2016 State of the Industry Report
February 4, 2016 - If 2015 showed us anything it was that there is enormous opportunity for the future of the biomass industry in Canada.
This year saw major developments in biochemical production, a solid boost in the domestic pellet market, the growth of overseas opportunities and a political drive towards clean, renewable energy. At the same time, it continued to show great uncertainty in the form of policy development, continued challenges with access to fibre and the fragility of domestic wood pellet demand.
The bitter cold that swept through Atlantic Canada during the first four months of 2015 was a welcome sign for pellet producers throughout the east. Pellet stove sales were brisk, and demand for wood pellets for residential use grew to an all-time high. Companies like Groupe Savoie in New Brunswick saw domestic pellet sales soar, while plants like Scotia Atlantic Biomass in Nova Scotia found the sudden need to provide resources domestically.
The spring thaw brought continued fibre transport issues, especially in Nova Scotia, where weight restrictions on many of the province’s secondary highways meant no fibre transport to mill. While harvested with equipment already in the forest continued to cut trees in many parts of the province, stems sat roadside until the ground was solid enough to retrieve the fibre supply.
There is still right-priced fibre issues throughout the region, with not enough fibre supply coming into most regional pellet mills to allow them to run at full capacity. Despite this, there was solid growth, especially in New Brunswick and PEI, of small-scale bioenergy projects. Driven by government support, PEI has already announced seven additional installations coming online in early 2016.
Rumours of renewed efforts to establish pellet operations continued to surface in Newfoundland, even though there has been little progress on plant development since Rentech won harvesting rights of the 280,000 cubic metre supply formerly used to supply the Abitibi-Bowater mill in Grand Falls-Windsor in April of 2014.
As the year wrapped up, a warm start to winter put a severe damper on the domestic pellet demand that boosted the region to start the year.
This past year started well and ended poorly for the majority of pellet producers in Quebec.
A banner year for domestic pellet demand started 2015, as a cold winter led to strong sales for wood pellets in Quebec. As a result of the winter weather, and in anticipation of another cold winter to start 2016, many pellet producers found themselves running their production close to capacity for the year. Two plants, Granules LG in St-Félicien and Energex in Lac-Mégantic, made significant upgrades to their operations in order to keep production running around the clock.
For two plants, 2015 was a year to forget. A fire at Granule Boreal in Amos in April destroyed the company’s 50,000 tonne/year plant, and the owners of the plant chose not to rebuild the operation. For Trebio in Portage-du-Fort, continuing fibre supply issues are causing the plant’s production to decrease substantially, with current production running at around 25 per cent of its original capacity. The fibre shortfall has come largely as a result of not enough accessible fibre in the Pontiac region, as well as competition from the restarting of Pembroke MDF.
The use of bioenergy continues to grow in the province, with many communities exploring new options for its integration. Near the end of 2014, Quebec had over 30 projects in the planning stages and several have broken ground and are progressing.
With the uncertain future of Trebio, and the warm start to winter, the pellet market in Quebec sits in a precarious position in 2016.
Without question, it was a big year for Ontario in the biomass, biofuel and bioenergy industries, with three highly anticipated projects completing construction and one other nearing the finish line.
In southern Ontario, BioAmber made its biochemical breakthrough with the opening of its bio-succinic acid plant in Sarnia. Despite plummeting oil prices, the plant is providing a cost-competitive alternative to petroleum-based succinic acid, but without harmful emissions. It is the first commercial-scale plant of its kind in the world and provides a model for other biochemical producers to follow in 2016 and beyond.
One of North America’s largest biodiesel plants now resides in southern Ontario, as Atlantic Biodiesel officially started production in Welland (see page 18 for our feature story). The plant, which did its first official pour in October, is expected to produce upwards of 170 million litres of biodiesel per year, as well as 15 million litres of high-grade glycerol, for consumption in the Canadian and U.S. markets.
In the northern part of the province, the highly-anticipated renovation of Ontario Power Generation’s Thunder Bay Generating Station marked the first facility in the world to burn advanced biomass. The renovation from coal to biomass burning cost just five million dollars to complete. While there is no current fuel provider in North America, there is already talk that the provincial government could be looking to financially support a domestic producer for the fuel.
Also in the north, Rentech looks to be back on track after a series of equipment struggles at its Wawa pellet plant. The Atikokan plant is already producing pellets for its contract with OPG, while the first major shipment from the Wawa plant took place at the end of the year.
Weather was also at play in the prairie provinces, especially Saskatchewan, where dry weather cut canola output. The estimated cutback was about 15 per cent versus output from 2014.
Also hurting ethanol production in the region was the official phase out of the Saskatchewan Ethanol Fuel Program. The Program, which began in 2002, originally provided a 15 cent/litre incentive for blending Saskatchewan-produced ethanol with petroleum fuel resources. As of April 1st, that incentive was removed as a result of the program review completed in 2013.
Manitoba remained quiet on the biomass/bioenergy front in 2015. The province continues work with small-scale operations for conversion to bioenergy, including agricultural operations. Manitoba is the only province in 2016 with an election, so it will be interesting to see how much work is done to bring bio-initiatives to the forefront during the campaign.
