The Wood Pellet Industry in Pennsylvania 2009

Daniel Ciolkosz, Agricultural and Biological Engineering Department
Charles Ray, School of Forest Resources

In 2008, a sudden economic downturn caused a significant reduction in the dimension lumber industry. This resulted in reduced availability of sawdust residue for pelletizing. During the same period, a sudden rise in fossil fuel prices caused consumers to invest in pellet stoves as an attempt to reduce home heating costs. These two factors led to increased demand for wood pellets but the inability to meet that demand. It has not been uncommon to hear of stores that are sold out of wood pellets, while nearby pellet mills sit idle.

In addition, the increased demand for pellets from consumers has initiated a sudden surge of new pellet production facilities throughout the Northeast, increasing the competition for the available wood residual feedstock. Pennsylvania currently has thirteen wood pellet manufacturers that consume the equivalent of nearly one million green tons of wood chips and sawdust annually (Table 1), and new plant announcements in the region are made almost weekly. While the production of wood residuals declines with the sawmill industry, the competition for those residuals is increasing rapidly.

Table 1. Wood Pellet Manufacturers currently in PA (Source: PSU Wood Products Operations Laboratory )

Further competition for the wood residual resource comes from other wood-using facilities, both traditional wood products and wood bioenergy producers. Figure 1 is a map of Pennsylvania with all wood biomass-using facilities (not including users of "commercial" sawtimber, ie, sawmills). The total wood consumption of these facilities, exclusive of the pellet manufacturers, is 9,089,208 green tons annually. Therefore, wood consumption of the pellet production industry by 2010 will be roughly about 1/10 of the total woody biomass consumption of all non-"commercial sawtimber" wood usage in the state.

Biomass feedstock logistics and market economics will yield tremendous influence over the potential of wood pellet production and its associated contribution to Pennsylvania's economy. Policy decisions made and industry incentives given without full understanding of these factors could have serious negative impacts, both for the pellet industry and Pennsylvania's wood-based industry in general. In 2008, the Pennsylvania Blue Ribbon Task Force on the Low-Use Wood Resource found that there is a potential of at least twelve million additional green tons of unharvested woody biomass in the state that could be available annually, and in perpetuity. The task force made a list of sixteen recommendations in four areas that would improve the ability of Pennsylvania companies to access and utilize more of this unaccessed woody biomass:

Area 1. General:

• Increase funding for PA Hardwoods Development Council

Area 2. Renewable Alternative Energy:

• Promote "Fuels for Schools and Beyond" type projects
• Encourage "smart" location of new cellulosic ethanol facilities
• Develop new technologies for low use wood
• Classify wood residue electricity as Tier I generation
• Consider co-location of ethanol plants with paper mills
• Develop cellulosic biomass information and mapping systems

Area 3. Wood Industry Infrastructure:

• Increase funding for PA Bureau of Forestry to maximize achievement of harvest goals
• Seed partnership with Allegheny National Forest to achieve 100% of harvest goals
• Promote regional rail service
• Stimulate supply from private forest landowners
• Mitigate troublesome local ordinances
• Increase education and assistance for private forest landowners

Area 4: Logging Infrastructure:

• Expand education, training, and access to capital
• Increase transportation weight limits for forest products
• Address high cost of workers compensation and unemployment insurance

All of these recommendations would improve the operating conditions for the remaining sawmill industry in the state, and thereby increase the amount of wood residual material available for competitive bidding to the wood pellet industry and its competitors for the resource. Without implementation of many or all of these recommendations, the wood pellet industry, as well as other woody biomass-using bioenergy industries such as cellulosic ethanol and wood-fired combined heat and power, may paradoxically find their growth potential severely constrained by the decreasing availability of a "low-use" wood resource that has been demonstrated to be increasing as a percentage of a Pennsylvania forest resource that is large and getting larger.

A successful future for the wood pellet industry requires that these problems be addressed in an effective and efficient manner, through appropriate education, training, research, and technical assistance to the industry. Both manufacturing and quality control issues have been the focus of wood industry training efforts in the past, and there is a need to implement similar programming that is devoted to the wood pellet manufacturing sector. Penn State Extension as well as short courses sponsored by groups such as the Allegheny Hardwood Utilization Group and the Sustainable Forestry Initiative have helped train the employees of logging companies, sawmills, and secondary wood products operations.

With the Renewable and Alternative Energy Extension Program at Penn State, the university is positioned to significantly increase its research and educational offerings for manufacturers of biomass energy producers such as wood pellet companies. It is critical that industry representatives collaborate on identifying, defining, and quantifying these needs so that they can be addressed by the various agencies.