I know it has been a week since I put up something new. Some readers have also noticed that I haven’t been commenting much lately, and my e-mails are piling up. Things have just been really busy. I have a few guest posts that should be ready to go within a week or so, but I saw a topical story this morning that was worth commenting on:
The unintended ripples from the biomass subsidy program
The issue of incentives for biofuels increasing the demand for grains and thus helping drive up food prices is often called “Food versus Fuel.” There is also an incentive program (Biomass Crop Assistance Program) designed to encourage the use of biomass for heat, power, or biofuels. As is almost always the case, there were unintended consequences:
While it remains unclear whether Congress or the Obama administration will push to revamp the program, even some businesses that should benefit from the subsidy are beginning to question its value.
“It’s not right. It’s not serving any purpose,” said Bob Jordan, president of Jordan Lumber & Supply in North Carolina, even while noting that he might be able to get twice as much money for his mill’s sawdust and shavings under the program.
“The best thing they could do is forget about it. All it’s doing is driving the price of wood up.”
Sounds like “Food versus Fuel” except in this case it is the cost of wood – not food – that is being driven higher. The thing is that there are always trade-offs and always unintended consequences. We have to be wise enough to change policies in cases where the unintended consequences outweigh the benefits. But you have to look at the big picture as well. Were there also unintended benefits? Things like that must be considered.
In this case, I don’t know whether the unintended consequences outweigh the benefits. I think it is too early to know for sure. But in any case, higher cost biomass is something I expect in the future. I made this point in my presentation at the Pacific Rim Summit. If your business model is based on either tipping fees, or just free or very cheap biomass – then I doubt that model is sustainable. I think as more companies attempt to turn biomass into fuel, competition will heat up and free or negative-valued biomass will be a thing of the past.
Therefore, I think the safe bet is to plan for 1). Escalating biomass prices; 2). No government assistance. I have no objections to getting started with government assistance, but if you don’t have a clear plan for operating in a subsidy-free environment, then you may just be wasting taxpayer money up until the point that your business fails because conditions changed (in a way that you should have anticipated).
Excellent point, RR about unintended consequences. The really sad part is that the Government is causing an awful lot of unintended consequences hurting a lot of people for no substantial benefit. Even if some of the things the Government is pushing worked, they would still be insignificant contributions to humanity's power needs.
So how should a Government try to move things in the right direction, given the Law of Unintended Consequences?
What might work would be:
(a) great clarity & simplicity in policies;
(b) use of X-Prize type processes;
(c) use of the purchasing power of the government itself, as with the US Air Force's contracts to buy defined quantities of synthetic jet fuel at specified prices.
Any other suggestions?
If you keep reading to the end:
“But pellet mill owners such as the Rolf Anderson, chief executive of Bear Mountain Forest Products, said the program will eventually create an incentive for people to bring small pieces of wood left by loggers out of the forest, which will give companies like his a cheap and steady stream of raw materials.
"It opens up economic opportunities. It opens up healthier forests, and it helps companies and individuals save on their energy costs," said Anderson, whose company is based in Oregon.”
“Any other suggestions?”
Try not to drawn conclusions before doing research. I do not mean some story written by a journalist.
Try not to drawn conclusions before it is even possible for data to be available.
In other words, try to not be against something before you have even given it time to work.
I think it's time to wean big oil off the ethanol and biodiesel subsidies. So what if it means higher fuel prices? That would just make biofuels even more profitable for farmers.
Even corn cobs can be turned to ethanol at a profit with oil prices this high. And oil is likely to double again by years end.
Suppose the 45 cent per gallon blenders credit were ended today. A gallon of E-10 would go up almost a nickle,right? Naturally,a gallon of ethanol would cost a nickle more as well. More money for corn farmers. Less spent by the federal government. More by consumers. Everyone's happy again.
Pacific Ethanol(PEIX) was up 60% friday. Things might be looking up.
"Pacific Ethanol(PEIX) was up 60% friday. Things might be looking up."
All the way to $1.40! Any day now they will be revisiting their highs of >$40.
I remember shorting PEIX near $40. My biggest trading mistake ever was covering that short position after a few dollars profit.
This is something very confusing. Government is promoting alternate energy generation and at the same time there is no help coming from there side. I think it is a serious matter related to our environment.
'But pellet mill owners such as the Rolf Anderson, chief executive of Bear Mountain Forest Products, said the program will eventually create an incentive for people to bring small pieces of wood left by loggers out of the forest, which will give companies like his a cheap and steady stream of raw materials.!
İ can see how much the forester will love to have a many more gypo loggers running around the forest. İt is difficult enough to control the woods at present. This statement was no more than idle chatter to have something to say by Andersen.
To have enough value to bother going after it would have to be collected by the truck load – not an arm load.
