News | April 2017

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Drax Is Increasing Pellet Production

Drax Biomass is beginning capital expenditure projects at each of its industrial wood pellet mills in the Southeast U.S.

Drax wants to increase production capacity at its Morehouse Bioenergy mill in Bastrop, La. and at its Amite Bioenegy facility in Gloster, Miss. from 450,000 metrics tons annually to 525,000 metric tons at each plant.

The capacity increase is part of a plan to increase in-house production to 2 million metric tons annually, which would supply 20-30% of the Drax Group biomass power facility fuel requirement in the United Kingdom and also service new biomass markets in Asia and elsewhere.

In addition to the expansion at its existing plants, Drax is looking at acquisition of distressed wood pellet plant assets to boost in-house production capacity.

In February Drax submitted bids for the purchase of the bankrupt German Pellets mills in Woodville, Texas (Texas Pellets) and in Urania, La. (Louisiana Pellets). The Louisiana plant auction was scheduled for March 9, though a fire February 27 at the German Pellets shipping facility at Port Arthur, Tex. (presumed also to be part of the bidding) possibly delayed the process.

Following an acceptance of an offer, the sales would have to be court-approved. The Texas facility has been in operation, while the Louisiana plant is idle. They each have 500,000 metric tons of annual capacity.

Drax Biomass is adding a second truck dump at both the Bastrop and Gloster mills to handle dry mill shavings, and installing dedicated delivery systems to move the dry material to existing dry hammermills. The expansions should be on-line before the end of the year.

Drax Group Remains Bullish On Biomass

“With the right conditions, we can do even more, converting further units to run on compressed wood pellets. This is the fastest and most reliable way to support the UK’s decarbonization targets, whilst minimizing the cost to households and businesses,” commented Drax Group CEO Dorothy Thompson as Drax released its financial reports for 2016.

The company reported 140 million pounds ($174 million U.S.) in EBITDA for the year, down 17% from 2015, citing challenging commodity markets.

Drax reported that 65% of its electricity generation was with biomass fuel, compared to 43% in 2015, with three converted biomass units in operation. Its total electricity output was 19.6 TWh (terawatthours) (12.7 TWh biomass generation, 6.9 TWh coal generation). The company noted it expects to end coal generation by 2025.

The company accounted for 16% of UK renewable electricity. “We are playing a vital role in helping change the way energy is generated, supplied and used as the UK moves to a low carbon future,” Thompson said. Drax began transitioning to biomass in 2012.

She noted that the wood pellet market has suffered from a significant excess of supply over demand, following three warm winters in Europe where there is a large market for wood pellets for heating. “However, against this backdrop there has been increased interest in biomass generation, particularly in the Netherlands and Japan with parallel policy developments expected to support biomass generation. So, although the market has been severely stressed by excess supply, it is expected that demand for biomass will increase in future years.”

Thompson said investments will go into effect this year to increase the capacity at each of its two wood pellets plants in the Southeast U.S. from 450,000 tonnes annually to 525,000 tonnes.

Drax Chairman Philip Cox said the company’s strong operational performance came against a background of low wholesale electricity prices and a volatile and demanding environment for renewable energy providers.

“Our aim for the power station is to deliver 100% sustainable, renewable and reliable biomass generation,” Cox said.

Enviva Says Pellet Growth On Horizon

Coming off “solid financial results” in 2016, Enviva expects 2017 net income to be in the $31-$35 million range and adjusted EBITA (earnings before interest, tax, depreciation and amortization) to be in the range of $110-$114 million.

The company reported net income of $17.7 million in 2016 on net revenue of $464.3 million, including the acquisition of closely affiliated Enviva Pellets Sampson LLC, the new wood pellet plant in Sampson County, NC and its 10- year 420,000 metric tons per year off-take contract with Dong Energy.

“Strong plant performance and reduced costs across our operations enabled the partnership to deliver solid financial results for the year,” comments Chairman and CEO John Keppler, adding that Enviva’ sales strategy is to fully contract its production capacity with a portfolio of off-take contracts, which currently have a weighted average remaining term of 9.8 years.

