Critical Mass

Old and new players alike are stepping up their game with semi-dry wood chips, and state incentives are helping drive the market to maturity.
By Ron Kotrba | March 07, 2019

The small but growing U.S. market for semi-dry wood chips finds its home in niche applications in the Northeast. “It’s not for everyone,” says Charles Levesque, a founding partner with Innovative Wood Fuels LLC. “Semi-dry wood chips are perfect for facilities that are maybe on the large size for wood pellets, or on the small side for traditional green wood chips. That’s the sweet spot.” Several years ago, Innovative Natural Resource Solutions LLC partnered with North Country Procurement Inc. to form Innovative Wood Fuels, and by 2012, field research was underway air-drying various species to get a better understanding of producing semi-dry wood chips with moisture content below 30 percent. “We were trying to mimic the way they dry chips in Western Europe, using the sun,” Levesque tells Biomass Magazine. “Active drying systems are expensive and, given the size of the market, we didn’t think it made sense—and we still don’t think it makes much sense because the market hasn’t grown all that much.” 

Levesque said IWF had begun promoting semi-dry wood chips to various clients early on, working to create a market by urging owners of businesses, manufacturing centers, schools, town buildings and hospitals in the Northeast to switch from fossil fuels to biomass. “We had been doing this promotion for a while, and there was an increase in the number of installations of wood pellet and chip boilers for heating,” he says. “Then, just as things were gearing up, fossil fuel prices tanked in 2014. Things have moved a lot slower since then. There are still new installations, but not at the rate prior.”

IWF produces an appropriate range for a niche market: thousands of tons per year. “We don’t have customers in the 5,000-ton range,” Levesque says, adding that a good-sized high school of 800 to 1,000 students to which he supplies semi-dry chips uses between 500 and 600 tons per year. “It makes it difficult to ratchet up volumes when you’re dealing with that size customer. We have the capacity to scale up to 10,000 tons, and if that happened over the next few years, I’d be delighted.”

Logwood enters IWF’s yard in central New Hampshire from “the existing logging infrastructure,” Levesque says. The company purchases select species of hardwood and softwood and sells both kinds of semi-dry chips. “Some markets want hardwood, and others want softwood,” he says. The logs are placed in specially designed stacks, which must be completely arranged by May for chipping in the fall. “Once it’s decked, we do periodic moisture checks,” Levesque says. The material stays in roundwood form until chipping.

IWF subs the chipping out to a number of contractors. “All the knives are set to produce a smaller-diameter chip, and we use a screening system to get the size we want with minimal fines,” Levesque says. “The delivery mechanics to the boiler are not like what you see for a green chip boiler. For semi-dry chips it’s more nuanced and delicate. You have to be careful of the quality. There’s a lot more manufacturing and product movement involved compared to chipping in the woods and delivering to market.”

Prechipping begins at the end of September. IWF prechips in order to have supply on hand in case a customer calls and needs fast delivery. The prechip pile is stored under cover, out of the weather. Other than the prechip pile, much of IWF’s dried logwood is chipped directly into full-size live floor trailers and delivered. “The facilities we supply must be able to handle live floor trailers,” Levesque says. “We’ve dallied in using pneumatic blower trucks, but it’s too expensive. The market is not big enough to own one of those trucks. We can deliver at a much lower price if the facility is set up to receive full-size live floor trailers.” The live floor trailers can haul 23 to 24 tons per load, whereas a blower truck can do half that. “If you’re delivering an hour one way, that makes a huge difference and, combined with our passive drying technique, it helps us offer the lowest possible price to our customers.”

The passive drying technique IWF employs to produce semi-dry wood chips is a guarded trade secret, but Levesque says the honed approach is based on timber species and size, the actual layout of the physical piles, and ensuring as much sun exposure as possible during the maximum critical drying months of May through September. “All of those things make up our trade secrets,” he says. “When we follow the formula we’ve developed, we know we’ll be at 30 percent maximum moisture.”

