FutureMetrics compares costs and benefits of advanced pellets

By Erin Voegele | August 27, 2014

FutureMetrics LLC recently published a white paper that compares the costs and benefits of torrefied pellets and steam exploded pellets with traditional white pellets. The paper concludes that under certain circumstances these advanced pelleted could allow a buyer to pay a lower price per gigajoule (GJ) while the seller can earn a higher profit per GJ.

The report, authored by William Strauss, president of FutureMetrics, uses white pellets as a benchmark and calculates the net benefit or penalty of producing and selling torrefied or steam exploded pellets versus traditional white pellets.  Rather than considering cost per ton, the analysis considers cost per unit of energy produced for the end user.

Within the report, Strauss notes there are several characteristics of black pellets not addressed by the analysis. For example, some black pellets are water proof. In addition, they can be pulverized with less energy than white pellets.

The paper explains that torrefaction and steam explosion result in pellets with higher energy density and higher bulk density. This is advantageous to logistics, as more metric tons per unit of volume and more energy per metric ton lowers the delivery cost on a per unit of energy basis.

An analysis described by Strauss within the paper determines that the value of a delivered 60,000 cubic meter shipload of torrefied or steam exploded pellets is higher than for white pellets. While the net value of a shipment of white pellets at a foreign port is estimated to be approximately $5.38 million, the analysis estimates the net value of a shipment of torrefied pellets at foreign port would be nearly $7.5 million. The net value for steam exploded pellets would be roughly the same at approximately $7.5 million.

The analysis, however, also notes that producing torrefied and steam exploded pellets requires higher costs. More feedstock enters the front end of the process and energy is used to convert the feedstock into torrefied or steam exploded pellets. Capital costs are also increased.

Overall, the analysis estimates that the net benefit of torrefied pellets compared to white pellets is 45.3 cents per GJ. The net benefit for steam exploded pellets is estimated to be 19.6 cents per GJ.

The white paper also includes sensitivity analyses and notes that there is currently very limited data on actual capital and operating costs for commercial-scale production facilities. The model used in the analysis is described as being based on a number of estimates and assumptions based on publically available sources.

A full copy of the white paper, titled “’Black Pellets’—A Financial Analysis of Costs and Benefits: Can they provide cheaper energy than white pellets?” can be downloaded from the FutureMetrics website.