Right now, a truck carrying a 20-foot shipping container is making its way through the streets of Quy Nhon in south-central Vietnam.&nbsp; Every so often, it stops in front of a small, nondescript factory and takes on a marginal load of wood pellets, perhaps 1 to 2 tons, and moves on to more stops, until the container is full.&nbsp; It&rsquo;s then that the container will be taken to the docks at the port in Quy Nhon, aggregated with other containers carrying similar cargo, and eventually loaded onto a container ship bound for South Korea.&nbsp; Each month, around 90,000 tons of wood pellets are collected and exported in this manner from Vietnam. This system, as unorthodox as it may seem to North American producers, has effectively shut them out from one of the fastest-growing new markets in the global pellet trade.
&ldquo;Pellet production in Vietnam started because of the South Korean power market requiring industrial grade pellets for boilers and also animal bedding about five or six years ago,&rdquo; Tan Nguyen, representative director at CellMark, tells Pellet Mill Magazine. &ldquo;At that time, Vietnamese producers didn&rsquo;t even know what the pellets were going to be used for.&rdquo;
While production may have begun in Vietnam six years ago, South Korea wasn&rsquo;t importing significant volumes until mid-2013, when monthly volumes began flirting with the 50,000-ton mark. In 2014, import volumes grew monthly, and by the end of the year, South Korea had imported nearly 2 million tons and had the full attention of wood pellet manufacturers around the world, including Vietnam.
Forests Products Powerhouse Vietnam is just over 1,000 miles north to south, and is long and thin with portions of the country not more than 35 miles east to west. The S-shaped country forms the eastern side of the Indochina peninsula, and with an area of nearly 130,000 square miles, is just slightly bigger than New Mexico. With 35 million acres of forest, if it were a state, Vietnam would trail only Alaska in terms of forest inventory. This vast resource, located next to many hundreds of miles of coastline dotted with shipping infrastructure, has helped Vietnam secure its place as one of the world&rsquo;s most dominant players in the forest products sector. In a report offered by the Vietnam General Department of Forestry, the sector was said to have grown 40 percent year-over-year from 2005-2010. Since then, the sector&rsquo;s growth has slowed, albeit only slightly, and is still growing over 20 percent each year.
Vietnam is a major exporter of not only wood fiber intermediates, like wood chips for paper production, but also finished goods like furniture. According to a report written by the Center for International Forestry Research, Vietnam is the second largest furniture exporter in Asia, trailing only China. This $2.5 billion-per-year industry requires a massive amount and variety of roundwood, more than Vietnam can provide from its own stocks. Vietnam imports 80 percent of the wood used in furniture manufacturing, some 4 million cubic meters, with China, Laos and the U.S. being the biggest suppliers. These roundwood inventories, whether from domestic or foreign sources, are converted into furniture products in a widely distributed manufacturing sector with nearly 3,000 different operations. A report written by the European Forest Institute suggests that nearly half of these manufacturing operations are relatively small, employing less than 15 people. It is from these small operations and the wood waste streams they produce that the Vietnamese wood pellet industry was born. &ldquo;With Vietnam being an enormous furniture exporter, pellet production offered an opportunity to solve the wood waste problem,&rdquo; Nguyen says. &ldquo;Furniture manufacturers used a very small amount of their waste for their own boilers, and for the most part, the cost of the remaining raw material was just the logistics costs.&rdquo;
Nguyen notes that about 90 percent of the wood pellet facilities in Vietnam are standalone affairs, most of which are located within 20 to 30 kilometers (12 to 19 miles) of several wood processing operations in southcentral and southern Vietnam.
Seth Walker, a bioenergy economist, characterizes the industry in much the same way. &ldquo;What we are hearing is these pellet producers aren&rsquo;t necessarily even running small factories, but they may be located next to someone&rsquo;s house,&rdquo; he says. &ldquo;They may produce a ton a day.&rdquo; Low, Low Prices While certainly a departure from the evolution toward larger facilities that characterize the industry in North America, this distributed, microproduction model has allowed Vietnamese producers to become the world&rsquo;s low-cost pellet option. Walker tells Pellet Mill Magazine that customs data from South Korea indicates that the Vietnamese are typically winning tenders for their volumes between $110 and $120 per delivered ton. &ldquo;You&rsquo;re talking about collecting residuals from the furniture manufacturing industry mainly and other low-grade material being mixed in,&rdquo; Walker says. Additionally, Vietnamese producers and brokers enjoy a significant shipping advantage, as there are financial incentives to return shipping containers to South Korea to keep that country&rsquo;s electronics manufacturing sector humming.
These ultra-low prices have resulted in quality problems as producers work to drive out cost and maintain profitability. In some instances, materials other than wood waste streams have ended up being used to make pellets. &ldquo;The tenders from the South Koreans put extreme downward pressure on the wood pellet price. The cost of raw materials was not going down as fast as pellet prices, and some producers chose to include rice husks in their finished product so they could win the orders,&rdquo; Nguyen says.
Henry Fahman, chairman and CEO of PHI Group, a diversified energy and natural resources company operating in Vietnam, has been watching this industrywide race for the lowest price for well over a year. &ldquo;The wood pellets producers in Vietnam were faced with a situation of strong competition for feedstock, at the same time prices for pellets were falling,&rdquo; he says.&nbsp; &ldquo;Some of the producers, because they couldn&rsquo;t control their feedstock, had to take whatever residues or feedstocks they could get their hands on. As a result, there was no consistent quality. Some of those pellets found their way into South Korea and created a very unfavorable perception of the product quality of the pellets coming out of Vietnam.&rdquo;&nbsp;
The quality of wood pellets landing in South Korea got so bad that in the spring of 2015, the South Koreans acted and imposed new import restrictions. The objectives of the restrictions were to ensure that the raw materials within the pellets were legally sourced and 100 percent wood fiber. Initially, wood pellets exported to South Korea had to be made from feedstocks procured from forests that had been certified by a global forest certification program like the Forest Stewardship Council or the Programme for the Endorsement of Forest Certification. North American suppliers found these requirements not only onerous, but illegal in some cases because of complex trade agreements. Vietnamese volumes continued to flow, along with the required documentation, which, in many instances, were later discovered to be falsified. The regulations surrounding the importation of wood pellets into South Korea have been in flux for most of 2015, and North American trade groups, most notably the Wood Pellet Association of Canada, have been working in concert with the South Koreans to remove these trade barriers. WPAC&rsquo;s efforts appear to have gained some traction, and a new verification process will be evaluated. Whether these new developments and regulation tweaks will lift prices remains to be seen. Tough Sledding Canadian producers aren&rsquo;t alone in their frustration with a market that once seemed so promising, but, at least for now, doesn&rsquo;t seem to offer opportunity for economic return. The shakeout within the country has already begun. &ldquo;Vietnam had more than 200 companies operating in the pellet sector, but that number has been reduced to less than 80 because of the challenges of low prices and unbalanced business,&rdquo; Nguyen says. Similarly, Fahman, whose company announced in August that it had entered into joint ventures with two wood processing facilities to install wood pellet operation, has for now tabled his plans to build pellet capacity in the country. &ldquo;You are faced with this situation whereby the price you are paying for feedstock is too high and the selling price to Korea is not enough to cover your margins, so if you open your shop you are losing money,&rdquo; he says.&nbsp; &ldquo;Most of the producers have closed down, and now I&rsquo;m trying to help them with new strategies, by either opening a new market channel or provide them with better-priced feedstock.&rdquo;&nbsp;
Opinions differ on whether this situation will eventually lead to a rebound in the prices for wood pellets in tenders coming out of South Korea. Arnold Dale, vice president of bioenergy at Ekman, remains skeptical.&nbsp; &ldquo;The Vietnamese are not very happy with the prices, yet at the same time, they&rsquo;ve got no one else to sell to and they seem to be willing to take the pain,&rdquo; he says. &ldquo;I can&rsquo;t see anything changing.&rdquo;
Walker suggests that there just isn&rsquo;t an appetite within South Korea to pay higher prices for wood pellets. &ldquo;When imports were highest and prices were highest, the utilities backed off on issuing tenders, probably because they didn&rsquo;t want to be paying $180 per ton for pellets,&rdquo; he says. &ldquo;So I think there is some price sensitivity there. I think they are happy to use pellets at $120 per ton. I don&rsquo;t think there is a lot of interest to move up the cost curve, and I don&rsquo;t think the political will is there for additional government support for higher prices.&rdquo;
Dale isn&rsquo;t surprised that developers like Fahman have slowed or altogether halted the development of larger production facilities inside the country. &ldquo;I really can&rsquo;t see how they are going to get it to make sense, because these little production units that are making pellets out of any available material and putting it into a container and getting it off to South Korea aren&rsquo;t going to go away,&rdquo; he says. &ldquo;They are the dominant force. So if you build a 60,000- or 100,000-ton pellet plant with state of the art equipment, and you make a perfect pellet, I just cannot see that you&rsquo;ll be able to sell it for what it&rsquo;s worth. You can only sell them for what someone will pay, and the South Koreans are absolutely focused on getting the lowest price.&rdquo;
It is hard to argue that pellet producers operating in Vietnam don&rsquo;t have great global opportunity. As the country continues to aggressively grow its forest products sector, the wood waste streams will grow proportionately. And as long as tenders for wood pellets continue to be issued in South Korea with a clear bias toward low prices, Vietnamese producers will, almost exclusively, have a role to play. &ldquo;The South Korean RPS only requires that utilities cofire at a certain percentage of biomass,&rdquo; Dale says. &ldquo;And you get fined if you don&rsquo;t do it. You don&rsquo;t get a payment per megawatt hour like it is in Europe, so quality doesn&rsquo;t really matter. The utilities have just got to prove that they are including biomass at the required percentage, and it&rsquo;s really a very small percentage.&rdquo;
This market reality isn&rsquo;t ideal for larger producers hoping to build a long-term, stable pellet businesses inside Vietnam, and many developers are hoping to identify new markets willing to pay higher prices for a product with higher quality. But whether they be in Japan or Europe, convincing other buyers that wood pellets manufactured in Vietnam are high quality may be an uphill battle.&nbsp; &ldquo;Everybody I&rsquo;ve met in Vietnam is looking for market opportunities in Europe, but quite frankly, it&rsquo;s not going to happen,&rdquo; Dale says. &ldquo;If you think about the sustainability issues and the certification requirements that those buyers have in place, and the problems that genuine manufacturers in the U.S., Canada and Europe have meeting those requirements, I just can&rsquo;t see how it is going to happen in Vietnam.&rdquo; Author: Tim Portz Executive Editor, Pellet Mill Magazine 701-738-4969 tportz@bbiinternational.com