Keppler notes a projection that worldwide demand for industrial wood pellets will increase to 27 million tons in 2020, representing an annual growth rate of 20%, driven predominantly by biomass consumption in Europe and Asia.

He cited the following recent developments:

• DONG Energy, the largest power producer in Denmark, announced in February it will completely eliminate the use of coal in its operations by 2023, replacing it with biomass. DONG Energy already has two facilities burning wood pellets which are expected to consume 1.8 million metric tons per year at full capacity.

• In December, Drax Power received EU state-aid approval of the contract for difference (CFD) through 2027 for its third 660 MW biomass unit, which is anticipated to require more than 2 million MTPY of wood pellets. Drax has stated that it could convert its remaining three coal-burning units to biomass in the next two to three years under the right conditions.

• In the Netherlands, biomass projects were awarded the majority of the 5 billion euros in funding in 2016, including 2.1 billion euros awarded to coal plants planning to co-fire biomass. RWE, Engie and Uniper received awards, and the minister of economic affiars has announced that the program budget will be increased from 9 billion euros in 2016 to 12 billion in 2017.

• In November, Japan ratified the Paris climate agreement as part of its plan to significantly reduce carbon emissions by 2030. Japan has set a target of 6.0-7.5 gigawatts of biomass-fired capacity, of which nearly 3.2 GWs have been approved through Japan’s feed-in tariff program. Several power producers have announced biomass projects, including Japan’s largest electricity wholesaler, Electric Power Development Company, which stated it expects to co-fire biomass at all seven of its coal-fired plants.

• Several announced biomassfueled projects in South Korea are expected to be operational by 2020, increasing the expected South Korea demand for wood pellets up to 6 million MTPY. As this demand is well in excess of expected domestic supply, a significant amount of wood pellets are expected to be imported under long-term contracts, representing a shift from the short-term tender mechanism currently used to purchase biomass.

• In January, China’s National Energy Administration announced that the country will spend at least $360 billion on renewable energy through 2030. Reports also indicate that China is expected to increase biomass-fired generation capacity from 10.3 GWs in 2015 to 15 GWs by 2020.

• Keppler says Enviva is completing a design replica of the Sampson plant at a permitted site in Hamlet, NC to supply MGT Power’s Teesside Renewable Energy Plant; and that in order to supply anticipated volume growth in Europe and Asia, Enviva is evaluating additional sites in Lucedale, Miss. and Abbeville, Ala.

Rentech Considers Options, Including Sale

Rentech, Inc. is exploring strategic alternatives for the company, including its sale. The announcement coincides with Rentech’s decision to idle its Wawa, Ontario wood pellet facility due to equipment and operational issues that would require additional unbudgeted capital investment. The decision also results from continued uncertainty around profitability on pellets produced at the facility, making additional investment in the facility uneconomic for Rentech at this time, the company said.

Idling the plant will allow Rentech to conserve liquidity as it formally explores strategic alternatives for the plant including ongoing discussions with third parties. In conjunction with the strategic review of the Wawa facility, Rentech previously reported that the Wawa facility experienced equipment and operating challenges subsequent to the replacement of conveyors last fall and that these issues have persisted.

“While we believe that the issues we have been experiencing at the facility can be resolved with additional capital investments, we have concluded that it is not economical to pursue those investments or to continue to operate the facility at this time,” the company stated.

Rentech’s other businesses, including its Atikokan wood pellet facility in Quebec, continue to operate, though the company is reducing production at the Atikokan facility to levels necessary to fulfill the delivery requirements under the Ontario Power Generation off-take contract. “We expect the Atikokan facility to generate cash flow in the range of breakeven to slightly positive in 2017 under this revised operating plan. Atikokan will no longer ship pellets to the Port of Quebec. We will continue to explore alternatives for selling additional pellets produced from the Atikokan facility to increase its utilization.”