The official startup of Enerkem’s waste-to-ethanol facility was one of the biggest headlines in 2015, capturing global attention in the process. The Edmonton-based plant will produce upwards of 130 million litres of cellulosic ethanol per year, generated from 90 per cent of the community’s non-recyclable solid waste.
The Enerkem/City of Edmonton model provides an ideal solution for clean fuel resources and MSW management while also providing a non-food base alternative for ethanol production.
As the fight for fibre continues in the province, the wood pellet production capacity continues its steady increase.
This year saw the development of Pinnacle Renewable Energy’s seventh pellet production plant, with full construction and the start of production at its Lavington mill in partnership with Tolko Industries (see page 10 for our feature story). The mill, which fills a gap left by the closure of the sawdust digester at Domtar in Kamloops, will produce upwards of 260,000 tonnes of pellets per year for sale to Pinnacle’s growing international clientele.
There are also significant upgrades being done to pellet plants within the same region of the new Pinnacle plant, with expansion underway at both the Viridis Energy West plant in West Kelowna and the Diacarbon Energy plant in Merritt.
Speaking of Diacarbon, their takeover of the Merritt plant, formerly the Highland Pellet Company facility, will involve both the production of white pellets and torrefied pellets, as work continues on its torrefaction capacity in 2016.
The much-anticipated Mackenzie bioenergy project is now operational following an equipment issue that delayed startup. The plant, adjacent to its sawmill operation, is generating a net of 230GWh, enough power for 24,000 homes and will generate upwards of $25 million in revenue for Conifex.
There are several wood pellet projects in development stages throughout the province as we enter 2016, including the Canfor projects in Chetwyn and Fort St. John, which were both at or near completion at the end of the year. Iberdrola has already broken ground on its two bioenergy projects in the province, so added capacity for the industry will come online in the year ahead.
The Northwest Territories is seeing a surge in biomass activity thanks to strong support from the government.
There are now 22 biomass heating projects in the NWT, with additional projects being built across the territory. The use of biomass is providing an approximate 35 per cent energy savings over traditional energy sources such as heating oil and diesel.
The recent formation of a biomass association in the NWT is helping to drive biomass and bioenergy initiatives forward. While logistics constraints still plague the region, the first local pellet operation is in the design phase, which should help to grow pellet supply even into difficult-to-reach parts of the territory.
COP21 in Paris provided some much needed optimism for the biomass industry in Canada going into 2016. A federal government focused on climate change initiatives is a welcome sign for the industry, and in turn, will hopefully lead to new policy development. The raising of ethanol and biodiesel blend percentages, financial support for community growth of bioenergy and district heat assets and investments in second and third generation biomass for coal replacement would be logical places to start.
We should see some positive development in provincial policies as well. Alberta’s commitment to focus on renewables should provide bio-friendly policy development in 2016. In Ontario, we could see incentives thrown the way of an investor that can copycat or mimic the fuel provided to OPG by Arbaflame. In B.C., it looks like the work put forward by WPAC and others could lead to legislation that helps make more fibre available for biomass producers.
There are also positive signs that there will be more demand for pellet exports. For starters, the conversion of Lynemouth in the U.K. means new demand for upwards of 1.6 million tonnes of pellets per annum. Progress made with sustainability targets in the Netherlands, market access work done in South Korea, a slew of energy projects needing wood pellets in progress in Japan and a potentially cold year in Italy could also open up new opportunities for pellet producers.
In all reality, the success of 2016 will be dictated by who steps to the plate following COP21 and what those efforts to reduce emissions look like. Should Canada follow through in dropping emissions nationwide, the domestic future of the biomass industry, including wood pellets, bioenergy, biofuels and biochemicals, could reach heights not yet seen before.
Top stories of 2015
Here are the most-read online industry stories of 2015 at canadianbiomassmagazine.ca.
- Most read news story – Wood pellets in demand (2015 Industry Report)
- Most read wood pellets story – Whitesand Waiting
- Most read biofuel story – Enerkem begins commercial production at Edmonton plant
- Most read bioenergy story – Conifex completes 72 hour run test
- Most read R&D story – Carlsberg developing wood based beer bottle
What they said
We asked representatives from three Canadian industry associations whether they thought 2016 would be a good year for their respective sector. Here is what they said:
Chair, Canadian Renewable Fuels Association
2016 will be a year of opportunity for Canada’s renewable fuels industry. We are well positioned to support provincial and federal governments as they develop cap and trade systems and work to meet aggressive greenhouse gas emission reduction targets stemming from COP21. Our products already reduce carbon emissions by 4.2 megatonnes in Canada every year – the equivalent of removing nearly one million cars from our roads – and more can be done.
Dr. Donald L. Smith
CEO and Scientific Director, BioFuelNet
2016 is likely to be a positive year for biofuels in Canada, especially towards the latter part of the year. Although the price of oil is likely to remain low, we expect that there will be improved policy tools that support initiatives and industries that aim to mitigate climate change.
Wood Pellet Association of Canada
I am optimistic about 2016 for the wood pellet industry, although a positive start to the year will depend on whether or not it gets colder in Quebec and Atlantic Canada. With lots of new volume coming online in 2015 and the possibility of lots of new energy projects needing pellets in both Europe and Asia, 2016 could be a really good year for Canadian pellet exports.