The cost-savings is a “huge” advantage, according to Levesque, but the major disadvantage is space needed for scale-up. “The material we produce is 25 to 40 percent cheaper than the other producer,” he says. “If we go to active drying and a smaller truck, it’s a much more expensive product. The disadvantage, if we were to be lucky and blessed enough to grow so big, is space to scale up if we run out. We literally need physical space on planet Earth, but we’re nowhere near the scale where that’s a problem—yet.”

Froling Energy
Competition is crucial for an industry such as semi-dry wood chips to hit critical mass. Froling Energy, a pioneer in the space, welcomes competition from IWF and others to help establish the market. Also based in New Hampshire, Froling Energy does not chip at its yard like IWF does. Rather, it buys bolewood that is chipped in the forest. While IWF sells separate hardwood and softwood chips, Froling Energy provides a blend of two-thirds hardwood and one-third softwood. “It’s always mixed,” says President Mark Froling. “We blend here on-site through the screening process, so we put two buckets of hardwood and a bucket of softwood. It seems to be a good mix. We experimented with all pine and all hardwoods, but we like this mix—we get good performance out of the blower truck and our boilers.”
 
Froling says the bolewood chips come in an “unruly” state from the forest, so once delivered to Froling’s yard the tramp metals are removed and the chips are screened so 99 percent of the product is less than 1.5 inches. From there, the chips enter the active dehydration stage to produce semi-dry chips, which Froling has branded precision dry chips (PDC).

The company recently upgraded its PDC manufacturing facility from a batch dryer system with a fluid bed floor to a larger, more predictable belt dryer system built for Froling Energy by Germany-based Rudnick & Enners GmbH. The belt is six feet wide and 50 feet long and the heat is provided by a 3.2 MMBtu biomass boiler that runs on PDCs. About 10 percent of the PDCs Froling Energy produces is used to dry its chips. “It’s a low-temperature belt dryer and it’s been working well,” Froling says. “On average, we dry our PDCs to 25 percent moisture.”

The company is preparing for a major scale-up project, and its new dryer is part of the plan. “Our lease is coming to an end here soon, and we are looking to fourfold our operation,” Froling tells Biomass Magazine. “We’re in the middle of acquiring land for a much larger site to produce quite a bit more chips.” In 2018, the company sold about 6,000 tons. Froling says this year he projects 8,000 tons and more than 10,000 tons in 2020, after a few new installation projects come online. Froling Energy doesn’t just produce PDCs, but it also is a boiler installer for medium-sized operations such as schools, universities, libraries, municipal buildings and manufacturing centers. “Once we’re in the 10,000-plus range, our approach for this new process will be similar,” he says. “We will still be screening and removing tramp metal, but we will use a steam boiler with a turbine.” The cogeneration of heat and power from a new, larger steam boiler and turbine will provide low-pressure steam to feed the same Rudnick & Enners dryer and high-pressure steam to generate electricity, helping offset Froling Energy’s $50,000 annual power bill. “We’re going to do all of that out of the same batch of fuel,” Froling says.

The new biomass boiler will be double the size of its current boiler and feature more redundancy. “If we have a failure, we need more resiliency and redundancy in our process, so we’re concentrating on that—more backup, more stout and resilient equipment, and making power ourselves as part of the resiliency,” Froling says. “We want to make a low-carbon product, and by making our own power we’re reducing our own carbon footprint and that of our product.”

Incentives
The 2018 Farm Bill increased authorized funding of $25 million for the Community Wood Energy and Wood Innovations Program (CWEIP) in years 2019-’23. “The use of wood for thermal energy from sustainably managed forest lands has numerous economic and environmental benefits including local job creation, enhanced energy security in rural communities, reduction of greenhouse gas emissions from fossil fuels, and improved forest health, which reduce the risk of wildfires on public and private lands,” says Jeff Serfass, executive director of the Biomass Thermal Energy Council. The improved CWEIP establishes a new national competitive grant program providing funding for up to 35 percent of installed costs on advanced community-scale wood heating, district heating and wood combined-heat-and-power projects, as well as grants for projects that commercialize new innovative uses of wood.

