Canadian Wood Pellet Update

Transcription

1 Canadian Wood Pellet Update PFI Annual Conference Ponte Vedra Beach, Florida Gordon Murray, Executive Director July 25, 2011

2 Presentation Canadian wood pellet industry update Insurance and safety issue Wood Pellet Association of Canada 2

3 Canadian annual pellet production capacity as of June 1, 2011 tonnes Western Canada Eastern Canada All of Canada Plants Average Largest Total % , ,000 1,889,000 64% 21 58, ,000 1,042,000 36% 37 79, ,000 2,931, % Wood Pellet Association of Canada 3

4 New Capacity Name City Province New Capacity (tonne/yr) 1 Northwest Wood Preservers Vanderhoof BC 30,000 2 Pacific BioEnergy Prince George BC 180,000 3 Pinnacle Pellet - Burns Lake Burns Lake BC 400,000 4 Firemaster Kamloops BC 30,000 5 Highland Pellet Manufacturing Merritt BC 29,000 6 Tahtsa Pellet Burns Lake BC 30,000 7 Groupe Savoie St-Quentin NB 55,000 8 Holson Forest Products Roddickton NL 50,000 9 Granulco Sacre-Coeur QC 20, Granules de la Mauricie Shawinigan-Sud QC 22, Trebio Portage-du-Fort QC 130, ,000 Wood Pellet Association of Canada 4

5 Western Canadian Plants Mostly overseas export focussed Pellets loaded on rail cars at plant site Rail to Vancouver or Prince Rupert Unloading and temporary storage at terminal Bulk carrier to Europe or Asia Wood Pellet Association of Canada 5

6 Eastern Canadian Plants Domestic and NE US focussed Small plants and high fibre cost 1 million tonnes capacity competing for 100,000 tonnes market mostly bags Just 3 of 21 plants shipping overseas from Halifax and Belledune Need to pool create marketing/shipping company Wood Pellet Association of Canada 6

7 Canadian pellet shipments tonnes* F Europe 1,350,000 1,700,000 North America 90,000 90,000 Japan 60,000 60,000 Korea 0 50,000 1,500,000 1,900,000 *estimates only Statistics Canada does not track wood pellets as a separate product and producers are reluctant to share data Wood Pellet Association of Canada 7

8 European markets for Canadian pellets Belgium power generation The Netherlands power generation United Kingdom power generation Denmark power/district heating Italy residential heating Canadian market share in Europe ~ 15% Wood Pellet Association of Canada 8

9 Estimating European wood pellet demand millions of tonnes *Some experts forecast more than 50 million tonnes for 2020 Wood Pellet Association of Canada 9

10 Forecasting European consumption is difficult Known: targets National action plans Unknown: National renewable energy support schemes Will pressure on national governments to reduce deficits result in loss of renewable energy subsidies? Wood Pellet Association of Canada 10

11 European pellet economics as of May 2011* Coal euro/mwh cif ARA Carbon emissions euro/mwh coal 5.72 Combustion efficiency adjustment euro/mwh biomass Wood pellets euro/mwh cif ARA Spread to be bridged by subsidies euro/mwh cif ARA *Source: Forest Energy Monitor, published by Hawkins Wright Wood Pellet Association of Canada 11

12 European Industrial Wood Pellet Buyers Group Dong, Drax, Electrabel, EON, Fortum, RWE, Vattenfall Holding private meetings since June 2010 Planning to impose on producers: Standard contracts Universal product standards Mandatory sustainability criteria 12 Producers have been excluded so far, but invited to particpate starting in September 2011 Wood Pellet Association of Canada 12

13 APX-ENDEX & Port of Rotterdam Plans* Biomass exchange starting with pellets in 2011 Trade for 5 hours twice weekly 9 contracts per session: 3 month, 3 quarters, 3 years Initially non-cleared counterparties made known to each other at conclusion of trade Physically settled (as opposed to cash settlement) Strict sustainability criteria *Source: Hawkins Wright Wood Pellet Association of Canada 13