I have to agree with Russ. And I would like to add that the waste left by loggers should stay right where it is to provide nutrients for the next growth of trees. Collecting all that litter for biofuels is the same mentality as gathering corn stover and other crop residue and leaving nothing to help maintain the organic matter content of farmland soil.
On a related note:
Food Prices DOWN 15% YOY
While ethanol production steadily increases.
Wholesale gasoline at $2.18 in electronic trading this morning.
We got some $2.88 gasoline coming our way.
Thanks for the link Rufus, something a liberal rag will not print:
“Americans spend just under 10 percent of their disposable annual income on food, the lowest average of any country in the world.”
It would be interesting if Washington Post Staff Writer Juliet Eilperin would disclose how much she spends buying coffee.
The agriculture and energy industry work 24/7, often under harsh conditions. When are we going to start hearing stories about the greedy coffee merchants?
The bottom line is there is an abundance of waste wood that can be removed and used to produce energy in an environmentally friendly way.
Sure, Kit. The key is "management."
Reasonable decisions not "craziness" from the looniest of envirobizarros.
As you know Rufus journalist like to infer "craziness" is the standard practice rather than the more boring story of good "management" that is the hallmark of successful companies.
When I type in my zip code to check the weather, the name Forest pops up. It is not usual to see land cleared by with a bulldozer pushing all the wood into a ugly pile. Recently I saw a lot cleared where the trees were recovered for lumber and the waste hauled away. Also I saw a lumber truck on the way to where I work. On my way home I noticed the lumber truck in our parking lot loaded with trees when land was cleared for our new building. All the wood waste was put to beneficial use. When a resource is properly used it is no longer a waste.
Russ and Rice Farmer might disagree but I see a lot of people trying to find better ways of doing things.
The last post dredged up and old gripe. Why do city people move to the county and then try to make it like the city? I can recall being new. I saw my neighbor doing spring cleanup on the common part of the drive way and joined him with my 10” Sears chain saw? It seems that the previous owner never bother to help. I had a lot of learning to do but all that was necessary was a willingness to learn. I had a serious accident on the way home from work before I could get all the firewood ready for winter. My neighbors showed and took care of it one Sunday afternoon.
Now for my gripe. A few years later when I build my dream house in the woods in California, I was careful to preserve as many ponderosa pines as I could as well as the Indian artifacts. Clearing away just enough native stuff to allow survival in a forest fire. I come home one day and the 7 acres across the road has been bulldozed bare. The new house that went up was a close to his neighbors as possible. When I sold my house, the first thing the new owner did was take out a beautiful ponderosa pine, live oak, and Indian artifacts and put in a big lawn and asphalt driveway. Welcome to the city.
Hi Kit P – Nothing wrong with cleanup at all – Actually is a lot better than burying the cuttings as was often done in the past.
İ don't think it has a place out in the deep woods though. A bit difficult to control when no one is watching.
For our new place we saved all the olive trees we could – moving trees that are very old even. The projects next door – they removed them all!
Olive trees are amazingly tough and can handle transplanting most anytime. Even if they burn to the ground they will probably come up again. The trunks of the older ones are beautiful.
Kinu-
I like the X-prize idea too, as opposed to government-financed R&D.
On your idea of purchasing power of the government (c), I think it will lead to waste and fraud. Once anyone makes money selling anything to the federal government, they become a lobby. The rest of us do not have the time to lobby against synfuel makers who sell to the Air Force, if we even know about it. But the synfuel makers will work their Congressmen and ply lobbyists to keep the program alive, probably waving the flag all along, that synfuel is needed to keep America safe, and would you send US soldiers into battlwe without enough fuel? etc.
In general, I like market solutions.
"And I would like to add that the waste left by loggers should stay right where it is to provide nutrients for the next growth of trees. "
No, it should not stay there, and it doesn't provide nutrients. What happens is that the slash piles are usually located on a cleared, bulldozed piece of land, where they trimmed and sorted logs, and then burnt. Because the wood is green, and you have the branches and leaves , it does not burn hot or clean. After it has burnt, the concentration of ash is so high that that area of land is rendered sterile. They can't leave the piles there as they are a fire hazard (they can and do spontaneously combust).
Now, if the logging companies chipped all their remnants, and dispersed them evenly, over the area harvested, it would be a a different story – but see if any of today's logging companies could remain profitable doing that?
Where I live, almost all local firewood sellers, and there are many, make their living by going to said slash piles and picking through them, and this is encouraged by both government and logging companies, as an alternative to random, illegal firewood cutting.
No one is suggesting you have to carry the wood out by the armload, but it doesn't always have to be by semi truck either. Two guys and a pickup and a trailer can get a lot of wood out of the waste piles, and make a sustainable energy business – and isn't that the whole idea?
A saying comes to mind here; "the road to hell is paved with good intentions"
This is a great example of a good intention (encourage biofuels) and poor execution – a subsidy program that was not needed and was then mismanaged.
