It is amazing the difference a year can make in the pellet fuels industry. One year ago, it was common to hear stories from producers who supply the U.S. residential heating market describe their situation as having their production sold out weeks in advance. This was largely due to a very cold and early start to the U.S. heating season, which led to undersupply in some regions. As pellet shortages can be very damaging to the reputation of pellet fuel and pellet-burning appliances as a reliable way to heat your home, several producers took action to assure that shortages would not be seen in the coming year. With added supply ready, the industry was met this heating season with unusually warm weather and the lowest gas prices we have seen in years. This combination has resulted in severe oversupply causing several producers to scale back or even halt production in the middle of the heating season.&nbsp; There seems to be continuous change in the export markets as well. While supply to EU power producers remains strong and does continue to grow, export power markets regularly incur strife over changing political climates, sustainability requirements, changing commitments to carbon reduction, global market competition and changing commitment to subsidy schemes. Any one of these issues seems to be able to open or close a market opportunity making it a constant battle for U.S. and Canadian producers to stay ahead of the issues. Fortunately, these issues are hit head-on by the U.S. Industrial Pellet Association and the Wood Pellet Association of Canada.&nbsp; A separate issue is the European residential pellet market. Just two years ago, there was a robust opportunity to sell product into Europe (primarily Italy). However, two warm European winters resulted in oversupply, while the strengthening of the U.S. dollar and a value-added tax being applied to pellets entering Italy has resulted in this opportunity largely going away. But all is not doom and gloom. Pellet fuel markets are still growing on a global basis. It seems that conditions may not be ideal at the moment. For the most part, the producers I have spoken to have indicated that they are weathering the storm well and in some cases I find that producers are using the downturn as an opportunity to address maintenance issues or even to make upgrades to the plant. Related to this, we have seen a substantial upswing in the number of producers who have initiated the implementation of a pellet quality certification scheme, particularly the Pellet Fuels Institute Standards Program. Historically, it has been rare to have producers who serve the domestic heating market engage in these programs during the winter months due to essentially being in the go mode. All hands are needed to continue to produce as much product as possible through the winter months, and then when things calm down in the spring the focus can be diverted to maintenance, quality management system development and various housekeeping issues. That is definitely not the case this year, and timing couldn&rsquo;t be better. While the EPA&rsquo;s new source performance standards took effect on May 15, 2015, appliance manufacturers still had until Jan. 1, 2016 to sell their old stock of uncertified pellet stoves. Now with the turn of the new year, only EPA-certified pellet stoves may be sold within the U.S. and all pellet stoves sold must burn pellets that have been graded under an approved certification scheme. This has no doubt resulted in producers starting to receive inquiries from their customers as to when they will engage one of the approved schemes (PFI Standards Program, ENplus and CANplus). We have even heard word that a certification scheme may become a requirement for some big box retailers. That being said, if you are considering implementing a pellet quality certification scheme, be aware that it generally takes several months to put all of the pieces in place, so it is wise to start the process well before any deadlines for compliance. Another item that is ripe for attention is safety program development. The pellet fuels industry has long suffered from safety-related issues such as fires and explosions, toxic offgassing from storages, self-heating, as well as safe handling and storage in large- and small-scale operations. Two years ago, ISO Technical Committee 238 added working group 7 to develop standards for safety as it pertains to solid biofuels, primarily in the form of wood pellets. Over the past two years, the working group has collaborated to develop the first draft of several safety-related standards. Currently on the table for review and voting are safety standards for large-scale handling and storage, small-scale handling and storage, offgassing, and safety pertaining to fires and explosions. These documents are currently under review by the U.S. Technical Advisory Group to ISO TC 238, but they have also been forwarded to the technical committees of PFI, Biomass Thermal Energy Council and USIPA for review and comment. If you have interest in reviewing these documents, then we would advise you to become active with any of these technical committees.&nbsp; For the pellet fuels industry, the current year may not be what had been hoped for, but as long as producers are strong enough to weather the storm there are many ways in which a downturn can be used productively to strengthen operations and the industry as a whole.
Author: Chris Wiberg Manager, Biomass Energy Laboratory 218-428-3583 <a href="mailto:cwiberg@tpinspection.com">cwiberg@tpinspection.com</a>

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Wiberg says with added supply ready as a result of last year's heating season, the industry was met this heating season with unusually warm weather and the lowest gas prices we have seen in years. This combination has resulted in oversupply.

Making the Best of Hard Times

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