Professional Documents
Culture Documents
To the
Max
Larger Ocean Vessels
Tabbed for Pellet
Transport to Europe
Page 22
Plus:
Producer Survey
Breaks Down
Distribution Trends
Page 16
AND:
Producers, Retailers
Unite to Combat
Demand Variability
Page 28
www.biomassmagazine.com/pellets
Contents »
24 Agra Industries
20 Airoflex Equipment
36 Astec, Inc.
5 BRUKS Rockwood
12 EBM Manufacturing
PHOTO: VAUGHAN BASSETT, PINNACLE RENEWABLE ENERGY
19 Evergreen Engineering
DEPARTMENTS
04 EDITOR’S NOTE
Industry’s Balancing Act
By Tim Portz
06 INDUSTRY EVENTS
08 TESTING GROUNDS
ENplus Update: Navigating New Changes
By Chris Wiberg
07 INDUSTRIAL INSIGHT
Pellets Still the Affordable, Available, Renewable One
By Seth Ginther
08 STANDARDS STEWARD
Pellet Fuels Institute Updates Standards Program
ON THE COVER By Jennifer Hedrick
LARGE DISCHARGE: This summer, some 10 BUSINESS BRIEFS
60,000 metric tons of wood pellets were unloaded
from a Panamax-class vessel at the Port of 12 NEWS
Immingham ready for transit to Drax power 34 MARKETPLACE
station.
PHOTO: VAUGHAN BASSETT, PINNACLE RENEWABLE ENERGY
SEPTEMBER/OCTOBER 2015 | PELLET MILL MAGAZINE 3
« Ed Note
Industry’s Editorial
PRESIDENT & EDITOR IN CHIEF
Balancing Act Tom Bryan tbryan@bbiinternational.com
16, Fletcher asked a number of producers how their operations balance the op- BUSINESS DEVELOPMENT DIRECTOR
Howard Brockhouse hbrockhouse@bbiinternational.com
portunity for growth while limiting the risk of ending a heating season holding too
much inventory. American Wood Fibers CEO Stephen Faehner told her, “I believe SENIOR ACCOUNT MANAGER
Chip Shereck cshereck@bbiinternational.com
more of us are putting a higher percentage of our capacity in storage—at least
ACCOUNT MANAGER
those of us who have the financial ability to do so.” For Faehner, the ability to cap- Jeff Hogan jhogan@bbiinternational.com
ture upside demand with on-hand inventory late in the heating season outstrips the
CIRCULATION MANAGER
risk of inventory carryover. The sources in Kotrba’s story, “Matching Pellet Supply Jessica Beaudry jbeaudry@bbiinternational.com
With Growing Demand,” on page 28, are quick to point out that amassing inven- MARKETING & TRAFFIC COORDINATOR
tory not only requires a storage solution, but an outlay of capital and disciplined Marla DeFoe mdefoe@bbiinternational.com
management of cash flow. Paul Stringer, vice president of sales and marketing, told
Kotrba, “This is a business that requires investment. It is an investment that you Subscriptions to Pellet Mill Magazine are free of charge—distributed
quarterly—to Biomass Magazine subscribers.To subscribe, visit www.
have to make to be a good supplier.” BiomassMagazine.com or you can send your mailing address to Pellet
Mill Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand
This issue, more so than any other issue this year, would not have been pos- Forks, ND 58203. You can also fax a subscription form to 701-746-
5367. Back Issues & Reprints Select back issues are available for $3.95
sible without the guidance of our editorial board and the robust participation of each, plus shipping. Article reprints are also available for a fee. For
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On Aug. 1, the European Pellet Council released updates 97.5. The ash limit for A2 grade is now ≤ 1.2 percent, and
to the ENplus quality management scheme for wood pellets. there is a temperature requirement of ≤ 40 degrees Celsius at
The new handbook—Enplus handbook version 3.0—replac- the last loading point for truck deliveries to end users.
es the prior version ENplus handbook version 2.0. Anyone When it comes to the ENplus certification process, sev-
who is currently ENplus certified under ENplus handbook eral changes have been made. There are now rigid timeline
version 2.0 will want to download the new handbook and requirements for compliance once the certification process
read it thoroughly as there are a number of changes that could begins. Inspection reports are due within two months of the
impact your current certification. Additionally, anyone who is inspection date and conformity reports must be complete
considering ENplus certification, but has not yet been certi- within a third month, otherwise the application is rejected. De-
fied, will also want to download the new handbook as there are ficiencies are classified into three categories—Types A, B and
several components that are different from what you may have C. Each type has different requirements for compliance. An-
previously understood. The handbook can be downloaded nual surveillance inspections are to be conducted with ± three
from the ENplus website at www.enplus-pellets.eu. months of the initial inspection date. Inspection criteria has
While there is a summary of changes provided on the remained much the same, however, it is now required that all
ENplus website, I will do my best to outline the substantive pellet storages also be inspected, which can include port facili-
changes here as they pertain to North American pellet produc- ties, warehouses, distribution points and others. The retention
ers. First, the handbook has a completely different format and of reference samples is no longer required for bagged product,
feel. There are now six parts to the handbook and there are however, for bulk delivery ENplus handbook version 3.0 now
national versions as well as an international master handbook. requires that a reference sample be collected for every vehicle
The international master handbook is the version that applies that is loaded. Reference samples are still held for nine months.
within the U.S. Canada has a separate national version, so be Regarding self-monitoring, the same five tests are still re-
careful you are downloading the version that applies to you. quired to be tested on site—bulk density, moisture, durability,
When first viewing the new handbook, I highly recom- length and fines—though it is now stipulated that if doubts
mend reading part one thoroughly before moving on to part concerning the pellet quality exist, then additional tests may be
two. Do not skip the terminology section as there are many ordered. This will apply primarily when producers approach
changes. Handbook version 2.0 included descriptions for the 0.7 percent ash requirement for grade A1. If ash content is
several entities including the EPC, national licensers, certifica- close to the limit, then ash testing at the production site could
tion bodies, inspection bodies and testing bodies. These same become a requirement.
entities still provide the overall structure, however, there are There are also changes regarding bag labeling. The EN-
now several additional terms such as competent management, plus certification seal has been changed as well as the way the
competent licenser, international management and certified grade is specified. In addition, all bag designs now need ap-
service provider to name a few. It is important to understand proval by the “competent management” before bags are sold
these new terms in order to understand how the system works, on the market. The certified company whose ENplus ID is
which differs from country to country and when operating in- printed on the bag is responsible for submitting bag labels
ternationally. whether it is your brand or the brand of another party.
