How Reporters Miss the Forest and the Trees When Covering Wood Bioenergy Markets

3 06 2013

While the general public’s understanding of wood bioenergy remains incomplete, recent reporting on the issue fails to meaningfully inform readers on the status of woody biomass supplies and the actual development of wood bioenergy markets in the U.S.  In fact, several articles suffered from three common errors we observe in major media coverage:

  1. Failure to provide context.
  2. Improperly assigning “causal” relationships.
  3. Errors of fact.

For example, Roger Harrabin of the BBC, in a March 5, 2013 article “Biofuels: MPs to Consider Subsidies for Power Stations” about potential subsidies for using wood at power stations in the UK, reported that power producer Drax plans to convert approximately half of the boilers at its coal-fired power station in Yorkshire to wood pellets.  Harrabin notes that this would “burn more wood than the entire output from the UK’s timber industry.” And how much wood would that be?

This took four minutes to track down and summarize using the online “ForesSTAT” database from the United Nations. The UK produced one-half of one percent of the world’s industrial timber in 2011.  The U.S. timber industry is 32 times bigger.  EU timber production is over 38 times bigger.  This failure to provide context for UK’s timber industry is like reporting on hamburger sales in India or breweries built by BYU graduates.  While these could prove interesting, the numbers may prove trivial.

A more recent May 28, 2013 report by Mr. Harrabin, “Renewable Energy: Burning US Trees in UK Power Stations”, further addresses the growing trade of wood pellets from the U.S. to the UK.  While the story gives ink to all sides, it lacks the context to illuminate the scale or likelihood of operational impacts on U.S. forests from UK pellet demand.  In fact, bioenergy is a relatively small business in the U.S. and will remain that way for the foreseeable future.  Readily available research and studies conducted by private firms and conservation groups, while sometimes diverging on potential implications, generally align with the facts on the current state of affairs.  One study is “Biomass Supply and Carbon Accounting for Southeastern Forests” conducted for the National Wildlife Federation and the Southern Environmental Law Center (with whom Mr. Harrabin produced an interview).  The study incorporates academic and private studies, and provides necessary context relative to potential policy outcomes.

In “Limits to Growth: Wood Pellet Production in the U.S.”, Forisk addresses the issue by quantifying how the actual growth of bioenergy relative to available resources in the U.S. can be understood.  In “Three Realities of Wood Bioenergy and Forest Owners”, Forisk specifies areas of direct relevance to timberland owners and legislators that forest analysts understand well and can address with authority and data: bioenergy project failure rates, forest landowner behaviors that increase long-term supplies, and wood supplier adaptability.  New wood markets do not create a frenzy of forest harvesting.  Forest owners and wood suppliers adapt through improved forest management, incremental growth of logging operations and utilization of previously underutilized wood raw materials.

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On Tuesday May 28, 2013, the Wall Street Journal published a front page story related to wood bioenergy markets that managed to score the trifecta and feature all three common errors appearing in media reports related to wood and timber industries.  Posted online on May 27th, the article, “Europe’s Green-Fuel Search Turns to American’s Forests” by Justin Scheck and Ianthe Jeanne Dugan contains factual errors, fails to provide context or measures of scale, and improperly implies causal relationships.  Ugh.  A few examples include:

  • The article does not scale UK demand to the U.S. forest industry.  During normal economic conditions, the U.S. forest industry consumes ~500 million tons of wood per year.  Currently, the U.S. is exporting on the order of 2 million tons of pellets per year.
  • “….Europe doesn’t have enough forest to chop for fuel…”  Not true.  Europe has 25% of the world’s forests.  While the article notes that “many restrictions apply” to Europe’s forests, it does not question the quality, usefulness or soundness of these restrictions.  The bottom line is that Europe may actually have enough wood, but chooses not to use it.
  • Many of the pellet-making plants springing up in the U.S….are near pine plantations established long ago partly to serve the now-slumping wood-pulp market.”  The reference to the “slumping” pulp market is factually incorrect and easily knowable.  This is a critical miss because the U.S. pulp and paper mills dominate the market for the low valued wood raw materials of interest to wood pellet producers.

The Wall Street Journal also dwells on the topic of swamp logging in North Carolina.  Few people would look to swamp logging as inherently desirable or preferable for a host of reasons.  However, it represents between 1% and 4% of related forestry activities, and the article skirts the primary economic drivers and realities for U.S. forest management.  Regardless wood pellet demand in the UK, forest owners in the U.S. will not overhaul their long-term forest management strategies or harvest practices for pellet markets.  The economics don’t make sense.  The U.S. remains a “sawtimber” market where landowners grow trees for lumber production.

In forestry, a natural tension exists between the unfettered exercise of private property rights and the biodiversity preferences of third-party conservation groups.  This “tension” is important.  Market incentives help ensure that private forests remain productive and forested, while spotlights on best management practices that protect soil integrity, water quality and wildlife habitat support long-term forest health.  This tension, like a tug of war, puts someone in the mud once in a while.  Sometimes a landowner cuts trees you might not cut, and sometimes states or groups seek a rule that restricts private property owners in an unreasonable way.  That is part of the back-and-forth.

