The State of Woody Biomass Across the North Country

Transcription

1 cover story The State of Woody Biomass Across the North Country STEVE BJERKLIE AND MIKE MONTE Timberwolf Logging (Littleton, N.H.) chip truck in foreground at a Veto Override Rally at the Bethlehem plant last summer. Timberwolf has supplied this plant with chips for 25 years. 12 THE NORTHERN LOGGER NOVEMBER 2018

2 Northeast Biomass: New Investment and a Big Political Victory Create Cautious Optimism BY STEVE BJERKLIE For the time being, at least, a cautious sense of optimism is being felt in the biomass industry in New England and the Northeast. In Maine, new investment in paper mills, including the scheduled reopening of a long-closed mill, has buoyed hopes that the pulp market will rebound. In New Hampshire, the successful override of a gubernatorial veto of biomass-supporting legislation has breathed new life into what had been a moribund chip market. Even so, industry observers and executives worry about the long-term future of biomass in the Northeast, largely due to biomass energy s relationship with energy markets in general and also due to the market for biomass thermal heat remaining small. As we move ahead, when you really look at the total picture, biomass thermal is the only bright spot, said Charles Levesque, president of Innovative Natural Resource Solutions, a New Hampshire-based consultancy focused on natural resource issues. But right now, we ve got a short-term window in the AS WE MOVE AHEAD, region for biomass, and we need to take advantage of it. Levesque noted that there AT THE TOTAL PICTURE, are, in effect, three markets for biomass: Chip-burning biomass BIOMASS THERMAL IS energy plants there are 17, total, in Maine, New Hampshire, Vermont, and northern Massachusetts, though not all of them operate full-time that consume the lion s share of low-grade wood chips; chip-burning thermal operations that heat institutions and facilities such as hospitals, schools, public buildings, etc.; and pulp-consuming paper mills, which have been in long decline in the Northeast but which may be flickering the life again, albeit on a limited basis. Also, biomass energy plants participate in the market for Renewable Energy Certificates, or RECs, which can influence a plant s ability to operate. Biomass energy is inextricably tangled with the overall energy market, said Levesque, which at present is driven by natural gas. As natural gas becomes more expensive, the market for biomass energy becomes more attractive but the futures markets are not projecting any big increases in fossil fuel prices for the foreseeable future, he cautioned. As long as natural gas remains cheaper or cost-competitive with biomass energy, natural gas will win the day. WHEN YOU REALLY LOOK THE ONLY BRIGHT SPOT. THE NORTHERN LOGGER NOVEMBER

3 With low natural gas prices and the resulting low wholesale energy prices, a more long-term policy initiative will be necessary to keep the biomass industry going, commented Mike O Leary, plant manager at Bridgewater Biomass Power Plant just north of Ashland, N.H. Facilities are getting older and margins are needed so owners can invest needed capital into the facilities. He continued: One of the frustrating points of the energy price debate is the claim that subsidies are adding significant cost to the total price of electrical energy. The reality is that the increase is minimal, and what New England really has is a transmission and distribution problem. According to a New Hampshire Public Utilities Commission study, transmission costs have risen 555% over a ten-year period. Wholesale generation prices are consistent with prices nationwide, yet transmission and distribution prices are more than double. Regulated utilities that get a guaranteed rate of return on these upgrades are reluctant to point to this as a problem and cloud the price issue with lumping the components together. Meanwhile, biomass energy plants in the Northeast may begin to face price pressure for low-grade wood as Maine s paper industry shows new signs of life. At the beginning of October of this year, ND Paper, a subsidiary of Hong Kongbased Nine Dragons Paper, announced its acquisition of the Old Town Paper Mill in Old Town, Me., which had been shuttered for three years. The acquisition follows ND s previous announcement that it would invest $111 million to improve a paper mill in Rumford, ME. As reported by the Portland Press Herald, The Old Town purchase is expected to boost pulp production in the state, although much of that raw material for making paper is expected to go to ND Paper s own mill. Eventually, however, some of the pulp could be exported, an increasingly lucrative new market for the state s forest products industry. Supply pressure is nothing new to the biomass industry, responded O Leary. We will have to maintain relationships and make convenience and turnaround times a priority. Suppliers understand the importance of consistent markets and efficiency for their businesses. We can only pay what we can pay. Levesque pointed out that while the revitalization of paper mills in Maine is good news overall for New England s timber industry It will bring stability to low-grade markets it will take much more than ND Paper s investments to restore Maine s paper industry to its glory days. Since 2014, we ve lost 4 million tons of pulp market as a result of paper mill closures, he said. On the thermal side, Levesque is optimistic for the longterm because prices for pellets and chips for thermal heat have been remarkably stable for as long as 10 years. Fossil fuel, by comparison, is super-volatile, he added. The problem with the thermal biomass market is one of size. While there are more than 400 institutional and commercial facilities in northern New England that buy wood chips for thermal heat, the total consumption is just 250,000 tons of chips per year at most. One of the several Veto-Override Rallies that NHTOA co-hosted in support of Senate Bill THE NORTHERN LOGGER NOVEMBER 2018

