Global pellet industry on the rise, sustainability key

By Lisa Gibson | September 12, 2011

The theme of the final panel discussion at the North American Biomass Pellet Export Conference, which was held Sept. 8-9 in New Orleans, was that the pellet industry is growing rapidly, and sustainability is of utmost importance.

“Come on in. The water’s fine,” said Harold Arnold, president and CEO of Georgia-based Fram Renewable Fuels. “I think it’s a great business to be in.”

The panel featured executives from pellet companies currently exporting their products, and included Mike Williams, director of strategy for wood products group The Westervelt Co., which is exploring pellet production and export opportunities. “Pellets are an obvious choice for us,” Williams told attendees. The company wants to begin producing wood pellets from the existing byproducts of forestry, thinning and harvesting operations on its 520,000 acres of timber land, as well as residue from saw and timber mills. The business plan includes the production of 1 million tons of pellets for sale to European utilities, he said.

Because the European industrial pellet market is quickly expanding, it represents the best opportunities for the timber company. Even Asian markets are beginning to emerge. Williams’ fellow panelists seemed to agree, adding that, at the same time the U.S. pellet market is slow to develop without government incentives. “We just don’t see any growth in that market,” said Morten Neraas, CEO of Florida-based pellet producer Green Circle Bio Energy Inc.

But a common theme throughout the event was that despite its rapid growth potential, the pellet industry is still volatile and unpredictable. “This is a tough business,” said panelist John Keppler, CEO of pellet company Enviva LP. Wood varies not just by tree, he added, but also by region and species. “There isn’t a person in this industry who can stand up and say they haven’t had any challenges,” he added.

Williams focused briefly on these challenges, including resistance from industries such as power, and pulp and paper. He also emphasized the continued resistance from environmental and other opposition groups, and the need to keep them properly informed about the truths of the industry. “We can’t afford any major slip-ups,” he said. “The unfortunate thing is they’re more organized than we are and they have more funding than we do.”

Sustainability (a major concern of environmentalists) is the core of the pellet production industry, Neraas said. Without it, the business is not successful. All the speakers on the panel addressed sustainability and its importance, and Arnold said it’s also a growing concern among European utilities. “The headline against all of this is sustainability, and that means nothing and everything at the same time,” Keppler said.

The tremendous wood basket in the Southeast U.S. can continuously supply European industrial demand and the residential market as it grows. The global pellet industry is becoming more attractive, helping to solve environmental problems, assisted even more by the manufacturers’ best practices policies.

The nascent industry has some challenges to overcome, but will be able to do it, Neraas said. A robust commodity futures market will emerge, Williams added. And that will open the door for more profit possibilities in an industry already making a name for itself in clean energy.

“Just because we’re doing something good doesn’t mean we can’t do it well and profitably,” Keppler said.