As our team at Pellet Mill Magazine works to send this issue to print, we&rsquo;re also in the throes of gathering and organizing data for our annual North American Pellet Producer Map. To say this effort is challenging and time-consuming is an understatement, but we&rsquo;re confident our data is becoming better and more accurate each year&mdash;a sincere thank you to all of the plant personnel who take a few minutes to call us back or respond to our emails. Copies of this map will be sent out soon&mdash;don&rsquo;t hesitate to reach out with any updates. The theme of this month&rsquo;s edition is Global Production and Consumption, and though the pellet map only includes North American production, manufacturing in the U.S. and Canada has global implications, indeed. The U.S. is the largest exporter of wood pellets in the world, with Canada coming in second, and both markets are thoroughly discussed in my page-10 Q&amp;A with FutureMetric&rsquo;s William Strauss and Seth Walker. I asked them a variety of questions on the industrial and domestic markets, policy, trends and more, and to sum up the conversation in just a few words, the industry is once again gaining momentum, after a few years of slower, post-boom growth. As stated by Walker, who said markets are strong in Europe, &ldquo;&hellip;demand has definitely caught up to supply, which means it may be time for new, greenfield mills. Combine that with expected growth from Asia, and we are entering a second phase of industrial pellet capacity expansion.&rdquo; Speaking of Europe, Senior Editor Ron Kotrba dug way into the ENplus certification program on page 16. While there are many parallels to the U.S.&rsquo;s Pellet Fuels Institute Standards Program, one of the main differences seems to be how pellet buyers view each of them. The program is so popular in Europe that most customers won&rsquo;t purchase pellets that aren&rsquo;t certified, whereas in the U.S., the program is much lesser known, and the majority of consumers seem unaware or indifferent (though the PFI is working to change that). And while U.S. producers can become ENplus certified for a few thousand dollars, Kotrba reports, the costs don&rsquo;t end there&mdash;if a U.S. producer becomes ENplus certified and sells only half of its inventory to Europe, for any labeled product sold in the states, pellet makers still must pay a royalty per metric ton. Another issue with ENplus is the frequency of fraud attempts, but as Gordon Murray, executive director of the Wood Pellet Association of Canada points out, this further demonstrates the value of the label. Revisions to further improve the program are in the works, according to Program Manager Gilles Gauthier, so stay tuned for a future update. The last thing I&rsquo;ll mention is that the agenda for the International Biomass Conference &amp; Expo, this year being held in Savannah, Georgia, in mid-March, attracts attendees from all over the world. We have a track dedicated specifically to pellets and densified biomass, and some of the leading industry experts will join me on the general session stage and in breakout panels to answer your questions and provide some valuable insight. Hope to see you there.&nbsp; Author: Anna Simet EDITOR asimet@bbiinternational.com

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As our team at Pellet Mill Magazine works to send this issue to print, we're also in the throes of gathering and organizing data for our annual North American Pellet Producer Map

The Big Picture 

Wood pelleting roots go back to the 1970s when the oil crisis began, but not on an industrial scale until much later. One challenge the industry faces today is that the knowledge that has been acquired over several decades is about to get lost with the first generation of managers, operators and service engineers. How do we address this issue? Pinnacle Renewable Energy opened its first pellet plant in 1989 in Quesnel, British Columbia, with three pelletizers. In 2004, its Williams Lake facility was commissioned, and U.S. pellet manufacturer Enviva was established. Georgia Biomass began operations in April 2011. All of this means that industrial-scale wood pellet production&mdash;plants with capacities greater than 100,000 metric tons annually&mdash;moved beyond infancy, and sufficient experience has been gathered (often, the difficult and expensive way). Now, the industry is already facing the next issue: the knowledge drain. The people who started the wood pellet industry are now at an age where they are about to retire, taking all the valuable information with them to Florida, Arizona or the Bahamas. Although equipment manufacturers were able to turn experience into better and more reliable products, there is still a great need to capture the logic used to successfully solve a problem and make it accessible to others with similar issues. Standardized incident and repair reports help in building a knowledge data base. An example failure report of a main shaft issue could include an assessment of what exactly went wrong. The questions to ask should gather information about machine noise and power consumption operating with and without product, bearing clearance, leakages and impurities (of course a pellet mill is dirty inside, but here I mean where they should not be). Then, the operator should remove the main shaft and check seals for age-hardening, cracks, dust and impurities. If this solves the issue, they should reassemble the main shaft and restart the pellet mill without die and rollers to check correctness. If this does not solve the problem, the operator needs to explore the problem further, best with their OEM or a service company. A report that includes all abnormalities and all causes of the failure should be written, and photos included. If necessary, the premature worn or broken parts should be analyzed, and the results included in the report. By documenting all major failures in these reports, operators build a database of solutions for the future. One possibility to depict the reports is a mind map, a diagram that illustrates tasks, concepts or items and shows relationships between the pieces of the whole (See Figure 1). Other knowledge-capturing techniques include action protocols, data capturing with sensors, brainstorming and concept mapping. A third person observes, interprets and records an action protocol expert solving problems. This is similar to the standardized reports, but requires a trained third person to literally look over the shoulder at the right times. While valuable, having these resources available is expensive, and may not be feasible. Another tool is big data, which can help improve preventative maintenance measures. Data on vibrations and temperatures can widen the picture on wear, and in the future, these data can help forecast equipment&rsquo;s end of life. Brainstorming is an unstructured, consensus-based approach to generating ideas about a certain problem. This approach involves multiple experts that consider all possible solutions. It is time-consuming and limited to a certain problem. Since it is a theoretical approach, it does not necessarily lead to suitable solutions. However, it can help discover solutions when repairs are in progress and existing attempts do not lead to a fix. Concept mapping links ideas to a network and is an effective approach to illustrate possible failure roots. Concept mapping takes into account that a failure can be caused by several reasons that are not obviously linked to the failure. Whatever approach operators choose, they should be sure to review the process from time to time. A good opportunity to check the comprehensibility of the knowledge-capturing system arises when new staff members come on board. &nbsp; Author: Holger Streetz International Operations Manager, Bathan AG h.streetz@bathan.ch +491-735918-550

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One challenge the industry faces today is that the knowledge that has been acquired over several decades is about to get lost with the first generation of managers, operators and service engineers.