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Like the furniture industry from which it procures the majority of its feedstock, the majority of the pellet industry in Vietnam is composed of relatively small facilities, operating on just one or two presses intermittently. 

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As South Korean tenders began to be issued with more frequency in late 2013 and into 2014, small producers, aggregators and brokers in Vietnam heeded the market signal and aggressively pursued and won a majority of this new business. 

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Vietnamese producers are gobbling up market share in emerging Asian markets. Offering the world's lowest prices, market observers wonder how long it can continue. 

Southeast Asia's Low-Cost Pellet Player

Canadian wood pellet exports to South Korea plummeted in 2015, subsequent to new import trade restrictions. Just last year, 1.8 million metric tons were delivered to South Korea. Lead exporter Vietnam supplied nearly 743,000 metric tons of wood pellets, followed by approximately 344,000 metric tons of wood pellets from Canada for around $75.5 million. China, Malaysia and Thailand also each exported more than 100,000 metric tons to the country. According to Global Trade Atlas, the total tonnage exported to South Korea from Canada over five months in 2015 was only 57,000 or approximately $11.5 million in pellet sales.
This slowdown was the result of South Korean wood pellet importers introducing a requirement in February for Forest Stewardship Council or Program for the Endorsement of Forest Certification chain-of-custody certificates to accompany bids for wood pellet tenders. Vietnamese pellet producers provided FSC certifications that, upon investigation, were found to be fraudulent. As a result, the South Korean government&mdash;through Korea Forest Service and the Korea Forest Promotion Institute&mdash;reacted by deciding that chain-of-custody certificates would no longer be accepted as evidence of a raw material source for wood pellets. Instead, KOFPI implemented new import requirements that rely upon the Apostille Convention&mdash;an international certification comparable to notarization in domestic law.
This created some issues for South Korea&rsquo;s second-largest exporter of wood pellets. First, Canada is not a signatory of the international Apostille Convention, so the South Korean government was not able to legally recognize the authentication process, thus making Canada unable to legally comply. Secondly, even if Canada were a signatory, the new rules created onerous documentation for the exporter. The new provisions required exporters to provide government-issued tenure documents for all fiber sources in each wood pellet shipment&mdash;down to the container level. Notarization of authenticity by the national government of the exporting government is required of each tenure document and provided to KOFPI.
Copies of fiber supply contracts must also be supplied by exporters. &ldquo;The Koreans, I think, had a misconception that a pellet plant would only get its fiber from a single source,&rdquo; says Gordon Murray, executive director of the Wood Pellet Association of Canada. &ldquo;I think they mistakenly believed that the requirement would be simple to comply with, when in fact, for all practical purposes, impossible.&rdquo;
Korean Objectives The South Koreans had two main objectives with these requirements. &ldquo;One is to obtain assurance of the legality of the sourcing,&rdquo; Murray says. &ldquo;The second objective is to ensure that the wood pellets are made from pure wood fiber, and they don&rsquo;t have any nonwoody material mixed in.&rdquo; Rice husks are one of the main concerns&mdash;which Murray says in North America is laughable, but is a problem in Southeast Asia&mdash;because pellets containing any material other than wood are considered biomass solid refuse fuel or BIO-SRF. This fuel is regulated by the South Korean Ministry of Environment and is subject to even more stringent import requirements than are required for wood pellets.
Wood pellet demand in South Korea began to pick up after a renewable portfolio standard (RPS) became effective in 2012, with the goal of reaching 10 percent of energy generation from renewable resources in the 2022 to 2027 timeframe. Murray says the first year the RPS was in place, Canada shipped about 5,000 tons of wood pellets to the country. Over the next few years, exports continued to rise to around 50,000 in 2013, then a couple 100,000 tons in the following year. Over 2015, wood pellet exports slowed to a trickle. A few Canadian containers continued to ship into South Korea when some exporters found the Korean embassy in Vancouver willing to accept unauthenticated documents.
Further complicating the pellet trade, a second issue was unveiled in the spring when South Korea issued a notice regarding national forest products standards, including wood pellet standards, to the Technical Barriers to Trade Committee of the World Trade Organization. WPAC reviewed the South Korean standards and found that neither the wood pellet grades nor the physical and chemical testing procedures aligned with the international standards developed by ISO.&nbsp; Finding Resolution Earlier this year, no longer able to legally ship pellets to one of its significant markets for the product, action had to be taken. A meeting was held in Seoul in June with KFS and KOFPI to discuss concerns and reach a resolution. Amongst those in attendance at the meeting was the Sustainable Biomass Partnership&rsquo;s technical director, Simon Armstrong, who presented the SBP certification system to South Korean participants to see if they would be interested in its implementation as a means of verifying fiber sourcing. The Koreans decided this was not something they would implement. The meeting hailed no solution, and Murray described it as a frustrating failure.
Another meeting was held in September. &ldquo;We went through quite a bit of effort to convince them, right up to the point of our federal trade minister writing to his counterpart in Korea,&rdquo; Murray says. &ldquo;The pellets were only one part of the general forest products trade that was under import restrictions of one sort or another.&rdquo;
The issue even came to the attention of the president of South Korea, who told the KFS they had to find a solution. &ldquo;We met with officials from the government, and actually managed to get it worked out so they&rsquo;ve abandoned the process that they set up with this Apostille process,&rdquo; Murray explains. &ldquo;They are no longer putting this sourcing requirement onto the exporter, and now the responsibility for verification of sourcing has been shifted to the importer.&rdquo;
Subject to ratification by KFS management, the involved Canadian parties&mdash;WPAC, Canada&rsquo;s Department of Foreign Affairs and Trade Development, Natural Resources Canada and the British Columbia Ministry of International Trade, the Council of Forest Industries, the Engineered Wood Association, the National Lumber Grades Authority and the Canadian Lumber Grades Accreditation Board&mdash;and the involved Korean parties&mdash;KFS, KOFPI and the Korea Forest Research Institute&mdash;agreed on a set of terms. The terms include that wood pellets will be made from pure wood and fall under the jurisdiction of the Ministry of Forests. The new verification process will be implemented for a trial period in the month of October. KFS will implement a spot-checking process and will reconsider whether to accept third-party, chain-of-custody certification evidence of fiber sourcing. Sawmill residues may be used as a raw material, provided that the sawmill owner states that the sawmill residues are one of the primary products of the mill (along with lumber and chips) and not a waste product. Korea will modify its pellet quality and testing standards to align with ISO, and does not intend to impose forest management requirements on other countries. Current Expectations Overall, Murray says that they are pleased with the results of the recent meetings and optimistic that Canada will be able to re-establish a mutually beneficial wood pellet trade with South Korea.