Rentech also reported that pellet sales at its New England Wood Pellet (NEWP) operations were negatively impacted by relatively warmer weather than in previous years, continued low-cost heating oil and propane, and changes in consumer buying patterns.

Rentech intends to explore strategic alternatives for the Wawa facility and for the company as a whole. Rentech is considering a sale of the company, a merger or other business combination, a sale of all or a portion of the company’s assets or a recapitalization.

Rentech has retained Wells Fargo Securities, LLC to assist in the strategic alternatives review process.

“If an appropriate strategic alternative is not achieved on a timely basis, and if the company were otherwise unable to secure additional sources of funds to address potential future liquidity needs, there could be a material adverse effect on the company’s business, results of operations, and financial condition,” the company stated.

In spring 2013, Rentech, based in Los Angeles and a specialist in clean energy technologies, entered the wood pellet business by acquiring a former OSB plant in Wawa and a former particleboard mill in Atikokan. The company reported it would convert both plants to wood pellet production with a combined 485,000 metric tons of annual production capacity, and that it had signed a 10-year contract with Drax Power to purchase most of the production and with Ontario Power Generation to purchase the remainder.

But Rentech continued to have issues and had to cancel planned deliveries to Drax in 2015. It also sold and/or restructured pre-existing businesses to gain capital.

At the same time, Rentech purchased Fulghum Fibers, Inc., including 32 chip mills. A year later, Rentech purchased New England Wood Pellet’s three heating wood pellet operations, and this business subsequently purchased Allegheny Pellet Corp.

Proposal Made For Gainesville Plant

Gainesville Regional Utilities has proposed to buy the Gainesville Renewable Energy Center biomass power plant in Gainesville, Fla. for $750 million, according to gainesville. com of the Gainesville Sun.

GRU, a municipally owned utility, and the biomass plant are just three years into a 30-year contract that calls for GRU to pay the biomass plant about $70 million annually, even if its services aren’t used. GRU officials maintain they’ve saved money by purchasing cheaper power elsewhere, while leaving the biomass plant on standby.

GRU General Manager Ed Bielarski says the deal could save the city between $600 and $700 million.

“This is an exit strategy for GREC and an entrance strategy for GRU,” he says.

GREC completed construction of the 100 MW facility at a cost of $500 million in October 2013 and it became available for commercial operation in late 2013. The plant was owned by Energy Management, Inc., BayCorp Holdings and Starwood Energy, as well as by principals of Fagen, Inc., which was the contractor.

The city offered to purchase the plant for $400 million in late 2013, but was turned down.

The plant was expected to utilize 1 million tons of woody biomass annually.

The plant operates a Metso bubbling fluidized boiler and Siemens turbine.

Bielarski says buying the plant would allow for modifications to fit utility needs and would result in significant rate reductions for residential and commercial customers.

Airex Energy Starts Up Torrefaction Plant

Airex Energy inaugurated its biomass torrefaction plant, located in the La Prade industrial park in Bécancour, Quebec. The industrial size demonstration plant, which required around 10 million Canadian dollars in public and private investments for its design, construction and startup, showcases the firm’s biomass torrefaction technology, called CarbonFX, said to significantly reduce greenhouse gas emissions in many industries that still use coal or coal byproducts.

Airex Energy’s torrefaction process transforms biomass residues into biocoal pellets. Unique properties allow it to easily disintegrate, so it can be ground up and combined with bituminous coal in thermal power stations producing electricity, without major changes to existing systems for handling, storing and grinding coal.

The CarbonFX system also produces biochar, a product with a high carbon content used for soil remediation, liquid filtration and metal reduction. Biochar, when mixed with compost or peat moss, promotes plant growth. Biochar also helps reduce metals and enables rehabilitation of former mining sites.

“We believe our technology will provide new ways for forestry companies to increase profitability while diversifying their sources of revenue. With this in mind, we have started marketing our CarbonFX systems in Canada and the United States in order to roll out this technology in all markets generating substantial amounts of residual biomass,” says Sylvain Bertrand, CEO of Airex Energy.