Knowledge Management at Pellet Plants

&ldquo;Don&rsquo;t underestimate the size of the European wood pellet heating market,&rdquo; says Gordon Murray, executive director of the Wood Pellet Association of Canada. &ldquo;ENplus certification and the label are essential for trade in Europe now. It&rsquo;s not legally required, but the market demands it. And if you don&rsquo;t have it, you effectively can&rsquo;t sell into that premium market.&rdquo; According to the European Pellet Council, 21.7 million metric tons of wood pellets were consumed in the EU28 in 2016. The majority of this went to heat production, representing 13.4 million tons, or nearly 62 percent. The remaining 38 percent was used for power production. Almost 70 percent of the pellets consumed for heat in Europe was in residential applications. Canada has a unique relationship with the EPC and the ENplus certification scheme. Not only does Murray sit on the board of directors of the EPC, but Canada has its own CANplus certification process and label modeled exactly after ENplus. Furthermore, WPAC is a national licensor of the ENplus label in Canada. &ldquo;We have the right to issue the mark in Canada,&rdquo; Murray says. &ldquo;There is no such licensor in the U.S. Any of our members that wants the ENplus certification, they apply to us and we appoint Control Union to be our national certification body. Procedures and inspections are set up and, if they pass, then they get certified ENplus and CANplus. If they get one, then they get the other. It&rsquo;s not either-or&mdash;it&rsquo;s both.&rdquo; U.S. pellet producers do not have this luxury, however, since there is no U.S. national licensor of the ENplus label as there is in Canada. &ldquo;The Pellet Fuels Institute had the opportunity to be involved,&rdquo; Murray says, &ldquo;but they chose to go a different route.&rdquo; The PFI label has credence in the U.S. but is limiting for international&mdash;particularly European&mdash;sales. Meanwhile, the acceptance and importance of the ENplus label is growing across the globe. According to Gilles Gauthier, the general Manager of ENplus, there are 478 ENplus-certified wood pellet producers around the world. While a vast majority of these producers are located in Europe, there are 12 in North America, 10 in Asia and seven in South America, among others, according to data on the ENplus website. &ldquo;ENplus was initially designed for the European residential market,&rdquo; Gauthier says. &ldquo;Then the scheme expanded dramatically in Europe and beyond, showing the great need of harmonizing and even improving the pellet quality all over the globe. Today, Europe remains the main driver for companies to get certified, but we notice a growing interest for ENplus in some areas outside Europe, a trend that we obviously support and accompany.&rdquo; Some PFI-certified pellet producers in the U.S., like Bruce Lisle of Energex American Inc., are interested in selling their product into the lucrative European market, but only see value in the ENplus label for shipments that would actually go to Europe. According to Lisle, ENplus certification would &ldquo;basically be an add-on&rdquo; to PFI certification. &ldquo;But this means all my production would be subject to royalties back to the EPC, and I find that untenable,&rdquo; Lisle tells Pellet Mill Magazine. &ldquo;I don&rsquo;t need the ENplus label to sell in the U.S. The PFI label is more recognized and it&rsquo;s been around a lot longer&mdash;since the early &lsquo;90s&mdash;and in its current form for several years. But if I want to sell into Europe, which I have tried, buyers require the ENplus label. Unless I want to subject all my production to royalties to the EPC, this effectively writes me out of that market. I view it as a trade restraint.&rdquo; Gauthier estimates the cost of ENplus certification between 2,000 and 3,000 euros ($2,278 and $3,418). &ldquo;As a third-party scheme, we do not have control over the certification costs,&rdquo; he says. &ldquo;These are entirely at the discretion of our listed certification bodies.&rdquo; Once certified, royalties for use of the label are 15 euro cents, or approximately 17 cents, per metric ton. Program Revision In early December, the EPC announced the launch of a revision process to ENplus. &ldquo;We have decided to update the system to improve even further the quality of the scheme, its added value to certified companies and its overall management, including the coordination with partnering organizations,&rdquo; Gauthier tells Pellet Mill Magazine. &ldquo;Any public or private standard should enter into periodic revision processes to guarantee a high level of quality and performances. The pellet industry is an ever-evolving one, constantly reaching higher levels of performance, regularly witnessing scientific breakthroughs. As the world-leading pellet certification scheme, it is our duty to anticipate and factor in these evolutions. Moreover, the rapid expansion of ENplus did not come without challenges in terms of management. In order for ENplus to consolidate its leading position, it was essential to launch this major overhaul.&rdquo; Gauthier says no aspect of the program&mdash;technical, procedural, coordination or governance&mdash;will be overlooked during the revision process.&nbsp; The revision process is driven through a multistakeholder approach. &ldquo;Indeed, it was essential for us to involve the industry as a whole in this process,&rdquo; Gauthier says. This includes pellet producers and traders to end-users; appliance manufacturers; certification, inspection and testing bodies; national pellet associations; and more. &ldquo;Concretely, this translates into several rounds of online public consultation, as well as the creation of an editorial and advisory committee that will accompany the revision all along the process,&rdquo; he says. The EPC has received various inputs, from requests to slightly adapt a specific technical requirement to major strategic changes. &ldquo;As we are at the early stage of processing those requests, it is too early to share on the specifics here,&rdquo; Gauthier says. &ldquo;The multistakeholder approach appears to be key, based on our experience, and the great expansion of the scheme highlighted the need to coordinate at best with the different partnering organizations.&rdquo;
Now seems like an opportune time for EPC to consider new approaches to how U.S. producers supplying stateside customers with pellets could access the European market without subjecting all of their production to European royalties. Lisle says the solution is simple. &ldquo;I can easily certify my plants under ENplus, and I&rsquo;m willing to do it for access to the European markets,&rdquo; he says. &ldquo;I can make a specific bag for Europe, and I would pay the EPC royalties on those particular sales.&rdquo; When confronted with this, Gauthier says, &ldquo;We should first bear in mind that ENplus is a voluntary scheme. Indeed, there is no legal obligation for any company to be ENplus-certified. It is then up to any company to determine whether ENplus brings them added value and make the strategic decision to go for it or not. It is worth noting that the decision to become ENplus-certified is often driven not by the acquisition of the seal, but because of the added value it brings in terms of quality management, which means increased profitability at the end of the day.&rdquo; He says about 15 percent of ENplus-certified companies are located outside Europe. &ldquo;And while we cannot disclose every detail, we know for a fact that a fair share of them does not export their products to this region,&rdquo; Gauthier says. &ldquo;What is even more revealing is the growing aspect of this trend, especially in the past three years.