Supply meets demand
Published 12:08 pm Wednesday, July 27, 2011
(Editor’s Note: This is the fifth in a six-part series that focuses on the growing wood pellet industry in northeastern North Carolina and southeastern Virginia.)
The southern Atlantic Seaboard has the opportunity to be part of a solution for the need for wood pellets in the European Union.
According to Peter J. Stewart, President and Chief Executive Officer of Forest 2 Market, renewable energy standards in the European Union, and specifically the northeastern part of the continent, will provide the opportunity for some facilities in the southern United States to provide wood pellets to help meet the demand for renewable energy.
“The renewable energy standards across the EU, specifically northeastern Europe require that between 20 and up to 50 percent of electrical power be generated from renewable sources,” Stewart said. “Those sources are wind, water and biomass, and pellets would fall under the last category.”
The demand for renewable energy in Europe, and specifically for wood pellets, has led to Enviva Biomass opening a production facility in Ahoskie while others are planned for southeastern Virginia.
Wood Fuel Developers of Chester, VA has plans for two, wood pellet mills (one in Greensville County, Va. and the other in Sussex County, Va.). Franklin Pellets, a newly formed partnership between Multifuels and CMI, is eyeing the possibility of opening a wood pellet shop within a portion of the now closed International Paper Mill in Franklin, Va.
There are various reasons the southern part of the U.S. has become one of the producers of pellets for Europe.
“When you start looking at the world and ask where pellets would come from, Scandinavia, South Africa and Russia would seem logical because they are closer,” Stewart said. “In reality, Scandinavia imports a great deal of their wood. You would then have to go over Scandinavia to get to Russia and that’s not a good option.”
Stewart said Poland and Czech Republic did produce pellets, but most were for their own consumption. South Africa provides difficulty for Eastern Europe as well.
Looking back toward North America, eastern Canada does not have a lot of wood resources and uses many of them themselves, leaving the Atlantic Seaboard of the United States.
“You have Maine and then a very populated Eastern Seaboard,” Stewart said. “Next is the U.S. south, which logistically is a good location.”
Brazil is another option, but Stewart said currently it is cheaper to get pellets from the United States.
Stewart said there were currently five large wood pellet production facilities in the southern United States with others planned, including the one in Ahoskie and those being studied in southeastern Virginia.
Experts estimate the EU will need 20-50 million tons of wood pellets per year by 2030, up from the current use of 10 million tons per year.
“You have a bunch of demand,” Stewart said. “Pellet producers think they will put up a pellet plant and export to Europe. It doesn’t sound all that complicated, but that’s what it is.”
He said the demand is the plus side of the economic forecast for wood pellets, but there is also a down side.
“With the pending demand, you would think the price of pellets would be increasing, but right now they are pretty flat,” Stewart explained. “At present, pellets are a break-even business. If the price increases with demand, which is what pellet producers are counting on, they will make a lot of money.”
As for the particular plants in northeastern North Carolina and southeastern Virginia, Stewart said the woodlands in the area would certainly support the facilities.
“It certainly does have the capacity to provide for a couple of facilities,” he said. “If they are large-sized mills, they will take about a million tons a day as opposed to pulp mills which average 2.5 million tons.”
He said, however, the U.S. south could meet only a fraction of Europe’s overall demand for renewable resources.
Retired forester Chip Burby of Ahoskie said the local Enviva plant would revitalize a dormant timber industry.
“It will be a big boom,” he said. “I thank the good Lord it happened, because it will be a big plus for this area.”
Burby said there was currently no market to support the local harvesting of hardwood, a fact causing hardship on the industry.
“Tracks of timber couldn’t be clear cut because you couldn’t get rid of the hardwood,” he said. “It is definitely a big thing.
“The hardwood pulp industry was completely dead,” he added. “This is a great thing for Ahoskie and Hertford County.”
Burby said he believed there was plenty of timber in the area to keep plants in product.
“Timber is a renewable resource and we will be okay,” he said. “We can grow timber in this area because we have the resources.”
As for the United States, Stewart said it is likely to be quite some time before pellets are used in this country for electrical power.
“Unless we have a lot of renewable standards that would push us to biomass, it would be the last product line,” he said. “The first replacement for coal would be wood fuel or bark. That’s the next cheapest, where as pellets are twice the cost of coal.”