The full extent to what this market could hold remains unclear. Christopher Kim, president of Vulcan Renewables, is exporting wood chips to Korea and plans to export pellet production from the company&rsquo;s under-construction Florida mill to the country.&nbsp; &ldquo;The market itself is in its infancy stage, but there needs to be a lot of overhaul of their regulatory system,&rdquo; he says.
John Bingham, chief analyst and forest energy monitor with Hawkins Wright Ltd., believes this immaturity makes it a difficult market for Western companies. &ldquo;It&rsquo;s a significant market at a global level,&rdquo; he says. &ldquo;It&rsquo;s not a particularly significant market from the North American perspective, because most of the pellets are provided within Asia, particularly from Vietnam.&rdquo;
&ldquo;The focus is on price, and almost price alone, with little attention given to pellet quality or sustainability,&rdquo; Bingham adds.&nbsp; Based on Murray&rsquo;s interactions with those in South Korea, he agrees. &ldquo;The reason I don&rsquo;t think they will move from focusing on quality over price is quite simply that they&rsquo;re cofiring at extremely low percentages&mdash;let&rsquo;s say around 3 to 5 percent,&rdquo; Murray says. &ldquo;The pellets are hugely diluted by coal, and so any imperfections in the wood pellets are just diluted so much that the impact doesn&rsquo;t really affect the boiler performance.&rdquo;
Murray points out that if you look at the Europeans, who are cofiring at a much higher rate, like Drax&rsquo;s two boilers at 100 percent biomass, quality is critical because it&rsquo;s not being diluted by coal. &ldquo;The Koreans have just taken a completely different approach, and certainly with the power utilities, they&rsquo;ve been unwilling to form any long-term partnerships,&rdquo; Murray says. &ldquo;They don&rsquo;t have any particular regard for their relationships with their business partners, and it&rsquo;s just all about cost and the short term.&rdquo;
Bingham says that some of the prices in Korea have been eye-wateringly low, prices down to the $100 to $110 per-ton cost insurance freight. &ldquo;The Canadians simply cannot compete at that level,&rdquo; he says. The low prices are partly a result of reduced demand because of a large stock overhanging in the country, according to Bingham.
&ldquo;Even though we&rsquo;re happy we got the import restriction solved, the pricing is going to continue to be a big impediment for us,&rdquo; Murray says. &ldquo;Right now, they&rsquo;re getting pellets out of Southeast Asia for around $120 a ton and for North American exporters that is just completely unrealistic.&rdquo;
Both Bingham and Murray perceive South Korea as an opportunistic market. &ldquo;If you&rsquo;ve got the cargo and you can respond to one of their tenders and make a dollar, then you&rsquo;ll ship, and, if you can&rsquo;t, then you&rsquo;ll have to rely on business elsewhere,&rdquo; Murray says. &ldquo;I think as we go forward that market is just going to fluctuate up and down.&rdquo;
Murray isn&rsquo;t worried this will dramatically impact the Canadian pellet market as other opportunities have developed internationally to offset the turmoil. &ldquo;There are a lot of other things offsetting the decrease,&rdquo; Murray says. A few he mentions include Japan&rsquo;s Osaka Gas coming online with a boiler this year; Sumitomo Corp.&rsquo;s plans to construct a 50-MW wood biomass power plant in Sakata City, Yamagata Prefecture, through its wholly owned subsidiary Summit Energy Corp.; a partnership between Pacific Bioenergy Corp. and GDF Suez; Drax&rsquo;s third boiler conversion coming online; potential in the Netherlands; Denmark&rsquo;s DONG Energy conversion projects; German Pellets&rsquo; investment in Eon&rsquo;s Langerlo coal-fired power plant for a pellet plant conversion project; and more.
The lifting of the trade restrictions has both positives and negatives to Murray. &ldquo;We can start shipping again, so that&rsquo;s a positive,&rdquo; he says. &ldquo;The negative part of it is that they don&rsquo;t really have any forest management restriction or chain of custody. In the Canadian case, and we believe also in the U.S. case, that would actually be a competitive advantage for us if there were more strict sustainability requirements versus what we understand is happening in some of the Southeast Asia countries.&rdquo; Murray says in many Southeast Asia plants, like those in Vietnam, there are lax conditions and safety measures in place. &ldquo;We&rsquo;re happy the export restrictions in South Korea have been removed, but it&rsquo;s not like we&rsquo;re jumping for joy and we&rsquo;re going to be flooding the market that we can export again,&rdquo; Murray says. Author: Katie Fletcher Associate Editor, Pellet Mill Magazine 701-738-4920 kfletcher@bbiinternational.com
&nbsp;
------------------------------------------------------------------------------------------------------------------
SIDEBAR South Korean Power Generation
South Korea was the world&rsquo;s ninth-largest energy consumer in 2014, according to estimates from the BP Statistical Review of World Energy 2015. South Korea is one of the top energy importers in the world and relies on fuel imports for about 97 percent of its primary energy consumption because the country lacks domestic energy reserves. The country&rsquo;s energy consumption is driven by its economy, and its economic growth is fueled by exports&mdash;predominantly exports of electronics and semiconductors.
Over the past several years, South Korea has had to rely on coal imports due to rising coal consumption paired with negligible domestic production. South Korea was the fourth-largest global coal importer last year, following China, India and Japan. Imports have risen from 131 million short tons (MMst) in 2010 to 144 MMst in 2014 as a result of the forced shutdowns of some nuclear plants because of safety issues in late 2012. Australia and Indonesia account for the majority of South Korea&rsquo;s coal imports, and Russia and Canada are other big contributors. A growing demand from the electric power sector increased South Korea&rsquo;s coal consumption by 59 percent between 2005 and 2014. The electric power sector accounted for about 60 percent of the country&rsquo;s coal consumption, while the industrial sector made up for most of the remaining amount in 2014, according to Korea Energy Economics Institute.
Fossil fuel-fired power plants make up a significant portion of the country&rsquo;s installed capacity, of which coal power plants consisted of about 26.3 gigawatts (GW) in 2014, or about 28 percent of the total capacity. South Korea plans to raise the share of coal capacity to 32.2 percent in 2029, according to the proposed new electricity plan. South Korea also plans to promote renewable energy to reduce its CO2 emissions by 37 percent from business-as-usual projected levels&mdash;projections of emission levels absent any carbon price scheme&mdash;in 2030. Since the South Korean RPS was implemented, renewable sources remain a small share of the country&rsquo;s electricity generation&mdash;only 4 percent according to KEEI in 2014&mdash;although renewable capacity and generation, apart from hydropower, are rising.