At $45/ton, sawdust is then about $2.50/GJ, very cheap energy that is in no need of subsidy. The sawdust can be run directly into any pellet mill, possible needing some extra moisture, where they then have a bulk export value of minimum $100/ton, and a retail value of about $250/ton ($5/40lb bag). If that is not enough margin for a pellet business to operate without a subsidy or tax credit, then that pellet business should not be in operation.
For the particle board companies, they, like any other business that uses a feedstock which can be used as energy, should have been able to see this coming, where there would be competition for their feedstock, and maybe they did. But they shouldn't have to compete with subisidised buyers, and the Biomass Crop Assistance Program even deals with this. From that link, the fact sheet says, very clearly, that the program is only applicable to "materials that would not otherwise be used for higher-value products"
So while this was an unintended consequence, it was clearly not unanticipated. Much as I loathe getting lawyers involved in anything, the particle board industry, and any other sawdust users, have good grounds for a court challenge to the government here, for not enforcing it's own rules.
I presume they put that clause in after the farce of the pulp mill black liquor subsidy, where by mixing in some diesel to the black liquor, they could claim it as a biofuel and get several billions in tax credits, when they are already burning the back liquor anyway.
For these same pulp mills to then complain about some else getting an equally ridiculous (though much smaller) subsidy is a bit rich.
But RR is bang on that it does illustrate the point that subsidies, not matter how well intentioned, have unintended consequences.
In the case of woody biofuels, for pellets etc, which is north America's fastest growing (and possibly most profitable) forest product industry already, there is clearly no subsidy needed in the first place.
Paul, Read the fine print in the NOFA eligibility guidelines more carefully: the limitation you quoted, 'the program is only applicable to "materials that would not otherwise be used for higher-value products" ' only applies to Federal Lands. For private lands, there is no higher-value exclusion and the composite panel manufacturers have every right to be concerned for the future.
I completely agree with your point that composite & pulp manufacturers shouldn't have to compete with subsidized buyers. Note that they already have been primarily renewable fueled industries (by the way, pulp is a top 10 industry by employee #'s) for a long time.
Whatever your position on the "Money for Nothin'" (Black Liquor Tax credit)program, we do know one thing: If you take biomass and make it into pulp and paper, you will add considerably more value than if you make electricity. In fact, Europeans say the job multiplier is 13x. If you take that same biomass and make it into liquid fuels, the job multiplier will be considerably higher than straight electricity. (Too early to estimate with accuracy, not as high as P&P, but probably worth it.) I wouldn't be surprised if the job multiplier in composite industries if even higher than 13x.
So, to generate discussion; Does it make sense to lay off 13 or more employees in one industry so you can create 1 job in another, and do it by way of taxpayer $ for a raw material that is already being utilized?
Now let me fix BCAP: limit the program to only that biomass not already being utilized: some (but not all, to Rice Farmers point) tree tops & branches, agricultural field "waste" (eg. stover) and dedicated energy crops. Net effect: increases available biomass, everyone competes on a level playing field.
In the interest of full disclosure, I have more than one relative working in these industries. I don't want their jobs to be an "unintended consequence."
Maury, from previous thread: "Pete,a Grand Minima is two or more decades with a sunspot number less than 15,while a minimum happens pretty much every 11 years. And yeah,I meant the earth's polarity. "
Sorry for the pedantry but … no, no, NO! There's no such this as "a minima", grand or otherwise. Minima is the plural of minimum. You cannot use the indefinite article before a plural (even in Americanese), e.g.
"I usually move to warmer climes during Grand Minima, but this was a Grand Minimum not worth writing home about".
🙂
Oops. Should've said: There's no such THING…
And oil is likely to double again by years end.
You are expecting $165 oil by the end of the year? That is sure to send the economy into a depression, which will drop demand, which will lower prices. Rinse, rather, and repeat.
OD
Interesting article, I hadn't heard of the problem before. Here is my suggested remedy to the problem. Set a ceiling on the price/support. Let's say typical market price for sawdust is $45/ton. They should set the price support ceiling at $40/ton. So under this program, if you sell your biomass for $30/ton, the program would kick in $10/ton to take the total to $40/ton. This could lead to people gaming the system by setting the price artificially low to maximize their subsidy payout. But if there is a non-bioenergy use for that material it would counter-balance that.
Dave, thanks for the clarification, though why they had the forethought to put in a sensible clause and then limit it's application so as to make it almost irrelevant is beyond me.
"Does it make sense to lay off 13 or more employees in one industry so you can create 1 job in another, and do it by way of taxpayer $ for a raw material that is already being utilized? "
OK, I'll bite. It absolutely does not makes sense to use taxpayers $ for this, or most other subsidies, either. In the absence of of subsidy, let the two operations compete for the resource, same as petrochemical makers compete with oil refiners. If that means paper has to get more expensive for the end customers, then so be it, and they can decide whether they want to use paper or not. It doesn't always mean the resource gets more expensive – it's production base will expand in response to the increased demand.
