2015 PFI conference underway in Williamsburg, Virginia

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The Pellet Fuel Institute annual conference is being held July 19-21 in Williamsburg, Virginia, hosting 185 attendees, 31 exhibitors and 11 sponsors.

This year’s conference began with an overview and analysis of the global pellet market, emphasis placed on activity in U.S., Canada, Europe and Asia. John Arsenault of the Wood Pellet Association of Canada began the discussion, speaking predominantly of Canadian pellet exports, production and consumption.

One of the points he made in his presentation was the success experienced in the Northwest Territories of Canada. Arsenault shared that 30,000 tons of pellets are consumed in NWT, close to 1 ton of pellets consumed per person.

Arsenault said that in Canada one of the key issues is in relation to fiber and sustainability. “We’re working with the Sustainable Biomass Partnership in the U.K. to back biomass in Europe,” Arsenault said. “We’re working with government and public opinion to show them that biomass is a way to reduce greenhouse gas emission—working with major producers and industry partners.”

He said, overall, global pellet demand is on the rise. He shared that 60 percent of all heating pellets are now ENplus certified. “In order to sell into Europe it helps significantly to be standardized,” Arsenault said.

Arsenault concluded that the general market outlook is positive, Europe is still the major export market, the U.S. is looking more attractive now for Canadian producers—mostly currency related—and the North American market will continue to grow.

Johan Granath with Ekman shared a more detailed look at international markets. EU imports of wood pellets from non-EU countries during 2014 totaled approximately 5 million tons. U.S. was the biggest supplier at 59 percent, Canada came in second with 19 percent and Russia was third at 12 percent.

According to IEA statistics, of the world’s wood pellet production share in 2014, the EU composed 48 percent; North America, 32 percent; Russia, 7 percent; and China, 6 percent. The rest of the world made up 4 percent, and Asia represented 3 percent, and is quickly growing, according to Granath.

As far as end uses, two-thirds of global pellet consumption in 2013 was for heating—residential, commercial, district heating, combined-heat-and-power (CHP)—and one-third attributed to power. Also, according to 2013 statistics, the main European pellet producing countries are Germany as number one and Sweden in second. The main importing countries include the U.K., Denmark, Italy and Belgium.

The U.K. is also the largest consumer, followed by Italy and the U.S. in third, based on 2013 statistics.

Asia was also discussed. Granath shared that Japanese wood imports are still modest. However, he said, “Imported wood pellets will play a bigger role in the future, particularly if cofiring takes off.” Total demand was 185,000 tons in 2014 and by 2015 it is likely to be 250,000 tons, he said.

Korea imported about 1.9 million tons of wood pellets in 2014, and total 2014 wood pellet demand in Korea was 2 million tons, an increase since 2013 when demand was 500,000 tons, according to Granath. “The rapid rise of pellet demand in Korea and the relative immaturity of the market, has led to inevitable lessons being learned,” Granath said. “The open tender system used by the Korean genco’s to procure imported pellets has arguably placed too much emphasis on price, at the expense of quality.”

He added that there has been a drop in sales to Korea from the U.S. because of the price point. Also stated was that the European wood pellet market remains the largest in the world, and likely will remain, but could be overtaken by North America.

Seth Walker with RISI elaborated on the Korean market explosion and slowdown, as well as touched on policy changes and uncertainty in Europe, low oil prices, exchange rates and weather impacts on the pellet industry. An inventory bubble was created in Korea, and now that prices plummeted, producers are sitting on lots of inventory. “The only pellets imported are coming from Southeast Asia,” Walker said. “They are cheap pellets mostly coming from hardwood furniture manufacturers in Vietnam.”

Three factors Walker highlighted that are impacting the European heating markets are warm winters, low global oil prices and exchange rates.

In his presentation, Walker mentioned the Dutch sustainability SDE-plus subsidy scheme, which issued official guidelines for sustainability in order for biomass to qualify under the scheme. Walker said for biomass to qualify for short rotation forest—less than 40 years—plantations must have been established prior to 2008. Long rotation wood—greater than 40 years—for pellet production must account for less than 50 percent by volume (excluding thinnings). In addition, timberland certification is required for forest management units over 1,000 hectares and decreases to 500 hectares by 2022.

An interesting tidbit Walker included in his presentation at the conference was the announcement that the Zilkha RE Selma Plant will provide its advanced waterproof pellets it produces to provide one-sixth of the heating in the city of Paris this winter.  

On the domestic front, Walker said it was a good year for domestic producers with strong prices due to the colder weather experienced in the Northeast.

One of his final comments he made was on the decreased oil prices. “Low oil prices didn’t have much of an impact on current year pricing, which is evident that consumers who already have pellet stoves will use them regardless of competitive fuel prices,” Walker said. “If you have one you’re going to use it.”

The morning conference conversation also included updates on the PFI standards program and the impact of EPA’s new source performance standards (NSPS) for residential wood heaters by PFI Executive Director Jennifer Hedrick and Chairman Darryl Rose. “It’s becoming quite critical,” said Rose in regards to the NSPS fuel standards.

Hedrick believes that “While overall, we agree with the intent of the NSPS Rule and share EPA’s goals of reducing emissions, we disagree with several components of the rule as they relate to pellet fuel requirements.”

According to Hedrick, despite attestations from EPA that the agency is not creating standards for pellet fuel, PFI believes that is exactly what they are doing by outlining minimum requirements for pellet fuel. “We do not believe that the EPA has authority under the Clean Air Act, which governs the NSPS rule, to set standards for pellet fuel,” she said.

PFI leadership determined that a more formal challenge of the rule was necessary. As a result, PFI filed a petition for review with the District of Columbia Circuit Court on Friday, May 15, the deadline to take such action as defined within the NSPS rulemaking process. 

The first general session of PFI’s conference rounded off with a discussion on how to enhance pellet operations. Key fire suppression techniques and strategies were discussed, as well as bearings performance and new key requirements instituted by OSHA. Chuck Coffin with Timken provided service engineering application success stories. Eric Conn with Conn, Maciel, Carey, highlighted three key reasons to pay attention to OSHA including the amended industry and fatality reporting rule, OSHA’s temporary worker initiative and GHS Hazard Communication.  “The agency has become more proactive in general,” Conn said. “You are more likely to be visited for a potential repeat violation, rather than wait for that incident to occur.”

One major issue OSHA is focused on is the temporary work initiative. In regards to OSHA compliance, Conn said, “Write into a contract who is responsible for what.”

Also on the panel was Harold Lawson with Kiddie Fire Systems who shared information about the company’s fire extinguishing systems. Ryan Morrow with Firefly provided a more preventative approach with fires and dust explosions within the biomass-handling process.

The recent fire that destroyed two, large wood pellet storage facilities at the Port on Brunswick on July 11 was brought up by Morrow, and emphasized why preventative measures must be a part of pellet operations. Morrow included the statement of, “It’s not a matter of if—it’s a matter of when,” in his presentation. Two important factors Morrow said are tied to the handling of biomass material is minimum ignition temperature (MIT) and minimum energy level (MEL). “In the risk analysis of the plant the MIT and the MEL of the handled material must be tested and verified prior to selecting an appropriate fire prevention system,” Morrow said. “It’s critical.”