Wood bioenergy in the U.S. faces limits to growth.  No one will be vacuuming U.S. forests to feed UK power plants.  The economics, logistics and sustainability of such strategies fail on multiple levels.  This is why markets in other regions such as South America, Russia and Canada continue to scale up capacity.  The facts, context and market relationships highlight a stuttered, evolving wood bioenergy market in the U.S. that continues to feel its way forward as part of the large, established wood-using forest industry.

Forisk will cover wood bioenergy market analysis during “Timber Market Analysis” on August 12th in Atlanta, a one-day course for anyone who wants a step-by-step process to understand, track, and analyze the price, demand, supply, and competitive dynamics of timber markets and wood baskets. For more information, click here


Wood Bioenergy Sector Continues to Shake Out; Viable Projects Down; Wood Volume Up

30 04 2012

Wood bioenergy projects continue to either gain traction or fall to the sidelines as investors shake the sector like a sack of Scrabble tiles.  While the number of projects that pass Forisk’s screening methodology in April fell from 297 to 295, the estimated volume of wood consumed by viable projects edged up 2.4%.  As of April 29, 2012, Wood Bioenergy US reports that projected wood demand for all 452 announced projects in the U.S. totaled 123.7 million tons, while the 295 projects that passed Forisk’s screen could consume up to 72.1 million tons of wood annually by 2022.

Project specific activities include:

  • Green Circle Bioenergy announced plans to expand its plant in Cottondale, FL to produce 600,000 metric tons of pellets per year. The company hopes to complete the expansion in 2012.
  • Traxys Power Group plans to purchase the former General Motors Fiero assembly plant to convert it to a biomass power plant in Pontiac, MI. (Trivia:  Ferris Bueller’s sister, Jeanie, drives a white Pontiac Fiero in the 1986 movie “Ferris Bueller’s Day Off”.)
  • Cate Street Capital met with the Millinocket, ME town council to discuss plans for a $35 million torrefied biomass machine at the Millinocket paper mill site.
  • Russell Biomass received a Clean Water Act permit for its proposed 50 MW cogeneration facility in Russell, MA. The project was originally a stand-alone electricity plant, but Russell Biomass changed the project to a cogeneration plant to meet Massachusetts efficiency standards. Construction is currently on hold pending the finalized RPS standards for the state.

For a complete Wood Bioenergy US summary of projects and associated wood demand statistics, click here.

Wood Bioenergy Sector Active; Projected Net Wood Use Changes <1% since January

2 03 2012

Since January 2012, multiple wood bioenergy projects in the United States have opened, closed or advanced their move towards operational viability.  However, the implications on potential wood use were insignificant.  Total potential wood use from announced and operating projects decreased less than 0.5% while potential wood use from operationally “viable” projects increased approximately 1%.  As of February 27, 2012, Wood Bioenergy US reports that projected wood demand for all announced projects in the U.S. totaled 122.7 million tons, while the 297 projects that passed Forisk’s screening methodology could consume up to 69.5 million tons of wood annually by 2022.

Project specific activities include:

  • Eagle Valley Clean Energy plans to build an 11.5 MW biomass power plant in Gypsum, CO that will use logging residues, pre-commercial thinnings, and fuel treatments as well as urban wood waste from a local landfill. Construction could be complete by the end of 2013.
  • Beaver Wood Energy received an air permit for its proposed wood pellet and 29.5 MW CHP plant in Fair Haven, VT. The group is pursuing an interconnection agreement and waste water permit.
  • Mt. Poso Cogeneration is operating and producing 44 MW of power at full capacity in Bakersfield, CA. Macpherson Energy Company and DTE Energy Services converted the former coal plant to 100 percent biomass. The plant runs on urban wood waste and agricultural residue.
  • ZeaChem will receive $12 million from USDA’s National Institute of Food and Agriculture (NIFA) through the Agriculture and Food Research Initiative (AFRI) Regional Coordinated Agricultural Project (CAP). Zeachem is targeting to produce drop-in fuels, including jet, diesel, and gasoline fuels, starting in 2013 at its biorefinery in Boardman, OR.
  • Enviva continues to expand its pipeline of activities.  The firm signed an agreement with E.ON to provide 240,000 metric tons per year of wood pellets beginning in 2013.

For a complete Wood Bioenergy US summary of projects and associated wood demand statistics, click here.

Biomass Power Slowed, but Pellets Proceed; Biofuels Projects Change Hands and Persist

3 02 2012

The wood bioenergy sector in the United States continues its extended round of musical chairs.  As of January 30, 2012, Wood Bioenergy US reports that projected wood demand for all announced projects in the U.S. dropped 7.4 million tons year-to-date, a 6% decrease since December 2011. This is largely attributed to the removal of several large biomass co-fire projects from the Wood Bioenergy US database, particularly in Ohio. Utilities claim that biomass remains uncompetitive with other alternative compliance options (note: natural gas). Also, some coal units are scheduled to shut down to meet EPA MACT requirements.