In the business world, there is only on true measure of what is a better use of a resource – profitability – that someone is willing to pay you more for something than it cost you to produce it. When government sticks its nose in, things go awry, as RR's post illustrates, and we all agree.
For the pulp mills to be complaining about this at all is the height of hypocrisy. They may employ a lot of people, but all the pulp mills are losing money, at a time of record low lumber/wood prices, so feedstock cost is not their issue. And the volume of pellets being produced in N. america to date (2 million tons/yr) is 2 orders of magnitude less than the wood used by the pulp industry. So if they complain that the small biofuel industry, even with subsidies, is sending them broke, that's not what's sending them broke.
What IS sending them broke is that paper is a sunset industry, at least in N./ America. There is a pulp/paper mill down the road from me (100yrs old), and they make the paper for the LA times, amongst other things. used to supply a few other newspapers too, but those papers are now gone.
They have been looking at converting to a biofuel plant, a waste to energy plant, a wood fired power station, anything to get out of the P&P business.
It does employ a lot of people, but they are only "Adding value" if a customer is prepared to pay for it, otherwise it's not a good use of society's resources, and their current lack of profitability reflects that – a major industry contraction is about to happen.
But there are still lots of trees growing all around us, and the people that harvest them will be happy to sell them to someone else – a new market will help the forestry industry, and unless the p&p industry can find some new markets for themselves, they'll become a small, specialist industry.
The fact that we are all carrying on this discussion without a single piece of paper being used is testament to that.
I am not anti pulp per se, I am just of the opinion that every business, biofuel included, should stand on it's own feet. All these bailouts, subsidies and trade protection are investing the country's scarce capital into industries that cannot be supported by their (shrinking) customer base, so why should they be supported by taxpayers?
I'll cool down now and let everyone else have their share of space here..
That's interesting Paul. I'd kinda assume that society is using less paper, but I've never seen any numbers for it. My mind still boggles at uses like newspapers — how many tons of paper get used for one day and then trashed? The fabled paperless office too … it always seemed like the use of computers generated more, rather than less, paper. And yet, when I think about it, the need for paper HAS been decreasing gradually … for instance transitioning from desktop to laptop computers in the office means fewer people bring paper printouts to meetings anymore. I print very very little these days, and when I get my hands on a Plastic Logic Que I will probably never have to print anything again. (No vested interest … I just love the look of it).
I'd kinda assume that society is using less paper, but I've never seen any numbers for it.
Paper consumption has dropped in the US since 1999
http://chrislang.files.wordpress.com/2008/02/us_china_finland.png
Though it may still be increasing globally
http://chrislang.files.wordpress.com/2008/02/paper.png
based on data from
http://earthtrends.wri.org/searchable_db/index.php?theme=9&variable_ID=571&action=select_countries
The largest decline in the US has been in newsprint at a 36% decline from 2000 to 2008 according to the American Forest & Paper Association
http://foris.fao.org/meetings/download/_2009/advisory_committee_on_paper_and_wood_products_50th/misc_documents/usa.pdf
Paul,
We agree about most things related to this post; I'm going to clarify just a few. With regard to the cost of paper…. as demand for biomass energy increases, I can see all forest products being priced at their "equivalent energy value", or perhaps, the equivalent oil pricing. It will be interesting to see what happens there and your profitability measure (which I agree with) will come into play. I wouldn't quite say "record low prices" for wood, but I would agree that raw material pricing is not the issue. Lots of issues with P&P: one is their long standing policy of sticking their head in the sand (not making people aware that they are the original renewable energy industry, among other things) others are not of their making but this isn't the time or place to go into that.
To further on Pete S.'s comments, what I will say is that while newsprint volumes are way down, most other paper volumes have still been slowly increasing (overall trend excusing the past year.) But the most interesting discussion should be around the Kindle and Que: I wonder what the right environmental thing to do is? Are we better off reading things on paper or on an electronic device? My inclination is that if the device lasted something north of 10 years and it was compared to paper being put in a landfill, we're better off with the electronics. But I think we all agree that 10 years would be a long time for such electronic devices, and we really aren't taking into account the true manufacturing and disposal cost of these devices. If we do a cradle to grave analysis of Kindle or Que compared to paper that was used and then recycled into pellets and energy, I think the picture is a lot more gray. I'm curious what would be the lower impact method. A final comment on that: as a long time fine woodworker, I really don't want to give up my Woodenboat and Fine Woodworking magazines. It's just not the same.
Having said all that Paul, touche about the way we are carrying this discussion; good point!
Looks like I'm forced to clarify: I'm talking about volumes on a global basis, not NA.
Pardon the gibberish. Here's hoping Pete will see the words Grand Minima used four times in one paragraph by some fairly smart folks…..and stop telling me there's no such thing.