Meetings were held earlier this year in Seoul, South Korea, to resolve the wood pellet trade issue between South Korea and Canada. Facing from left to right: Hyun-Mi Park and Lesley-Ann Reed of the Canadian Embassy to South Korea; Gordon Murray, WPAC

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Delegates in the Korea-Canada forest products standards discussions that took place Sept. 9 to 11 worked on setting terms at the Korea Forest Research Institute in Seoul, South Korea.

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Pellet trade between South Korea and Canada essentially came to a standstill this year, but recent coordination between the two may bring back opportunities. 

Situation South Korea

Borneo, the third-largest island in the world, is shared by three sovereign nations: Indonesia, Malaysia and Brunei. Two Malay states occupy northern Borneo and, together with the Federal Territory of Labaun on an island off the coast of Borneo, make up East Malaysia, or Malaysia Timur, of which Peninsular Malaysia lies just west. The largest Malay state on Borneo, Sarawak, is home to one of the newest and largest pellet mills in Southeast Asia&mdash;if not the largest.
Built by Spanish engineering company Prodesa, the 120,000-ton mill, called Green Pellet (Sarawak) Sdn. Bhd. (GPS), is a joint venture between international trading group CellMark, the public institution known as Sarawak Timber Industries Corp., and a private, local investor and wood plant owner named Derasas Jaya SBD. &ldquo;They conform a group that can work very well because all of them add value to the joint venture, covering the weakness of the others,&rdquo; says Victor Monge, Prodesa sales engineer for the Asian region.
Monge tells Pellet Mill Magazine that GPS is in its final stage of commissioning and will soon be in operation. He says groundbreaking on the mega-sized pellet mill took place summer last year. &ldquo;It&rsquo;s known that it is very difficult is to achieve 100 percent of production capacity during the first years of operation,&rdquo; Monge says. &ldquo;Because of that, Prodesa is going to be in charge of the operation and maintenance of the plant for reaching the nominal capacity, reducing the operation costs and teaching the local staff the best way to run the plant according to our experience.&rdquo;
GPS produces an industrial white pellet. &ldquo;The target is to obtain an I1 or I2 grade,&rdquo; Monge says. The destination of all these pellets is more than 2,500 miles north through the South and East China Seas to South Korea. &ldquo;In the short term, all the production will go to South Korea because they are working hard for the environment and adopted a renewable portfolio standard (RPS) regulation that requires the increased production of energy from renewable energy sources,&rdquo; he says. &ldquo;In the midterm, it is expected that other countries in the area take the same kind of policies, increasing their wood pellet consumption.&rdquo;
According to the U.S. Energy Information Administration, in late 2012, &ldquo;South Korea experienced several incidents of falsified certificates for components of some of its existing nuclear power plants, adding to the industry&rsquo;s distress following neighboring Japan&rsquo;s Fukushima nuclear disaster in 2011. The South Korean government shut down four reactors temporarily, and another six were offline for maintenance, removing up to 40 percent of the nuclear capacity from service until the government inspected all reactors. Nuclear power generation fell by 10 percent from 155 terawatt hours (TWh) in 2011 to 139 TWh in 2013 before rebounding to 156 TWh in 2014. The country&rsquo;s current long-term energy plan, released in early 2014, lowered the share of nuclear capacity to 29 percent of total generating capacity by 2035 from the previous goal of 41 percent by 2030.&rdquo;
The EIA says South Korea plans to promote renewable energy to reduce its carbon dioxide emissions by 37 percent from business-as-usual projected levels in 2030. Its RPS went into effect in 2012 and, while renewable energy only made up 4 percent of the nation&rsquo;s electricity generation in 2014, according to the Korean Energy Economics Institute, renewable energy production in South Korea is on the rise. Inside the Plant Back on the island of Borneo, for GPS to meet its 120,000-ton nominal capacity of industrial-grade white pellets per year, the facility will process about 175,000 tons of wet, raw material annually. Monge says the feedstock will be mainly waste. &ldquo;Sarawak state has a large wood-based industry generating enormous amounts of wood waste,&rdquo; he says. &ldquo;The surplus wood waste from the nearby factories, which is not being utilized, gives the opportunity to reuse what would otherwise be timber residue into new products.&rdquo; The waste comes in the form of slabs, chips, sawdust, veneer and plywood residuals made from Acacia and tropical wood.
The plant contains three Promil-Stolz-brand pellet mills, delivered and installed by Prodesa, that Monge says are designed to allow for installation of an additional pellet mill to increase production further, if the owners see fit. Monge says the chipper is an undisclosed Asian brand that produces sawdust from the raw material in one step. Prodesa has installed several different conveyance systems according to the different needs of the process. &ldquo;Mainly chain and belt conveyors, but also a pneumatic system at some point,&rdquo; Monge says.
The drying system employed at GPS is a unique design, &ldquo;one of the first of its kind in Asia,&rdquo; Monge says. Designed and manufactured by Prodesa under Swiss Combi license, it&rsquo;s a belt dryer that uses hot water at around 100 to 110 degrees Celsius to dry the raw material. &ldquo;As it&rsquo;s an indirect low-temperature drying process, the main advantages compared to drum dryers are the safety, the low level of emissions, and the quality of the obtained product, maintaining all the chemical properties of the lignin,&rdquo; he explains.
On the backend, the plant includes a jumbo bag loader and a container tilter for direct bulk loading. Eyeing the Market Over the past several years, Prodesa has built, or is in the process of building, seven pellet mills in different parts of the world, Monge says, four of which include combined heat and power. In addition, the company has participated in several other projects with its drying line. And apart from that, Prodesa continues to perform feasibility and engineering studies for other possible plants. Even though Prodesa has conducted project engineering for another pellet mill in the region, along with biomass drying work,&nbsp; GPS is its first complete pellet mill project in Asia.
&ldquo;The first plant in an area is always a bigger challenge,&rdquo; Monge says, &ldquo;but all of them are different in some part. You need to be flexible and adapt your design to the local characteristics.&rdquo;
While Pellet Mill Magazine attempted to speak with the joint venture partners of GPS, they deferred comment to Monge at Prodesa until the plant is fully operational. On CellMark&rsquo;s website, the company touts its commitment to preserving Malaysian wildlife and the environment by its adoption of an orangutan at the Semenggoh Wildlife Center named Roxanne.
&ldquo;CellMark&rsquo;s commitment to the environment and surrounding wildlife species does not stop at the adoption of Roxanne,&rdquo; the company&rsquo;s website says. &ldquo;It goes way beyond that with the company&rsquo;s plans to build a 120,000-ton a year mill to produce renewable energy in the form of wood pellets. The raw material used in the pellet-making process is the residual from other wood processing plants in the area and the same raw material will be used to power the mill, giving it a very low-carbon footprint. The first mill called GPS is just the start. CellMark&rsquo;s intention is to build additional capacity in the area to get to the level of 500,000 tons of renewable energy pellets in Sarawak while looking for other potential sites in Indonesia and Thailand.&rdquo;
Monge says he was transferred to the region after Prodesa analyzed the market from a distance, and a branch office was established. Monge says he attends various regional events and participates in local biomass forums trying to get a better understanding of the markets and possibilities, searching for clients and local partners to work with.
&ldquo;It&rsquo;s a growing market, young, active and with a big potential in the biomass sector,&rdquo; Monge says of Southeast Asia, &ldquo;but in the end, every market is difficult and has its own characteristics.&rdquo; Two of the challenges Monge says he is facing in the region are dealing with short-term mentalities and less-than-desirable industrial habits.
Monge says one of the main characteristics of Prodesa is that it gets &ldquo;very involved in the projects,&rdquo; he says. &ldquo;We don&rsquo;t just install the plant. We want the plant working and the client satisfied. In fact, as I said, we are going to be in charge of the operation and maintenance of the plant for two years.&rdquo; He says while the possibility of Prodesa owning a small equity portion of GPS never arose, the company is open to an ownership stake in other projects.
&ldquo;We hope that all the eyes looking at this plant realize that it&rsquo;s an interesting business and also positive for the environment and local population, making it the first of many,&rdquo; Monge says. Author: Ron Kotrba Senior Editor, Pellet Mill Magazine 218-745-8347 rkotrba@bbiinternational.com

