The Multifaceted Benefits of Pellets

FutureMetrics' William Strauss outlines the many benefits expanded pellet heating could bring to the U.S.
By William Strauss | March 28, 2014

When people talk about energy, particularly at the federal level, they think of electricity and transportation.  In the northern states, those two large sectors account for about 65 percent of energy use.  The other 35 percent—which is heat for homes and businesses— is often ignored in policy discussions. 

The reason this matters is that the heat in many homes is produced from burning imported petroleum-based fossil fuel in boilers or furnaces. For northern states that are dependent in part on heating oil and propane, the majority of every dollar spent on heating fuel leaves the regional economy, and much of that money spent on heating leaves the country. 

 If heating oil were a product of U.S. petroleum, at least the money spent would stay in the country.  But most of the heating oil refined in the U.S. for the northern markets is not. Only about 19 percent of the heating oil refined in the Gulf Coast refineries comes from petroleum extracted from U.S. wells
At a price of $3.80 per gallon, FutureMetrics estimates that about 770,000 jobs are exported to the other countries that supply the petroleum for heating oil and some of the propane used to keep Northern Tier states’ homes and business warm.  This estimate excludes areas that already heat with natural gas or electricity, and areas that are likely to get natural gas.

A very optimistic scenario might suggest that by 2020, most urban centers will have natural gas.  But that will leave a lot of homes and business on heating oil or propane.  The pictured chart shows the number of rural households in the northern tier states that are not on natural gas, most of which will never have a natural gas connection.

It would be irresponsible, given the current demands by the pulp and paper industry, to suggest that there is sufficient sustainable forest feedstock today to make pellets to heat 6 million homes.  But the world is changing, and demand for fiber from our working forests for papermaking will change dramatically in the coming decade. 

We are already almost half way to having enough pellet fuel for 6 million homes.  Currently, the U.S. produces nearly 10.4 million tons per year of wood pellets annually.  Another 7.9 million tons of capacity is under construction or in the advanced development phase.  Some of the existing production and almost all of the new capacity is earmarked for export into overseas markets.  If those pellets were to stay here for our heating markets, they would heat almost 2.6 million homes. 

The conversion from petroleum-based heating fuel to premium wood pellet fuel has many benefits, which accrue from three key pathways that have positive multiplier effects: More than 75 percent of each dollar spent on heating oil does not stay in the local economy, and jobs are exported along with that money.  Locally produced pellet fuel keeps almost 100 percent of every dollar spent circulating locally; pellet fuel is about half the price of heating oil for the same heating energy, and those savings increase the income that households and businesses have to spend in the local economy; the supply chain for harvesting, manufacturing and distributing sustainable biomass creates jobs. 

Additionally, the conversion of 6 million homes and businesses from heating oil and propane to wood pellets would reduce net carbon emissions in the U.S. by 81.6 million tons per year.

The premium wood pellet sector can deliver lower end-user heating costs, a higher degree of energy independence, needed jobs from three important pathways, and can reduce carbon dioxide emissions while doing so.

Author: William Strauss
President, FutureMetrics