We consider to what extent the long-term dynamics of cyclic solar activity in the form of Grand Minima can be associated with random fluctuations of the parameters governing the solar dynamo. We consider fluctuations of the alpha coefficient in the conventional Parker migratory dynamo, and also in slightly more sophisticated dynamo models, and demonstrate that they can mimic the gross features of the phenomenon of the occurrence of Grand Minima over suitable parameter ranges. The temporal distribution of these Grand Minima appears chaotic, with a more or less exponential waiting time distribution, typical of Poisson processes. In contrast, however, the available reconstruction of Grand Minima statistics based on cosmogenic isotope data demonstrates substantial deviations from this exponential law.
http://www.springerlink.com/content/0g855004653274j7/
Dave – agree with you about the longevity and recyclability (if that's a word) of consumer electronics. These need to improve. Some years ago I saw a prototype of a great idea for mobile phone recycling. Many of the components are recyclable but it is labour intensive to separate them. This prototype used shape memory plastics to hold many of the components together. Heat them to seventy Celsius or so (can't remember what the magic number actually was) and hey presto!, they all spring apart. Don't know what happened to the idea. There's probably some much simpler low hanging fruit though, e.g. from 2012 all mobile phones sold in the EU have to be compatible with a single universal charger.
Jeepers, Maury, I am close to despair. I didn't say there was no such thing as Grand Minima. I said there was no such thing as *_A_* Grand Minima. Look at your four occurrences. None are preceded by the word "A", i.e. the indefinite article. One is preceded by the word "these". In other words, the context makes plain that they are all plurals. If I am talking about one of them, it is a Grand MiniMUM.
Imagine we are talking about Widgets.
Me: There's no such thing as *_A_* Widgets because Widgets is the plural of Widget.
A Widget. Many Widgets.
A Grand Minimum. Many Grand Minima.
🙁
I read the other day that corn is considerably cheaper (per btu) to burn than wood pellets.
$4.00/56 lb v. $5.00/40 lb.
About the same btu content.
Jes sayin
Oh, and as far as "stover:" About 1/3 is as much as Any landowner will consider removing.
The cobs that some are starting to use, and that Poet is going to use for cellulosic ethanol, have very, very little nutrient value.
In fact, on looking at your source again, their fourth usage: "reconstruction of Grand Minima statistics" is actually bad grammar. "Grand Minimum statistics" would be more apt.
🙂
A solar “Grand Minima” (Or,for Pete's sake,a consecutive number of quiet solar minimums)produces a time of great hardship, a time of significant natural global cooling, a time of great famine and starvation and a time of major epidemics.
http://www.breadandbutterscience.com/GMDPP.pdf
Sorry Pete,but you're wrong in this case. There is such a thing as A grand minima. Minima isn't the plural of minimum either. If you want to pull your hair out,imagine how I feel. I'm the one being improperly corrected again and again.
Perhaps the moral of the story is: don't take grammar lessons from Armageddonist nutcases. His usage is wrong in almost every case. The clue is where he ties himself in knots talking about "the 27 Grand Minima’s [sic] that have occurred over the past 12,000 years" … and then refers to individual ones as the Maunder Minimum, the Sporer Minimum etc.
Either way, A Grand Minima sounds like a contradiction in terms to me, or a French grandmother…
Dave wrote "as demand for biomass energy increases, I can see all forest products being priced at their "equivalent energy value", or perhaps, the equivalent oil pricing."
That is exactly what is happening, same as for fermentable grain (corn, wheat) and oilseeds. From here on, anything that has an energy value, will always have a floor price of some level.. It won't necessarily relate to oil pricing unless, like ethanol, it can substitute for oil as a transport fuel.
So, for the time, being wood pellets will be priced on their heating or electrical generation value. Soon municipal solid waste will start to have a commodity energy value, as the waste to energy plants get built.
Under this situation, Terry, I doubt that sawdust would ever come close to being as cheap as your floor price, it is already a "semi refined" feed stock.
But the N. American pulp and paper market is in freefall, and probably Europe too. Not just newspapers, but schools, offices,etc. I even heard something about US hospitals, computerising their medical records – though I think that was more to make sure they were operating on the right patient rather than saving paper.
Dave, as a fellow woodworker I am firmly with you about Woodenboat, it wouldn't nearly as relaxing sitting down in the leather chair by the fire, with a glass of port and a Kindle -goes against exactly what Woodenboat is about. So, like the paper industry, there will be a niche, but shrinking, market for hardcopy – how many of today's teenagers will be reading paper stuff in 30yrs? – they'll regard it like I do my fathers dusty LP's – so last century!
Lumber futures bottomed out last year at $165 per 1000bd.ft, now up to $215, most mills are profitable at about $250. That is 2.4 cu.m of 2×4's, or about 1.3 tons. So if milled, planed, kiln dried timber is at $125/ton, and it is 18GJ/ton, it's energy value is $6.90/GJ. Raw, knotty logs around here trade at $35/cu.m, or about $3/Gj. So, at low lumber prices, it's not worth all that trouble and the mills that have cogen plants, will either start burning the logs to sell electricity, or grinding them and pelletising them.
