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U.S. Wood Pellet Industry Benefits from High Fuel Prices

Gina-Marie Cheeseman
| Friday October 24th, 2008 | 0 Comments

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The high price of oil and gas makes wood pellets a heating alternative, particularly in the Northeast, which relies on oil to heat homes. Wood pellets are made from sawdust, shavings, or ground wood chips which are compressed under high pressure and turned into pellets. The International Energy Agency (IEA) released a report about the wood pellet industry in November 2007. The report covered ten years, from 1997 to 2007.
Wood pellets came into existence in North America in the 1970s as an alternative fuel because the price of oil spiked. As the report puts it, “the primary purpose was to help resolve the energy crisis.” Used primarily in the beginning by industrial, commercial and institutional sectors, the first residential wood pellet stoves were sold to consumers in 1983.


As of 2006, North America had over 80 wood pellet manufacturers, and produced about 2,300,000 tons of pellets. Sweden, the U.S. and Canada, are the largest producers of wood pellets. In 2006 the three countries combined produced over 3,500,000 tons.
The IEA report pointed that pelleting facilities have to use locally sourced raw materials “because their low bulk density makes them too costly to transport over long distances.” In response to production demand, most facilities use only white wood residues, which restricts their production potential. Pelleting facilities are also affected by the fact that they usually depend on “only a few local sawmills.”
The report claims that use of wood fuels “produced in a sustainable way” does not result in the “net release of carbon dioxide into the atmosphere, since the CO2 released through the consumption of biomass fuel is taken up by growing biomass.” The report endorses wood pellets as a way to “serve the strategic purpose of reducing CO2 emissions.”
Incentives for the wood pellet industry
In the U.S., federal and state governments “influence biomass energy production or use,” according to IEA report. The Energy Policy Act of 1992 provides incentives for ‚Äògreen’ energy called the Renewable Energy Production Incentive. Eligible facilities receive annual payments of 1.5 cents per kilowatt hours for the first ten years of their production.
The same incentives were extended to private facilities that produced wind, closed-loop biomass or poultry waste, first as a ten year program, but was renewed in 2004 for another ten years. The eligibility list expanded to include open-loop biomass, solar, municipal solid waste, geothermal, and small irrigation power.
The Biomass Research and Development Act of 2000 and Section 9002 of the Farm Security and Rural Investment Act of 2002 gave preference to biobased products. The IEA report characterizes it as a government “preferential purchasing program for biobased products in order to help promote emerging markets for these products.”
President Bush issued several executive orders that benefited biomass products like wood pellets. The Presidential Executive Order 13101, or the Greening the Government Through Recycling and Waste Prevention, requires federal agencies to give preference in grant programs to recycled content products. The Presidential Executive Order 13134, or the Developing and Promoting Biobased Products and Bioenergy, set a goal of tripling the use of bioenergy and bioproducts in the U.S. by 2010.
On the state level green pricing is used, which is a voluntary program that pays consumers for electricity from “environmentally friendly sources,” according to the IEA report. Thirty-four states have green pricing programs.
The report characterized CA as “one of the most dynamic among US states in its commitment to mitigating climate change and promotion of renewable energy sources.” In June 2007, as part of the Renewable Energy Portfolio Standard, Governor Arnold Schwarzenegger announced the Bioenergy Action Plan which called for the use of biomass for electricity to reach 40 percent by 2020.


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