Suwałki, 11 December 2013
As winter supply meets stronger than expected demand in Austria, Italy and Germany for “White Pellets” Poland’s eager Forest and Lumber industry is keen to meet the shortfall. But is it really worth the effort long term? The current consumer demand often means sourcing “White Pellets” over huge distances incurring much transport costs and embedding more CO2 than could ever help the environment and what becomes of all of the bark and other waste discarded in the process?
What Are White Pellets And Why Are They So Expensive?
White Pellets are made of the materials of the cream of the lumber industry, they are free from leaves, bark or and even knots. The domestic heating markets in Italy, Austria and Germany consume more than 90% of all White Pellets produced. White Pellets are 6mm in diameter and are sized between 15mm and 30mm, they are supplied in perforated plastic bags of 10-15 kg each. White Pellets are manufactured from Pine Trees but some leaf trees are also used to make these pellets.
The raw material for White Pellets is sourced from large Lumber Processing factories [referred to as timber factories in England] because scale is very important to be profitable in the pellet industry. There is little room for small operators in the White Pellet business, furniture manufacture and wood for construction is at an all time slow, so large Lumber Industry capitalized on White Pellets. Downstream factories have very little waste these days.
With slower production and better efficiency in the joinery and furniture manufacturing industry the wood factories are very small producers. Joinery and furniture industry are often sending their wood waste back upstream to the Lumber Processing factories for Pellet Production. White Pellets prices are very high because the strong demand for saw dust and raw materials suitable for White Pellet production are also used to make MDF and particle boards. Wood waste is in such high demand that costs exceed 100 Euro per ton in Austria today. Prices in the Czech Republic are currently 75 Euro per ton and users pay more than 50 Euro per ton even in North Eastern Poland.
In the beginning of the White Pellet boom it was mainly the clean sawdust from the lumber mill and any waste which resulted from the squaring off of the wood profiles. Today large White Pellet Manufacturers employ shredding and debarking lines to shred whole trees just to satisfy the growing White Pellet Market less wood is being converted to profiles.
How is Conservation Managed?
In the European Union there have been strict quotas for minimum production of profiles from raw materials and in the past Lumber Production has been actively prevented from turning perfectly good raw materials into industrial biomass. But exceptionally high prices for White Pellets continues to fuel demand and it has created a strong black market and even poaching in many member states.
Quotas for profile production outside of the European Union are largely ignored however growing trade from Ukraine and Belarus is limited because of poor quality and sharp practice. Eastern European biomass is not popular with the domestic markets in Italy and Austria because of quality, for example pellets which are too short create dust from the pellet fan and pellets which are too long jam the pellet feed. Pellets from Eastern Europe are available but they have a much lower value because of impurities and are considered by the majority of larger merchants suitable only for Industrial use.
Africa and the United States are providing White Pellets to Europe in huge quantities
“In the United States the NRDC is already calling for new legislation to restrict the US forest industry uncontrolled supply of White Pellets to the EU. NRDC claims the increasing demand for White Pellets in the EU an environmental disaster”.
Do White Pellets Benefit The Environment?
In principle White Pellets burn cleanly, with low emissions. The specification for Domestic Pellets in Italy, Austria and Germany requires less than 0.9% ash, less than 0.1% Sulphur and even lower Chlorine. Although environmentalist claim that wood burning is Carbon Neutral in principle because current demand means White Pellets are transported hundreds even a thousand or more kilometers by truck, the true environmental benefits are often negative rather than positive.
Even the most energy efficient modern production line for White Pellets consumes more than 100 kW of electricity for every ton of White Pellets manufactured, this electrical energy drives the hammer mill, conveyors, lighting and other equipment at the White Pellet factory. The electricity consumption at the White Pellet production facility means at least 10 Euro per ton in cost unfortunately it also means that the Carbon neutrality of burning wood as a Carbon Neutral fuel is already lost.
The electricity consumption at the White Pellet production plant is only the beginning of the environmental impact because it does not include heat nor does it factor in the inefficiency of many low cost White Pellet manufacturing lines. In Central Europe poor quality Chinese and Russian Pellet Making equipment and lines often consume twice as much electricity as other high performance equipment manufactured in Northern Europe.
The heat load required to artificially dry wood which is often overlooked by environmental assessors can have many more times the environmental impact as electric power. Some pellet producers inefficiently burn bark and other forest waste materials in dated or defective equipment to produce their own heat for the production of pellets.
The heat load for White Pellet Production is at least three times the electricity load adding more negative impact to the environmental balance sheet.
How Can The Increasingly Negative Trend Towards White Pellets Be Reversed?
Having studied the biomass and White Pellet industry for some time SOLIDEA Group recently completed a series of reports introducing recommendations which can reverse the negative environmental trend of the White Pellet Industry. Increasing efficiency across the pellet industry is clearly necessary this can be achieved by better practices and due diligence whole life cycle and by introducing low cost small scale gasification devices such as the PowerCan®200.
SOLIDEA Group study applied its EVE® [Energy Value Engineering] Principles to the White Pellet Industry. There are fours stages to EVE® these are Stage ONE technical correctness, Stage TWO control, Stage THREE Energy Saving and finally Stage FOUR energy offset.
A brief summary of “Critical Findings” of the White Pellet Industry are :-
Limiting The Size Of Pellet Production Increases Efficiency and Reduces Embedded Carbon
White Pellet production lines are becoming increasingly larger and many installations already passed the 30 tons of pellets per hour production levels. Several lenders already have large facilities in workout because of inefficiency, these business have particularly failed despite a dynamic market because the level of operations has been too ambitious.