14 South Korean Market Situation Committed to 30% GHG by 2020 RPS for power generation: % Increase ~ ½% annually until % Biomass energy target for 2020: 4,211,000 toe Pellet equivalent: 10 million tonnes Wood Pellet Association of Canada 14

15 Insurance and Safety Issue Unacceptable frequency of incidents Rising workers compensation premiums: 2008: $1.33 per $100 of payroll 2011: $2.04 per $00 of payroll equals 54% increase Some members refused insurance Insurers leaving the sector Wood Pellet Association of Canada 15

16 Selected Incidents April 27, 2011 Pinnacle/Canfor Houston BC Fire April 4, 2011 Pinnacle Pellet Armstrong BC Explosion April 4, 2011 Pinnacle Pellet Williams Lake BC Fire March 10, 2011 Pacific BioEnergy Prince George BC Explosion December 17, 2010 Pacific BioEnergy Prince George BC Explosion September 8, 2010 Enligna Near Halifax NS Fire May 2, 2009 Westwood Fibre Kelowna BC Explosion Ontario Power December 1, 2008 Generation Atikokan ON Explosion September 18, 2008 Granules de lac Mauricie Shawiningan QC July 2008 Westwood Fibre Kelowna BC Explosion Fire Wood Pellet Association of Canada 16

17 Letter from Jacques Gagnon, VP, Lumbermen s We have incurred an inordinate number of claims causing us to pay out far more in settlements than we ever charged in premiums.

18 Canadian Insurance Market Overview Significant claim activity Lumberman s Underwriting Alliance reduced their underwriting capacity LUA s premiums reduced by 50% over the past five years while their loss ratio at the end of 2009 had increased to %. (Source: Canadian Insurance Statistical Issue) ACE Canada will no longer underwrite for pellet industry Wood Pellet Association of Canada 18

19 Without improvement, there will be fewer underwriters willing to insure this class. Those that continue to insure will provide less capacity with more restrictive terms. Rates will increase. Insurance Conclusions Unless a best practices plan incorporating risk management and risk control is in place, insurance may not be available to some. Wood Pellet Association of Canada 19

20 Majority of incidents related to: Dust explosions and fires Self-heating and spontaneous combustion Hazardous emissions (off-gassing) The causes are all well understood and we know how to prevent them so why do they keep occurring? The problem is one of commitment and process Wood Pellet Association of Canada 20

21 Our Solution 1. Obtained acknowledgement from members: this is a serious problem that must be fixed. Need to change culture. 2. Consultations with insurance industry and BC Forest Safety Council. 3. BCFSC and WPAC to jointly develop a safety certification program. (Consult producers, insurers) 4. Plant visits to identify safety issues and to obtain grassroots support. Wood Pellet Association of Canada 21

22 Our Solution 5. Present certification program to WPAC board for approval and adoption. 6. Resolution that 100% of fatalities and serious incidents must be eliminated. 7. Certification audits leading to certification. 8. Maintenance audits. 9. Communication with insurance industry. 10. Improved performance & periodic re-certification. Wood Pellet Association of Canada 22

23 General Audit Subjects Management Leadership Hazard and Risk Assessment Standards, Procedures and Work Instructions Training, Education and Certification Health and Safety Communications Systems Incident Reporting and Investigations Systems Injury Management / Return-to-Work Program Wood Pellet Association of Canada 23

24 Technical Audit Subjects Fire and Explosion Prevention Off-Gassing, Ventilation and Confined Spaces Hot Works Lockout Working at Heights Respiratory Protection Combustible Dusts Wood Pellet Association of Canada 24

25 Anticipated Benefits Improved worker safety Reduce workers compensation premiums Reduce insurance incidents Reduce insurance premiums Continued access to insurance Wood Pellet Association of Canada 25

26 A Concern Not all producers are fully on board Wood Pellet Association of Canada 26

27 Thank you for your attention! Wood Pellet Association of Canada 27