Green Pellet (Sarawak), a 120,000-ton pellet mill undergoing its final stages of commissioning in East Malaysia, is a joint venture between CellMark, Sarawak Timber Industries Corp. and Derasas Jaya SBD. 

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From an upper view of the unique belt dryer, one can see the heat exchangers and chimneys inside the compact plant. 

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Green Pellet (Sarawak) features three pellet mills made by Promill-Stolz, delivered and installed by Prodesa. The design allows for incorporation of an additional mill as demand for its industrial-grade pellets grows in Asia. 

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Essentially all of GPS's 120,000 tons of wood pellets will initially be shipped more than 2,500 miles north from the East Malaysian state of Sarawak on the island of Borneo to South Korea. 

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The East Malaysian state of Sarawak is home to the region's newest, and quite possibly the largest, pellet mill—the first of many to follow. 

Land of the Rising Mill

Harold Arnold, USIPA chairman and president of Fram Renewable Fuel, opened the 5th Annual Exporting Pellets Conference held in Miami, Sept. 20-22, by suggesting that wood pellets were not a commodity, but instead a &ldquo;specialty fuel with ever-increasing requirements.&rdquo;
The first conference panel provided an assessment of the current market for wood pellets and demand trajectories looking into the coming decade. John Bingham, director at Hawkins Wright consultancy in the U.K.,&nbsp; opened the discussion and drew attention to the newly installed conservative majority, which, with full control over energy policies since 1997, is already reigning in investments in renewable technologies. Bingham noted that parliament has already removed the exemption from a climate change levy that had been afforded renewable producers since its passage in 2001.&nbsp; Bingham concluded by noting that changes in currency valuation have resulted in a 15-percent increase in the cost of wood pellets for those buying with euros.
A subsequent panel was comprised of pellet-buying European utilities. Deborah Keedy, head of biomass procurement at Drax Power, said a third unit is under conversion to biomass inputs and will come online soon. Further, Keedy said that Drax is committed to the conversion of a fourth boiler as long as there is some form of government support for it. &ldquo;Without any subsidies, we (utilities) wouldn&rsquo;t convert any coal plants to biomass,&rdquo; said Martin de Wolff, head of biofuel trading at RWE Supply and Trading.
The conference concluded with a more sober assessment of the global pellet market compared to the optimism that largely marked the 2014 event. The conference&rsquo;s final day was comprised of market outlooks offered by Enviva president and CEO Johnathan Keppler, Nigel Adams, a conservative member of parliament representing North Yorkshire, U.K., and the conference&rsquo;s traditional endcap panel built entirely of pellet producers.
Keppler reported that the global pellet market now stands at 28 million tons of consumption annually, with 15 million tons flowing into the heat market. This 28 million-ton market is worth $5 billion annually. Keppler concluded his remarks by suggesting that, ultimately, forest-level certification would be in the industry&rsquo;s long-term interest to satisfy European policy makers and rate payers.

The 2015 Exporting Pellets Conference wrapped with a panel discussion moderated by USIPA executive director Seth Ginther. From left to right: Mike Williams, Westervelt; James Roecker, Georgia Biomass; Ginther; Richard Peberdy, Drax; Thomas Meth, Envi

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USIPA 2015, producers eye flat year ahead

The Sustainable Biomass Partnership has made several announcements recently including news that NEPCon and NSF International have become SBP-approved certification bodies and Westervelt Renewable Energy has achieved SBP certification from NSF Sustainability.
The SBP first fully approved NEPCon&rsquo;s application to become an SBP certification body. NEPCon, a Danish nonprofit, conducts certification audits for numerous forestry certification schemes including the Forest Stewardship Council, SAN/Rainforest Alliance and the PEFC Forest Management Standard.
NEPCon leveraged its current status as an accredited certification body for both FSC and PEFC forest management schemes to gain SBP approval. &ldquo;We decided to engage in SBP certification because the market for woody biomass is growing fast," said Peter Feilberg, NEPCon executive director. "The impact of this trend on the world&rsquo;s forests depends on how the biomass is harvested. SBP is about ensuring that it is done in the right way."
In order to gain SBP approval, NEPCon had to demonstrate an ability to implement the SBP requirements and completed an SBP-approved training course. NEPCon will be monitored on an ongoing basis and the audits it performs for biomass producers, including pellet mills, will be reviewed by the SBP.
Following NEPCon, the announcement was made that NSF has been approved for the certification of biomass producers and the biomass supply chains in Canada and the U.S.. Most recently, the SBP announced Westervelt Renewable Energy has achieved SBP certification from NSF Sustainability, a division of global public health organization with NSF International. SBP certification enables producers to demonstrate that the woody biomass pellets they supply for energy production meet the regulatory and sustainability requirements of energy producers throughout Europe. SBE Latvia Ltd. and AKZ Ltd. are also certified biomass producers.
The SBP framework was formed by industry stakeholders in 2013 to create standards and processes that enable biomass producers, typically pellet and wood chip mills, to demonstrate that they source their feedstock responsibly and that it complies with the regulatory requirements applicable to power generators burning woody biomass to produce energy.

