Monday, 03 May 2010 16:37

European demand to drive production of wood pellets

Rate this item
(0 votes)

European Union demand for wooden pellets will continue to drive U.S. production but will also limit the industry’s profitability, according to the head of a bioenergy, wood and forest products consulting firm.

“The pellet business is marginal,” said Pete Stewart, president and chief executive officer of Forest2Market, based in Charlotte, N.C. “The Europeans know how much it costs to produce pellets, and they’re not going to pay more.”

Stewart was the keynote speaker at the first day of the LSU AgCenter’s Louisiana Forest Products Development Center conference on wood-based biofuels, biomass and bioenergy. Around 80 people attended Thursday’s sessions.

Europe is about 15 years ahead of the United States in terms of legislation to limit carbon emissions, Stewart said. In the United Kingdom, 20 percent of the country’s energy must be produced by renewable resources by 2020; only six percent is green energy now.

To meet those goals, the United Kingdom will have to import about 12 million tons of pellets a year, Stewart said. If one-third of that production comes from the United States, then eight to 12 new pellet plants will be needed.

And that doesn’t include the demand that will be generated by northern Europe and France, he said.

Pellets are made from the less costly wood used by pulp and paper mills. The wood is ground into sawdust and pressed into small pellets, which are burned in power-generation plants. The pellets are considered carbon neutral because trees produce the same amount of greenhouse gases whether they’re burned or decay naturally.

Stewart said Europeans are generating “true green demand,” meaning they think green energy is a good idea and are willing to pay extra for it.

In the United States, people think green energy is a good idea but they aren’t willing to pay for it, Stewart said.

However, there are a number of factors that will limit the export of pellets, Stewart said. For one thing, there are only four or five ports in the South that can handle the enormous cargo ships needed for pellet shipments, and a handful of other ports that can be modified, at great expense, to do so.

Stewart said there are other limiting factors for pellet plants, in Louisiana and elsewhere, including a limit on the supply of wood, Stewart said. A pellet mill comes in that needs 500,000 tons to 1 million tons of wood a year generates a price shock, driving up prices for everyone.

Both those factors appear to favor Point Bio Energy LLC’s just-announced plant at the Port of Greater Baton Rouge. Point Bio officials say the deepwater port and the supply of wood were the major reasons to build the plant here.

However, Stewart said competition for the feedstock to make the pellets from existing industries, such as pulp and paper mills, will also limit the growth of pellet plants.

The economic impact of a pulp or paper mill is just much greater than a pellet plant, Stewart said. Politicians don’t want to be seen as supporting a pellet plant that employs 100 people over a paper mill that employs 1,000.

Read 4913 times