&rdquo; When asked whether the council will consider waiving royalties on specific shipments from U.S. producers who become ENplus-certified but distribute stateside, with royalties in effect on any shipments that enter the European market, Gauthier says revising the schedule of fees and related process will, in fact, be considered during the revision process. &ldquo;The idea of collaborating with some other certification schemes has some merit but, so far, ENplus could not enter in this process mainly because of important technical differences or, in some other cases, because of major professionalism gaps,&rdquo; Gauthier says. Lisle says the technical parameters between the two standards are very similar. The latest undertaking at PFI is a metals standard. &ldquo;We at PFI agreed to adopt this,&rdquo; Lisle says. &ldquo;I know at my mills, we have a metals standard. It&rsquo;s a duplicate of the European one.&rdquo; While Lisle says the PFI and ENplus standards are close, he points out two major differences. &ldquo;One is grading,&rdquo; he says. PFI&rsquo;s premium grading has several tiers related to ash content: up to 1 percent; from 1 to 2 percent; and utility grading above 2 percent. &ldquo;ENplus&rsquo; A1 grade limits ash content to 0.7 percent,&rdquo; Lisle says. &ldquo;There&rsquo;s a major difference between 0.7 percent and 1 percent.&rdquo; The second major difference, &ldquo;which is the critical issue,&rdquo; Lisle says, is how the standards are applied to the particular producers. &ldquo;Case in point, with the ENplus standard, producers get one inspection per year&mdash;period,&rdquo; he says. &ldquo;PFI requires monthly inspections and a sampling every thousand tons initially, and then once a high level of confidence is achieved, the sampling requirement jumps to every 5,000 tons. And our inspections are random audits, not scheduled. The inspectors can show up at any time. This keeps a tighter rein on our producers to maintain the quality of their fuel.&rdquo; Gauthier says the EPC supports any professional certification scheme that allows the pellet industry to guarantee quality product, whether that is ENplus or another professional certification. &ldquo;The inspection regulation of PFI indeed differs from ENplus,&rdquo; he says. &ldquo;However, a revision of the inspection requirements and related processes will be considered under the broader ongoing overhaul of the ENplus scheme.&rdquo; Combatting Fraud The EPC is transparent about fraud in the market with respect to its ENplus certification and label. A plethora of information about fraud is available on the ENplus website. More than half of the ENplus fraud cases involve irregular use of the label. The second most common fraud seen is product misuses, including fraudulent use of the ENplus seal on pellet bags. Third is certification falsification. While ENplus management reserves the right to take legal action against any fraudulent use of its registered material, it typically resolves these issues outside of court through a two-step approach. &ldquo;The first one is to contact the infringing company to try and solve the problem in an amicable manner,&rdquo; the ENplus website states. &ldquo;In a vast majority of cases no further action is required, as attested by our resolution rate of 73 percent. However, some cases remain unsolved after this first step. For these, we enter a second phase, more coercive, whereby fraudulent companies see their name and actions exposed in our public registrar, the Blacklist, pending a final resolution of the case.&rdquo; Paul McLean, managing partner of Enkarterri Associates, a small brokerage firm in the U.K., tells Pellet Mill Magazine that in December he had two buyers for whom he was trying to locate 100,000 metric tons of ENplus-certified pellets annually. &ldquo;Every single offer from Latvia and Lithuania has been a scam, except one, which doesn&rsquo;t currently export to the U.K.,&rdquo; he says. &ldquo;The scammers pass themselves off as existing companies and the scam is always the same&mdash;to bounce you into sending 50 percent upfront. All large deals are transacted through letters of credit, and that implies they have asset finance behind the deal. Asking for 50 percent upfront pays for the wages and shipping, and it indicates there is poor or no financial backing in these pellet manufacturers.&rdquo; Mclean says many of these firms lack investment in their systems and procedures to become ENplus-accredited. &ldquo;The market requires it, and it requires producers to follow policies, processes and auditing,&rdquo; he says. &ldquo;Small producers find it onerous to comply, so it&rsquo;s easier to just pass the pellets off as [ENplus-certified when they are not].&rdquo; The first action McLean says he takes when encountering a suspected pellet fraudster is to check the ENplus Blacklist. &ldquo;It&rsquo;s the first thing I do as part of my due diligence,&rdquo; he says. Once the first shipment arrives from companies that pass McLean&rsquo;s due diligence, he tests the pellets through an accredited lab. As to what might alleviate fraud with the ENplus certification and label, McLean says reduced costs and more inspections may help. &ldquo;Small producers run tight margins, and the cost of certification is probably prohibitive,&rdquo; he says, adding that increased inspections would &ldquo;definitely&rdquo; help reduce fraud.
&ldquo;When you only inspect once a year, anything can happen in that time,&rdquo; Lisle says. &ldquo;We have only had one PFI fraud case that I recall and we nipped it in the bud.&rdquo;&nbsp; Given that European buyers and end-users require the ENplus label, it clearly has value, Murray says. &ldquo;And there is a cost,&rdquo; he says. &ldquo;It costs the EPC money to manage and update it in order to do quality control, making sure pellets are up to the standard, and it costs money for companies to get certified, set up their own lab and have quality control procedures in place. When unscrupulous companies set up a little pellet plant somewhere and they need this mark to sell product, they try to cheat. To me it proves the value of the mark. There would be no fraud if there was no value. Different countries have different cultures, though. The respect for the rule of law and value of trademarks is not universal.&rdquo; Gauther says, &ldquo;In such a competitive sector as wood pellets, the ENplus certification, as a world leader, is bringing a major marketing advantage to the certified companies, especially since ENplus is required by a lot of traders and end-users. In this context, fraud can occur. In order to protect the well-performing certified companies and to guarantee our brand value, the ENplus trademark is widely protected at an international level, and its use is strictly limited to certified companies. For this reason, consumers are advised to check that the ENplus seal on the products they buy matches the details of a certified company, by consulting our relevant lists for producers, traders and service providers, as well as the procedure, &lsquo;How to detect fraud,&rsquo; on the ENplus website.&rdquo; The ENplus brand legal protection and fraud tackling procedures are solid, Gauthier says. &ldquo;But, as for the other aspect of the scheme, we will look for further improvements during the scheme revision. At the moment, the most challenging part is probably raising awareness with all our stakeholders about checking whether the pellets they are buying or using as ENplus-certified are indeed related to a legitimate certificate, and to have them inform us whenever they have doubt. Any case that is reported to us is subject to a follow-up, without exception.&rdquo; Author: Ron Kotrba Senior Editor, Pellet Mill Magazine 218-745-8347 rkotrba@bbiinternational.com

