Leftovers

Finding value in lumber mill leftovers
Demand for sawdust has grown tremendously, with prices in some parts of the country doubling. But the housing slump means there's less of this unlikely commodity to go around. Nina Keck reports.
Listen at http://marketplace.publicradio.org/www_publicradio/tools/media_player/popup.php?name=marketplace/pm/2008/08/06/marketplace_cast1_20080806_64&starttime=00:23:17.0&endtime=00:27:00.0
TEXT OF STORY
Kai Ryssdal: Even if you don't read the financial news all that closely, you can probably name at least a couple of commodities right off the top of your head, right?
I bet sawdust didn't come to mind. Most of us probably think of it as something to sweep into the garbage after the sawing's done, but demand has grown enormously.
As Vermont Public Radio's Nina Keck reports with wood manufacturing and construction down due to the housing slump, sawdust is at a premium.
Nina Keck: Gagnon Lumber in Pittsford, Vermont produces between 25 to 30 tons of sawdust a week. Underneath the saws, a conveyor belt carries a steady stream of the sweet smelling remnants to a huge pile.
Owner Ken Gagnon says he sells most of it to area farmers.
Ken Gagnon: The sawmill business and agricultural farming have been hand in hand through history, so there's always been a market for a certain amount of sawdust, whatever the farmers could use for his cows.
But sawdust has come a long way from its use as a cushy barn bed. Landscapers and gardeners like it for mulch while meat smokers use it as an aromatic flavoring. Finely ground sawdust is a lightweight filler in many plastic products. It's used to make particle and fiberboard and it's become a valuable renewable fuel source in the form of wood pellets.
Charlie Niebling runs a wood pellet plant in Jaffrey, New Hampshire.
Charlie Niebling: With heating oil approaching $5 a gallon, people are genuinely concerned and anxious. A lot of people are thinking seriously about alternatives now.
Niebling says he can't make wood pellets fast enough. But while demand for wood byproducts is at an all-time high, supplies are down.
Ken Gagnon and mill owners across the country blame the drop in construction.
Gagnon: We've been going through a correction for pretty near two years here on our level, so we're actually not producing as much lumber as we could, which has an indirect effect on how much sawdust we make.
But if sawdust is so precious, I asked Gagnon why not make more of it? For now, he says, even in the middle of a housing slump, it's still more profitable to mill lumber.
Gagnon: It may come to a time where the byproducts are going to be the saving grace of the lumber industry. I think the housing market will come back, but I really see the byproducts, primarily the biofuels, whether it's sawdust or chips, will be a big part of things to come.
Chris Recchia thinks that's already happening. Recchia is Executive Director of the Biomas Energy Research Center.
Chris Recchia: This has transitioned from a waste product, a byproduct, to a real commodity. That is the turning point that we're at right now, which we think is a very good thing.
Because, Recchia says, it's encouraging better use of resources. Typically when loggers finish a job, they'll leave behind a lot of low grade cuttings not suitable for lumber. Now that wood byproducts are fetching a higher price, loggers can process and sell what they used to consider waste wood to people like Charlie Niebling of New England Wood Pellet.
Niebling: We are purchasing material from logging contractors who harvest this low grade material that otherwise has little value, take the bark off of it for us, chip it and send the chips to us and that simply wasn't possible three or four years ago.
Niebling says in their company, the term "waste wood" no longer exists.
For Marketplace, I'm Nina Keck in Chittenden, Vermont.