4 A high school using thermal energy to heat buildings might buy just 700 tons of chips annually. Two Pinetree Power biomass plants in New Hampshire, in Tamworth and Bethlehem, burn more than a half-million tons of chips every year. But if oil hits $90 a barrel, that will push more facilities to convert to biomass thermal, said Levesque. They have to think in terms of return on investment. A new appliance for thermal heat that burns wood chips will cost up to four times the cost of a new oil burner, but a high price for oil can change the economics of the equation pretty dramatically. In New Hampshire, the timber industry was assured of a market for low-grade wood chips, at least for a three-year near-term, when, on September 13, Governor Chris Sununu s veto of Senate Bill 365 was dramatically overridden by the New Hampshire legislature by a margin of a single vote. SB 365, which took effect immediately SINCE 2014, WE VE LOST after the vote but will take realistically not take effect until 4 MILLION TONS OF PULP the next energy auction later this year, requires New Hampshire s MARKET AS A RESULT OF electric utilities, including giant Eversource, to purchase a PAPER MILL CLOSURES. portion of their power needs from the state s six biomass power plants at a cost of about $18 million per year for three years. SB 365 sunsets in three years, but if the veto had been sustained, a quick collapse of the wood-chip market was probably inevitable, as the six biomass plants could not have afforded to stay open. In New Hampshire, the second-most forested state in the country, the wood-chip and wood-pulp markets are vitally important: More than three- THE NORTHERN LOGGER NOVEMBER

5 Freshly chipped low-grade wood pouring into a chip trailer at a timber sale logged by Magoon Logging, Loudon, N.H. quarters of all the standing timber in the state is low-grade, unsuitable for lumber, and approximately 40 percent of all the timber harvested in New Hampshire is chipped. According to the New Hampshire Timberland Owners Association, some logging companies in the state earn upward of 40 percent of their income from low-grade harvesting. When the final vote tally was announced and it was clear that the veto had been overridden, the visitor s gallery overlooking the Hall of Representatives, where the New Hampshire House vote was taken, burst into applause and shouts. Even so, SB 365 is not a savior but a temporary fix. Prior to the passage of SB 365, the biomass generation model was in serious trouble and without the override likely would have been shuttered, commented Mike O Leary of Bridgewater Power. Post-365, there is still uncertainty because contracts have not been formally adopted as of this date. There is optimism that the facilities can survive with this legislation and further optimism that many policy-makers are now keenly aware of the bigger picture of biomass fueled electric generation and the importance of low-grade wood markets not only the wood market, but the more widespread implications that the industry plays in the convergence of tourism and natural resource management. Biomass generation still faces significant pressure in New Hampshire even with passage of SB 365, he added. I cannot speak for the other facilities, but until we see some positive movement on REC prices we will continue to be very tight and fuel price will have to stay in check. (According to Charles Levesque, REC prices have tanked. ) RECs have a supply/demand dynamic and markets respond accordingly, continued O Leary. Many states are getting much more provincial with their REC policy and the benefits it provides both generators and consumers. Clearly biomass markets provide benefits to the state. The bigger question is how much do you pay for those benefits and how do you pay for the benefits? Electric markets are still depressed, said Robert Berti, licensed forester and manager at FORECO LLC, a timber industry management firm. Biomass plants will have to work hard to stay competitive, even with SB 365. But I think lowgrade markets are going to be strong, in part because the pulp market is coming back from what s happening in Maine and in part because 365 stabilizes the market for three years. Overall, this is all a good thing for people in the woods, he concluded. NL 16 THE NORTHERN LOGGER NOVEMBER 2018