When it comes to the specifications for wood pellet As I am sure you can now see, the changes to the newest
classes (grades A1, A2 and B) there are a few important up- version of the ENplus handbook are substantial. If you are
dates. First, ENplus handbook version 3.0 now references already certified or interested in pursuing this quality manage-
ISO 17225-2 (formerly EN 14961-2) as the basis for the grade ment scheme, I highly recommend downloading the ENplus
criteria, and all ISO-test methods are referenced instead of the handbook version 3.0 and reading it in detail. The new hand-
previously referenced CEN- and EN-test methods. In some book came into force for all new users as of Aug. 1 and will
cases, the referenced ISO-test methods are not published yet, come into force for currently certified companies Jan. 1.
but there is a note in the handbook that the EN-method ap-
Author: Chris Wiberg
plies until the ISO-method is published. Second, there is grade
Manager, Biomass Energy Laboratory
criteria that has been tightened. Specifically, for ENplus A1 the 218-428-3583
durability requirement is now ≥ 98.0 and for B grade it is ≥ cwiberg@tpinspection.com
As we at the United States Industrial Pellet As- ready to use sustainable biomass as an important
sociation get ready for our 5th Annual Exporting component of their plans to mitigate climate change
Pellets Conference in Miami, it continues to be an and increase their use of renewables. There are a few
exciting time in the industrial wood pellet industry. hurdles to address in this area, such as workforce
European policymakers are poised to come back and infrastructure, but we anticipate this domestic
from recess with one thing on their minds when it market will open up in the next few years, especially
comes to energy policy and decarbonization—how as the coal industry and domestic power genera-
do they accomplish their goals in an affordable way tors look to cofiring as the most cost-effective way
without creating additional economic burdens on to continue the life of current coal plants. Because
taxpayers? U.S. coal-fired power plants could use biomass for
As affordability moves to the forefront of Eu- cofiring to meet the objectives of the Clean Power
ropean policymakers’ minds when confronting the Plan—and do so while preserving jobs, infrastruc-
energy “trilemma” of affordability, security and de- ture and capital investment—biomass can provide
carbonization, biomass remains the only affordable, an affordable way for the U.S. to decarbonize as well.
commercially available renewable technology that There are additional nonsubsidized markets,
can provide dispatchable baseload power to balance such as the chemical production market, that could
the energy grid at a moment’s notice. Baseload. Re- also open up for industrial pellet producers. In the
newable power. All the time. Other renewable tech- U.S., we have spent the past decade developing the
nologies are intermittent, meaning they only work infrastructure and building a sophisticated supply
when their fuel source is available, i.e., when the sun chain to turn sustainable, low-grade woody fiber
is shining or when the wind is blowing. into sustainable wood pellets and deliver them to the
Accordingly, it is important to look beyond ba- world. With this development now behind us, the in-
sic per megawatt-hour cost comparisons of all re- dustry is able to participate in new markets without
newable technologies in order to truly understand the costly start-up expenses.
how much each technology costs the average con- It is critical that the industry remain flexible as
sumer on the road to decarbonization. A deeper we head into this period of expansion and diversi-
analytical cost comparison will show that intermit- fication. There are plenty of opportunities in both
tent technologies also carry hidden costs associated traditional and emerging markets for industrial
with “demand capacity”—power plants that must wood pellets and the entire bioenergy industry, we
be activated to balance the grid when the sun is not just need to be prepared to grab them as they come
shining and the wind is not blowing. These power along.
plants are often fossil fuel-based power stations that For a more in-depth discussion on these issues
are kept on standby at excruciatingly high costs to and how the wood pellet industry can participate in
the consumer. new markets, I hope you will join us in Miami, Sept.
Affordability will also translate here in the U.S. 20-22 for our 5th Annual Exporting Pellets Confer-
as federal and state lawmakers begin to implement ence. Visit www.theusipa.org/conference for more
President Obama’s Clean Power Plan. The plan em- information.
phasizes the importance of renewable energy and
Author: Seth Ginther
recognizes that sustainable biomass can be an im-
Executive Director
portant player in the fight against climate change. U.S. Industrial Pellet Association
As we work with EPA on the specifics of biomass 804-771-9540
sginther@hf-law.com
carbon accounting, there are a multitude of states
At the PFI Annual Conference this summer, PFI an- cies, and the producer incorporates certain in-house quality
nounced several modifications to its standards program. For verification at the production site.
those of you who produce pellet fuel, I encourage you to take If successful audits are not continually demonstrated,
note of these program enhancements. manufacturers will resume the once-per-1,000-ton audits.
The PFI Standards Program is a fuel-quality program Once conformance is maintained, facilities are again eligible to
requiring regular third-party audits of pellet manufacturing fa- reduce their testing frequency to once every 5,000 tons.
cilities. It is a voluntary program, though new EPA regulations The simple goal of these changes is to strengthen the
are sure to impact the marketplace and the demand for fuel program, which is achieved by ongoing review of the pro-
tested through a graded-fuel program. gram’s structure and its documents. You can review this infor-
The PFI Standards Program is administered by the mation on the PFI website, www.pelletheat.org/pfi-standards.
