USIPA conference opens with blend of optimism and caution

By Tim Portz | October 02, 2014

The fourth annual Exporting Pellets Conference, hosted and produced by the U.S. Industrial Pellet Association, opened on the afternoon of Oct. 1 in Miami, with a blend of reported progress and urged caution. 

USIPA Executive Director Seth Ginther began by reporting that the 62 member companies that comprise USIPA are producing pellets for a market with “more certainty now than there was twelve months ago.” Ginther went on to draw attention to a handful of the world’s most nascent pellet markets including the Netherlands and South Korea. “You might see some folks in this room that look a little tired, as many of them spent some time in South Korea last week,” said Ginther.

Ginther then welcomed Nigel Adams, a member of the British Parliament from Selby, which boasts nearly 10 percent of the United Kingdom’s power production capacity. Adams offered that public support for the use of biomass continues to be strong in the U.K. with 63 percent of British citizens reporting they are in favor of the use of biomass for power production. “Biomass is recognized as the lowest cost, flexible dispatchable form of renewable energy,” he said. Adams continued saying, “Biomass is doing quite well among regulators and politicians.” 

Adams then transitioned into a more cautious tone and urged the audience to recognize that the U.K.’s appetite for pellets is not limitless and that the government’s financial support for renewables has limits. “The coal-to-biomass conversions that you already know about are likely to be it,” he reported.  One of the reasons that no new coal conversion capacity should be expected is that the financial support that is critical to making conversions pencil out is being directed to other renewable technologies. Noting this reality, Adams said, “It is a tragedy that so much of the U.K.’s support for renewables has been spent on technologies that are for more expensive and far less reliable than biomass.”

The event’s opening stanza concluded with a now traditional panel of USIPA’s principal buyers, European power companies including representatives from RWE, GDF Suez, Drax, Dong and Vatenfall. Moderated by Thomas Meth, executive vice president of sales and marketing at Enviva, the panel echoed Adams’ blended tone of cautious optimism.

Drax’s Matthew Rivers expressed increasing concern over a level of activity in the sector that he suggested outstripped the actual opportunity. Rivers pointed to a recently published market forecast by RISI that reported the global pellet market could grow to 50 million tons by 2024, saying it offered, “future expectations without foundation.” Rivers suggested that this bullish market optimism was drawing increased scrutiny to the sector. “The sector depends upon the license to operate,” he said. Rivers continued by pointing to the pressure that nongovernmental organizations (NGOs) are putting on policymakers as the wood pellet industry continues to gain momentum. 

Unwanted fervor and scrutiny or not, biomass continues to be a strategy power producers will deploy as they work to drive carbon out of their production portfolios. “What biomass allows us to do is to give aging coal facilities another life,” said Jens Price Wolf, director of thermal power asset management and development at DONG Energy. 

The panel concluded with a robust discussion about some of the key messages the broader biomass-to-energy industry needed to bolster in the coming year. Two themes emerged. First, panelists urged the industry to continue in its efforts to demonstrate that its fiber sources are sustainable. Second, nearly every panelist suggested that there was a tremendous opportunity to educate policymakers about the advantages that biomass has over other forms of renewable energy. In a policy environment where financial support is not unlimited, the panelists stressed that the dispatchable, low-cost, base load qualities of biomass needed to be communicated again and again.

Despite the cautionary tone taken by Rivers and others, the panel was unanimous in confirming that the industry had enviable near-term growth opportunities. The panel pointed to a heating market in Europe that already creates a larger market for pellets than power production and is growing at a million-ton-per-year clip. And while panelists may take issue with some of the more aggressive market forecasts, they all agree that the market for wood pellets will continue to steadily rise over the next few years. Finishing off the panel on a high note, Vattenfall’s Jason Woods stated, “we should all be excited to be in a market that is set to double.”

The 4th annual Exporting Pellets Conference is taking place at the Fontainebleau in Miami and concludes on Oct. 3.