PFI Meeting 2008

When a couple of the HHT executives came to our shop a couple of months ago they asked us if we were going to be attending Harman's annual dealer meeting. We said, "No. Because the PFI had sent out their notice of annual meeting months before, and by the way why would Harman book their meeting when the PFI has theirs?" The response stopped me in my tracks. "PFI- What is it that they do, again?" Unfortunately, in many ways I agree with his assessment that the PFI is disjointed, unorganized, and in many cases ineffectual, but I would have liked to see a more proactive response of having industry reps get more involved to help get it on the right path than having them mock it and walk away. He is a good guy, don't get me wrong, it just wasn't what I hoped to hear.
So, off to muggy South Carolina for the meeting. There were probably approximately 250 people in attendance. This has grown impressively. According to one long time member they started back in Missouri in the early 1990's with six people meeting in a hotel room. In attendance were mostly fuel manufacturer's, pellet mill equipment manufacturer's, two maybe three stove manufacturer's reps- including Dan Henry from HHT, a couple of commercial boiler manufacturer's, and three maybe four dealers.
The board meeting took place the day before we arrived. There was a little "professional" scuffle that changed their intended path for leadership. Scott Jacobs from Ozark Pellets in Missouri emerged as the new PFI President, replacing long time President Bruce Lisle of Energex.
After opening comments John Swaan from the Wood Pellet Association of Canada was first to speak. He talked of the success in exporting fuel to Europe. How we exported more pellet fuel to Europe last year than we used domestically, and future growth potential. He was followed by Christian Rakos from an Austrian company who affirmed the success of wood pellet for use as fuel and energy, and said that they would be willing to share their experiences to help us grow.
Dave Atkins did a presentation on a program called Fuels for Schools in which chip fired and/or pellet fired boiler systems were being installed in schools through a grant program. The savings experienced by these schools was impressive.
A representative from ACORE (American Council on Renewable Energy) did a presentation on the potential of biomass energy, and how the pellet industry could benefit from partnering with ACORE.
Then the conversation really steared toward commercial/industrial uses and introduced the catch phrase of the weekend- Biomass Thermal Energy. Their presentation conveyed to the fuel manufacturers that the real growth in the industry was in commercial and industrial applications. Large boiler systems are beginning to emerge, and larger players are developing ground level partnerships for energy production, and industrial applications. There were a couple of larger boiler manufacturer's present who presented their system, and partnership proposals to install these larger systems which would be delivered by bulk from the manufacturers directly.
They also spoke of new legislation that would subsidize biomass use for power production. There was concern among the group about raw material difficulties, and how this would magnefy the issues if they were competing against groups that could use the subsidy. Talk shifted to government affairs with the usual plea for funds for lobbying efforts. This is where the PFI seems to get stuck. The talk of raw material shortages arises. Then it is clarified that the easy and inexpensive raw material is getting difficult to get. You have to pay where ten years ago you may not have... Then talk turns to growing both individually and as an industry. A great number of pellet mills are not interested in growth. I can see their point. Growth is risky- Remember what happened the last time the industry took a big leap in 2005 pulling in all sorts of fuel from Canada's West coast and put big bucks into processing plants? We certainly do. To put a number on it, dealer's who grew capacity to meet the last demand bubble lost five figures, pellet mills lost six to seven figures, and stove manufacturer's lost seven or eight figures. That is a lot of zeroes!! Thus the PFI divides. Small stable growth to support local residential markets on one end, and the extreme company that wants to go all commercial industrial and spend every penny on government lobbying on the other.
The conference had it's light moments, like when Dan Henry's friend sang a song he had written in the seventies about a Plain Ol' Brown Recyclable Paper Sack (I think I got it right??), and it was good to see familiar faces, and try to get a feel for their take on the current situation.
There was a good conversation about standards. They have come up with a label and testing system that will classify wood pellets more consistently, and slightly more accurately. The big definer will still be ash content, although it will also include btu's sodium content, etc. This will help the end user have a better idea about what is in the bag as 99% of pellets on the market claim premium status by the current definition.
I do have to say that as a dealer I would have been very disappointed if I attended the PFI conference hoping for answers about pellet fuel availability and solutions for the current situation in the Northeast. There really, that I noticed, was no talk of residential use, dealers, or supply issues in the Northeast.
The focus of this conference was commercial and industrial applications, using wood pellets for thermal energy, and obtaining government support.
I walked away from the conference with two main thoughts- We are now exporting more inexpensive wood pellet fuel to Europe than we use domestically, while importing even more expensive oil. The growth of this industry, at least by the the main Northeast pellet manufacturer's desire, is in commercial and industrial applications.

Harman

Harman's annual dealer meeting was held this last weekend. This is an event we dealers look forward to each year to see new products, discuss the upcoming season, and see Harman's facility which is always growing and changing. This year was even more anticipated as Harman has new owners, and demand is back to surge levels resulting in supply and distribution challenges. Not necessarily new challenges but with new faces, procedures, and at a higher volume than we have seen previously.
Many people have been spreading rumors and/or beating down Harman online. Unfortunately, I have not seen credible information or sources to this end. I would like to throw my two cents in to the ring for consideration. I am biased. We are one of Harman's larger dealers, and are big proponents of the wood pellet industry.
Our orders started increasing in volume in May. At this point we were still operating off of our early buy inventory. This is an order done by dealers in the spring that equals approximately 1/3 to one half of anticipated sales for the year. By June those stoves had all been spoken for and we started putting in little orders as we our sales occurred. We were cautious because many MANY of us were burnt hard the last time (2006) we really ramped up to meet an overwhelming demand. We did not want to put ourselves in that dangerous put you out of business situation we had just barely recovered from. Home and Hearth Technologies was in the process of introducing a distribution program to the larger dealers that would accomodate our desire to not stock large amounts of stoves. While this was going on Harman was making a needed software change to HHT's system as this is usually the quiet time of year. As the orders began to pile up we heard through the grapevine that an old tactic of dealers placing large orders in anticipation of high demand had begun. We placed a large order ourselves even though the new distribution program was still on the roster. The new computer system started spitting out paper. It automatically processed and placed the orders in their system and faxed confirmation. Around this time the dealer's on the new program had to put their orders in for the coming months. We put that order in, too. At this point Harman was already sending warning shots for orders ship accuracy. We kept taking orders but informed our customers it may be a wait extending in to first quarter. This did the opposite of slow things down. People were in full panic mode at this point. We would sell record numbers of stoves, have ten people waiting on a 90 degree day, and the phone would ring non-stop all day.
I would like to point out that our other pellet stove lines are also backordered and giving out inaccurate dates at this point due to the overwhelming order volume. Not just Harman. We have had dates pushed back on multiple lines, and backorders are in place for all but a handful of dealers/stoves.
Harman visited key dealers to determine if the orders they were receiving were real or just anticipation ordering as has happened in the past (like the last time we all ramped up for demand that disappeared overnight= last year). As soon as they determined it was a real demand they began to act. They made a decision not to flood the market with stoves fearing that it would trigger a pellet shortage. I do think that the PFI and stove manufacturer's could greatly benefit from communicating real sales numbers to each other to make sure there are enough of both to meet demand but that is a topic for a different time and group... Harman also decided to take control of the situation and allocate stoves to all dealers instead of sending huge numbers of stoves to people as the orders had been submitted. (10 here, 10 there... instead of 1000 to one). This does not make the one guy who ordered 1000 very happy but keeps a hundred dealers who ordered ten able to cover at least some of their demand. They spent a great deal of effort to best determine how to accomodate the maximum number of consumers throughout the Northeast (peak of demand) and the rest of the country. I did not get all of the stoves I ordered but I fully understand why Harman did it and agree with their long term prognosis. We heeded their warnings and have minimal schedule conflict other than a stove ship date being a couple of months off. This is frustrating to some but this is a long term solution and a stove will last fifteen to twenty years with proper care and maintenance so a couple of months is relatively small in comparison. Harman is continuing to hone their existing production lines and working to add additional capacity which may improve the status even more.
I have confidence in Harman, and Hearth and Home technologies. I would like to think that we have turned the corner on acknowledging wood pellet heat as a viable and needed alternative. I don't think we will have many more chances if the public once again turns their back on pellets like they did last year. We need to stop exporting inexpensive, local, renewable wood pellet fuel to decrease our dependence on expensive imported oil and gas. If you want things to grow and change faster write your congressman and senator. Send a donation to the Pellet Fuels Institute to support lobbying efforts to push through rebates and/or tax write offs for wood pellet appliances and or fuel. Be part of the solution.