Once a few of them start doing that, and the lumber supply tightens, prices will recover. For a lumber mill, the pellet or cogen plant is what will allow them to ride out the slumps, so they are still there for the building booms – it is the only thing that will save them.
As soon as the linkage is established to alternate commodity markets, in this case energy, things get very exciting. IT's great for the primary producer (the farmer or the forest owner) but if you are a processor, then as RR says, your business is only as secure as your feedstock supply – you may find yourself being outbid by another industry.
In any case, when it's a dog eat dog market like that, subsidies are absolutely unnecessary. Watch instead for the particle board makers, and pulp mills, looking for subsidies to prevent them from moving their operations to China. They got "money for nothin", next it'll be "money or I''m movin'"
Like it or not,his usage is correct Pete. The Dalton, Maunder, Sporer, Wolf and Oort Minimums were actually Grand Minima events. A Grand Minima is just an extended period of extremely low sunspot activity. Maybe we'll call the next Grand Minima The PeteS Minimum. As good a name as any.
It is indeed correct to say that wood value is connected to fossil fuel prices. As sawmills in Europe are installing Cogen, the price of sawdust and chips are way up. You do not have to own a degree in economics to understand that when a certain product can be used in multiple ways, pricing will be steered towards the upper level.
Another comment on wood use : it is extremely difficult to define low-value and high-value products and to link it towards certain wood qualities. The European particleboard industry, in particular in Italy, is using more and more low quality recycled wood coming from demolition, packing, … Certain companies produce panels out of 100% recycled wood. Particle board industry can use and clean the low quality wood and produce end products at lower price than using co-products from sawmills. On the other hand, wood quality for Cogen installations, especially with lower MW, must be excellent in order to cope with emission regulations.
In order to reach sufficient energy from renewable sources, it is clear that subsidies are necessary to make new plants possible. But it is the possible multiple use of biomass products that is the prime trigger for competition, the system of subsidies is an accelarator in this unpredictable balance of pricing.
http://www.merriam-webster.com/dictionary/minimum
minimum
plural minima or minimums
The Maunder Minimum was a Grand Minimum, one of many Grand Minima.
"it is clear that subsidies are necessary to make new plants possible."
I couldn't disagree more. If you need a subsidy to turn $50/ton into $250/ton wood pellets, something is very, very wrong.
When the price goes up for sawdust, then the biofuel plant can switch or supplement with things like recycled cardboard, wood demolition waste, tree trimmings, yard clippings forest residue etc, the fuel is all round you. Where I live (on the coast) there are tens of tons of driftwood that wash up every day!. You just have to become creative and innovative. When subsidies are there, businesses tend to focus their efforts on creative ways to keep them, not creative ways to live without them.
Certainly what is needed are clear rules relating to biomass generating plants (emissions, grid access, etc), same as for coal of anything else, but I fail to see the inherent need for subsidies, especially when there are alternate bidders for the product. As you said, it will gravitate towards the highest value use, and if that is not biofuel, then so be it.
That is good to hear that so much use is being made of recycled wood, and interesting about the emissions for cogen. ironic give that the original idea of the cogen was to use the waste wood.
I am confident the wood to fuel industry will continue to develop, but as you can see from the earlier examples and RR's post, subsidies, at best, seem to do as much harm as good, and at worst, are a waste of money and do no good at all. And once in place, removing them becomes a political nightmare as the recipients all play the "victim" card. They should just grow up and get on with business, same as everyone else.
I read the other day that corn is considerably cheaper (per btu) to burn than wood pellets.
Rufus~
On the surface, that makes no sense. What did you read that said that? And did it explain why?
To grow corn one has to make an energy investment in fertilizer, diesel fuel, herbicides, pesticides, and fungicides, while most wood grows on its own taking advantage of the Sun, rain, and the natural nutrients of whatever soil it is growing in.
My sister in Montana has a stove that burns corn or wood pellets Wendell. She buys whichever is cheaper at the time. A 40 lb. bag of either is about $5.
She buys whichever is cheaper at the time. A 40 lb. bag of either is about $5.
Maury~
Would the subsidies corn receives explain that?
The last time I checked,corn farmers got 23 cents a bushel in subsidies Wendell. Less than half a cent per pound. I doubt 15 cents would make much difference on a 40 lb. bag. We can make ethanol with field corn,switchgrass,and wood or burn them for heat or electricity.
So the cost of corn and pellets is about the same, as is their heat content (about 18MJ/kg), and their moisture content, around 10%. So Maury, your sister is spot on to buy whichever is cheaper.
What would be interesting is to find out what the ethanol distillers sell the residue for. Since they are taking out the starch, they leave cellulose and lignin (which has a higher energy density), so the residuals, if they are dry enough would have a higher energy content. More importantly, they should be much cheaper.
