February 28, 2013, Quebec - While the growing pellet industry in the US south has some labour and logistical advantages, producers in Canada hold a significant edge in third-party certification.
By Scott Jamieson
And according to RISI associate bioenergy economist Seth Walker, US pellet exporters will have a hard time closing that gap any time soon.
This was among the market forecasts delegates at the first Canadian Wood Pellet Heating Conference heard this morning in a packed session on markets and trends. The conference is presented by the Wood Pellet Association of Canada (WPAC) and the Quebec Wood Export Bureau, and runs from February 27 to March 1. It has drawn over 100 attendees interested in promoting the domestic pellet heating market.
Walker explained to delegates that US producers draw much of their fibre from small, private woodlot owners. With almost 60 per cent of the supply coming from timberland owners, achieving certification of a significant volume of export pellets is a major challenge. "Currently this is not an issue, but there is talk of EU power generators demanding certified product for as much as 70 per cent of their fuel supply. In that case, Canada would have a significant advantage."
That advantage stems from the fact that upwards of 60 per cent of the Canadian forest products value chain is already certified to recognized standards such as CSA, FSC and SFI. "Many of the smaller suppliers in the US do not deal in enough volume to make certification a viable option – it's not worth it."
To date that has not limited expansion in the US southeast. Pellet production in the US has boomed since 2010, with 2012 exports of 2 million tonnes a 52 per cent increase over 2011, and a four-fold increase from 2010 levels. While Walker expects pellet production in the southeast to continue to grow to as much as 6 million tonnes by 2017 (Canadian exports will more than double to over 4 million tonnes by then), there will be challenges and cost pressures.
"With OSB production ramping up again, there will be more pressure on roundwood supplies in the south." Still, he notes that despite all the biomass gains in recent years, its share of the roundwood used in North America remains very small compared with other industrial users like pulp and paper or panels.
In comparing the production costs of pellet suppliers in BC and the US south, Walker notes that while each region holds advantages over the other, the net delivered costs to power generators in the EU are remarkably similar. "US producers have an edge in transport, BC producers have lower capital costs." WPAC president Robert Tarcon pointed out that these cost breakdowns may change in the future, as shipping costs from BC drop through the use of larger super max vessels but fibre costs increase through the use of more beetle kill salvage. Still, he expects the overall cost to remain in the same ball park.
Regardless of cost structures, Walker forecasts that continued regulated growth in markets like the UK, Japan and Korea will provide export opportunities to the industry in both countries. There are several major biomass conversion projects in the works for UK power producers, while Walker predicts that Korean power generators facing 2020 CO2 reduction targets will reach the same conclusion as their EU counterparts. "Co-firing biomass is the cheapest way to get there."
You can follow live coverage of the event on Twitter @canadianbiomass or by following #WPAC13.