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NEPCon, NSF International, Westervelt Renewable Energy recognized by Sustainable Biomass Partnership 

The Model Neighborhood Wood Heat Initiative has helped install state-of-the-art, high-efficiency wood pellet boilers in 23 homes and eight nonresidential buildings. Participants have saved more than $180,000 buying wood pellets manufactured in Maine instead of fossil fuel from out-of-state sources.
The Maine Model Neighborhood is one of four that the center has started with local partners to motivate homeowners and commercial building owners to switch to &ldquo;local heat&rdquo; across the Northern Forest. Berlin, New Hampshire, led the way, where 40 homeowners and several nonresidential property owners installed boilers. In Vermont, the program is assisting homeowners and working lands businesses in the Northeast Kingdom. In New York, the program will focus on the communities of Saranac, Saranac Lake and Tupper Lake. &ldquo;We have a tremendous renewable resource in the region,&rdquo; said Maura Adams, program director of the Northern Forest Center. &ldquo;Wood pellet manufacturing is using only a fraction of the wood that used to go into paper making, and this new industry is benefiting the region. Altogether, our programs have generated more than $3.5 million benefit to the regional economy and will result in more than a 3,000-ton reduction of carbon dioxide.&rdquo;
The Model Neighborhood Wood Heat Initiative in western Maine is a partnership of Western Maine Community Action and the Northern Forest Center.

Model Neighborhood Wood Heat Initiative reports great success 

A 2,000-MW, coal-fired power plant in North Yorkshire, England, has announced it will stop producing power at the end of March and close, rather than convert to biomass as once proposed.
In the notice, the company said it would require funding of &pound;200 million ($308.8 million) over the next three years to continue generating power, which it described as &ldquo;financially unsustainable for the 53-year-old plant.&rdquo;
In late 2013, the U.K. Department of Energy and Climate Change announced the government had sent draft investment contracts to 16 renewable energy projects that progressed to the next stage of the Final Investment Decision Enabling for Renewables process. This process provided subsidies to plants to enable projects such as renewable conversions. Eggborough was on that list, but was removed from it in mid-December when it was cut to 10 projects that were identified as &ldquo;provisionally affordable&rdquo; under budget caps. As a result, the coal-fired plant&rsquo;s proposed conversion to biomass was deemed unlikely to move forward, and at that time, the plant was projected to cease operations by the end of this year.
Neil O&rsquo;Hara, chief executive of Eggborough Power Ltd., said the utility believes Eggborough Power could have a significant part to play in ensuring security of supply in the U.K. electricity market, particularly while there remains great uncertainty around new-build, gas-fired generation.
Recent changes to the bidding rules for the government&rsquo;s Supplemental Balancing Reserve, its Capacity Market Rules, and renewable subsidies available for biomass conversion all contributed to the plant&rsquo;s shut down.

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Eggborough Power Station to close, biomass not an option

Astec Industries Inc. has announced it has entered into an agreement and received a related down payment to build, deliver and install the first production line of a new turnkey wood pellet production facility.
The $30 million agreement with Highland Pellets LLC includes the option to add additional production lines, related equipment and installation services, which could bring the total order amount to $143 million. Astec expects to deliver the first production line and related equipment no later than early next year.
Commenting on the announcement, Benjamin Brock, CEO, stated, "We are pleased to announce this $30 million order for the first production line of a planned multiline wood pellet plant facility. Highland Pellets has been great to work with on this agreement and we look forward to a long-term relationship with them."
Although Astec has received an order and a down payment on the first $30 million portion of the facility, the remaining $113 million in goods and services is optional.

Astec Industries receives $30M pellet plant order 

The sale of German utility Eon&rsquo;s Belgium 556-MW Langerlo coal-fired power plant to wood pellet producer German Pellets is expected to close this year.
Eon has signed a share sale and purchase agreement with German Pellets, according to the company. Eon expects to close the deal in the coming months, but is unable to comment on the financial terms. Eon had originally planned to convert the coal-fired plant into a 400-MW wood pellet-fueled biomass plant, but decided to look for an investor.
"The biomass project in Langerlo no longer fit into the core strategy of the Eon group,&rdquo; said Tom De Bruyckere, the Belgium spokesperson for Eon. &ldquo;With an environmental permit, a building permit and a principled commitment to financial support by the Flemish energy regulator, the project had every chance to succeed. Eon therefore decided to look for a buyer for the project.&rdquo;
German Pellets decided to invest in the plant and plans to convert the power plant to burn biomass, according to Claudia R&ouml;hr, the communication and marketing representative with German Pellets GmbH.

German utility Eon's coal-fired power plant in Belgium was purchased by German Pellets with plans to convert it to biomass.

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Eon to sell coal-fired power plant to German Pellets