You could pelletise the residuals and then sell those as fuel, though I have not heard of any of them doing that, they normally go as animal feed. Could even grind the stover and put that into the pellet mix too…
The last time I checked,corn farmers got 23 cents a bushel in subsidies Wendell. Less than half a cent per pound. I doubt 15 cents would make much difference on a 40 lb. bag.
Maury~
OK, it's not the subsidies. So what's the explanation of why a bag of corn costs about the same as a bag of wood pellets? It doesn't seem to make sense when to grow corn farmers have to buy energy-intensive fertilizer, pesticides, herbicides, and fungicides; plus burn diesel oil.
There has to be some explanation that is not apparent to me. Could it be that the wood pellet people price their bags near that of corn and are making a lot higher profit?
I think so Wendell. If corn was twice as much,they could probably charge twice as much for the wood pellets. Like Paul said,they're very similar in btu's and moisture content. I'm surprised a switchgrass pellet industry hasn't sprung up already. I guess it's easier said than done.
Maury/Wendell,
It already is being done, from a guy in Wisconsin
"I've been testing switchgrass pellets in my magnum 7500 furnace and I'm impressed with the heat output of these pellets. Advanteges: less bulky ash( no klinkers!), same BTU as corn, burns longer per pound than corn, and burns cleaner too. disadvantages: cannot be lit by automatic igniters and needs a stirring mechanism in the firepot. The cost of these pellets is $180 for 1 ton. I was so impressed that I am now a distrubiter of this fuel."
And for an amazing amount of information, from a group that has first looked at switchgrass to pellets in 1991:
http://www.reap-
canada.com/bio_and_climate_3_2.htm
From their website " the grass has to be ground up to pass through a 5/64" screen" and (not surprisingly) "it is easier to make briquettes"
And "a selling price of $150/ton" and, my favourite,
"The most promising regions… are those where hay production costs are low and heating costs are high due to long winters and high fuel costs".
So you are right on about how they price it!
Take a look at what baled grass hay sells for, typically $50-100 ton, and you can see why farmers are interested in this. And having lifted many thousands of bales of hay growing up on the farm, I'd much rather work with pellets!
I don't think it exists yet, but look soon for a "combine pelleter" that can take the dried hay from windrows in the field and grind and pellet in one pass.
Once you have that, Wendell's point about needing fertilizer, pesticides, etc for grain growing will ring very true. Go a step further and farm the short rotation woody crops and it gets better, as they have the longest growing season, you plant once and harvest five years later, with no ploughing of fields, etc, you can "harvest" at any time of year to suit yourself, independent of weather and so on. It will just be so much easier to be an energy farmer than a food farmer.
Now that farmers can choose to be in either the food or energy business, and the world is hungry for both, I think good times are ahead for the farmers. While most other (non-energy) businesses see their costs rise with the price of oil, farmers will now see their incomes rise with the price of oil/energy. And for a pellet farmer, their fuel inputs per ton will be much lower than the grain farmers.
And the more that decide to go into the energy farming business, the smaller the supply and higher the price of food goes. Not that there's anything really wrong with that, basic food is cheap even at twice today's prices, it's the processed food that is expensive. Watch for the food companies to start asking for subsidies next as both their "feedstocks", raw produce and energy , start rising together.
They, and the livestock meat industry, will be the first call for an end to the corn ethanol subsidies, which some are already doing.
We will hear a lot more of "wood/food versus fuel", and if that makes everyone more careful about their consumption and wastage of both, then that is perhaps the single greatest contribution the biofuel industry can make.
And here is a link to an interesting website, with an interesting discussion about grass pellets, wood pellets and corn.
http://forum.iburncorn.com/viewtopic.php?t=2086
Gotta love how with a website name, you can call a spade, a spade.
For those comparing the cost of wood pellets to corn and wondering how they can be so similar: consider that you are forcing a tree through a 1/4" hole. I think you are underestimating the input costs to make wood pellets.
Dave,
Keep in mind that the majority if the pellet mills in N. America including the one referred to in the original article, are using sawdust residue from sawmills. So in this case the hard work has already been done by someone else.
From a Kahl, German pellet mill maker: "specific energy consumption.. .. is between
30 and 50 kWh/t in case of wood
processing."
This is for the pellets, only, so if you are working from sawdust, this is it, and you are looking $5 of electricity for a ton of pellets. One guy and a $12k mill can make two tons/day, and at $250/ton, that's a pretty good business.
IF you start with logs, then yes, you have to chip and then grind them, which takes about the same power again, plus some drying. This is what they do in Europe, but here most mills are running on residue, as there is still plenty of it.
A large mill in northern BC produces about 100,000 tons of pellets a year, almost all of which is exported to Europe. Granted, they have economy of scale, but they are collecting whole (beetle kill) logs and grinding them. They work on a mill gate price of $100/ton, and are planning to expand..
