Pellet market smoldering

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Articles - February 2010
Thursday, January 21, 2010
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PHOTO COURTESY OF CHRIS SHARRON

Wood pellets are looking like the next big thing in Oregon’s campaign to create green jobs. Or are they?

First Prineville-based Ochoco Lumber received a $4.9 million stimulus grant through Business Oregon to construct a wood pellet factory in John Day. Then a Redmond start-up named Pacific Pellet announced plans to convert 40,000 tons of scrap wood per year into pellets to heat homes and businesses and eventually fuel everything from schools and hospitals to factories and power plants. Ochoco’s grant will enable it to retain 80 workers and create 11 new jobs, while Pacific Pellet is expected to employ 20 people. Both plants will produce an alternative fuel from a renewable resource that burns with very low emissions.

Of course, that was the claim with ethanol, too. Industry insiders say the last thing the wood pellet industry needs is more production. Three wood pellet plants in Oregon have been shut down recently because of severe oversupply in the market.

Chris Sharron, president of West Oregon Wood Products in Columbia City, has suspended production at both of his mills and laid off 30 workers until the pellets start moving again. “Demand has dried up,” he says.

As with ethanol, skyrocketing fuel prices powered massive speculation in wood pellets, followed by subsidized construction and overcapacity. European Union nations required by law to find new sources of “carbon neutral” energy have been burning more pellets and less coal in their power plants, importing millions of dollars worth of pellets from the U.S. each week. The European market has justified the construction of huge new pellet plants in the Southeast, where production has grown by a factor of 10 over the past five years. But it’s a long road from Central Oregon to Europe.

The market in Oregon has been fickle. Sharron says 2008 was his best year ever, but 2009 was his worst. The state has tried to intervene by offering tax credits for pellet stoves and paying to convert schools to pellet fuel. “We’re trying to take a responsible and efficient approach to growing this demand,” says Matt Krumenauer, a senior policy advisor for the Oregon Department of Energy.

Whether they can grow enough demand to sell 80,000 new tons per year of wood pellets remains to be seen. Mark Stapleton, president of Pacific Pellet, says he is confident the market for pellet stoves will rebound and grow. “We’re not trying to displace anybody,” he says. “We’re just trying to give the consumer more options.”

BEN JACKLET
 

Comments   

 
FLGams JR.
0 #1 CEO Cornerstone Sales LLC MinnesotaFLGams JR. 2010-01-28 09:27:16
The pellet producers are putting them selves out of business. We have on here in Northern Minnesota who some how got sand mixed into the pellets. Think of what that did.

Now the prices for pellets have gotten so high, you might aas well burn fuel oil or LP gas. So then you can save the hastle of cleaning and maintaining a pellet stove, which most customers don't know how to do. Everyone is looking for magic. The baby boomers want to make life simple, not harder for them selves. We still sell 90 gas, and 10% wood/ pellets. I am sitting on a semi load of pellets which are going out at cost, just to get rid of them! Funny- feast or bust.
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tim
0 #2 east coast viewtim 2010-02-17 07:01:55
2008 provided justification for pellet prices to go up, between demand and increased fuel cost (trucking) people were willing to except the spike in price. trucking cost came down and production cought up with demand but prices stayed high. The producers that will be left standing will understand their ability to adjust to the market and treat their customers with the respect they deserve. Maintain the healthy margin between pellets and oil and you will have a growing busyness, try to justify your products price by being green and you will die.
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Steve
0 #3 Steve 2010-09-06 12:33:51
Here in Western WA, pellets have shot up from $150 a ton to $259 a ton in one season (it's now Sept 2010).

Propane is way up also, but I'm calculating if I want to keep my pellet stove anymore. Had it for 25 years but probably this is my last year of heating with pellets.
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