BioCycle February 2010, Vol. 51, No. 2, p. 36
Mark Jenner

THE U.S. fuel pellet industry is growing at an unprecedented rate. The British Timber Trades Journal recently reported that the North American wood pellet industry grew from a capacity of just over one million tons five years ago to a capacity of over six million tons. In January, RWE Innogy of Germany and BMC of Sweden, announced a joint project in Waycross, Georgia to build a fuel pellet mill that will process 750,000 tons of wood biomass pellets for export to Europe. Statistics from the Pellet Fuels Institute show that in the 2000-2001 heating season, North America produced 730,000 tons of wood biomass pellets. We’ve come a long way in just ten years to surpass the annual pellet production for the continent, in a single pellet plant.
Before the turn of the 21st century, an average sized pellet mill was as small as 10,000 tons/year (tpy) capacity. That increased to 30,000 tpy, and now is over 100,000 tpy. Among this class of mills was the biomass crop fuel pellet cooperative, Show Me Energy, Missouri. In 2008, the Green Circle Bio Energy, Inc. opened a 500,000 tpy facility in Cottondale, Florida.
Not all the new pellet mills are supersized. Many mills using local materials with domestic markets are still being built in the 30,000 tpy capacity range. Some are driven by more than foreign markets. Colorado has two “mid-sized” pellet mills in the 100,000 to 200,000 tpy capacity range, making fuel out of dead trees left behind by the devastating pine beetle epidemic.
The fuel pellet industry is not immune to a challenged economy. Dixie Pellets in Selma, Alabama, with an annual production capacity of 400,000 tons, closed last September. Another older mill in northwest Montana reportedly also closed in January. Nestled in the Rocky Mountains, the Montana mill had an annual capacity of 30,000 tons.
One of the curious aspects of this wood pellet production explosion is that the domestic price of fuel pellets has remained fairly constant. Economics is about balancing supply and demand. If too much is produced, the prices fall. Yet here we have a case where the supply of pellets increased many fold in just a few short years and the price for pellets domestically has remained fairly stable.
When inflated energy-related prices marched the crude oil price up over $140/barrel in 2008, pellet fuel prices stayed low, selling around $200/ton. Since then, fear of inflated heating oil prices heading into the winter months pushed the price of fuel pellets up over $250 for most of the last 18 months. Only in recent weeks has the price of fuel pellets begun to move back toward the $200/ton mark.
Clearly, the U.S. market has not behaved at all like the fuel pellet supply which is burgeoning. The demand for domestically produced biomass has dove-tailed nicely with the international demand for domestically produced biomass. While our U.S. carbon emission market development has hit a political wall, the European carbon markets keep chugging along.

PELLET VS. OIL BTUS
The concept of exporting hundreds of thousands of tons of biomass energy sounds like a nice twist on our energy balance of trade and energy security. If we just assume that the Green Circle Bio Energy mill in Florida is exporting 500,000 tons of wood pellets with an energy value of 8,000 btu/lb, we are exporting 8 trillion btus of biomass energy. Without a doubt, this is a lot of energy, but does not yet stack up in the broader U.S. energy consumption.
A barrel of oil contains 5.8 million btu. Dividing 8 trillion btu by 5.8 million btu/barrel, we get an annual petroleum energy equivalent of nearly 1.4 million barrels. According to the Energy Information Administration (www.eia.doe.gov), the U.S. consumed an average of 18.7 million barrels of oil per day during 2009. That means the 1.4 million energy-equivalent barrels of oil annually exported in the wood pellets accounts for 1 hour and 48 minutes worth of energy used with crude oil.
Another way to look at this is by comparing it to the annual U.S. energy consumption. The U.S. annually consumes about 100 quadrillion btu of energy. For simplicity, a quadrillion is a thousand, trillion btu. So if 500,000 tons of wood pellets is 8 trillion btu, we are exporting 0.008 percent of our annual energy consumption in those pellets.
The real story here is that this green energy sector is experiencing phenomenal economic growth. These are real green jobs that are being developed without a revised Renewable Fuel Standard (RFS) or federal cap and trade legislation. Woody biomass fuel pellet production is expanding about as rapidly as the equipment can be manufactured. The European carbon markets and policies are largely driving this expansion, but it hasn’t slowed the growth of domestic solid biomass fuel markets.
New domestic markets are opening through the cofiring of biomass at conventional power plants, which will challenge some of the demand for the European market. The way this green energy sector is growing, it is only a matter of time before it really does show up in national energy accounts.
This demand for green fuels is raising the cost and availability of compost carbon sources (see “The Business of Food Waste Composting” in this issue), but the demand for green fertilizers and soil amendments is also going to increase. Increased revenues from “green” everything will bring in a premium to any product that can offset fossil fuel. The increased raw value of biomass will also put intense pressure on carbon going into the landfills in ways that have not happened yet.

Mark Jenner, PhD, and Biomass Rules, LLC has joined the California Biomass Collaborative. Burning Bio News and other biomass information is available at www.biomassrules.com.