Gilles Gauthier, the general manager of ENplus, discusses with Pellet Mill Magazine the recently announced revision process for the program and how the leading quality certification scheme combats fraud.

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The ENplus certification program is undergoing a major overhaul—and everything is fair game. 

The Cost and Value of Quality

There has been a consolidation trend in the U.S. the past couple years. Has that leveled off, or will it continue to some extent? SW: I think we will continue to see some more consolidation. The low-hanging fruit, so to speak, has already been picked, but in my opinion, we are still more likely to see merger and acquisition (M&amp;A) activity than we are new greenfield mills. WS: Recent years in the heating pellet sector were challenging due to a combination of excess supply, warm winters, and low fossil fuel prices.&nbsp; Profit margins for small, independent pellet mills were very tight, or even negative.&nbsp; Some mills failed financially and closed, and others were made available for acquisition. In the past year or so, demand for heating pellets has increased and the gap between supply and demand has almost closed. Normal to colder-than-normal winter weather has allowed operating mills to run at full capacity in many locations.&nbsp; I would expect to see M&amp;A continue, but also we may see a few new projects in some regions. We're also we&rsquo;re seeing some overseas companies buying stakes in wood pellet plants in North America. Why is that an ideal scenario for both parties, and should we expect to see more of that? SW: For overseas buyers, it provides them with a bit more security of supply. If you own a portion of a pellet mill, you have more control over the risks associated with the business. There can also be cases where a pellet mill investment may not make sense on its own, but if you look at the return from investment in a pellet mill&mdash;plus, say a biomass power plant overseas&mdash;you get a nice package. WS: In Japan, the large traditional trading houses are engaged in supplying pellet fuel to small, independent biomass power plants, some of which they also own or are joint venture partners in, and for co-firing at the large utility power stations. Some of the trading houses are investing upstream or are considering investing upstream. This is not an unusual strategy for them, as they have invested upstream in other sectors such as lumber production, coal, steel, etc.&nbsp;&nbsp; Speaking of trends, are there any others worth mentioning, in the domestic or global wood pellet industry? SW: Strong markets in Europe&mdash;demand has definitely caught up to supply, which means it may be time for new, greenfield mills. Combine that with expected growth from Asia, and we are entering a second phase of industrial pellet capacity expansion.&nbsp; WS: The U.S., Canada, Vietnam and the Baltic nations have dominated the industrial pellet markets.&nbsp; They will continue to be major suppliers.&nbsp; However, we expect to see other jurisdictions with good fiber characteristics&mdash;sustainable and competitively priced&mdash;and good logistics increase their role in global supply.&nbsp;&nbsp;&nbsp; Let&rsquo;s talk oil oil and pellet prices in the U.S. How has competiveness been in the past few years, and what&rsquo;s projected for the future? SW: Despite historically low oil prices, pellets have maintained their cost advantage over oil in most cases. There were one or two seasons (2014-'15 and perhaps 2015-'16) where oil was cheaper in some markets, but that was a unique case. Most forecasts, including the U.S. EIA, call for increasing oil prices but at relatively modest levels&mdash;in the $60 per barrel range. WS: We also expect to see resurgent growth in demand for pellet boilers in the U.S. Northeast. Those states consume about 84 percent of all heating oil used in the U.S. Of those states&mdash;and the rest of the country&mdash;Maine is the most heating oil dependent. About 68 percent of every dollar spent on heating oil leaves the state. At three dollars per gallon, the 61 percent of Maine&rsquo;s homes that use heating oil cause $602 million per year to leave the Maine economy.&nbsp; The economic multiplier effects that accrue from converting central heating systems to modern, efficient, and fully automatic pellet boilers using regionally produced pellet fuel will have significant positive economic impacts.&nbsp; State policies supporting the investment decisions to install pellet boilers will have very good paybacks to the states. Domestically, very little new capacity has been built over the past several years. There have been some proposals, but very few plants made it to the finish line. Can you discuss the main challenges new-build projects face right now? How is Canada different? It seems much more capacity has come online there in the past few years. SW: We are really talking about two separate markets&mdash;the domestic heating market and the industrial export market. For industrial exporters, two things happened: Demand did not materialize as quickly as some had hoped, and nearly all power station commissionings are delayed for one reason or another,&nbsp; and the strong U.S. dollar really hurt exporters. The U.S. South went from a low-cost position in the industry to being higher cost than regions like the Baltics, all because of currency. With new demand materializing and supply constraints in many other competing regions, new U.S. industrial capacity is all but inevitable. For domestic heating markets, capacity overshot demand many years ago, and the markets are still trying to get back in line. Most domestic market capacity came on line in response to strong demand including 100,000-plus new stove shipments each year. For the past several years, the market has improved, but at a much slower rate, and there is still excess capacity in the market. Do you think there is a future possibility of economically shipping pellets from the U.S. West Coast? SW: There is certainly a strong economic case for shipping pellets from the West Coast to Asia. There are likely a few really good opportunities for export mills on the West Coast but overall the market is relatively constrained from a fiber standpoint. Unlike the U.S. South, West Coast mills have to rely on sawmills for their feedstock as roundwood pulpwood is in limited supply and quite expensive. Even when it comes to mill residuals markets for chips are quite strong, including exports to Japan, so pellet mills are left competing with particleboard and MDF and other industries for sawdust and shavings. Combine that with a flat outlook for lumber production in the West, and opportunities will be limited. In a recent paper, you highlighted that year-on-year growth of pellet imports from 2017-&rsquo;18 is projected to be about 26 percent. Can you discuss what&rsquo;s attributed to this? SW: We see a resurgence in absolute growth plus some good seasonal affects. Korea, Japan and the Netherlands all grew in terms of absolute power plant supply while places like Denmark and Italy had cooler winters, which lead to increased demand.