Overall, I would suggest the energy inputs to grow and harvest a ton of corn are higher, as are the equipment costs, for similar scale operations.
Having said that, they will still charge as much as the market will bear…
Dave,
For an indication of where the global pulp industry may be headed, check out this story:
"Indonesia firm picks wood pellet mill over pulp mill"
http://timberbuysell.com/Community/DisplayAd.asp?id=5637
Watch for some existing pulp mills here to re-tool for pellets. They are already in the business of converting chips to something, so it's not a big deal to convert them to something else. If 10% of the US and Canadian mills did this, both they and the remaining pulp mills might well be profitable.
And a few more pulp mills going to pellets..
BRUSSELS , Nov. 27, 2009 (RISI) – Stora Enso has begun production at its new Kopparfors pellets factory, located in the debarking room of the company's closed Norrsundet pulp mill in Sweden.
From Prince George, BC.. "Pacific BioEnergy intends to restart the (lumber) mill and build a new pellet plant" The article talks about the buyer's main reason for buying the mill is to get the tree farms it controls – reminds me of something RR said about securing your feedstock.
"Enligna Canada, a wood pellet manufacturer, is expanding its production capabilities in Upper Musquodoboit, Nova Scotia to meet international demands."
"to meet demands" is a line we have not heard from from the lumber and pulp mills for some time, and likely won't for some time yet.
There is a clear trend here. Not saying that all pulp or sawmills can do this, but we do have a biofuel growth industry, that really doesn't need the subsidies.
For those comparing the cost of wood pellets to corn and wondering how they can be so similar: consider that you are forcing a tree through a 1/4" hole.
Dave,
While it certainly makes sense to compact sawdust and other wood waste and residue into pellets so they can easily be handled and burned, why deconstruct a big tree into small bits and pieces in order to shape it into small pellets?
Is the advantage of handling and burning pellets so great that it makes sense to first grind up trees in order to pelletize them, instead of just cutting the trees into larger chucks of firewood as has been done for thousands of years?
Wendell,
I think the answer that is that, yes the advantages are that great.
With the pellets, being a consistent size, (about 6mm diameter, and 10-15mm long) they "flow" easily, an auger consistently. Chips can be made to a consistent size, but are still irregular shape and interlock. Also, if chipping a tree, you need to dry the chips, or they will start to compost themselves, heat up and can self-ignite.
The grinding and pellet making process allows you to control the moisture content.
Not saying that chips can't be used, and they are at many saw and pulpmills for cogeneration plants – that is, they are used at the point they are created.
But for transport and long term storage, pellets are better, and consistent quality grades have been established.
For gasification processes in particular, a consistent fuel is more stable.
Take the production process a step further and torrefy the chips and then pelletise and you have a product that can be directly substituted for coal – something chips alone can't do.
Finally, because the pellets are compacted in the pellet mill, they have a greater bulk density than chips – about double, which has significant advantages when trucking/shipping and storing.
If I was doing direct usage of trees to power generation, I'd chip, but, with the going price for pellets about 1.5 to 2x what I could sell the electricity for, pellets are a better bet, and they sell for about 5-10x the price of chips!
So someone is prepared to pay for the convenience…
Wendell,
I'll echo many of Paul's comments: and this is from a person who is not fond of whole tree chips as the source of biomass for pellets. (I believe residues you mention are just fine.) Paul's point about handling biomass is perhaps the most important. Combusting firewood or chips is not a process that can be run unattended: pellets allow for an automated process, thus, the value is that great. Secondly, the scales we're talking about are entirely different. I don't see pellets ever being burned in utility size boilers (I use that phase hesitantly because biomass can never match the scale of a large coal fired plant and be 'the right thing to do.' Torrefaction may be a technology to be the exception to that rule: too early to say either way.) Pellets are primarily for the residential, small commercial, and school or hospital size markets.
Dave
Dave/Wendell,
Yep, for small stuff, pellets are the way to go, for large, I'd go with chips. Contrary to what I said, chips are shipped across oceans, from Australia to Japan and China for pulp/paper making
BUt this company has decide to use poellets for a utility scale plant:
" RWE AG, Germany’s second-largest utility, will build the world’s biggest plant for wood pellets in the U.S. state of Georgia, allowing it to lower carbon- dioxide emissions at a Dutch power plant.
The company will spend about 120 million euros ($170 million) on the facility, which will have an annual capacity of 750,000 metric tons and start in 2011, Essen, Germany-based RWE said today. The pellets will be shipped to the Netherlands to supplement hard coal at the 1,245-megawatt Amercentrale station."
This works out to 2000t/day of pellets, which generate 130MW, just 10% of the total output.
But, Dave is still right, they are not even close to replacing coal with pellets. They would suck up over half of the world pellet production to fuel this one plant.
My local pulp mill buys wood chips for $25/ton, that sounds like a much better business strategy to me