Since December 2015, Airex Energy has conducted a gradual commissioning of the plant’s equipment and performed several tests to optimize the process. The company started commercial biocoal and biochar production, with the goal of producing 15,000 metric tons annually from residual biomass such as forest residues, sawdust, bark and recycled wood.

DONG Energy Plans Total Coal Phase-Out

Denmark’s DONG Energy has decided that by 2023 coal will no longer be used as fuel at the company’s power stations. The decision is a result of the company’s vision to lead the way in the transformation to a sustainable energy system and to create a leading green energy company.

Since 2006, DONG Energy has reduced its coal consumption by 73%, and the company has now decided to entirely phase out the use of coal. The power stations will be replacing coal with sustainable biomass.

“The future belongs to renewable energy sources, and therefore we’re now converting the last of our coal-fired power stations to sustainable biomass,” says Henrik Poulsen, CEO.

DONG Energy is the first among the large European energy companies to decide to phase out coal for the production of electricity and heating completely.

Since 2006, DONG Energy has reduced its coal consumption through a reduction in the number of power stations as well as conversions to sustainable biomass instead of coal. At the same time, the company has constructed more production capacity based on offshore wind than any other company in the world. This means that in just one decade, DONG Energy will have gone from being one of the most coal-intensive utilities in Europe to being among the greenest energy companies in Europe.

Since 2002, DONG Energy has used wood pellets and wood chips as fuel at both Herning Power Station and Avedøre Power Station, and over the years the company has increased the share of biomass at the two power stations. In 2016, both Studstrup Power Station near Aarhus and Avedøre Power Station near Copenhagen were converted to run 100% on wood pellets and straw, and during the spring of 2017, Skærbæk Power Station near Fredericia will be able to run 100% on wood chips.

With DONG Energy’s decision to stop all use of coal by 2023, a future solution must now be prepared for the company’s remaining two coal-fired power stations: Asnæs Power Station and Esbjerg Power Station. DONG Energy is in dialogue with the heating customers in Kalundborg and Esbjerg regarding the possibilities of converting the two power stations to use wood chips as fuel instead of coal when the existing heating agreements expire at the end of 2017 and 2019, respectively.

“Our cooperation with our heating customers is good. The large cities have ambitious goals to reduce their CO2 emissions and demand green district heating from our power stations. In cooperation with the municipal heating companies, we’ve already converted a large part of our power plants to using sustainable wood pellets and wood chips as fuel instead of coal and gas,” says Poulsen.

The municipal district heating companies in Copenhagen and Aarhus, for whom DONG Energy’s power stations produce district heating, welcome the decision.

Morten Kabell, Mayor of Technical and Environmental Affairs of Copenhagen and Chairman of the Metropolitan Copenhagen Heating Transmission company (CTR), says: “I’m pleased that DONG Energy is now removing the last coal from Copenhagen. It’s a huge contribution to our efforts of making Copenhagen the world’s first CO2- neutral capital. Through our heating contracts, CTR has contributed to making the district heating from Avedøre Power Station green, and now coal is disappearing altogether. It is an important element in our strategy that all heating must be CO2-neutral by 2025.”

Denmark’s total annual emissions of greenhouse gases have been reduced by approximately 25 million tonnes CO2 from 2006 to 2016, and DONG Energy’s share of the reduction amounts to approximately 53%.

DONG Energy expects its share of Denmark’s total reduction to remain at this level from 2016 to 2023.

In 2023, the company will have reduced its annual CO2 emissions by almost DKK 18 million tonnes compared to 2006 levels. The total reduction corresponds to the annual emissions of more than 9 million cars. In 2023, the company’s electricity and heating production will emit approximately 0.5 million tonnes CO2 annually, primarily from gas-fired boilers covering peak loads in the district heating system and situations with lack of power.

All DONG Energy’s suppliers of wood pellets and wood chips must ensure that the biomass they supply comes from sustainable forestry where the woods are replanted and biodiversity is protected.