&nbsp; Looking at major drivers in 2019 and beyond, can you give some specific examples of policy or projects that are expected to have an influence on global trade? SW: Asia is really expected to be a major driver moving forward. The role that cofiring plays in both Japan and Korea will greatly influence the magnitude of market growth. New demand from dedicated biomass plants is quite certain while cofiring at major power stations adds a lot of volatility to the outlook. Looking way into the future, the way Europeans handle power plants that have been converted from coal to biomass&mdash;Drax, for example&mdash;after their current subsidies run out, will have a huge impact on the market in decades to come. WS: I think that over the next five years the consequences of climate change will become increasingly costly and impossible to ignore.&nbsp; It is my opinion that even the U.S. will finally have policy by 2025 that supports carbon emissions reduction.&nbsp; As I have said many times, a rational and pragmatic component of the transition to a more decarbonized power sector is to leverage existing large utility coal power stations by cofiring pellets with coal.&nbsp; Those power stations lower CO2 emissions while providing needed baseload and peaking power that wind and solar cannot supply. Perhaps someday battery storage will deal with the intermittency and variability of wind and solar.&nbsp; But in the meantime, a solution for renewable low carbon on-demand power already exists. By the mid 2020&rsquo;s the U.S. may become a significant user of industrial wood pellets in its coal power stations. Does the global landscape look competitive, or will demand eventually exceed production? Are any new countries emerging as major suppliers, and will there be any new major consumers? SW: Demand is definitely getting to the point where new capacity will need to be developed to meet it. Over the last few years the bulk of new capacity has come on line in Southeast Asia in order to supply Japan and, mostly, Korea. Other regions like Australia and Brazil will also play a role in an increasingly global market. &nbsp; WS: In any sector in which there are long lead times to develop production capacity, there are bound to be overshoots and undershoots in supply.&nbsp; It takes at least 18 to 24 months from the time the decision is made to build new pellet production capacity until startup. Then there is a period of three to 12 months (or more if there are deficiencies in design, equipment, and operations protocols) to ramp up to full capacity.&nbsp; We are in a period now where demand for industrial pellets is expected to exceed supply, and thus there are many new pellet production projects in the pipeline. Millions of tons per year of new production will be needed over the next several years. Aside from the Atikokan Power Station, there aren&rsquo;t any power plants in North America converting to wood pellets, and many of the larger-scale biomass-using stations have closed. What would it take for this to become feasible here? SW: In the U.S., it would take a federal policy that incentivizes renewable energy, particularly in states that currently object to such policies. The Clean Power Plan would have gone a long way in promoting biomass markets in the U.S. since states and utilities in coal country would quickly realize that cofiring wood pellets would be one of the most cost-effective ways to meet their targets, while also saving jobs at power plants, and creating more in the woods and at pellet mills. Unfortunately, the CPP essentially died with the election of our current president. Eventually, I would hope we will see another federal policy that promotes renewable energy, but it will likely take years, if not decades, before any new policy is actually implemented.&nbsp; WS: Seth and I have slightly differing opinions on how soon North America will seriously embrace a strategy to move toward decarbonization of the power sector. As my comments above note, I think the real financial impacts of the consequences of climate change by the mid-2020s will motivate national policy in the U.S. and Canada. The policy could be based on penalties for emitting CO2 , as there are now for sulfur, oxides of nitrogen, and other polluting byproducts of combustion. Penalties, such as a high enough tax on carbon, create incentives to avoid CO2 emissions.&nbsp; Policy could also be based on a guaranteed higher rate for electricity generated by carbon beneficial methods. When one of those policy schemes is implemented, coal-fueled power stations in the U.S. and Canada will begin to use pellets. Any regulation that makes power stations internalize the external consequences of their production will make power more costly. That is the price of preventing pollution. In this case, the pollution is causing massive changes in the environment that will cost way more if unmitigated, than marginally higher electricity prices. The advanced or black pellet industry always seems to be just a few years away in North America. A few projects pop up here and there, but there is never much buzz about them. Any perspective on that? WS: In general, any alternative to plain vanilla white pellets must be competitive on a cost per unit of energy basis&mdash;for example, dollars per gigajoule (GJ).&nbsp; From our point of view, it is past time for the evolution of pellets from version 1.0. Pellet fuel has been the same for decades. FutureMetrics has looked at several so-called black pellet technologies. In our opinion, the Norwegian company Arbaflame has evolved to a competitive version 2.0 pellet. The key to their competitiveness is the highly optimized use and conservation of mass and energy. The mass losses in the thermal treatment process are captured and converted into a biochemical stream. In effect, the plant is a combination pellet and biochemical factory. The revenue stream from the biochemicals allows for a price for the waterproof pellets that is competitive with white pellets on a dollar per GJ basis. We think this technology will become mainstream. &nbsp; Author: Anna Simet Editor, Pellet Mill Magazine asimet@bbiinternational.com 701-738-4961

