Preventing Pellet Plant Failures

The apparent simplicity of making wood pellets has and continues to cause many project developers to fail to incorporate the knowledge, skills and wisdom gained from experience into the plant designs and operations protocols.
By John Swaan | February 23, 2016

The apparent simplicity of making wood pellets has and continues to cause many project developers to fail to incorporate the knowledge, skills and wisdom gained from experience into the plant designs and operations protocols. It is much more cost-effective to get it right the first time, rather than to retrofit, or worse, fail. Errors in feedstock procurement strategies, plant design, equipment choices, process flow, operations methods, and transportation strategies lead to outcomes that fail to meet the benchmarks set in the spreadsheets that justified the project’s development.

Every step of a wood pellet manufacturing project, from feasibility analysis, fiber procurement, design and engineering, commissioning, full operations, to mill-to-user logistics, should benefit from the lessons learned by many years of seeing all the wrong ways of trying to make and market wood pellets. Wood pellet projects, whether for the heating markets or for producing industrial pellets, are far more complex than process schematics and rosy spreadsheets suggest.

For example, if the procurement strategy is poorly crafted, the average delivered wood costs may exceed expectations and fiber quality may not match expectations. A few fiber-related guidelines will prevent problems with production volumes and project cash flows. Secure consistent volume for 24/7 operations, regardless of supplier interruptions, seasonal harvesting interruption, and weather or road conditions. Site the plant within a 50-mile radius of the majority of the fiber supply. Have knowledge of sustainability requirements and compliance costs, as the wood basket must be able to supply certified fiber at volumes and pricing as expected. Avoid fiber baskets that have competing pulp mills, board plants or other wood pellet plants that may demand the same wood. Strategize to have as consistent a species mix and quality as possible.

The feedstock should be clean and free of dirt, stones or foreign debris, as low-quality feedstock deteriorates pellet quality and durability, and lower-quality feedstock and variable species mix also stresses the equipment and increases operating costs.

We often say that the manufacturing process of wood pellets is 70 percent technical, and 30 percent art. Engineers may get the 70 percent right, but if the 30 percent art (experience, knowledge and skill, wisdom) is not acknowledged, the project could spend many years in its commissioning phase or be scuttled due to impatience on realizing the expected rate of return on the investment.

We know from experience that in most cases, having the project design and process equipment selection reviewed by an expert in pellet plant operations will result in a project that transitions from construction to full operation faster, and is much more likely to meet or exceed industry benchmarks. Relying on an engineering, procurement and construction company claiming to have the knowledge and experience to deliver an operating plant on time and on budget is a gamble. They may have several projects under their belt, but they typically do not have the benefit of operations experience. Project developers who tap into the wisdom of those who have seen it all, know all the wrong ways of doing things, and advise the engineering firm on design and equipment specifications are more likely to have far fewer headaches.

Final informed decisions on selecting process equipment for the correct size and capacity for the desired performance should be the responsibility of the project developer under the guidance of a seasoned pellet making expert. All project developers have learned or will learn that building the wood pellet plant is the easy part. Commissioning a wood pellet plant and bringing it to its expected capacity and pellet quality is like the “valley of death” that many startups experience. Cash flows the wrong way while in the valley of death. Some never emerge, while others see the internal rate of return degrade as the investments needed to get it right mount. Getting it right early in the development cycle can shorten the commissioning phase and get the cash flowing in the right direction faster.

A state-of-the-art plant built correctly only operates and performs as well as the people who operate it. A well-trained and disciplined operations team is essential. Training by seasoned operations experts, prior to startup and during commissioning, is critical. Even if all of the criteria for fiber supply and plant design are on the mark, the operation is much more likely to emerge from the valley of death sooner if the operators are not learning from their own mistakes, but benefiting from the wisdom of seasoned experts.

All of the above aside, assuming there is a market for the pellets at prices that support a project, making wood pellets can produce decent margins. But just one large or a few small surprises can erase those margins. The best way to avoid surprises and losing money is to involve a seasoned expert as early in the project cycle as possible and to ask challenging questions that are informed by operational experience.

Author: John Swaan
Senior Associate, FutureMetrics Inc.