FutureMetrics analyzes wood pellet project risks

By Anna Simet | August 22, 2012

In order to illustrate advanced modeling techniques for identifying and quantifying risks associated with wood pellet manufacturing projects, FutureMetrics Inc. has released an overview of a risk analysis.

Authored by FutureMetrics President William Strauss, the analysis illustrates the use of Monte Carlo simulation—a computerized mathematical technique that allows people to account for risk in quantitative analysis and decision making—to quantify key decision metrics for the development of a wood pellet plant.

The example in the analysis is limited in scope to feedstock, product pricing and operational risks. It is based on a 50,000-ton-per-year pellet manufacturing facility collocated with a combined-heat-and-power plant supplying hot water for belt drying and power, and includes considerations associated with pellet export projects—policy risk, currency risk, shipping cost risk and market disruption risk—and for torrefied pellet production, including mass and energy risk, balance sensitivities and cost of goods risk, reliability and maintenance cost risk, and market demand risk.

Strauss will present the analysis at the 2012 Palisade Risk Conference in Las Vegas, Nov. 7-8. Access a free copy here.