American Lumber Standards Committee, which oversees the The larger goal gets to the crux of the program, which
program’s auditing bodies and testing labs, and does its own is to provide consumers with fuel that is consistent and reli-
regular audits of production facilities. able, ensuring that their appliance is operating at its maximum
The current program has been in effect for three years. capability.
The enhancements to the program are a result of a review of Manufacturers I’ve spoken to who are participating in
best practices by auditing agencies, ALSC and the PFI Stan- the PFI Standards Program each had different motivations
dards Committee. We took into account analyses of testing for joining the program, but all have seen improvements in
results and practices of the participating fuel manufacturers their operations, whether through higher-quality production,
alongside the established standard specification and PFI Stan- operations efficiencies, or cost savings due to incorporating
dards Program documents. recommendations following audits. Their initial investment in
Some of the more notable changes to the program include: the program has delivered significant return.
- Clarifying that the program is not a weights and If you aren’t participating in the PFI Standards Program,
measures based program. I encourage you to take a closer look at the program, espe-
- Increasing the range for acceptable bulk density to 40 to cially in light of recent program modifications and the new
48 pounds per cubic foot. EPA regulation of residential pellet appliances, which requires
any new EPA-certified appliance to use pellets submitted to
- Reducing the conformance criteria requirement from
a third-party, fuel-grading program. Consumers purchasing
95 percent to 90 percent.
these new appliances will need access to graded fuel. How will
- Adoption of the Rules of the Mark, which govern the you meet those requirements?
program’s Quality Mark, found on product that meets
the program’s specifications. Author: Jennifer Hedrick
Executive Director, Pellet Fuels Institute
The major modification to the program involves a reduc- 703-522-6778
tion in sampling frequency for manufacturers. Under the pre- @pelletfuel
Hedrick@pelletheat.org
vious requirements, third-party audit samples were collected
every 1,000 tons. New requirements allow for a reduction in
the sample collection frequency to one audit sample for ev-
ery 5,000 tons of production, provided the producer demon-
strates three consecutive months of audits with no deficien-
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vecoplanllc.com (336) 891-0858
Business Briefs PEOPLE, PRODUCTS & PARTNERSHIPS
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U.S. GHG emissions from combustion of fossil fuels for electricity Port of Liverpool terminal
generation (MMT CO2) to supply pellets to Drax
GHG emissions 1990 2005 2013
Total CO2 from fossil fuel-fired electric generating units 1820.8 2400.9 2039.8 In June, U.K.-based Peel Ports Group an-
From coal 1547.6 1983.8 1575.0 nounced plans for a new £100 million ($158.29
From natural gas 175.3 318.8 441.9 million) biomass terminal at the Port of Liver-
From petroleum 97.5 97.9 22.4 pool. The facility will supply pellets to the Drax
SOURCE: U.S. EPA
power station in Selby.
EPA releases Clean Power Plan The terminal will be owned and operated
The final rule also allows states a two- by Ligna Biomass Ltd., a company owned by
In early August, the U.S. EPA released
year extension to submit plans, if needed. the shareholders of Peel Ports Group Ltd. U.K.-
the Clean Power Plan final rule. In addi-
States requesting an extension will have based Graham will build the facility. The project
tion to including some key changes when
until September 2018 to submit final plans is scheduled to be fully operational by next July.
compared to the proposed rule, the plan
either alone or in cooperation with other Once complete, the terminal will have the
contains vague language related to using
states. The final rule also includes several capacity to handle up to 3 million tons of wood
certain kinds of biomass fuel as a carbon
measures to provide more flexibility to pellets per year. Pellets that arrive at the port will
reduction method.
states and utilities. be shipped via rail from Liverpool to Selby. Peel
The rule calls on each state to craft its
While the proposed rule suggested Ports Group estimates the terminal will have the
own plan based on policy and resources
biomass power may play an important ability to facilitate up to 10 train loads of pellets
of its choosing, and is designed to provide
role in achieving carbon reduction goals, per day, accounting for up to 40 percent of the
flexibility in meeting goals set by the EPA,
the final rule does not provide certainty total wood pellets consumed by Drax each year.
which vary by state. The final rule requires
on how biogenic emissions will be treated. In addition to rail loading capability, the port fa-
existing power plants to reduce carbon
Rather, that will be largely determined by cility will also feature 100,000 tons of pellet stor-
pollution by an average of 32 percent by
the EPA’s yet-to-be-completed accounting age capacity.
2030, a 9 percent target increase from the
proposed 30 percent. framework for biogenic carbon emissions.
Quality worldwide.
AMANDUS KAHL USA Corporation · 105 Hembree Park Drive, Suite L · Roswell, GA, 30076
Phone: 770-521-1021 · sales@amanduskahlusa.com
AMANDUS KAHL GmbH & Co. KG · SARJ Equipment Corp., Mr. Rick B. MacArthur · 29 Golfview Blvd., Bradford, Ontario L3Z 2A6
Phone: 001-905-778-0073 · rbmacarthur@sympatico.ca · www.akahl.us
Pellet News »
BIOMASS PROCESSING
with BLISS.
Bliss Industries, LLC is a leading manufacturer
of wood and biomass pelleting equipment for
residential, commercial and industrial pellet fuel.
2015 Producer
Survey
Capacity, Capital, Storage Partner
in 'Pellet Dance'
A sampling of producers offers a glimpse of the
delicate balance between meeting yearly pellet
demand and stranding precious capital.