“When we use sustainable biomass, we achieve significant CO2 reductions in comparison to when we use coal and gas. Our wood pellets and wood chips originate from forest areas with continuous reforestation, meaning that new trees grow up to absorb the CO2 emissions created during the combustion of the biomass,” says Poulsen.

With the Danish industry agreement for sustainable wood-based biomass, the entire Danish energy industry is committed to documenting sustainability in relation to the use of wood pellets and wood chips. The industry agreement became effective in 2016, and the documentation requirement will be phased in toward 2019, when suppliers will be controlled by independent auditors and certified if they meet the requirements.

Equustock Adds Two Facilities

Illinois-based Equustock, LLC has acquired pellet and shavings facilities in Rapid City, SD and Kingsbury, NY. The Rapid City, SD plant is the former Mountain Pine Management facility and the Kingsbury, NY plant is the former location of Royal Wood Shavings.

The Rapid City plant is already in production of Equustock pelleted horse bedding, cat litter, absorbents and fuel pellets. Plans include additional lines to simultaneously produce Equustock and custom label products.

The Kingsbury, NY plant produces manufactured shavings for the equestrian community serving the Northeastern U.S. Immediate plans are to upgrade equipment and packaging lines to accommodate Equustock’s three distinct shavings products as well as custom labeling for select clients.

According to CEO Claire Brant, “The acquisitions of these two strategically located facilities combined with our existing network of plants allows Equustock to effectively reach markets for all of our products throughout the United States.”

Hatton-Brown Partners With Wood Industry Summit

Hall 26 will once again be home to the Wood Industry Summit during Ligna 2017 in Hannover, Germany and Hatton- Brown Publishers is once again an official partner of the event and will be promoting Wood Bioenergy, and its other forest products magazines.

The Summit made a very successful debut in 2015, with international customers achieving an investment volume of some €30 million. As an international meeting place for the primary industry cluster, the Wood Industry Summit features innovative solutions for harvesting and processing and for integrating the various stages of processing.

The Summit is divided into three areas: an exhibition, a forum and a matchmaking hub. Every day from Tuesday, May 23, to Friday, May 26, the forum of the Wood Industry Summit will highlight a topic of current international interest in the industry, with experts from Germany, Austria, Canada, Russia, Sweden and Spain giving presentations and fielding questions from the audience.

The main themes at the Wood Industry Summit 2017 include:

Tuesday, May 23: Forestry 4.0: Vision or Future?

Wednesday, May 24: Development and Infrastructure to Ensure Sustainable Forestry

Thursday, May 25: Forest Fires – Prevention, Detection and Firefighting

Friday, May 26: Fleet Management to Optimize the Logistics Chain from the Forest to the Factory

Exhibition stands located next to the forum will provide an ideal networking environment for exhibitors and visitors.

Ligna will be held May 22-26 at the Hannover Exhibition Grounds. It’s organized by Deutsche Messe AG and German Woodworking Machinery Manufacturers’ Assn.

Contact Anja Brokjans, [email protected]

Sherman Development Has New Ownership

Sherman Development, a closed 24 MW biomass power generation station in northern Maine, could restart as early as June, according to its new owner.

42 Railroad Ave LLC CEO Steven Johnson announced the finalization of the purchase agreement for Sherman Development from Niagara Worldwide LLC.

Johnson says he plans to rebuild the turbine, activate new transmission lines, and build a rotary kiln to produce more than 100 tons per day of activated carbon.

“Sherman Power Station was constructed to be the diamond jewel of the industry, with an automated feed system and other state-of-the-art technologies, which have been maintained very well by Wheelabrator and Boralex, and when the plant was shuttered a few years ago, it was shut down properly, with all the infrastructure left in place to make the restart very economical,” Johnson says. “In today’s market, the cost to build a biomass fueled power generation station of this magnitude could easily be over 100 million dollars, but at Sherman, even with installation costs of the new activated carbon rotary kiln, we’ll still be able to keep the re-start budget under 10 million dollars and should be up and running by the end of June 2017.”

According to Johnson, Sherman Plant has the ability to take in more than 700 tons per day of wood fiber for fuel.

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