In liquid fuels news, the USDA granted ZeaChem a conditional commitment for a $232.5 million loan guarantee from the 9003 Biorefinery Assistance Program. The loan guarantee could help fund a 25 million gallon/year commercial biorefinery. ZeaChem plans to build the commercial biorefinery at the same site as its demonstration plant in Boardman, OR. The company recently completed construction of the core operations at the demonstration plant and continues construction on the ethanol production units for a 2012 start-up. Meanwhile, LanzaTech purchased the former Range Fuels site in Soperton, GA for $5.1 million in a foreclosure auction. The company plans to use wood residues to produce fuels and chemicals. We continue to consider technologies to manufacture fuels from wood as speculative, until they perform at commercial scale.

Enviva’s first shipment of pellets left from the Port of Chesapeake on December 31. The vessel, bound for Europe, contained 28,000 metric tons of wood pellets. Enviva began operations at the Ahoskie pellet plant in November. Two additional plants are in the planning stages in North Carolina and Virginia; both will also use the same port.

For a complete Wood Bioenergy US summary of projects and associated wood demand, click here.

471 Operating and Announced Wood Bioenergy Projects in the United States

2 11 2011

As of October 30, 2011, Wood Bioenergy US includes 471 wood-consuming, announced and operating bioenergy projects in the continental US.

  • In total, these projects represent potential, incremental wood use of 135.9 million green tons/year by 2021.
  • Based on Forisk analysis, projects representing only 73.0 million tons/year pass basic viability screening. Click here to download the free summary.

How does Forisk screen projects?  Amanda Lang, Managing Editor of Wood Bioenergy US, prepared the following “summary in one slide” to outline the process.  (For those interested in the complete history and methodology of the screening process, click here to access our 2010 bioenergy screening white paper.)

Forisk’s ongoing research includes this project-by-project screening to better understand how capital is being allocated in the energy and forest industries as it relates to markets for wood and timber.  Examples of project-specific updates from October include:

  • F.E. Wood & Sons plans to build a 300,000 ton per year pellet plant in West Baldwin, ME. The plan is contingent upon signing contracts with pellet customers and the state of Maine restoring a key rail line.
  • Enviva will supply wood chips to Dominion’s biomass conversions at the Hopewell and Southampton power stations in Virginia. The 50 MW power stations are planned to begin operations in 2013.
  • German Pellets plans to build a 500,000 metric ton per year pellet plant at a former chip mill site in Woodville, TX. The company plans to start operations by early 2012 and will export pellets to Europe.
  • Liberty Green Renewables dropped plans for two 32 MW biomass plants in IN and asked the Department of Environmental Management to revoke air permits.
  • ZeaChem signed an agreement with Pacific Ethanol to provide operating and accounting services to its Boardman, OR plant starting in the fourth quarter of 2011. The 250,000 gallon per year plant is planned to be operational in 2011 and is located adjacent to the Pacific Ethanol Columbia plant.

To purchase the subscription version of Wood Bioenergy US, including the full project list, please click here to visit the Forisk Store.

Wood Bioenergy: Projected Demand Exceeds 70 Million Tons by 2021; Detailed Study Clarifies Biofuels Projects for Investors

26 05 2011

The May issue of Wood Bioenergy US indicates that, as of May 25, 2011:

  • The continental US has 453 wood-consuming, announced and operating bioenergy projects.
  • In total, these projects represent potential, incremental wood use of 130 million green tons/year by 2021.
  • Based on Forisk analysis, projects representing only 71.1 million tons/year pass basic viability screening.

This is the first time projected demand has exceeded 70 million green tons within ten years.  In total, the pass rate of projects is 65%.  Of the 453 total projects evaluated, 54% are associated with cogeneration and/or wood-to-electricity.  The number of liquid fuel projects declined from 36 to 34 since last month.  Click here to download the free summary.

The decline in wood biofuels projects is consistent with the results of the study we published with the Schiamberg Group – Transportation Fuels from Wood: Investment and Market Implications of Current Projects and Technologies.  This research includes the status of 36 cellulosic biofuel projects, estimated commercialization timelines for 12 technology approaches, and implications for bioenergy and timberland investors in the US.   How was the study conducted?

Each technology process was evaluated based on its ability to produce at commercial scale and its estimated yields.  Many of these estimates came from firms, which we compared to proven pilot and demo scale projects.  Our experience in benchmarking information from private firms is that it can prove unreliable and overly optimistic.  Range Fuels is an example of a project we’ve covered since 2009 using similar criteria, and it basically played out as expected based on the criteria used.

For the liquid fuels study, those two elements, ability to produce at commercial scale and estimated yields, can be estimated given existing projects today and provide the basis for a continuum of both technologies and projects.   The key difference we find in comparing notes with private firms is that a successful pilot project is deemed “success” while that would be insufficient from our view.  The critical elements are ability to produce at commercial scale and yields.

For more information about this study, please click here.