Sustainable Biomass: What’s Ahead for New Markets

The U.S. industrial wood pellet industry is positioned for future growth.
By Seth Ginther | March 01, 2019

It’s a time of optimism in the wood biomass industry. Not only is there growing recognition that sustainable biomass is a viable climate solution, governments are increasingly incorporating it into policies that will help them achieve their low-carbon and renewable energy goals for the next decade and beyond.

Chief among these policies is the European Union’s revised Renewable Energy Directive for 2012-’30 (or RED II), which has been a major focus for us at the U.S. Industrial Pellet Association. The RED II effort to harmonize bioenergy sustainability across EU Member States was an important one, and something the industry strongly supports because of the positive influence it can have on the trade of wood pellets.

The final RED II supports bioenergy as a pathway to lowering carbon emissions, and allows Member States to use sustainable imported biomass to achieve the low-carbon and renewable energy goals recommended in the Paris Agreement. In short, RED II sets us up for another decade (or more) of supplying the European market.

As we continue to see strong markets in Europe, combined with expected growth from Asia and new sectors, and we are entering an exciting time industry, and there are some new opportunities on the horizon. 

Emissions Momentum in Germany 
Despite having one of the most advanced renewable energy systems in the world, thanks to its Energiewende (energy transition) policy, Germany has struggled to reduce its emissions since the government’s 2011 decision to exit nuclear energy. This put an increased emphasis on coal, the most emissions-intensive fossil fuel, which now provides more than 42 percent of Germany’s power, according to the International Energy Agency. The result is that Germany’s carbon emissions have been growing, while their neighbors’ has been declining.

That is set to change with the recent recommendation from the government-appointed coal commission to completely phase out coal-fired power generation by 2038. Without nuclear or coal to deliver baseload electricity, there is strong potential for biomass to account for lost capacity. 

Converting from coal to a reliable renewable energy source will be a tall order for the country, but one our industry has filled many times over in other Member States. By cofiring wood pellets—both domestic and imported—jobs and assets can be saved, energy prices can be kept stable and carbon emissions can be reduced. 

Opportunity in Ireland
Ireland presents another opportunity for biomass to preserve power assets, secure supply, and reduce the use of coal-fired power. Energy demand in Ireland is expected to spike as it becomes a hotbed for data centers—Amazon, Facebook, Google and others have plans for large data centers in the coming years, and Ireland expects data center investment to reach almost €9 billion by 2021.

National grid operator EirGrid has projected energy demand will rise by as much as 57 percent in less than a decade as more data centers come online, and could use a quarter of the country’s electricity. It warns that power plants or renewable energy projects will have to be in place no later than 2026, or there will not be sufficient generation in place to meet national demand. 

This trend is more alarming, given the country is woefully behind on renewable energy targets, needing to jump from 27 percent renewable to 40 percent renewable by 2020. For Ireland to solidify its position as the data center capital of Europe, a stable, low-carbon power source like biomass, which can be deployed quickly and economically, is critical.  

Netherlands Industrial Heat  
There are additional opportunities in heat markets where our industry’s well-developed supply chain can prove beneficial to large industrial heat users across Europe. This is particularly the case in the Netherlands where manufacturers including Heineken and Phillip Morris demand a large amout of heat for production, but need to decarbonize in accordance with the Dutch government’s renewable energy goals. The U.S. Southeast is ripe to supply this market, having spent the past decade investing in the infrastructure necessary to efficiently deliver sustainable biomass across the Atlantic.

Japan Leaves the Starting Gate    
Outside of the EU’s borders, we are seeing concrete development in the Japanese market. Several large North American pellet producers have signed long-term off-take agreements with Japanese power companies to supply wood pellets for cofiring.

This market, which we have been anticipating for years, has finally left the starting gate, and we are off to the races. Early in 2017, the Japanese Ministry of Economy, Trade and Industry developed an energy plan for Japan’s future, titled the “Best Energy Mix,” which will govern energy policy from now until 2030. This strategy includes a goal of 23 percent renewable energy for electricity production, with biomass (pellets, chips, and palm kernel shells) projected to account for 30 percent of the overall share. This policy, along with government support schemes, will increase total biomass demand from 7.6 million tons in 2017 to over 20 million tons in 2025.

Bioplastics and Biochemistry   
Beyond traditional subsidized markets, there is also potential for pellets to serve as feedstock for development of bioplastics and biochemical by using the lignin contained in wood.

According to European Bioplastics, the global market for bioplastics is predicted to grow by roughly 25 percent over the next five years. This trend is possible thanks to the increasing demand for sustainable products by both consumers and brands alike, stronger policy support for the bio-economy, and the continuous efforts of the bioplastics industry to develop innovative materials with improved properties and new functionalities. 

Because we are able to efficiently source lower-value wood fiber and turn it into a transportable pellet, our industry can easily turn a stranded asset into an affordable, sustainable feedstock for these markets.

Looking Ahead  
The pellet industry has invested over $2 billion in the U.S. Southeast region over the past decade to develop a sophisticated infrastructure and tap into underutilized supply chains. As a result, we can effectively deploy our product around the world.

This, together with abundant wood resources in the region, will allow the U.S. pellet industry to see sustainable growth to serve all of these markets and more. The next decade will be an exciting one for the industry, and we are looking forward to what’s next. 

Author: Seth Ginther
Executive Director
U.S. Industrial Pellet Association
[email protected]

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