Room to Grow!

In 2005 120,000 stoves and fireplace inserts were sold throughout the United States. That number has not grown as many think it could have or should have. As a matter of fact the number actually went down last year. Pellet stoves (as opposed to whole house systems) were new to the European market around 2005. They sold somewhere in the neighborhood of 16,000 stoves that year. Last year in Europe over 360,000 pellet stoves were sold. What a difference! and Why? Government incentive is still the number one reason in my opinion. Gas and oil prices are much less subsidized and Europeans are encouraged to look to other fuel sources. Then there is the Kyoto protocal and green movement, two areas where we are gravely lacking.
Yet there is hope, and time to change. At the Pellet Forum in Wels, Austria last week the US was declared a country with large growth potential in the pellet market. Of course, Americans in the crowd had to endure a little bit of a beating on why we are so far behind, but the end message is, I believe, a positive one.
Pellet use in the US was estimated between one and one and a half million tons of pellets last year. A source in the pellet industry said there is about 90 million ton of unused wood waste available in the US right now. That is one of the strongest assets we could have. As more pellet mills come on line each year our supply grows, and costs, as always, have remained stable relative to other energy's such as oil.
There is a large commercial and industrial sector that is untapped in this country, and the Europeans have noticed. Some Americans as well. Growth in this sector may open up doors to government support and incentive, as well as push the industry into bulk distribution, and whole house systems that are sparsely available, and still manually demanding with the fuel loading.
Wood pellets have actually had an impressive ride when you consider that we are the only fuel with no government incentive or support. Ethanol is subsidized at $.51 a gallon for example. Even wind and solar energy's have rebates, and incentives in place. The PFI seems to be waking up and taking action, FINALLY. They have had a growing relationship with a lobbying firm, and there are now several people in the industry who are focusing on creating, introducing, and getting bills brought to the attention of our congressmen and senator's. While we have not yet successfully had a bill move through to active status we are gaining ground, and attention in Washington.
I am excited for the future of wood pellets. It is a fuel that is local, renewable- at this point still made from waste products otherwise destined for landfills, carbon neutral, and affordable!

Yellow Pine Energy contracts with Georgia Power

Released : Monday, January 14, 2008 11:57 PM
January 15, 2008 (FinancialWire) Southern Co. s (NYSE: SO) Georgia Power has signed a 20-year contract for electricity with Yellow Pine Energy Company, LLC, a biomass-fired facility to be located near Fort Gaines, Georgia. The material used to generate the power will come from timber harvesting residuals and collection of non-commercial tree species, tree-thinnings, lumber scraps and wood waste reclaimed from landfills. The Yellow Pine facility is scheduled to go into operation in 2010 and will produce 110 megawatts of renewable energy. Under the contract, Georgia Power will purchase almost half of the plant's capacity, or about fifty megawatts. Yellow Pine is an affiliate of Summit Energy Partners and Morris Energy Group. Summit Energy is a renewable energy company formed in 2002 by its principal, Mark S. Sajer, to develop renewable plants. Atlanta-based Georgia Power is the largest subsidiary of Southern. The company serves 2.3 million customers in all but four of Georgia's 159 counties.