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In a Q&A with Pellet Mill Magazine, FutureMetric's Seth Walker and William Strauss shine light on domestic and worldwide wood pellet markets. 

Surveying the Global Wood Pellet Landscape

Kusano joins FutureMetrics FutureMetrics Inc. has hired Yoshinobu Kusano as policy advisor regarding the Asian wood pellet markets. Kusano has extensive experience in the wood pellet sector and will provide FutureMetrics with updates and analysis on current and evolving policy in the high-growth regions of northeast and southeast Asia.&nbsp; Kusano&rsquo;s experience, contacts and knowledge about policy will enhance FutureMetrics' understanding of the current and future Japanese and South Korean markets for industrial wood pellets. He is currently the executive advisor and the head of the fuel procurement group for Biomass Energy at Renova, a Japanese developer and operator of renewable power projects.&nbsp; Prior to Renova, he spent several decades with Sumitomo Corp., leading their wood chip and wood pellet group. Wheeler nominated to head EPA On Jan. 9, U.S. President Trump formally nominated Andrew Wheeler to serve as administrator of the U.S. EPA. Wheeler has held the post of acting administrator since July 9, following Scott Pruitt&rsquo;s resignation earlier that month. Wheeler&rsquo;s nomination must be approved by the U.S. Senate. Trump nominated Wheeler to fill the role of deputy administrator of the EPA in January 2018. The Senate approved that appointment in April, by a vote of 53 to 45. Information released by the White House indicates Wheeler previously served as a principal and head of the energy and environment team at Faegre Baker Daniels Consulting. Prior to joining Faegre Baker Daniels Consulting, he worked at the U.S. Senate Environment and Public Works Committee for 14 years, serving in various roles, including as the majority and minority staff director and chief counsel. He began his career at the EPA as a special assistant in the toxics office where he received three bronze medals. PFI submits NSPS comments On Jan. 14, the Pellet Fuels Institute continued its ongoing effort to eliminate the inclusion of minimum pellet fuel requirements in the New Source Performance Standard by submitting written comments to the U.S. EPA prior to the comment deadline. Tim Portz, executive director of PFI, said the organization&rsquo;s comments are a refrain of the position that the organization has held and argued for since at least 2015. &ldquo;Including minimum pellet fuel requirements in federal regulation will not advance the aims of the Clean Air Act and will unfairly burden pellet manufacturers with compliance requirements not born by any other fuel type in the wood heat category,&rdquo; he said. &ldquo;The challenge for the PFI is helping stakeholders in the regulatory community understand that our opposition is not to standards or minimum requirements, but to codifying those standards and requirements within a piece of federal regulation.&rdquo; EIA: 780,000 tons of densified biomass fuel sold in September The U.S. EIA released data showing that U.S. manufacturers produced approximately 720,000 tons of densified biomass fuel in September, with sales reaching 780,000 tons. The data was released as part of the December edition of EPA&rsquo;s Monthly Densified Biomass Fuel Report, which includes data for September. The EIA collected data from 82 operating manufacturers of densified biomass fuel to complete the report. The report does not include data from facilities with annual production capacities of less than 10,000 tons. These smaller facilities report data annually, rather than monthly. The 82 manufacturers who submitted data for September have a combined annual production capacity of 11.76 million tons and collectively had an equivalent of 2,088 full-time employees, according to the EIA. P&ouml;yry selected as EPCM contractor for torrefied pellet plant P&ouml;yry announced Baltania O&Uuml; has awarded the company an engineering, procurement and construction management services contract for a torrefied pellet plant under development in V&auml;gari, Estonia. Construction of the project is currently scheduled to be complete during the first quarter of 2020. Once operational, the plant will have the capacity to produce 157,000 metric tons per year of torrefied pellets made from forestry wastes and byproducts of the wood processing industry. The torrefaction process employed by the facility will be based on Clean Electricity Generation B.V.&rsquo;s technology, which converts biomass into torrefied pellets and biochar utilizing its proprietary torrefaction reactor. Air permit issued for Enviva Pellets Hamlet The North Carolina Department of Environmental Quality&rsquo;s Division of Air Quality has issued an air permit for the Enviva Pellets Hamlet LLC facility in Richmond County. In response to community concerns, DAQ staff closely analyzed estimated emissions of the Enviva facility along with other emissions sources in nearby communities, including Dobbins Heights and Hamlet. Analysis of the expanded area shows that the operation of the Enviva facility, within the limits of the final permit, would comply with the National Ambient Air Quality Standards. Pinnacle announces name change&nbsp; Canada-based pellet producer Pinnacle Renewable Holdings Inc. recently announced it has changed its name to Pinnacle Renewable Energy Inc. The company&rsquo;s stock trading symbol on the Toronto Stock Exchange will remain as PL. Stock was expected to begin trading under the new name on Jan. 4. Pinnacle currently operates eight wood pellet production facilities in western Canada and one in Alabama. The company also owns a port terminal in Prince Rupert, British Columbia. Efficiency Vermont announces rebates for efficient wood and pellet stoves Efficiency Vermont is partnering with participating stove dealers around the state to apply a $650 discount at the point of purchase for select stove models. To qualify for the rebate the stoves must be professionally installed. According to the Vermont 2016 Wood Heat Baseline Study, 38 percent of homes in the state are heated in part by wood. The wood heat industry supports more than 1,000 full-time jobs and displaces approximately 68 million gallons of fuel oil each year. The Efficiency Vermont discount is available through participating retailers who sell cordwood and pellet stoves that meet efficiency and emission standards. Larger rebates of up to $1,000 are available for Vermonters who are replacing older model stoves and taking them out of service. Astec CEO Brock resigns, Dorris serves as interim Astec Industries Inc. announced that Benjamin Brock has resigned as president, CEO and member of the board of directors, effective Jan. 21. The board has appointed Richard Dorris to serve as interim CEO until a permanent successor is named. Dorris has served as executive vice president and chief operating officer since 2014. In addition, the board appointed William Gehl as chairman of the board, effective immediately. Brock said, &ldquo;It has been a privilege to work alongside Astec&rsquo;s dedicated employees over the past 26 years and to lead the company as CEO for the past five years ... After 26 years of service, I am confident that now is the time to pursue new personal and professional interests. I look forward to watching Astec&rsquo;s continued growth and success in the future.&rdquo; The Astec board has initiated a search process to identify a permanent CEO, and will be working with a leading executive search firm to assist in its efforts. Enviva to expand Southampton plant capacity Virginia Gov. Ralph Northam announced that Enviva Partners will invest at least $75.7 million to expand its operation in Southampton, Virginia. In addition to increasing wood pellet production by a third to approximately 750,000 metric tons per year, the expansion will allow for the processing of sustainably sourced pine at the existing facility, significantly augmenting the company&rsquo;s usage of fiber from Virginia forests. Virginia successfully competed with multiple Mid-Atlantic and Gulf Coast states for the project. The Virginia Economic Development Partnership worked with Franklin Southampton Economic Development Inc. to secure the project. Northam approved a $400,000 performance-based grant from the Virginia Investment Performance Program, an incentive that encourages capital investment by existing Virginia companies. Enviva is also eligible to receive sales and use tax exemptions on equipment associated with the expansion.

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Business Briefs

In January, I was delighted to help nearly 60 wood heat leaders from my region come together at the University of Vermont to reflect on and strategize about our work. While the Northeast is full of wood heat activity, people working in this sector hadn&rsquo;t convened for nearly two years, and a number of us felt the time was right to meet again. But instead of a conventional conference or expo, we opted for a small, one-evening, one-day event designed to foster conversation and problem-solving, and perhaps revive collaboration in our region. The event featured the release of initial findings of a major UVM study on factors affecting decisions to purchase automated wood pellet heating systems. PhD candidate Laura Edling interviewed 60 stakeholders and the research team processed almost 700 surveys from people who installed pellet boilers, or considered installing but did not. Analysis is ongoing, so there&rsquo;s much more to learn, but one striking finding is that the top reason people considered purchasing an automated wood heating system, by far, was &ldquo;I wanted an alternative to fossil fuels.&rdquo; That, along with many other insights from the research, will help us refine the messages we use when promoting wood heat. Messaging was a consistent theme throughout the summit. Our introductory panelists commented on the disinformation, lack of knowledge, and fear of change that have hampered the wood heat market. Later discussions suggested that solutions include becoming much more vocal about positive wood heat stories, learning to deliver clear soundbites, and making the &ldquo;warm and fuzzy&rdquo; case for wood heat instead of technical. This approach is consistent with the &ldquo;Feel Good Heat&rdquo; campaign that the center has coordinated and will be expanding in 2019&mdash;look for an update in a future issue. We also enjoyed a talk by Neil Harrison, founder of re:heat and director of the U.K.&rsquo;s Wood Heat Association. He shared insights from the U.K.&rsquo;s experience with large wood heat incentives, and told us he&rsquo;s envious of all our trees and cold weather. He reminded us of the importance of installation standards and thoughtful incentive schemes to ensure robust, sustainable market development. The summit&rsquo;s success was due in large part to a strong planning team: Bill Bell, Maine Pellet Fuels Association; Ansley Bloomer, Renewable Energy Vermont; Cecilia Danks, University of Vermont; Emma Hanson, State of Vermont Agency of Natural Resources; Scott Nichols, Tarm Biomass; Charlie Niebling, Innovative Natural Resource Solutions; Adam Sherman, Biomass Energy Resource Center; and Joe Short, Northern Forest Center. The enthusiasm throughout the summit for improving our public communications and working closely together as wood heat leaders set an exciting tone for the year ahead. Participants discussed the possibility of reviving or reconfiguring a regional working group to continue timely and relevant conversations throughout the year. We look forward to being part of this work, and perhaps helping organize a similar event in 2020. Author: Maura Adams Program Director, Northern Forest Center madams@northernforest.org www.northernforest.org

