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Power Prices Jolt Pellet Producers

By Anna Simet | March 07, 2014

When I was a kid, a nagging question we would frequently hear from my dad was, “Why are all of these lights on? Do you think I work for the power company?” (As if utility employees get discounts on electricity.)

As an adult, I don’t yet have any kids who are tall enough to reach the light switches, but my husband hears similar things from me, because he loves to leave the lights on. I am the designated bill payer, so I know what electricity costs and how much we use.

The truth is that I really have nothing to complain about. Here in North Dakota—and most of the Midwest—power prices are relatively cheap. According to data from the U.S. EIA, average retail electricity prices in December were 8.03 cents per kilowatt hour (8.55 for residential, 8.18 for commercial, 7.19 for industrial) in North Dakota. South Dakota, Nebraska, Iowa and Indiana all hang around that range.

But it’s quite a different story in the Northeast. In New Hampshire, for example, the average price for all sectors was at 14.72 cents in December. In Rhode Island it was 18.37, in Vermont, 14.63, in Massachusetts 17.19, and Maine 12.68. That must hurt.

(Note: In an earlier post, I had incorrectly used the dollar unit instead of cents!) 

So what got me thinking about this? Earlier in the week I was talking to Jonathan Kahn, president of Geneva Wood Fuels in Maine, and he said pellet producers in the Northeast are being slammed by electricity prices. I had called him for a completely different reason, but I’m glad he mentioned it, because it wasn’t on my radar. Hammer mills, dryers, presses and moving material all require energy, obviously. And it really adds up.

I did some research and couldn’t find much information as to what the average pellet mill spends on energy costs per year, but I did find a several-year-old study commissioned by the Ontario Ministry of Natural Resources that said including electric/natural gas requirements, in eastern Ontario, an average mill’s energy cost would end up around $10 per metric ton of output. There are many varying factors that can change that number, though, including whether a plant is using fibers as a drying fuel, if there’s a grinding operation on the front end, if there’s no natural gas available in the area, and, of course, prices of electricity in the region.

So if you’re talking about a 50,000-ton mill, that’s $500,000 in annual energy costs.

I’m curious as to find out what that number is at today, and how it compares from the average Northeast producer to Midwest to West. Pellet producers work hard and are seemingly very passionate about what they do, and not because they make a pretty penny. Historically, pellet production has been a relatively marginal business, so escalating power prices must take a toll on profits.

Are you a pellet producer and willing to talk electricity prices? Shoot me an email at asimet@bbiinternational.com .

 

 

 

3 Responses

  1. Philip Treanor

    2014-03-07

    1

    Before deciding on the expense of production for wood pellets one must ascertain the cost of Electricity, diesel and more importantly the cost of Steam/hot water. The government of Ontario provided some costs but these should be accepted with a Thank You to that government. Is there any hope of acquiring similar information from Domestic mills? Really appreciated your article Philip Treanor Yuba City, Ca.

  2. John Arsenault

    2014-03-10

    2

    Electrical power requirements to make pellets vary from a low of around 125 kWh/ton for a small kiln dry feedstock unit up to 300 kWh/ton for a large scale roundwood feedstock operation as mentioned by one of your presenters at your recent "Successfull Pellet Plant" webinar. The price of the kWh varies from a low of around 6 cents (Georgia, Quebec, BC) to the highs you mentioned. The Ontario numbers you quoted are either wrong or outdated considering that the kWh in Ontario currently sells for over 12 cents.

  3. Phillip Dauben

    2014-03-13

    3

    If the fiber supply warrants it, why not generate power onsite using a portion of the sawdust used for making pellets? I would think the combustion process could use the excess heat for drying and the generation costs could be fixed based on supply contracts with the fiber suppliers. Excess power could even be sold back to the local grid.

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