Maintaining Momentum

The U.S. Industrial Wood Pellet Association’s Seth Ginther discusses a decade of growth, and what’s on the horizon for the still-expanding industry.
By Anna Simet | December 01, 2018

For our new readers, tell us about the U.S. Industrial Wood Pellet Association, and its history and mission.
Founded in 2011 by several industry leaders, including Enviva, Fram Renewable Fuels, ecoFUELS, Georgia Biomass, and the Westervelt Company, USIPA promotes sustainability and safety practices in the woody biomass sector and advocated for the growth of the global bioenergy market.  We represent U.S. wood pellet manufacturers, as well as others in the supply chain, from shipping and transport, to equipment manufacturing, to traders and brokers, to producers. The association provides a unified voice for the industry, works with regulators on renewable energy policies, and educates policymakers on the sustainability of the industry and U.S. forestry practices.

Looking back on the year, what are some standout milestones or accomplishments the industry achieved?
Our biggest achievement this year was in the European Union. Two years ago, the EU started the process of developing the EU Renewable Energy Directive for 2021-‘30 (also known as REDII) to comply with the commitments made in the Paris Agreement and to set emissions and renewable energy targets. The REDII proposed a new set of bioenergy sustainability criteria that would apply across all member states. 

USIPA, our members, and our partner organizations across Europe and North America supported the idea of harmonized criteria, as it provides regulatory clarity and allows for easier trade of our product. Throughout the lengthy legislative process, we advocated for smart bioenergy policies that would support the strong history of forest stewardship and private landownership we see here in the U.S. Southeast. In the end, the final REDII bioenergy sustainability criteria strikes the right balance of ensuring sustainable practices while also recognizing the complexity of forest products markets in the U.S.

Additionally, the EU Parliament, EU Council, and European Commission recognize the important role that bioenergy plays in meeting emissions requirements and providing stable, secure power generation. We are pleased with the outcomes of this legislative process, which was finalized this summer, and look forward to continuing to supply Europe’s energy markets.

What does the U.S. export market looklike right now, in terms of capacity, production, etc.?
Our members are on track to export about 6 million metric tons of wood pellets this year. We are seeing new development from some of our existing members, and also seeing some new investments being made from some new faces. There is another 1 million to 1.5 million metric tons of capacity in the pipeline.

The export market experienced a multiyear boom, beginning in roughly 2008. How would you describe recent growth?
As the industry has matured, we are seeing steadier, incremental growth.  This is to be expected as the industry really started from zero in 2008 and ramped up quickly. With the REDII policy secured, there are additional opportunities in Europe, including the German power market and the industrial heat market in the Netherlands.  The Asian market also continues to hold promise, so we anticipate the incremental growth will continue.

The European market has been the major driver of the U.S. market, which, as I already mentioned, really started gaining momentum about a decade ago. Can you summarize the drivers of that demand?
The drivers of that demand have been the Kyoto Protocol, the Paris Agreement, and the EU’s own emissions targets.  To comply with the Kyoto Protocol and establish the EU as a leader in climate change mitigation, the EU developed its first Renewable Energy Directive, which established a 20/20/20 emissions by 20 percent, and use 20 percent renewable energy by 2020.  This was the original driver of the European market, as EU countries needed to quickly source reliable renewable energy. They understood that sustainable biomass could provide baseload, on-demand power that could balance the grid alongside other renewables, which could be intermittent and unstable. 

The REDII (discussed above) established similar rules to comply with the Paris Agreement, this time committing to reduce emissions by 30 percent and increase renewable energy usage to 32 percent. This will continue to drive demand and potentially open up new markets for us in Europe.

Some predictions indicate the European market is set to plateau. Do you agree with that, or there any new potential markets or trends there?
There are still opportunities for growth in Europe.  As mentioned above, the REDII sets up the industry with regulatory certainty and government support, two key factors required for the growth of any industry. 

In Germany, for example, a commission has been established to submit plans by the end of the year for abolishing coal-fired power. Of Germany’s energy,  40 percent provided by coal, one of the largest shares in Europe, and over 50,000 people are employed in Germany’s coal industry, so moving to renewable energy resources will not be easy.  However, our industry has a proven track record of success in helping member states reduce coal usage, so we see great opportunity for biomass, both domestic and imported, to play a role in Germany’s decarbonization. 

There is also the industrial heat sector in the Netherlands, where large manufacturers who are major heat users will need to find renewable sources to comply with Dutch regulatory requirements. We have a surplus of available lower-grade feedstock in the U.S. South, and we have already developed the supply chains to export our product to northwestern Europe, so we have a prime opportunity to supply this market as well.

Moving on to Asian markets, which is the theme of this issue of Pellet Mill Magazine, does the U.S. industry have a chance at gaining more market share there, or will it focus on growth elsewhere? I have been told Canadian producers have a route advantage that U.S. producers just don’t.  
We see a lot of potential in the Asian markets.  The U.S. South has an abundance of lower-grade, affordable feedstock.  In fact, all market projections indicate we will experience a surplus of this feedstock for the foreseeable future. This makes the region a very competitive supplier for both Japan and South Korea.  Combined, these markets are projected to be larger than current European markets, so there is opportunity for all of North America to successfully supply Asian demand.

Is there a possibility of exporting wood pellets from the West Coast, especially with the massive amounts of dead and dying trees there? Is there a chance it might be economically done in the future?
Currently, the most economical location is the southeastern region of the U.S. because the industry has spent the past decade building out supply chains, and because of the very strong and active forest products industry that already exists in the region. The West Coast is certainly a future possibility, but there are still many uncertainties, such as the price of feedstocks, the investment needed to build out infrastructure, and the availability of fiber, as the western U.S. has vast amounts of federally owned lands, which have strict limits on harvesting rates.

In the U.S., have there been any favorable policy developments in terms of incentivizing energy derived from pellets and other biomass?
Over the past few months, the U.S. EPA has released the Affordable Clean Energy rule, which provides states instruction and guidelines for developing state plans to reduce carbon emissions and increase renewable energy usage. While the U.S. has no national emissions target at this time, many states and localities are committing to the promises in the Paris Agreement and creating their own environmental goals. Additionally, EPA, DOE, and USDA sent a letter just this month to Congress touting the benefits of woody biomass energy and outlining their plans to develop policies around the use of biomass as a renewable energy source. This could open up a favorable situation for a domestic U.S. market for pellets.

Safety is critical in this industry. How important is this topic to the industry and your members, and why? What is the motto or bottom line when it comes to safety?
Safety is priority number one for our industry and our members.  Providing a safe work environment for industry employees is nonnegotiable. USIPA’s Safety Work Group, which is comprised of safety and operations professionals from each pellet producer, has developed a set of industry best practices and holds routine calls and meetings to provide updates and discuss safety incidents. 

What are some major areas of focus of your association in 2019?
In 2019, we will be focusing on communicating our industry’s positive message (we have a great story to share!), and continuing to strengthen current markets and explore new ones.

Author: Anna Simet
Editor, Biomass Magazine
[email protected]