1. Porter joins Uzelac Industries Uzelac Industries has appointed Mike Porter sales manager of biomass. Porter will lead a regional sales team, establishing new relationships and business partners throughout the U.S. and Canada. Porter has extensive experience in the biomass and wood drying industry, having served as the director of new business for Firefly North America, as well as sales coordinator and sales manager for M-E-C Co. 2. NESTEC adds Elsman to aftermarket team NESTEC Inc. has announced Ray Elsman will join the company&rsquo;s aftermarket team. Elsman adds another 34 years of expert experience in the application, design and installation of air emission control and energy conservation systems, increasing NESTEC&rsquo;s unprecedented 300-plus years of staff experience. Elsman joins the NESTEC team from Lundberg located in Bellevue, Washington, with extensive knowledge of the wood industry applications. 3. Congressional Biomass Caucus reinstated The Pellet Fuels Institute has announced that the U.S. House Biomass Caucus has been reinstituted, as the House Administration Committee officially approved its charter in September. The co-chairs are Rep. Bruce Westerman, R-Ark., and Rep. Ann Kuster, D-N.H., members of the House Natural Resources and House Agriculture Committees, respectively. The Congressional Biomass Caucus is a bipartisan caucus seeking to support the development of biomass and elevate the renewable resource&rsquo;s profile in Congress. The first biomass caucus was developed in 2011. 4. BTEC announces Stronberg as new executive director The board of directors of the Biomass Thermal Energy Council has announced the appointment of Joel Stronberg as BTEC's new executive director. His appointment will bolster BTEC's role as the nation's advocate for clean and efficient use of renewable biomass for thermal energy and combined heat and power. Stronberg, a renewable energy professional with 20 years of experience, has consulted for many groups in the clean energy field, including the American Solar Energy Society and the National Associate of State Energy Officials. 5. Lignetics acquires Geneva Wood Fuels Lignetics Inc. has announced the acquisition of the assets of GF Funding LLC, whose facility was formerly known as Geneva Wood Fuels, expanding its footprint into Maine and upper New England. Lignetics acquired the wood pellet manufacturing facility of GF Funding LLC, based in Strong, Maine, which produces hardwood pellet fuel for residential and commercial use. The facility produces Maine's Choice and Geneva Wood Pellets brands of residential hardwood pellet fuel, which can be found at independent retailers and select chains throughout the Northeast. 6. Maine Energy Systems introduces wood pellet hot air furnace Maine Energy Systems recently announced the North American release of the MESys AutoPellet Air, the world&rsquo;s first modulating fully automatic wood pellet hot air furnace. The units are being built in Bethel, Maine, by MESys and were collaboratively designed and developed with European pellet pioneer, OkoFEN. The AutoPellet Air has a rated maximum output of approximately 100,000 Btu and has recently qualified for an Efficiency Maine rebate worth up to $5,000 for most Maine residents. 7. Rentech makes organizational changes to improve fiber business Rentech Inc. has announced organizational changes designed to improve the operations and execution capabilities of its fiber operations. Steve Roberts, managing director of Canada, who has led the team responsible for establishing and maintaining customer and commercial relationships for Rentech&rsquo;s industrial wood pellet business, will now also lead growth initiatives for this segment of the fiber business. Dennis Corn, vice president of projects, is responsible for overseeing the completion of the Wawa and Atikokan projects to full production capacity. Kevin Cain will now serve as vice president of Rentech&rsquo;s wood chipping business. In this role, Cain will focus on improving operating and financial performance at all 26 U.S. Fulghum fiber mills, along with growing Fulghum&rsquo;s wood chipping business in North America. Mark Wilson, CEO of New England Wood Pellet, will continue to manage NEWP&rsquo;s four operating facilities and grow NEWP through acquisitions of wood pellet facilities in the commercial heating market. 8. Rural Energy announces ISO accreditation U.K.-based biomass distributor and installer Rural Energy has announced it has successfully qualified for ISO 9001 and 14001 certification. &ldquo;Our recent success in gaining ISO 9001 and 14001 accreditation is testament to our dedication to offering a market-leading service and adhering to industry regulation,&rdquo; said Paul Clark, managing director at Rural Energy. &ldquo;As we promote the economic and environmental benefits of biomass technology, we feel it is only right that we practice what we preach in operating an efficient and environmentally friendly business.&rdquo; Rural Energy achieved joint certification in 27 days, passing the comprehensive United Kingdom Accreditation Service certification audit with the help of business development and quality management company Heron Standardise.
9. Joint venture to commercialize biomass processing technology Two companies are forming a joint venture to work with Utah-based Biomass Energy Enhancements LLC on commercializing a pretreatment technology that BEE says enables biomass to be utilized as a direct replacement for coal or for cofiring, without requiring steep investments in plant modifications. The companies are Active Energy Group plc, a global supplier of wood fiber products for MDF manufacturing, and Biomass for Energy, a processing system supplier. The joint venture, called AEG Coalswitch Ltd., will create a fuel that can be delivered in a range of different compacted formats including pellets, granules, briquettes or bales and contains similar thermal and friability characteristics to coal, according to BEE. Richard Spinks, CEO of Active Energy Group, said AEG CoalSwitch is aiming to have a market-ready product by mid-2016. 10. Finnish technology launchs into UK forestry, energy markets Finnish MHG Systems recently launched its mobile and Internet cloud service at www.woodlandmanager.com.&nbsp; This real-time planning and management tool brings efficiency and productivity gains to forest owners&rsquo; and managers&rsquo; mobile devices. Forest owners can easily see what operations need to be carried out and how much money they may be able to get from harvesting, immediately or in the near future. The aim of MHG Systems in the near future is to bring forest owners on the same platform with contractors and other stakeholders through MHG Biomass Manager. Field workers can be instructed with site-specific working methods, and can report work updates through a user-friendly MHG mobile interface. 
SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Pellet Mill Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence.

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Business Briefs

As children, we were all no doubt introduced to the philosophical thought experiment, &ldquo;if a tree falls in the forest and no one is around to hear it, does it make a sound?&rdquo; While we have probably resolved this one, a query I still struggle with involves professional, peer-reviewed publications that, for one reason or another, do not get the exposure that they deserve. They fall in the forest and don&rsquo;t make a sound. Nicholas Institute for Environmental Policy Solutions, Duke University, authors Christopher S. Galik&rsquo;s and Robert C. Abt&rsquo;s article, &ldquo;Sustainability guidelines and forest market response: an assessment of European Union pellet demand in the southeastern United States,&rdquo; is one such piece.
Having recently concluded our 5th Annual Exporting Pellets Conference, I found that Galik and Abt spoke effectively in this piece to some of the issues of concern to our membership in the U.S. Industrial Pellet Association. I&rsquo;d like to briefly discuss this article here with the hope that a more thorough reading and reference of it will take place in the future.
Galik and Abt recognized that a thorough understanding of the interaction between policy targets and forest biomass markets is required when developing guidelines for bioenergy development and in shaping investment decisions as these will effect both the environment and business outcomes. Galik and Abt believed that a breakdown here had the very real potential to hinder the development of a sustainable bioenergy market or frustrate the accomplishment of environmental objectives.
This was a common theme that emerged from our most recent conference in Miami as our members expressed concern with policies that take time, energy and investment of capital to satisfy, that seem to change on a political whim and, often without any explanation or reason, that prompted the change being supplied. Standardization of terminology and an accepted lexicon for this industry for use by policy makers was also noted as a requirement as some terms seem to evolve over time. These methods have the potential to thwart investment capital or devalue markets, and both techniques seem to be a strategy used by those who oppose this industry.
Galik and Abt continue to evaluate the influence of EU recommended sustainability guidelines on the inventory of forest situated to supply these markets. They then consider changes in forest composition and scope in response to expected increases in pellet demand. They assess how sustainability guidelines can influence the evolution of forest markets. Galik and Abt found that regardless of the presence of sustainability guidelines, the net result was an increase in removals, an increase in forest area and little change in forest inventory. They also found a trend of annual gains in forest carbon.
This discussion closely mirrored a recurring topic in Miami among USIPA Members. U.S. forests are growing. The U.S. has some 750 million acres of forest, approximately 37.6 percent of its landmass. The total acreage devoted to U.S. forests has barely changed over the past century. Despite rapid population growth and increased demand for timber, the number of trees in U.S. forests has increased every year for more than 50 years.
Clearly, this is not the impression of forests in the U.S. that opponents of the industrial wood pellet industry want anyone to have. It&rsquo;s easy to display an undated photo of a clear-cut forest somewhere, devoid of context. But, the indisputable fact is that our forests are thriving. Unlike Europe, private landowners control 56 percent of all U.S. forests, and 86 percent of those in the southeast, which accounts for most of the U.S. pellets produced for export to Europe. The net volume of trees per acre in this region has increased 94 percent since 1953.
Our members are guided by a culture that values sound forest management practices that produce forestry products while safeguarding environmental values and maintaining healthy growing stands that capture carbon from the atmosphere. A robust industrial wood pellet market helps ensure the removal of more greenhouse gases by providing landowners with incentives to plant more trees, and they are. It&rsquo;s simply troubling when an article that supports much of what the industry is saying gets buried. It literally falls in the forest without a sound. It&rsquo;s time to have fact-based and fair conversations about this industry. &ldquo;Sustainability guidelines and forest market response: an assessment of European Union pellet demand in the southeastern United States,&rdquo; by Galik and Abt, is one such conversation, and I commend it to you. Author: Seth Ginther Executive Director U.S. Industrial Pellet Association 804-771-9540 sginther@hf-law.com

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Ginther says it's time to have fact-based and fair conversations about this industry, commending the article â€œSustainability guidelines and forest market response: an assessment of European Union pellet demand in the southeastern United States."