Froling says his company has never received federal incentives for its startup or operations, but he says state incentives have been important. “We were able to get grant funding through the Public Utilities Commission,” he says. “In New Hampshire, the PUC funds renewable energy projects.” The first round of grant funding Froling Energy received was for its boiler to power the drying plant. “The PUC doesn’t incentivize drying or process equipment,” Froling says. Froling Energy has applied for a second grant funding round through the state for its resiliency increases and cogeneration plant planned for construction to expand operations later this year. “We applied, but we won’t know if we’ll get it ‘til springtime,” Froling says. The company also helps its boiler-install clients, almost all of which are commercial entities vs. residential customers, apply for state incentives. “Almost every one of them is large enough where it makes sense to spend time on grant applications,” he says.
“Sometimes the state will pay up to 30 percent of the costs, other times it’s 10 percent.”

Not only is Froling eligible for grants to help offset its own and its customers’ costs, but given that the company uses PDCs to dry PDCs, it generates renewable energy credits (REC) under the state renewable portfolio standard (RPS) as well. “In New Hampshire, those are [obtained] for every megawatt-hour of thermal energy produced,” Froling says. “So right now with our current boiler, more or less, we generate one REC certificate an hour.” He says while market prices fluctuate, each REC certificate is typically worth around $20. “It’s a nice discount,” Froling says. “It’s a quasi-rebate or subsidy that helps us make this fuel. Our customers are also getting RECs for every megawatt-hour—we are one of the larger thermal energy credit creators.”

Levesque says it’s essential to have incentives. He adds that he is encouraged by what is taking place in his neighboring state of Massachusetts.

Massachusetts
Massachusetts’ RPS was created in the late ‘90s and first went into effect in 2003. It initially provided incentives for biomass power plants. By 2011-’12, interest in renewable thermal energy was on the rise. In 2012, a report was issued through the Commonwealth Accelerated Renewable Thermal Strategy that laid out a plan to follow for the state to expand renewable heating and cooling offerings. The CARTS report offered a suite of recommendations, including infrastructure grants to support local growth, expanding the RPS to include heating, rebates and more. The first round of grant funding focused on the renewable heating supply chain. The second round of state grant funding was just announced Feb. 11 and granted nearly $3 million in match funding for several wood chip projects. Four of the five recipients have wood chip-related projects, and at least three of the five involve dried wood chips.

“There are different standards and requirements for using pellets, dry chips and green chips under the Massachusetts Alternative Energy Portfolio Standard (APS),” says Mike Judge, director of the Renewable and Alternative Energy Division of the state Department of Energy Resources. The APS was established to complement the existing RPS. “The DOER wants to promote the use of dry chips and pellets as much as possible,” Judge tells Biomass Magazine. “Dry chips burn cleaner and more efficiently, so it’s the most efficient use of the local resources we have and something that we would like to see used more often when displacing fossil fuels.”

Caluwe Inc. of Burlington is receiving $426,000 in cost-share funding to build a showroom storage warehouse in western Massachusetts and purchase a service vehicle. Also included in the project is the full testing and certification of several European wood chip boilers and related emission control devices to U.S. EPA and Underwriters Laboratories standards. Pantermehl Land Clearing Inc. of Ashfield is granted $350,000 to purchase a large format chipper, live floor trailer and chip screen to allow for the creation and bulk delivery of dried woodchips. Also cost-shared is a 65-foot by 80-foot chip storage building and asphalt pad. Wagner Wood of Amherst is receiving $885,000 in cost-share funding to purchase the equipment to process, handle, store and deliver dried wood chips. This project will include the purchase of a chip trailer designed to pneumatically deliver dried chips into residential or commercial fuel storage silos. And the largest cost-share grant recipient under the Feb. 11 award announcement is Holiday Farm Inc. of Dalton, which is receiving $1 million to purchase equipment to process, handle, store and deliver dried wood chips. This project will include the purchase of two pneumatic delivery trucks.

Tim Crane, co-owner of Holiday Farm, has started TTC Energy LLC to launch his semi-dry wood chip manufacturing business. Crane is a descendent of Zenith Crane who, in 1801, started a well-known company making paper from cotton and linen in western Massachusetts. For seven generations, the company has made the paper used by the U.S. government for its currency. Holiday Farm, another generational family business, has 1,000 acres of forestland, and Crane’s activities and experience over decades there launched his interest in producing semi-dry wood chips. After retiring from the family currency paper business, Crane sought new opportunities.

