Because margins remain slim for wood pellet production, the region's existing logistics infrastructure is proving vital. Many earlier pellet plants built close to wood sources but far from logistics centers went bankrupt during the recession. Now, new facilities are learning for those mistakes, understanding the importance of transport costs and taking advantage of existing infrastructure. This could prove especially important since a substantial volume of US wood pellet production is destined for European power plants.
The southeastern US is ideally situated to help meet European growing demand for wood pellets in the effort to meet the EU's goal of 20% renewable energy by 2020
Largest production facilities in the world
As EU countries ramp up biomass consumption to meet future goals for the reduction of carbon dioxide emissions, nearly all the existing pellet plants in the Southeast US are increasing production. High-profile wood pellet plants in Florida and Louisiana are some of the leading suppliers in the country. Green Circle Bioenergy in Cottondale, Florida, announced in August 2010 that they had achieved full production of 560,000 tons of wood pellets, the largest production facility in the world. Green Circle has also looked at opening a second wood pellet mill in the southeast.
Georgia is currently building an even larger production facility, expected to go online later in 2011. Georgia Biomass, a partnership of RWE Innogy of Germany and BMC of Sweden, is expected to supply 750,000 tons annually if production begins as expected in the third quarter of 2011. An existing wood pellets plant in the state, Fram Renewable Fuels, currently operates the largest wood pellet plants in Georgia and has targeted 200,000 tons of wood pellets for 2011, rising 40% from 2010 levels.
Dr. Leonhard Birnbaum, Member of the Executive Board of RWE AG, one of the companies that own Georgia Biomass, said in a January 2010 release that the Georgia plant was "a strategically important step towards safeguarding the supply basis for the constantly growing biomass market in Europe. This is because we will be unable to achieve targets for reducing CO2 emissions in Germany and Europe without biomass."
The Georgia Biomass plant, currently being completed in Waycross, Georgia, is projected to be the largest wood pellet facility in the world, overtaking Green Circle. When production begins in 2011, the approximately 750,000 tons of pellets per year will go almost exclusively to replace hard coal input in Europe, initially replacing up to 30% of coal consumption at power plants in the Netherlands. Additional wood pellets exports could go to support biomass facilities and power plants in Germany, Italy and the UK.
When choosing Georgia for the new facility, RWE was swayed by the pine growth rate in the southeast and the region's efforts in logistics and sustainable forestry. "The growth rate of the pine in the U.S. is extraordinary due to long vegetation periods, high temperatures and rainwater," said Thomas Wiedenhoefer, chief technology officer for Georgia Biomass in an interview with Site Selection Magazine. "Trees grow twice as fast as in northern Europe."
With 24 million acres of forests, Georgia is one of the states with the experience, infrastructure, and access to feedstock to be a leading producer of wood pellets
Importance of existing infrastructure
The Southeastern US can offer wood pellets at a competitive price mainly because of the existing infrastructure of ports, rail, and roads to deliver wood pellets to nearby deep-water ports. Along with the availability of sustained wood sources from local plantations and year-round harvesting, this combination provides important benefits over the northeastern U.S. and Canada. The region's pines, hardwoods, grasses and logging scraps, are enticing lures to many domestic and foreign companies investing in wood pellet production.
"Green Circle in Cottondale is brilliantly situated because they have a contract rail rate to run their freight down to Panama City for not more than $7 per ton," said James Baldwin Jr., Manager, Southern Sails Louisiana and Honorary Consul of Norway. "Their FOB costs are dirt cheap," says Baldwin, referring to Freight on Board or the costs of shipping the pellets from the production facility to an export port.
These southern states have a long history of wood chip, lumber, log, and pulp and paper exports, providing existing logistics support for new plants and facilities. In less than 6 years, the wood pellet industry in the southern U.S. has grown from nearly zero to over 2 million tons in 2010.
Georgia Biomass specifically chose its location close to the Port of Georgia in Savannah specifically to limit FOB costs. "The Savannah folks are going to try to dominate," says Baldwin, "again because of the FOB costs. If you make pellets in ‘Timbuktu' and have to spend $25 per ton to get to a load port, you're dead in the water when competing with Savannah or Cottondale."
"Pellet makers made the mistake of installing their pelletizers as close to the wood source as they could, rather than to a blue-water ocean port," Baldwin continues. "The trick in all of this is to get as close to a Mobile, New Orleans, or Savannah as possible with your pellet machines." Some companies have started the process of buying used pelletizers out of bankruptcy and installing them close to the sea.
Coupling European buyers with Southern US facilities has also turned wood pellet production into a year-round operation. As Baldwin explains, industrial buyers from Europe are using wood pellets primarily for energy sources, co-generating with coal to conform to clean air standards. This means that wood pellet production in no longer a seasonal activity, further supporting increased production through new and existing facilities.
Kenneth Norris is a US based contributing editor to PPI magazine and the RISI community website and can be contacted at:firstname.lastname@example.org