June 27, 2010

Extolling the benefits of heating with pellets

The switch from oil makes sense on many levels, but it won’t occur without government help.

By Tux Turkel tturkel@pressherald.com
Staff Writer

What's the quickest way to burn 25 percent less heating oil in the Northeast?

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Burnham's pellet plant plans put on back burner

Plans to build a $20 million wood pellet manufacturing plant in Burnham this year have been put off, a victim of tight financing and lower demand.

It's an example of the challenges facing an industry that couldn't make pellets fast enough two years ago, when oil prices spiked, but now is more cautious.

Last July, International Wood Fuels announced plans to build a 100,000-ton-per-year plant next to Pride Manufacturing Co., the world's largest wooden golf tee maker. The company, which does business globally, had moved to Portland from California to be near growing markets. The project was announced in Portland with great fanfare. State officials praised it as a way to save existing jobs, create new ones and help wean the region from oil.

But construction never began and Steven Mueller, the company's president, now says the project is set for the fall of 2011. He blames the delay on difficulty in getting debt and equity financing, as well as current market conditions. Maine, he said, will be a net exporter of pellets by 2012, and International will continue to invest in the state.

"Maine remains our headquarters and Burnham remains a facility we will construct," he said.

Maine has four pellet plants. Two of them -- Northeast Pellets in Ashland and Geneva Wood Fuels -- are coming back on line following fires. Corinth Wood Pellets in Corinth is operating at roughly half capacity; Maine Woods Pellets in Athens also remains in production.

-- Tux Turkel

Wind energy won't do it. Conservation and efficiency will make a big difference, but how about switching 1.4 million homes in seven states from oil heat to clean-burning, biomass boilers that are popular in Europe.

The conversion -- done over the next 15 years -- would cut annual oil use by 1.14 billion gallons, create 140,200 jobs and keep $4.5 billion in the regional economy.

These are among the conclusions of a recent study that outlines the benefits of a large-scale switch of central heating systems in the region from oil to wood pellets and other forms of renewable biomass. Called "A Bold Vision for 2025," it was prepared by five trade groups that include the Maine Pellet Fuels Association and the newly formed Biomass Thermal Energy Council.

Using sustainable harvest figures, the study calculated how much biomass is available each year in New England and New York. There's enough to meet three-quarters of the industry's annual heating goal, the study found. The balance could be satisfied with solar and geothermal energy.

But like other bold, alternative-energy strategies, this one faces obstacles. It needs favorable government policies and a higher degree of consumer awareness. Most of all, it needs oil prices to stay high enough, long enough, for people and businesses to make alternative investments.

The study was prepared before the oil spill in the Gulf of Mexico, which has refocused public attention on cleaner energy and renewable resources.

"The timing is right," said George Soffron, chairman of the Maine Pellet Fuels Association and chief executive officer at Corinth Wood Pellets. "People are looking for a reason (to switch from oil heat)."

The study was introduced at a recent wood energy conference in New Hampshire. It has received little public attention so far, but advocates are preparing to send press releases, contact officials and create marketing campaigns.

Much of the national debate over energy policy centers on electricity and gasoline. Less is said about thermal energy. But heat is a big concern in Northern states such as Maine, where eight of 10 homes burn oil and the state has ambitious goals to cut oil dependence.

Two years ago, when heating oil hit record prices, it seemed possible that many Maine homes would convert to wood fuels. Mainers were waiting in line to buy stoves and boilers, as well as cordwood and pellets.

But the recession, collapsed oil prices and last year's warm winter threw the pellet industry for a loop. Sales are way down and existing pellet plants are operating at half capacity. A new mill that had planned to open this year near Pittsfield has been put off until late 2011.

In Europe, modern wood pellet boilers heat schools and businesses, not just homes. Fuel is delivered in bulk by truck and automatically fed into the boilers. The higher cost of the equipment is subsidized, reflecting policies to cut petroleum dependence and fight climate change.

A European-style distribution system is slowly being set up in the Northeast, but it lacks a similar level of government support.

Maine Energy Systems in Bethel distributes an Austrian-made boiler that costs more than $10,000. Sales have been slow and the company isn't profitable.

A federal tax credit of $1,500 lowers the cost, but Dutch Dresser, the managing director, said a 30 percent incentive common in western Europe is needed here. Some proposals in Congress, including bills co-sponsored by U.S. Rep. Olympia Snowe, R-Maine, and Sen. Jeanne Shaheen, D-N.H., would help, Dresser said. Supporters hope these provisions could be included in a federal energy bill.

Wood pellets don't have a high profile in Washington, D.C. They tend to get lumped in with biomass, the broad definition for plant material used as fuel.

Forest biomass got a bad rap this month. A state report in Massachusetts concluded that cutting trees to feed wood-fired electric plants would contribute to climate change. The same report had favorable findings for burning biomass for heat, but that conclusion got little mention.

"We feel like the stepchild of the renewable energy world," Soffron said. "All you ever hear about is wind and solar."

Soffron and Dresser met briefly this month with Energy Secretary Steven Chu, when he was at the University of Maine to visit an offshore wind research lab. Chu seemed supportive of wood pellets, Soffron said, but offered no commitment.

Consumer awareness also is critical. Dresser said he'd like to install a network of demonstration boilers in homes, so people could visit and see the systems work.

"When people think of wood pellets, they think of stoves and 40-pound bags," he said.

That's because New Englanders know about cordwood, and the chores of hauling logs and cleaning ash from stoves. They're less familiar with high-efficiency pellet boilers, which produce little ash and operate automatically.

"Burning wood is considered old technology," said Charles Niebling, chair of the Biomass Thermal Energy Council. "Our job is to persuade people that we're not talking about your grandfather's boiler in the basement."

The industry also has to convince people that pellet heat will cost less than oil. A ton of pellets has the heat energy of 120 gallons of oil, Niebling said. With heating oil now at $2.50 a gallon or so, the break-even for a ton of pellets is $300. Niebling, the general manager of New England Wood Pellet in Jaffrey, N.H., said pellets bought in bulk are selling for roughly $240, not including delivery, so heating with a pellet boiler today still makes economic sense.

"Ninety percent of consumers are simply looking to save money," he said.

In the months ahead, the industry will try to convince Northeast politicians to support the 2025 biomass vision. And it will try to persuade consumers to switch to pellets. Members of the Maine pellet group met recently to discuss an advertising campaign, to counter the seasonal pitches made by oil dealers. That would be a first for a young industry with little money to spend on promotion.

Rising oil prices would make their task easier. But Bill Bell, a spokesman for the Maine pellet association, said his group's challenge is to increase demand for the fuel before the next petroleum price spike.

"We can't just be at the mercy of oil prices," he said. 

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

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