“As I got insight into what was happening in Massachusetts with DOER and its thermal renewable energy initiative that included biomass as an eligible renewable fuel worthy of renewable energy credits, I started to pay attention,” he tells Biomass Magazine. “As regulations evolved and were finally officially promulgated, I saw opportunities in wood chips as a low-cost renewable fuel that is local. Also, the RECs make the economics highly advantageous. Fossil fuels generally remain cheap, so there isn’t a market without a stimulus, and what the state has done is provide that stimulus, which drove me to the fuel side.”

Crane has been collaborating and consulting with Froling. “Without my collaboration with Mark, I’m not sure I’d be doing this,” Crane says. “Mark is collaborative and views new entrants in the market not as competition but as a necessity to evolve and grow the supply of dry chips. He keeps no secrets from me.”

He adds that while his semi-dry wood chip manufacturing business will be modeled after Froling Energy, slight differences exist. “Mine will be flexible in scale,” Crane says. “I know the market will evolve slowly, and after the facility is built, there will not be demand for all that capacity. So I’m developing a process that doesn’t overinvest in capacity in the beginning, but one that doesn’t eliminate the benefit of scale in process design.” Crane is skipping batch drying and starting out with a belt dryer similar to Froling Energy’s. He says the DOER grant application process was “minimally painful.”

Judge says, “Unlike other initiatives that encourage the deployment of actual biomass boilers and furnaces, this infrastructure grant program is designed to support incentivizing chip drying innovations and related infrastructure. Many of the grants provided under the program foster the type of investment that will expand the availability of the fuel needed by owners of biomass boilers and furnaces.”

TTC Energy’s sales must evolve from scratch, Crane says. “We’re not fighting over customers, we’re developing the demand in Massachusetts. A critical part of the ecosystem has to be preaching the gospel merits of the DOER program and clean, renewable wood as a viable concept.”

The Massachusetts Forest Alliance is one of those advocacy groups. Matt Barron, chair of the MFA policy committee, says he plays an advocacy role for members to advance their agenda, and MFA is very active in the wood heating sphere. “We have a Statewide Wood Energy Team through which we conduct tours of schools, hospitals and other buildings that have undergone successful conversions to chips and pellets, and we publish case studies,” Barron tells Biomass Magazine. “The show-and-tell is very eye-opening for people. They get to see these systems in operation and see how efficient they are. We are an advocate, a cheerleader.” MFA also tracks legislation, lobbies legislators and provides op-ed pieces to local newspapers touting the benefits of clean, modern wood heat, among other critical activities. 

“The infrastructure grant funding by DOER is important,” Crane says, “but not as important as the rebate program at the Massachusetts Clean Energy Center. The big obstacle to people adopting wood heat is the cost of equipment. The equipment is very sophisticated, super clean and highly automated. It ain’t your grandpa’s boiler. And it’s expensive.” Crane says even after demonstrating a quick ROI to customers with substantial fossil fuel bills, it’s still a tough sell. “So when they can shrink that number in half like through what MassCEC is doing, that’s huge,” he says. “If MassCEC backs off its support for heating units, it would be a real blow, and it would take real momentum out of this initiative.”

Provided MassCEC continues offering rebates to help build this market, instate supply of wood chips must keep up. “In Massachusetts, we currently don’t have a lot of organizations that are capable of providing dry chips, as much of the supply is manufactured and dried outside of the state and brought in,” Judge says. “As we have more biomass facilities installed that are capable of using dried wood chips in Massachusetts, we want to have the requisite amount of fuel needed to feed those facilities—so if we’re going to do it, why not do it locally?”

Crane says he thinks the semi-dry wood chip industry is approaching critical mass. “That’s what I’m betting on, but I have to admit it’s too early to tell,” he says. “But I hope I can make a difference.”

Author: Ron Kotrba
Senior Editor, Biomass Magazine
218-745-8347
rkotrba@bbiinternational.com