Energizing the Woody Biomass Market

The race to meet renewable energy targets has increased the demand for saw dust, shavings and wood chips.
By Rona Johnson
Woody biomass could be one of the fastest growing markets in the U.S. as competition for the resource heats up between pulp and paper mills and renewable energy plants.

About three years ago, William Perritt, who was reporting on wood fiber and lumber markets for RISI's International Woodfiber Report and Crow's Weekly Market Report, started making a case for tracking the wood biomass market. In October 2008, RISI's Wood Biomass Market Report was started with Perritt as its executive editor.

"I kept saying ‘You know something, this is going to be the next big thing,'" Perritt says. "But I had no idea how big it would be, and I don't think anybody did."

Press releases announcing biomass power projects have been flooding reporters' inboxes. These announcements range from the building of 25 to 100 megawatt plants in the U.S., to coal-fired power plants switching part or all of their facilities to burn biomass, to the construction of mega plants in the U.K. that will import wood chips from North America and other countries and produce in excess of 250 megawatts of electricity power.

"They just keep coming," says Perritt, who has a section in his monthly newsletter that details new projects. "I figured in the first couple of moths that [section] would start to dwindle and I would have to figure out something else to fill that copy hole. But I think we had only one month where there was just one new project and updates on some others."

This trend has led to greater competition for woody biomass and has caused a stir in the wood products industry with the consensus being that there are positive and negative impacts to the increased demand.

"With the so-called traditional industry players, there are reactions that could be described as both positive and negative," Perritt said. "With a new energy plant or a new pellet mill in the neighborhood, it's going to cause competitive factors for similar products." They include wood products such as pulp wood delivered to pulp mills because biomass can compete on a level with that, as well as the lower-grade items such as particle board and medium density fiberboard.

On the other hand, the new demand creates a market for some wood waste that was not there before such as saw dust. "Who would have thought saw dust would turn into gold," Perritt said. "The pulp mills were picking that stuff up just for the cost of delivery. The saw mill would call up and say ‘Hey guys come get it.' It's not that way anymore."

For some lumber mills decimated by the collapsed housing market and the sheer drop off in construction, getting paid for materials such as wood chips, shavings and saw dust that weren't valued in the past might be the key to survival.
The one sector of the wood products industry that could benefit the most from the nascent woody biomass market is the logging industry, which has been in the dumps, Perritt said.

The retraction in logging capacity is one of the main concerns for anyone who is buying wood on the open market, Perritt said. "Loggers are just disappearing but it's very hard to quantify." That's because there are a lot of mom and pop operations, and some logging operations may still be operating but they've dropped crews.

"These biomass markets have given the loggers something to do, and the ones that have been able to invest in some equipment or who got ahead of this thing early on and bought chippers and grinders are doing a little bit better. If it can keep some of these loggers in business then that is a good thing for the whole industry."

Preparing for the Demand

The U.S. biomass market is small compared with some European countries where bioenergy development is further along.

In the 27 European Union member states, bioenergy contributes only 3.7 percent of the total primary energy supply; however, in several European countries such as Finland and Sweden it contributes 20 percent and 16 percent respectively of the gross inland consumption, according to the European Biomass Industry Association.

That market is being closely monitored by Finland-based MHG Systems Ltd., which develops enterprise resource planning (ERP) systems to connect the bioenergy and forestry industries in Europe (see graphic on page 39). The ERP system uses Internet, real-time maps and satellite-based information to map out biomass and other resources, including information about where the biomass can be found, moisture content and if it was produced and harvested sustainably. The system is designed to improve a company's biomass procurement and logistics operations and financial efficiency by tracking the biomass from the field to the bioenergy production facility.

The company currently does business in several countries, targeting companies in the energy, biofuels, electricity and heating, harvesting, saw milling, pellets, forest services and the forest industries, and is in the process of establishing a North American presence.

Although Finland and Sweden already consume large amounts of woody biomass, MGH believes there's room for growth there, and in other parts of the world. In Finland for example, the market for small-scale utilization of forest biomass in single-family homes is not developed at all and there is a huge potential to develop that market particularly for pellets, according to Dominik Röser, a researcher at the International Forest Technology Finnish Forest Research Institute and Seppo Huurinainen, managing director of MGH.

Röser and Huurinainen see the potential for woody biomass markets in rural areas of Germany, especially for wood chips, and France where the market is not very developed. In Eastern Europe district heating systems that are mainly based on coal, oil and gas, could be easily retrofitted for biomass, they say. Large forest fires are causing problems in Spain and Portugal, which would provide excellent possibilities for woody biomass utilization in the future. "In particular, China has huge potential to increase both forest biomass and agrowastes for heating and power," Huurinainen says. "Big investments are just about to start."

Röser believes the U.S. and Canada hold the biggest potential for the development of biomass markets. "They have a need for heat and also the necessary resources," he says. "Furthermore, pulping is increasingly moving to South America and Asia, which will create the need for a new market both in North America and Europe."

Although the potential is there, Röser has some advice for the budding biomass industry. "The latest developments in the U.S. are very encouraging," he says. "The potential is huge. But the industry has to market biomass properly since there are still so many misconceptions about burning wood-air pollution, sustainability, etc. Also an active dialog with environmental groups and researchers will be essential to move biomass forward."

MHG offers its bioenergy ERP service in 13 languages and says new languages can be easily added. "MHG is in readiness to start doing business in North America right now," Huurinainen says. "For easy start we have launched a risk-free Starter Package including business model development consultancy, training, software and hardware."

For more information about MHG's ERP systems check out its Web site at www.mhgsystems.com.

In order for the U.S. biomass market to fully develop, the proposed bioenergy plants have to be built and in operation. Until that happens, those who will be impacted, or could benefit, are watching and preparing.

"I went from being one of the people at RISI who quietly worked away at the pulp wood report and every now and then would start to squeak and whine about biomass, and now we're very much in the spotlight," Perritt says. "It's just amazing what's happening in the industry. It's a big buzz right now and it's going to fade back, but what the heck, it's kind of nice to be part of something like this." BIO

Rona Johnson is the editor of Biomass Magazine. Reach her at rjohnson@bbiinternational.com or (701) 738-4940.