BY KATIE FLETCHER
W
hen customers are unable to on uncontrollable factors, like volatile weath-
find bags of pellets lining the er patterns and other competitive fuels, is a
shelves of their neighbor- challenging balancing act, and it isn’t uncom-
hood big box retail store in a mon for a producer to lose their steadiness.
particularly cold heating season, the situation Pellet Mill Magazine distributed a survey
has sometimes been attributed to a capacity to North American pellet producers, compil-
shortage. The empty shelves are not a result ing information about their infrastructure ca-
of limited production capacity, however, but pabilities and distribution patterns as a means
rather the limited capacity producers have to to share some collective data about the in-
store product. The pellet fuel shortages have dustry. In August, 52 producers responded percent. About 16 percent reported their an-
been limited, in fact, to select regions of the to the online survey. The number of respon- nual production trends have stayed about the
U.S. during certain times of the year, and dents is representative of the industry as a same or flat. The remaining 8 percent have
have not impacted all producers––tightness whole, but the data was self-reported and experienced their annual production trend-
in the marketplace has been experienced pre- gathered without random sampling tech- ing downward by more than or less than 20
dominantly where the most dynamic market niques. Respondents represent a variety of percent in the past two years. Based on this
share is sold, the Northeast. plant sizes across different regions of the sampling of producers, overall, pellet pro-
A tight supply of pellets in a particular U.S. The straightforward, 12-question survey duction is on the rise.
region has often been countered with softer sheds light on a range of questions from the American Wood Fibers began produc-
markets for pellets elsewhere, creating not a amount of annual production producers are ing wood pellets in 2005 with a 50,000-ton
problem of capacity, but of logistics. Further, able to store on-site to how much of their plant in Circleville, Ohio. It opened a 75,000-
storing enough product to meet demand is production they distribute through big box ton plant in Marion, Virginia, in 2009 and of-
often a substantial commitment not only in retailers. fers 25,000 tons—contract manufactured—
dollars, but infrastructure. Even if producers from a plant in Schofield, Wisconsin. The
have the capability to store adequate product Capacity and Capital company has experienced about the same to
on-site, they may not have the capital needed Amongst the survey respondents, about marginal improvements in annual produc-
to keep the plant running during the off-sea- 76 percent of producers have experienced tion trends over the past few years. American
son when consumer demand is low. Driving increasing annual production trends—43 Wood Fibers CEO Stephen Faehner says the
just the right amount of throttle into a plant percent increasing by less than 20 percent company can store well over 10,000 tons of
to produce product with demand contingent and 33 percent increasing by more than 20 pellets on each site, about 20 to 30 percent
ON-SITE STORAGE: According to Pellet Mill Magazine's industry survey, 35 percent of pellet producers have
capacity to store less than 10 percent of their annual production on-site, and 10 percent can store over 30
percent of their yearly production. Producers agree that on-site storage capacity is critical to a pellet operation. What percentage of your
PHOTO: APPALACHIAN WOOD PELLETS INC.
annual production do
you have the capacity to
of annual production. There seems to be an than we’ve needed over the last few years,”
upward trend in the ability of pellet manu- says Tom Plaugher, vice president of opera-
store on-site?
facturers to store more pellets off-season, he tions with Appalachian Wood Pellets. “We’ve
says. “This season we carried above 20,000 been able to continue moving product in the
tons total, so that’s a pretty hefty commitment off-season and have not come close to max- Less than
in dollars, but it’s also a commitment in infra- ing out our storage capacity. It’s allowed us to 10%
structure,” Faehner says. “You can only put so produce to our maximum potential.” 10 -
much of this out in the weather for so long. I Based on the survey, just under 30 per- 20%
believe more of us are putting a higher per- cent of the respondents join Faehner and 20 -
centage of our capacity in storage—at least Plaugher in having the capacity to store over 30%
those of us who have the financial ability to 10,000 tons of pellets on-site. Twenty-four of
do so.” the responding producers, or 46 percent, have Over
Appalachian Wood Pellets Inc. the ability to store between 1,000 and 10,000 30%
50,000-ton-per-year plant in West Virginia can tons. The remaining 25 percent of respon-
store around 20 percent of its production ca- dents split fairly evenly between storing less
pacity on-site, and its production has been in- than 100 tons of finished product on-site and
35% 30% 25% 10%
creasing by less than 20 percent over the past 100 to 1,000 tons. Another way to look at the
two years. “We’ve been fortunate at our facil- data is that 35 percent of producers can only
ity—and we probably are a little different than store less than 10 percent of their annual pro-
most—in that we have more storage capacity duction on-site. About 55 percent can store SOURCE: BBI INTERNATIONAL
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10 to 30 percent of their annual production,
and just 10 percent can store over 30 percent
of their yearly production capacity.
Western producer Stan Elliot, vice pres-
ident of sales with Olympus Pellets, says in
the Western two-thirds of the country over
the past five years or so there has been plenty
of production and storage capacity, but the 6285&(%%,,17(51$7,21$/
Northeast has experienced some issues with *5$3+,&6)5((3,.
says, adding he thinks big box stores are go- appeared as though very few people are ac-
ing to trend toward purchasing certified pellet Do you offer off-season tually committed under contract. “Powerful
product. He believes having the Pellet Fuels (March-July) discounts? retailers get indemnity from their suppliers,”
Institute standard certification will give pro- he says. “When there is written documenta-
ducers a leg up in the marketplace. “A lot of tion, it is usually in the form of a one-sided
producers worry the cost of certification is vendor agreement that is not a contract and
prohibitive,” Faehner says. “I would argue
that the opposite is true. It actually comes
back to you in higher quality, fewer com-
55% is nonbinding.” Faehner adds, “Once they is-
sue purchase orders and product is shipped
against them, then you have something more
plaints, callbacks and replacements, and im- concrete, but there are very few companies
proved throughputs. I think certification of
wood pellets is the future.”
When it comes to bulk sales, the survey
45% YES with hard-and-fast contracts.”