It's Time to Have the Right Conversations

Speculation on biomass potential in the Asian markets has become a regular conversation among wood pellet industry participants. And despite the wildly high forecasts over the past five years, most North American producers have experienced uninspired results. Just as with Europe, it is important to separate the hype from the facts, allowing investors, producers, traders and supply chain partners to plan accordingly.
Recently, a group of industry participants attended the U.S. Pellet Industrial Association conference. Every year, a similar group converges in cities in North America and Europe to attend Argus Biomass and the Wood Pellet Association of Canada conferences, in addition to USIPA. Although participants come together for a variety of reasons, one of the high points is the market outlook segments of the conferences. This year, at USIPA, John Bingham of Hawkins Wright, consultants to international pulp, paper and bioenergy industries, provided just that.
According to Hawkins Wright, worldwide industrial demand for wood pellets in 2015 exceeded 13 million metric tons. Although Europe remains the leader, with the majority of consumption, South Korea and Japan combined now measure 16 percent of worldwide demand. South Korea demand rose 7 percent from 1.9 million metric tons in 2014 to 2.03 million metric tons in 2015, forecasting to grow to 2.7 million over the next five years. Most noteworthy was the sharp increase of imports, almost 300 percent.
Although the growth is still in single digits, the 2012 renewable portfolio standard (RPS) has the ability to set in motion more impressive growth. RPS requires power producers with a capacity greater than 500 MW to generate 10 percent of their total power from renewable energy by 2022. The largest Asian biomass power plant today stands at 105 MW. Based in the South Korean province of South Chungcheong, this GS EPS project took three years and $254 million to convert. Currently, this biomass plant is fueled by agricultural waste product including palm kernel shell (PKS).
Clearly, all the growth cannot be expected to come from South Korea, despite the RPS. After all, according to Mc Kinsey &amp; Company analysis, the demand for wood pellet biomass in Asia is expected to reach 10 million tons per year by 2025.
In 2012, Japan also rolled out a new initiative to boost renewable energy growth in the country. The feed-in tariff (FIT) system provides generators with preset premiums on renewables for 20 years. As a result, Japan&rsquo;s expected installed renewable en&shy;ergy capacity is almost 400 GW by 2025, according to a study from research firm GlobalData that forecasts an increase in cumulative capacity from 317.5 to 389.8 GW over the next 10 years. Although the majority of installed capacity is expected to come from thermal generation, it is anticipated that biomass, wind and solar will also play a key role. In fact, according to the Biomass Industrial Society Network, 80 wood biomass generation projects received approval in 2014. Most of these projects are cofire plants that will utilize coal and wood pellet biomass. This would increase the biomass consumption to approximately 30 million cubic meters.
Despite the forecasts generated by RPS and FIT, in South Korea and Japan, all eyes are on China, with high expectations over the two decades. According to Kyung-Ah Park, head of Goldman Sachs environmental markets group, almost half of China&rsquo;s cities experienced acid rain in 2013 and a 100 percent increase in days of haze, year over year. As the world&rsquo;s largest emitter of greenhouse gases, China has pledged to peak emissions by 2030. The country is positioning itself to be the leader in clean energy deployment. Goldman Sachs believes that China will continue to reduce the role of coal in its primary energy consumption by promoting the development of clean energy including nuclear power, hydro, wind, solar, biofuel and natural gas, with an estimated decline of coal use by 62 percent in 2020.&nbsp; As a baseload power, biomass stands to be a reliable option for China as it furthers its renewable agenda.
With over 300 terawatt hours of worldwide electricity generated by biomass today, and the highest growth of electricity production per unit of gross domestic product in Southeast Asia, the prospects for biomass are astonishing. Although it may be difficult to predict when Asia overtakes Europe in consumption of biomass, it&rsquo;s clear that this will occur.&nbsp; Author: Michele Rebiere President, Wood Pellet Association of Canada CFO, Viridis Energy Inc. 604-669-7831 mrebiere@viridisenergy.ca

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Asian markets have become a regular conversation among the wood pellet industry participants. Rebiere says although difficult to predict, Asia will overtake Europe in consumption of biomass.

Great Expectations: Asian Renewable Energy Plans 

Just over a year ago, our team decided to add two issues to the editorial calendar at Pellet Mill Magazine. At the same time, we decided to introduce editorial themes to each issue and finally, we decided that the final issue in 2015 would be dedicated entirely to Asian pellet production and markets. Our planning for the 2015 year came on the heels of the U.S. Industrial Pellet Association&rsquo;s Exporting Pellets Conference and it was clear that the Asian marketplace was going to be worthy of our attention in 2015. We were right, but for the wrong reasons. Beginning in late 2013, monthly imports of wood pellets began to skyrocket and grew month over month deep into 2014. South Korea finished 2014 importing just under 2 million tons and it seemed a certainty that the long-awaited Asian market had arrived with South Korea being the region&rsquo;s first buyer.
Since that time, pellet imports have plummeted and imports from North America are almost completely stalled out. What transpired is a complex story, and we&rsquo;ve dedicated the bulk of this issue to telling it. Katie Fletcher worked closely with Gordon Murray at the Wood Pellet Association of Canada for her feature, <a href="http://biomassmagazine.com/articles/12543/situation-south-korea">&ldquo;Situation South Korea.&rdquo;</a>&nbsp; Without a doubt, Murray is the most knowledgeable person in North America with regard to the South Korean marketplace and its challenges and for good reason. For now, the North American producers best positioned to benefit from increased pellet buying activity from South Korean buyers are his members in British Columbia. Installed pellet capacity in that province alone is over 2 million tons and more capacity is being planned and built. Pellets shipped from the Port of Vancouver will reach South Korean ports in two weeks, less than half the time required to get a vessel there from the Baton Rouge, Port of Brunswick or the Port of Chesapeake.
From talking with Gordon, and Fletcher&rsquo;s story, it is clear that the South Korean market is a long way from becoming a market any producer, or lender, could bank on. The challenges are varied and include everything from cultural and language barriers, to ultralow-cost providers in the region, to the low inclusion rates of wood pellets and what that means for quality demands. Still, the work to open and stabilize new markets for wood pellets in Asia will continue. The opportunity is simply too great to stop now.
Tim Portz VICE PRESIDENT OF CONTENT &amp; EXECUTIVE EDITOR tportz@bbiinternational.com

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The final issue of Pellet Mill Magazine in 2015 is dedicated entirely to Asian pellet production and markets. Although still in its infancy, work to open and stabilize new markets for wood pellets in Asia will continue.

November/December 2015

Business Briefs

Business Briefs

Columns

It's Time to Have the Right Conversations

Great Expectations: Asian Renewable Energy Plans

Seoul Power

Featured

Southeast Asia's Low-Cost Pellet Player

Situation South Korea

Land of the Rising Mill

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Business Briefs

Business Briefs

Columns

It's Time to Have the Right Conversations

Great Expectations: Asian Renewable Energy Plans

Seoul Power

Featured

Southeast Asia's Low-Cost Pellet Player

Situation South Korea

Land of the Rising Mill

November/December 2015