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In January, nearly 60 wood heat leaders from the Northeast came together at the University of Vermont to reflect on and strategize about their work. 

Coming Together in the Name of Wood Heat 

In the 1993 comedy &ldquo;Groundhog Day,&rdquo; Bill Murray&rsquo;s character becomes stuck in a repeating time loop, punctuated morning after morning by a radio alarm clock playing &ldquo;I Got You Babe&rdquo; by Sonny and Cher. The film uses this plot foundation to showcase Murray&rsquo;s dry, perfectly timed humor, and it has become a fan favorite. Additionally, the film introduced into popular culture the use of the expression Groundhog Day, which refers to something locked in recurrence, usually with negative connotation. Certainly, our industry&rsquo;s Groundhog Day is the perpetually stalled minimum pellet fuel requirements promulgated in the U.S. EPA&rsquo;s New Source Performance Standard. Last week, the Pellet Fuels Institute submitted extensive comments outlining our opposition to the inclusion of minimum pellet fuel requirements in the rule, and the legal rationale behind it. To be fair, our comments were simply a refrain of the very same argument the PFI made nearly five years ago, in May 2014. First, the EPA does not have the legal authority to include minimum pellet fuel requirements within the NSPS. And second, the inclusion of such standards would do nothing to help achieve the air quality goals that inspired the regulation in the first place. Minimum pellet fuel requirements are not the only aspect of the NSPS currently under review, and the closing weeks of 2018 were among the busiest of the year for the hearth industry, as everyone in the sector was working to finalize their positions, prepare and edit their comments, and submit them on time. While the issue of minimum pellet fuel requirements is directly and uniquely felt by pellet manufacturers throughout the country, the sell-through provisions extended and not extended in the EPA&rsquo;s amendments will likely generate the most robust and passionate debate. For now, a two-year sell-through provision has been granted to hydronic heaters and forced-air furnaces, while a similar sell-through option for cordwood and pellet stoves has not. The result is that specialty hearth retailers of all kinds face significant uncertainty regarding what inventory will be legal to display and sell just one heating season from now. During a handful of conversations with pellet appliance retailers in the past few months, I&rsquo;ve heard about delayed or reduced inventory replenishment orders. When multiplied across the entire hearth supply chain, the complaints of economic disruption are far from hyperbole. The biggest casualty for the PFI throughout all of this regulatory wrangling is that without a thorough review of our position and the reasons for it, a casual observer might assume that the PFI is generally opposed to minimum pellet performance standards. Nothing could be further from the truth. In fact, within the past year, I&rsquo;ve heard industry peers wonder aloud why the PFI Standards Program set such a high bar regarding monthly testing and audit schedules. The reality is that the PFI worked hard to build a standards program that walked the fine line of satisfying regulators with their robustness without driving producers away with high-cost implementation and ongoing participation. Where pellet fuel requirements and appliance sell-through provisions end up after this process draws to a close is anyone&rsquo;s guess, as is when this process will end. It is worth noting that the comment deadline came and went within an agency running on a skeleton crew during a federal government shutdown. The inclusion of minimum pellet fuel requirements in a piece of federal regulation is misguided. The existence of measurable qualities in a fuel product is not an apt justification for inclusion in federal law. What shouldn&rsquo;t get lost in our opposition to where these regulations should and should not reside is our commitment to the production of a high-quality heating product. The manufacture and use of wood pellets as a solid heating fuel can contribute to improved local air quality. As evidence, look no further than the numerous wood stove swap-out programs that incentivize consumers to replace older cordwood appliances with cleaner-burning pellet appliances. We&rsquo;re proud to represent the producers of this country&rsquo;s cleanest-burning solid wood fuel product, and are hopeful the comments of PFI and our industry peers bring this matter to a timely and favorable conclusion. Author: Tim Portz Executive Director, Pellet Fuels Institute tim@pelletheat.org 651-398-9154

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The inclusion of minimum pellet fuel requirements in a piece of federal regulation is misguided.

January-February Pellet Mill

Business Briefs

Business Briefs

Columns

The Big Picture

Coming Together in the Name of Wood Heat

Our Version of Groundhog Day

Featured

The Cost and Value of Quality

Surveying the Global Wood Pellet Landscape

Contributions

Knowledge Management at Pellet Plants

January-February Pellet Mill.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

The Big Picture

Coming Together in the Name of Wood Heat

Our Version of Groundhog Day

Featured

The Cost and Value of Quality

Surveying the Global Wood Pellet Landscape

Contributions

Knowledge Management at Pellet Plants

January-February Pellet Mill