Forty-six percent of producers reported
that they process in-season orders they receive
indicates that producers either sell very little
or quite a bit of their annual production in
bulk. Over 50 percent of producers sell less
than 10 percent of their production volume SOURCE: BBI INTERNATIONAL
NO through customer-priority ranking, followed
closely with 40 percent of producers process-
ing orders on a first-come, first-served basis.
Others include quickest payment terms, net
in bulk or none at all. However, 27 percent price, historical customer demand, black-box
sell more than 50 percent in bulk, and 19 per- retailers. Often, received commitments are formula and a combination of ways. Sales are
cent fall somewhere in-between. not binding under contract. In fact, 29 per- usually made by an in-house sales representa-
Variances in the supply and demand of cent of producers don’t have sales contracts tive, with 83 percent of producers reporting
pellets is a result of the inevitable guessing at all, and another 38 percent have less than this is who is responsible for the bulk of their
game producers have to play to estimate how 50 percent of their annual production com- sales.
much product they’ll need to meet demand mitted under contract. After reviewing the Without a majority of producers’ pro-
and the commitments they receive from their survey, Faehner found it interesting that it duction committed under contract, they rely
upon forecasts, historical sales, reliable cus- a lot of independent or regional pellet retail-
tomers and other variable methods to gauge 'RDQ\RI\RXUELJ ers that do buy some,” Elliot says. “We offer
demand. Elliot says big box retailers will give ER[FXVWRPHUVEX\ summer specials and we certainly encourage
forecast estimates of what they’ll need. “The LQWKHRIIVHDVRQ" those, but so far the big box guys haven’t tak-
forecasts tend to be a little slanted because en advantage of those sales.”
they want to put the burden on the pellet Elliot believes retailers will work with
producer to make sure you have enough for producers when there are projection mis-
them, but of course, if it’s a mild year, it’s very
difficult living up to that commitment,” he
says. “We’ve certainly had that situation. The
calculations. “Retailers will try to alleviate a
projection shortfall, but of course they can’t
force the pellets down people’s throats any
<(6
big box guys, typically in the West anyway, will more than we can,” he says.
only carry pellets say from Labor Day until As the industry matures, retailers and
the end of February, then they start switch-
producers alike will get better at gauging the
12
ing out all of their departments into garden supply and demand needed to keep pellet
and that sort of thing. If they’re behind on plants profitable, retailers’ shelves stocked
their commitments, and this has happened in 6285&(%%,,17(51$7,21$/ and pellet consumers supplied. “Sometimes,
the last two years for us, then we bring it to you just have to work with each other and
their attention. They are normally willing to understand that we’re in a seasonal business,”
keep pellets in their stock maybe for another they don’t run into that type of a situation Elliot says. “You look at their forecast and
month just to help meet that commitment.” again,” he says. determine whether you think it’s realistically
The survey results show that 67 percent According to Faehner, usually big box based on what you think is going to happen.
of producer’s big box customers buy in the retailers cease buying quickly once the end of It’s just part of the dance.”
off-season and that the remaining 33 per- the season approaches. “You have to look at it
Author: Katie Fletcher
cent do not. Plaugher says it seems like the from the perspective of the big box and how Associate Editor, Pellet Mill Magazine
number of big box retailers purchasing in the they operate,” he says. “They are a season- 701-738-4920
kfletcher@bbiinternational.com
off-season is increasing, especially over the to-season business. They are always resetting
past two seasons, which he attributes to some their stores and they don’t carry the inventory
product shortages. “They’ve started taking off-season. It’s just not their model.”
products in the off-season, doing some of None of Olympus Pellets’ main, large
their own storage, I’m assuming to make sure retailers purchase in the off-season. “We have
www.NESTECInc.com
SEPTEMBER/OCTOBER 2015 | PELLET MILL MAGAZINE 21
« SHIPPING
Panamaxing It Out
As the consumption of wood pellets
in European power stations matures,
shipping efficiency is maximized by
utilizing the largest vessels available.
BY TIM PORTZ
O
n June 2, at the Westview market via the company’s Westview Terminal,
Terminal in Prince Rupert, a $42 million wood pellet receiving, storage
British Columbia, a Panamax- and shipping facility in Prince Rupert. This
class vessel, the Popi S, was facility connects Pinnacle’s robust production
loaded with nearly 60,000 tons of wood footprint with any port in the world. The
pellets produced by Pinnacle Renewable challenge Pinnacle must overcome is that its
Energy. Thirty-four days later, the pellets Westview Terminal is over 11,000 nautical
were successfully unloaded at the Port of miles from the ports on England’s East Coast.
Immingham’s Renewable Fuels Terminal, For comparison, the Port of Chesapeake,
making it the first successful use of a a Virginia terminal utilized by U.S.-based
Panamax-scale vessel to transport wood competitor Enviva, is just 4,214 nautical miles
pellets. The shipment is important for a from the Port of Immingham. While the Popi
number of reasons, significant among S spent 34 days navigating North America’s
them that shipments of this size will need West Coast, through the Panama Canal and
to become commonplace to make the northeast across the Atlantic, ships leaving the
widespread use of wood pellets for power Port of Chesapeake likely made the journey in
generation economically sustainable in the less than two weeks. The advantage in freight
long term. costs for producers in the southeastern
The advantages of using larger vessels United States is clear. “The only way we can
to ship wood pellets are easy to understand. compete is on scale,” says Vaughan Bassett,
Larger vessels generally allow for the transportvice president at Pinnacle.
of goods, including wood pellets, at a lower Until the Popi S shoved off from the
unit cost than smaller vessels. Still, there areWestview Terminal, Pinnacle relied largely
numerous factors at play that complicate what upon the Supramax class of vessels. Bassett
initially looks like a simple business decision.reports that Supramax vessels typically leave
The movement toward the use of wood Westview with around 50,000 tons of pellets.
