Ecostrat releases white paper on woody biomass procurement

By Katie Fletcher | August 22, 2016

Ecostrat Inc. recently released a white paper for current and prospective owners and operators of small- to medium-scale woody biomass energy plants. This particular publication provides an overview of five common mistakes in wood procurement and how to fix them and is part of the company’s supply chain risk series for small- and medium-sized biomass systems.

The first mistake discussed in Ecostrat’s paper is bioenergy project developers who come to the understanding that their wood fiber feedstock is “typical” and don’t necessarily prepare for the potential problems wide variances in woody biomass feedstock can create with the fuel handling system they choose, if not properly tested.

Ecostrat referenced a RAND study in the white paper that reiterates how common feedstock issues are. According to the study, many new bioenergy projects are running at less than 50 percent of capacity and that in over 80 percent of the cases, this is due to feedstock issues. To avoid this problem, significant thought needs to be put into the feedstock handling system. In fact, biomass feedstock can be tested in a handling system mimicked after the one purchased (or the one intended for purchase) to help understand problems that may occur before they do. Idaho National Lab has a national biomass feedstock user facility where this can be done.

Three tips Ecostrat provided in its white paper to avoid making this mistake are: 1) to design the combustor/gasifier for the feedstock, not vice-versa; 2) to avoid taking the equipment manufacturer’s feedstock spec and assume that you can procure that spec from local suppliers; and 3) to get a good feedstock study. Ecostrat suggested having preferred suppliers provide samples that are independently tested by a lab of the buyer’s choosing and have the equipment manufacturer confirm that the system will work with that spec. As for a good feedstock study, it should look at expected variabilities in sizing, moisture content, CV, ash content and any other factors that could impact system performance.

Mistake number two is paying a higher premium than necessary for tighter specification. According to Ecostrat, it is always better to use the same specification for wood fiber as the large buyers in the woodshed. Smaller facilities tend to have tighter feedstock specifications, which often results in a higher feedstock cost. This is because it adds perceived risk. If contract terms differ from the broader market, suppliers will justifiably charge more, but Ecostrat stated in the paper, “Small- to medium-sized biomass projects tend to overpay for feedstock.”

Sometimes, suppliers will charge premiums as much as 50 percent or more over market prices due to various terms in the supply contract. Ecostrat suggested that buyers need to understand whether these premiums are justified by engaging an expert to carry out a proper wood fuel study. The study should bring to light who the main competitors are and what they pay for fiber, who the top suppliers are and how they rank in terms of reliability and quality, as well as what typical contract terms are in the region.

Paying flat fees for truckloads of wood fiber is the third mistake discussed in the white paper. Ecostrat said that in its analysis of hundreds of project over the past 20 years, it shows “in over 20 percent of these cases, customers are charged full rate for loads that are, on average, only 85 percent full.”

According to the white paper, if a bioenergy company does not have on-site scales, then in the supply contract “you should have the right to direct any load at your discretion to an independent weight scale.” Knowing what an average full-load weighs can help compare independent weights with the suppliers’ scale tickets, which should be done several times a year, Ecostrat stated.

The fourth mistake is bad request for quotes (RFQs) for wood fiber procurement. “Bad RFQs result in underperforming projects, feedstock quality issues, costly repairs and shutdowns, shortages/outages, and higher than necessary feedstock cost,” Ecostrat shared in the white paper. Some basic RFQ rules to follow in order to avoid costly mistakes include: 1) RFQ terms should mirror terms of competing established buyers for fuel in the local market; 2) suppliers should be engaged early in the process; 3) operations should be structured to be supplier friendly; and 4) a contract should avoid onerous rejections or penalty clauses.

The fifth and final mistake included in the publication is when there is a lack of a disruption plan for when things go awry. According to Ecostrat, when it comes to woody biomass, supply disruptions are the highest source of additional cost to bioenergy plants. Disruptions can occur for a variety of reasons such as weather, equipment breakdown, competitive demand for scare fiber by large local buyers, etc. Ecostrat said, “Understanding the likelihood of a supply disruption occurring and setting up a plan to deal with it can result in tens or hundreds of thousands of dollars of savings per year.”

The full white paper can be accessed here.