Potential pellet demand high for North America

Aug. 8, 2011, Seattle WA – A number of new
wood pellet plants in Canada and the United States are set to commence
operations during 2011, with more plants planned in the coming years. With the
additional capacity coming online, the industry is eyeing the growing demand in
four regions: Europe, Asia, and to a lesser extent the Maritime Provinces of
eastern Canada and Northeastern United States. The existing coal-fired energy
sector in the U.S. South remains a potent, yet unrealized market to date.

Federal policies in the United States that
restrict CO₂ emissions would ultimately benefit the pellet industry in North
America, as many coal plants would likely begin using pellets for co-firing, as
is the case in Europe. These changes would dramatically alter existing pellet
flows and production plans.

Europe has been the largest export market
for North American pellet producers for a number of years, receiving nearly 1.5
million tonnes in 2010, as reported in the North American Wood Fiber Review. The most significant potential for increased wood pellet use, both
short and long term, will continue to be in this region, as the European
Union’s 27 member countries have a goal of sourcing 20% of the EU’s total energy
needs with renewable sources by 2020.

In 2008, biomass used in the EU provided 80
million tons of oil equivalents (mtoe). The European Commission estimates that
this consumption may increase to 140 mtoe by 2020. In addition, Germany’s
recently declared goal to totally eliminate its nuclear power industry by 2022
will increase its demand for renewable energy, including woody biomass. Other
countries such as Italy, Finland, Poland, and Switzerland are starting to
question the viability of nuclear power as a future source of energy.

Asian demand for biomass energy is finally
beginning to emerge and shows signs of significant potential growth. South
Korea has recently announced policies to increase the portion of energy
consumption from renewable sources, including woody biomass. The country’s new
Renewable Portfolio Standard calls for reducing greenhouse gases by 30% by 2020
while concurrently increasing its use of wood pellets to five million tons in
10 years.

Japan’s confidence in nuclear power has
continued to plummet since the Fukushima nuclear plant crisis in early 2011,
which will likely result in an increase in woody biomass use as a portion of a
larger renewable energy portfolio in the next few years.

The growing European and Asian demand for
wood bioenergy is being answered by a number of Canadian and U.S. companies
already engaged in or moving towards an expanding export market. Besides
British Columbia, which has been the major supplier of pellets to Europe, the
U.S. South has recently witnessed the opening of a few large pellet plants with
plans to ship a majority of their production to European consumers.

There is much uncertainty regarding future
energy policies worldwide, but one thing is undeniable: pellet demand in
Europe, Asia, and perhaps also in the United States will be experiencing
dramatic growth over the next five years.