pellets to make electric power—in particular “What we’ve determined with the Popi S trial
the conversion of nearly half of Drax power is that the maximum cargo size that we can
station’s annual output to biomass input— put into the Panamax class of vessels is about
has created a demand for industrial wood 60,000 tons—10,000 tons or 20 percent
pellets felt around the world. Producers with more than we were doing in the past. That is
access to large volumes of wood fiber in significant and considerable,” he says. Bassett
close proximity to ocean shipping lanes have continues by noting that the travel time and
and continue to come online to satisfy this the fuel usage is virtually the same between
growing demand. the Supramax vessels they traditionally use
and what they experienced and learned in the
Particular to Pinnacle Popi S trial. “The only major difference is the
Pinnacle Renewable Energy, Canada’s amount of cargo you can put into it,” he says.
largest manufacturer of wood pellets with
six production plants in British Columbia, Not That Simple
perceives this market opportunity as When considering all of the results
fundamental in its corporate mission to be “the of Pinnacle’s Panamax tests with the Popi
world’s most reliable producer and lowest-risk S, the company’s interest in increasing
supplier of bioenergy products.” The bulk the widespread use of Panamax vessels is
of Pinnacle’s production enters the global straightforward. The urgency toward this
FIRST OF ITS KIND: In July, 34 days after steaming away from Pinnacle Renewable Energy’s
Westview Terminal in Prince Rupert, British Columbia, the Panamax-class vessel Popi S berthed at the
Port of Immingham, unloading the world’s first Panamax-sized load of wood pellets.
PHOTO: ASSOCIATED BRITISH PORTS
$*5$
,QGXVWULHV
<285(3&&2175$&725
)520'(6,*1
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STILL WATERS RUN DEEP: Operational since 2014, the Westview wood pellet
terminal makes the most of its berth-side draft of 16 meters, which can easily
accommodate Panamax-class vessels. Here, the Popi S makes pellet industry
history as the world’s first Panamax-class vessel to be loaded with wood pellets.
PHOTO: VAUGHAN BASSETT, PINNACLE RENEWABLE FUELS
WOOD
Proof of Safety
In a document Murray
provided to Pellet Mill Magazine,
written by Staffan Melin,
research director for WPAC,
PELLET
research efforts spearheaded
by the WPAC are outlined that
have informed the IMO’s Bulk
Cargoes Code since 2004. In
the document, Melin notes that
FUEL
while wood pellets are classified
in the category Materials are
Hazardous in Bulk, because they
do emit carbon monoxide as they
degrade in transit, the gases they
produce while degrading are not
flammable.
The document indicates • FIRST CHOICE IN PREMIUM GRADE PELLETS
that the vast majority of ocean- • MADE FROM 100% RECYCLED WOOD FIBER
small number of Panamax-class going cargoes require the vessels • MEETS OR EXCEEDS PFI AND ENPLUS A-1 STANDARDS
vessels, including the Popi S, carrying them be “equipped
• NATIONAL AND INTERNATIONAL DISTRIBUTION
are outfitted with this piece of with fixed-gas fire extinguishing
equipment, Bassett says, but in a systems or fire extinguishing
vessel class that numbers around systems giving equivalent
MEET THE HOTTEST NEW PELLET COMPANY IN AMERICA.
900, he believes only 50 or so protection.” There are, however,
have it installed. cargoes that have been exempt THERMAGLO.COM
For now, anyone looking from this requirement, and the
to ship large amounts of wood WPAC has been working to get
pellets must find a vessel with this wood pellets added to this list.
system installed, and the owners Quite simply, the WPAC has had
of Supramax vessels—nearly all to produce scientific proof that
of which have the equipment— wood pellets “would not emit
know it. Trade associations have flammable composite gas, would
taken notice, and the Wood Pellet not self heat and would not have
Association of Canada has been a burn rate above a certain level.”
aggressively working on this issue Working in close
for some time now. “It boils collaboration with the Univeristy Northeast Wood Products, LLC | 13 Crow Hill Road
down to a market thing,” says of British Columbia, the Uncasville, CT 06382 | 860.862.6350 | thermaglo.com
Gordon Murray, WPAC executive WPAC conducted research
director. “When the pool of that supported this claim and
SEPTEMBER/OCTOBER 2015 | PELLET MILL MAGAZINE 25
presented their findings to the IMO in rate of 6 million metric tons of wood pellets per
September 2013. The process to ratify IMO year at Drax, delivered entirely in those 25,000-
regulations moves slowly, and the research ton capacity vessels 240 individual shipments
worked its way through technical reviews and would be required. For comparison, the same
working committees through 2014, eventually volume delivered entirely by Panamax-sized
ratified by the Maritime Safety Committee vessels carrying 60,000 tons requires just 100
June 12. The exemption will go into effect on individual shipments. Looking at it this way,
a voluntary basis Jan. 1, and one year later— it is easy to see how larger vessels can help
after procedural votes with IMO members— alleviate potential bottlenecks at U.K.-based
will become mandatory. pellet receiving ports.
Once fully ratified, all Panamax vessels With an eye on their transit distance
will be able to move wood pellets in bulk, from European markets, Pinnacle has always
regardless of whether they are equipped with envisioned and planned on a progression
the extinguishing systems. ”It’s not just good towards Panamax vessels. Speaking about
for Canadian producers,” Gordon says. “It’s Pinnacle’s Westview Terminal in Prince
good for every pellet producer in the world.” Rupert, Bassett says, “We designed the thing
for Panamax-sized vessels, but the first time
Optimized for Size we actually filled a Panamax was the Popi S
While wood pellets are and will likely trial.”
continue to be shipped in smaller, handy-sized The topography of the port is enviable
vessels capable of carrying around 25,000 tons when it comes to berthing Panamax-sized
THE BUSINESS END: The Port of Immigham of pellets, the desired trend for producers vessels. Built into a formation that Bassett
commissioned the construction of two custom-built
continuous ship unloaders (CSUs) to prepare for the and the ports that receive them is for larger refers to as fjord-like, Westview reaches depths
coming tide of larger vessels filled with wood pellets. shipments. Assuming an annual consumption of 13 meters right off the berth, and just a few
These CSUs are capable of moving pellets out of a
ship’s hold three times faster than a crane and with far
less dust.