6 Biomass in the Lake States BY MIKE MONTE T he use of biomass as a renewable energy source has been anticipated for a long time, not only for the Lake States, but hopefully, for the entire nation. The concept should be heavily embraced by all entities that require heat and electricity. The fact is that we can grow fuels that are sustainable, and along with solar and wind power, provide energy to the nation without disturbing the ground and adding more carbon dioxide to the atmosphere. In addition, there is not a finite limit to the supply of biomass fuels. Oil wells go dry, coal mines are mined out and natural gas wells only have so much natural gas in the ground. Trees, and other plants, like corn, keep on growing. In a time of climate change, a growing and renewable source of fuels makes sense! Natural gas is now inexpensive. Infrastructure has been switching to natural gas. In some cases, a plant can use either, but has chosen natural gas because of the lower cost. This means that the suppliers of the wood chips, or woody biomass to be more precise, have equipment sitting idle that was a major investment. That investment is now bringing no returns. The questions that arise are: Will natural gas stay inexpensive? Will there be anybody there to supply biomass when the price of natural gas goes up? My attempt to answer these questions is this: No. Like any commodity, there will be ups and downs in prices, and as time goes by, downs will occur less than ups. Check out gasoline prices and remember when $3 gas was enough to bring on fainting spells on the part of the customers. Now, gasoline is about $3 here in the Midwest, and we barely notice, but it still costs more to run your vehicle. A disruption in the production of natural gas will surely raise the price of this commodity, and if we look at the price of other commodities, they often don t lower the price to what it was before the disruption. If you are the owner of a chipper or chippers along with the van trailers for transport of chips and you can t sell any chips, you will likely sell the equipment. If there is a drastic price rise in natural gas, will anybody be equipped to supply chips? If you have been burned once in this market, are you going to invest again? Jim Carey is an Upper Peninsula logger who invested in chippers and trailers and produced chips for a number of markets. He said the market is stagnant, with about four days work a month for this equipment. He is a bit disheartened to see it sitting idle behind the shop, but if nobody is buying chips, why make chips? Fortunately for Carey, he also has a gravel business, and the truckers who usually haul chips are now hauling gravel, so he hasn t had to lay off any drivers. Still, the chipping equipment and the investment he has made is sitting quietly behind his shop. A few miles to the south, Kevin Marshall is equipped to produce chips as fuel wood. Marshall uses the top of trees, and he is impressed by the utilization possible when the tops are harvested. According to Marshall, there is a 35% increase in volume on a clearcut and about 25% on a marked sale. In addition, the landowners like the cleaner look of the logging job. He added that by utilizing the tops on a clearcut, he can produce three to four loads of chips per day. Unfortunately for Marshall, the summer and fall have been very slow for his chip business. He produces chips for the Domtar plant in Wausau, but through these two seasons, he has been able to produce about three loads per week. He has hopes that Domtar will increase the biomass usage when the cold weather arrives this winter. This not very uplifting look at the biomass market makes us realize that our society and corporate entities haven t embraced the fact that much of our forests are not utilized to provide the maximum benefit to all of us. From the other side of the coin, users of biomass and of natural gas are always looking at the bottom line. A spokesperson for two pulp mills in Michigan said that natural gas is cheaper, and the cost of electricity is cheaper during the day than at night. During the night time hours they will burn bark bought from sawmills that run peeling operations to offset the higher electrical and heating costs. During the cold months, chips will be burned, but in small amounts. It would be nice to report that biomass is taking off, that our society has realized that we have huge amounts of energy available that grows back and is not a finite resource. But it doesn t appear that this has happened in the Midwest at this time. NL THE NORTHERN LOGGER NOVEMBER