Large production often means delays in raw materials and significant increase in energy and other costs at the White Pellet production plants. Operating large plants at low capacity quickly reverses the benefits of most business models. Delays in supply means lost customers in what is still a very competitive market.
SOLIDEA Group EVE® team recently advised one lender against debt financing a large scale operation because waste streams were simply not available and any local disruption or dispute would mean raw materials have to be transported over greater distances squeezing margins increasing risk.
Energy consumerism is entering a new era in energy supply and demand where energy production is dispersed to be more efficient. Centralizing power production or even large scale capability to supply centralized power goes against current and future trend.
“Few White or Industrial Pellet production facilities can sustain production over 5 tons per hour. Lenders should look more closely at risk in the supply chain and take a modular approach to lending to potentially growing a business incrementally and with first a better understanding of the local and regional market”.
There is Too Much Waste In The Waste Conversion Process
Production of White Pellets is wasteful, often much convertible feedstock is also used to produce heat. Bark and green materials are inefficiently burned to produce the heat needed to manufacture White Pellets. Generally raw materials for Pellet Production are wasted as are other significant resources such as energy and transport fuels, together it has a terrific negative impact on the industry and the environment.
Low cost boilers which pollute the atmosphere unnecessarily can be easily replaced with highly efficient small scale gasification units. Gasification is a traditional energy solution which converts wood waste to producer gas, producer gas is reformed to fuel and fed to a gas engine.
CHP Gas Engines produce electricity and heat all the time, the electricity is fed directly to the power grid network for a regular income and the heat produced can be used to offset production of pellets. The efficiency of gasification is almost always at least double that of burning, but the environmental impact of gasification of waste is lower than 10% of burning waste.
A Closer Look At The White Pellet Industry Business Model Presents New Opportunities
White Pellet Manufacture is wasteful of resources, less than 70% of the total available white wood waste resource is used for White Pellet making despite high cost and demand. SOLIDEA Group measure a very low efficiency and this does not consider the value of bark nor does it consider the vast waste streams still upstream. Less than 30% of harvested wood becomes wood profiles and no more than 10% of the total resource is converted to White Pellets. This means that more than 60% of trees harvested for Lumber Production is still waste and which is both unaccounted for and even in isolation a negative environmental impact.
Small scale gasification could utilize all waste streams including those left on the forest floor, producing electricity locally means that the Lumber Production facility and even the Forest Maintenance regime has a significant income. Creating local jobs and local wealth without embedded carbon locally and transmitting or offsetting electrical energy locally is far more efficient than producing pellets for export.
Introducing a four ton per day 200 kWe gasification units produces an income of almost 500 Euro per day in Poland based in current consumer energy prices in Poland and without subsidies. The heat produced in one PowerCan®200 CHP unit can be used to offset more than 40 tons a day of dried wood chip for White Pellet Production.
As SOLIDEA Group have unquestionably demonstrated with PowerCan®200 studies Gasification and White Pellet manufacture together is a commercial and environmental success. But SOLIDEA Group have recommended the Polish forest industry to look at a business model to take PowerCan®200 a stage further.
The PowerCan®200 was designed to be used either alone or in clusters at the source of a waste stream and to produce between 200 kWe and 1,2 MWe of electricity. PowerCan®200 is moveable it means it can be relocated same day. But PowerCan®200 also provides the opportunity to redistribute waste to any number or configuration of applied PowerCan®200 installed where heat is most needed at local hospitals, schools and even shopping centres locally.
The advantage of redistribution of waste locally means that electricity and heat are best used and most efficiently producing an income as well as offsetting cost for a host. Utilizing heat even inefficiently [at half capacity] the PowerCan®200 demonstrates fast Capital Repayment and under 2 years. The income thereafter is more than 270,000 Euro a year on a daily consumption of 4 tons of any forest waste.
The income in the PowerCan®200 model provided by SOLIDEA Group is based on current Polish commercial supply rates and without any form of incentive
“Small Scale Gasification clearly demonstrates a business model 4-5 times more profitable than White Pellets, the development of gasification on a dispersed grid is without question the best way Poland can manage and capitalize on its own resources. Small Scale Gasification in Poland can drive new renewable energy economy without subsidies and without adding further to environmental concerns, not only taking a big bite out of the Pellet Makers Bark but setting a commercial and environmental example to others in the European Community”
Gasification compares even more favorably than the Gross Business Model of White Pellets. For example 4 tons per day of White Pellets and lets say 1460 tons per year would provide us a gross income of around 290,000 Euro per year. The current merchants cost for White Pellets delivered in Italy is around 200 Euro per ton meanwhile one connected PowerCan®200 produces over 270,000 Euro per year.
Gross income means before manufacture, packaging, delivery and other costs. Whilst White Pellet production wastes much material Small Scale Gasification wastes none. At the time of writing this article transportation from South of Poland to North of Italy has an overhead cost of more than 65 Euro per ton, and the electricity alone required to produce one ton of White Pellets exceeds 10 Euro per ton.
How Should The Legislator Regard The EU’s Insatiable Demand For White Pellets?
Supply of White Pellets urgently requires legislative control in the EU. Enforcement of quotas in the Forest Industry for the production of wood profiles needs to be better implied to stop environmental concern. Poland should defend its borders against imports of raw materials which can have a negative environmental impact and clamp down on poaching.
How Can We Make A Difference?
In 2014 SOLIDEA Group are actively promoting green energy projects in Poland and looking to assist White Pellet makers. SOLIDEA Group will be promoting production of energy from small scale gasification by encouraging buyers and sellers throughout Poland as part of its EVE® Program.
SOLIDEA Group is committed to assist anyone in the industry with Small Scale Gasification offering finance and take off agreements in Poland for PowerCan®200 users.
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