PHOTO: VAUGHAN BASSETT, PINNACLE RENEWABLE FUELS
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more meters out the depth is 23 or 24 meters. per hour. The facility employs two custom- it will also be a welcome development for the
“I think it is the deepest natural harbor on the built continuous ship unloaders (CSUs) built owners of a vessel class that’s been struggling to
West Coast in America,” Bassett says. expressly for the unloading of wood pellets find steady volumes of cargoes. Built to move
This natural depth allows the port to from very large vessels including Panamaxes. massive amounts of iron ore and grain, the
easily receive Panamax vessels, but the port’s With a slightly different hull configuration Panamaxes were also once kept busy moving
ability to load the vessel was unknown until than Supramaxes, the team at the Westview coal. Some of the Panamaxes slowdown can
the Popi S trial. The speed and ease at which Terminal wasn’t sure what to expect from an be attributed to the fall off in coal exports since
these Panamax vessels, 30 meters longer than ease-of-loading standpoint. Their experience 2012, but now, it seems, the vessel class might
Supramax and built with seven holds instead of was a pleasant surprise. “We were able to load be buoyed by coal’s renewable replacement.
five, matters for a number of reasons. Owing the pellets much easier, from a geometric If every ton of Pinnacle’s annual production
to the rainy climate in British Columbia, the perspective, into the Panamax than we had were moved via Panamaxes, their volumes
Westview Terminal must make the most of been able to in the Supramax,” Bassett says. would create roughly 20 load opportunities for
any day with dry conditions. “We can’t load in At their current production output, the vessel class, hardly enough to completely
the rain,” Bassett says. “Wood pellets are rain Pinnacle will load between 12 and 18 vessels revive the class. Bassett, however, sees the
sensitive. We need to have the ability to load each year at the Westview Terminal, and, up success of the Popi S as the beginning of a
fast in periods which are quite short. We can until the Popi S, those vessels had all been widespread transition to Panamaxes across
load at 2,000 tons an hour if required.” Supramaxes or smaller. But with the successful the industry. “With our successful use of the
The same requirement applies when trial of the Popi S paired with the research and Panamax class now, we’ve sort of opened up
unloading vessels at their port destinations in the subsequent decision by the IMO to include that vessel class to the pellet trade,” he says. “It
the U.K. The Popi S was unloaded at the Port wood pellets on the list of items exempt from means there will be less of them lying idle.”
of Immingham’s Renewable Fuels Terminal, the requirement for extinguishing systems, it
operational since 2014. The terminal, with seems likely that more Panamax-class vessels Author: Tim Portz
Executive Editor, Pellet Mill Magazine
100,000 tons of on-site storage capacity, will be berthing at Westview. 701-738-4969
can unload vessels at a rate of 2,500 tons Certainly this is positive for Pinnacle, but tportz@bbiinternational.com
W E C O N V E Y Q U A L I T Y
F
ew events can sour the experience 150-plus small businesses in the Northeast.
of domestic, residential pellet stove According to data from a recent Pellet Mill
users more than being unable to Magazine distribution survey, less than 50
buy product during a cold snap. percent of respondents’ annual production is
“Frankly, not having enough products to sold to big box stores, leaving a majority of
meet demand is my major concern,” says Paul domestic market sales to smaller retail outlets.
Stringer, vice president of sales and marketing “We don’t deal with big box stores, mostly
for Somerset Pellet Fuel, a Kentucky-based just mom-and-pop stores,” Mayer says. “We
pelleting operation with an annual capacity of have a couple of retailers that have five or
50,000 tons. Somerset’s raw material comes to six locations, some have four that do 10,000
the facility already kiln-dried from its hardwood tons out of one retail location.” He says the
flooring plant. The company’s pellet customers small retailers in his network really distinguish
are big box stores such as Tractor Supply Co. themselves by getting to know their customers
and Lowe’s. “All of us in the pellet industry and the product, and by delivering product to
want the market to grow,” Stringer says. “If the customers’ homes—even bringing a pallet
customers can’t get pellets, they won’t buy the jack to the customers’ driveways or helping
stoves and it hampers growth in the industry.” hand-stack product.
Supply shortages are part of any growing Dejno’s Inc. operates a 40,000-ton pellet
market, but the business of residential wood facility in Kenosha, Wisconsin, and has a
pellets is different than many other, more fleet of 35 trucks and 600 trailers to deliver
predictable industries. It’s an emerging market its Dejno’s brands of hardwood blends and
that is based on unpredictable events such as softwood blends. “We’ve been in business for
oil and natural gas prices, the housing market, 10 years and we’ve seen the ups and downs—
weather, the economy and even politics. the times of extra supply and then crisis
“The past year has been difficult with management where everyone’s out,” Dejno
supply and demand,” says James Mayer, says. Located between Milwaukee and Chicago,
salesman for PelletsNow LLC, a third-party Dejno’s pellet facility doesn’t have a dryer, so
distributor of pellets in the Northeast supplied the plant doesn’t process green product the way
by Maine Woods Pellet Co. LLC. “Demand is other facilities do. It receives sawdust directly
greater than supply and it’s hard to meet the from suppliers such as sawmills.
needs of our customers the way they want to Dejno says pellet shortages in stores are
be met.” He says while demand usually slows oftentimes beyond the retailers’—and his—
down in spring and summer, this season it control. “Weather, propane and petroleum
hasn’t. price spikes, or a housing market downturn
PelletsNow has a retail network of where the raw material is not available—
SPECIAL DELIVERY: Dejno’s Inc. uses its fleet of 35 trucks and 600 trailers to deliver its hard and soft blends of wood pellets to retailers within a 150-mile
radius of its mill in Kenosha, Wisconsin. Vice President Larry Dejno says buyers need to be aware of the market risks that retailers face when not building up
inventory on their end.
