&rsquo;t forget that. Author: Tim Portz Vice President of Content &amp; Exacutive Editor tportz@bbiinternational.com

March/April 2015

Business Briefs

Business Briefs

Columns

Industrial Producers Eye Global Thermal Markets

Controlling Wood Pellet Quality For Residential Heating Markets

Dancing With The One What Brung Ya

Featured

The Clean Warmth of an Engineered, Regulated Fire

Renewable Heat Wave

Contributions

Gauging Customer Likelihood Of Purchasing Biomass Heating

March/April 2015.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

Business Briefs

Columns

Industrial Producers Eye Global Thermal Markets

Controlling Wood Pellet Quality For Residential Heating Markets

Dancing With The One What Brung Ya

Featured

The Clean Warmth of an Engineered, Regulated Fire

Renewable Heat Wave

Contributions

Gauging Customer Likelihood Of Purchasing Biomass Heating

March/April 2015