PHOTO: DEJNO’S INC.
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a fee, and nearly 22 percent offer storage at stores comes down to risk of investment, “This is a business that requires
no fee. The remaining 55 percent offer no noting that last year there were a few stores in investment,” Stringer says. “Clearly, for the
storage. Dejno says occasionally he stocks Hudson and St. Croix Falls, Wisconsin, that manufacturer, you are holding a lot of pellets in
inventory for his customers if they don’t have were out of pellets for weeks, which surprised the summer so that you can meet the demand
the storage space. “They don’t want to be left her considering natural gas prices were so low. in the winter. It is a cash investment that
shorthanded,” he says. “Sometimes if they do “For them, they would have to buy through a you have to make, in my mind, to be a good
a prebuy we’ll stock more inventory for them.” distributor and purchase a semiload at a time, so supplier.” For retail, Stringer views it the same
Mayer says transportation and storage are the the company is putting out this money up front way. “The best suppliers can afford to invest
biggest variables and the largest cost. Using hoping that the local customers come there to in pellets when they get them in the summer
PelletsNow’s partner, Quest Transportation, buy [versus going to a big box store],” Goossen months, or at least the months prior to winter
the company drops product directly from says. “They’re putting up this investment and and they stock up,” he says. “Otherwise, they
Maine Woods Pellet Co. to retailers. “Storage hoping they’ll buy at 25 cents more a bag or are going to be caught up in the scramble that
has always been something we have looked at, $1 more a bag from the local place, and now we see each year. I don’t think there is a magic
but it’s a lot of cost,” Mayer says. you’re housing 24 pallets outside and trying to solution for that. It is the business.”
Buying early can help alleviate the supply keep them from the weather, or rodents. So the A piece of advice Dejno offers retailers
crunch later in the season. “We’ve had more biggest complaint I hear is putting up $4,000 in that want to alleviate the madness when
customers this year make an effort to put their August and maintaining a semiload of pellets, demand is crazy and supplies are tight is to
orders in early,” Mayer says, adding that some but come January they may be out, and if they keep the good buyers employed. “That’s the
of them have already ordered one-third to one- order more and pay a premium for that, and reason we run into issues—when we’re dealing
half of their predicted supply for the upcoming have to turn that price over to the consumer, with a new buyer,” he says. “We don’t do a
season. Goossen says for the pine pellets used they will go to a big box store like Menards. I’ve whole lot with big box stores, it’s mostly small
as absorbents in oil fracking operations, orders seen it happen.” She says Menards has called retailers such as garden shops and independent
have been put in six months ahead of time to her a few times in the past month. “They’re businesses. There are only a few big box stores
ensure supply. anxious for pellet purchasing in the upcoming we regularly work with, but when they have a
She says the issue with the local hardware season,” she says. changeover in responsibilities it feels like we’re
reeducating them all over again. When there’s important, elements: communication and and ask them more in-depth questions and tell
a shortage, they scramble and buy stuff going relationships. “We have strong relationships them, ‘When you get to 50 or 100 calls a week,
into next year. When they’re comfortable and with loyal customers and we agree to target give me a call.’”
supplied well, they’re not interested in putting volumes to deliver to each customer,” Stringer Dejno says, “If you have long-term
in inventory for the next season.” says, adding that there is always more demand relationships on both sides, you get used to a
Retailers carrying multiple brands might than he can deliver. comfort level of what is in inventory and on-
also help offset tight supplies in the heating “Once we get into the season, like right hand vs. what your customers’ expectations
season. Mayer says some of the retailers he about now, the best plan for me is to be in are. The more you communicate, the better
services sell several brands. “That’s good— contact with my customers once a week to it is for their situation.” He says at least three
they need a diverse line of products,” he says. find out what their customers are saying—are points during the year—preseason, in-season
Dejno says many retailers have realized that they buying sand, are they buying salt, what’s and end-of-season—his company has good
more brands are better because it helps with the consensus,” Mayer says. “Then they ask conversations with its dealer-customers.
fluctuation. “What we find is when a retailer is me what’s going on with the mill and ask if “We just learn from each season, and find
short on a brand and orders are way behind, we there are any changes. That way the retailers that comfort level on how to go forward,”
get a lot of calls in those times of shortages,” know and they aren’t out of the loop.” Mayer he says. “Sometimes the solution is literally
he says. “We don’t take on new customers at says there needs to be better communication communication. The best thing is when there’s
that time. We call them back in the off season on all ends—between pellet manufacturers, a buyer that understands the market risks
so we don’t deplete our inventory.” Many of his wholesalers, retailers and home owners; and of not building up inventory on their side.
customers have been with the company for five even between pellet producers, wholesalers and Everyone wants just-in-time delivery but with
to 10 years, and Dejno says he doesn’t want to stove manufacturers. “I enjoy talking to retailers this product, it’s about building up inventory on
short loyal, long-term customers to satisfy new about trends and forecasts,” Mayer says, adding both sides to be prepared for a run.”
orders. that he has seven or eight retailers in strategic
Ultimately, the best solution to tight locations throughout the Northeast that he Author: Ron Kotrba
Senior Editor, Pellet Mill Magazine
supplies of pellets during the heating season distinguishes as superior based on their sales. 218-745-8347
may boil down to two simple, but very “I give those guys more than one call a week rkotrba@bbiinternational.com
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