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US Industrial Pellet Association Holds First Annual Conference, Poised to Shape Industry

Last month, the U.S. Industrial Pellet Association (USIPA) held its first annual conference in New Orleans. The meeting brought together more than 225 people from 11 countries, representing manufacturers, industrial buyers (EU utilities predominately), equipment manufacturers, consultants, private equity firms, logistics companies and wood supply chain experts. The number and types of companies that attended stand as a testament to the need for an organization like USIPA.

USIPA was founded in February of this year to address the issues facing US manufacturers of industrial grade pellets bound for Europe. USIPA’s founding members—Enviva Biomass, Fram Renewables, Green Circle Bio Energy, and the Westervelt Company—have made a major financial and human capital investment in the organization in order to ensure that the collective voice of US industrial pellet manufacturers would be represented during discussions that will establish the fundamental underpinnings of the international pellet trade.

Much is at stake for both buyers and manufacturers in these discussions, which are currently underway within EU governing bodies and the industrial buyers’ group for European utilities. The discussions will focus on three complex issues: the establishment of certification standards (physical specifications), the potential harmonization of sustainability standards across all EU countries, and the pellet buyers’ desire for uniformity in pellet purchase contracts. Because these are not simple issues, business, political and scientific discussions will need to take place in order to reach agreement.

These themes were the focus of the conference.

In particular, conference participants voiced concern over the potential for the creation of an unwieldy set of sustainability measures should a harmonized EU sustainability standard be created. Today, each EU country has its own sustainability standards and requirements for audit. While this situation presents challenges and introduces inefficiencies for pellet producers who must adhere to multiple standards, it is the devil they know. The process of developing a single standard, on the other hand, has the potential to create plenty of uncertainty before a harmonized standard is fully in place. The process will also no doubt become a battle ground for those non-governmental organizations who wish to put a stop to all forest utilization everywhere. USIPA’s comments on an EU request for comments on the harmonization of sustainability standards are available here.

Another topic that received a lot of attention was the need for buyers and sellers to agree on certification standards or technical specifications. Buyers’ operational efficiency is highest when wood pellets are consistent in size, composition and structure. Producers are seeking specifications that take into consideration the wide variation of wood feedstock available. Specifications that are defined in a way that allow for an unambiguous determination of an “on-spec” or “off-spec” shipment is very important to both buyers and sellers, as it will help ensure uninterrupted supply reaches EU buyers and remove the financial and reputational risk to the producer of a rejected delivery. USIPA’s comments on the technical specifications of pellets being proposed by the industrial buyers’ group are available here.

Other presentation topics ran the gamut from perspectives on the realities of wood supply, supply chain risk, and competition for wood raw materials to the metrics used by capital investors when evaluating bioenergy investments. The forecasts for EU demand were pretty consistent across the board, and the competition between pellet producers and established US pulp and paper manufacturers for wood raw material was a recurring theme as well. (These two themes have been the subject of a Forest2Market blog post Pellet Manufacturing Capacity in Southeast US Expands to Meet European Demand and an article written by Pete Stewart of Forest2Market and published in Forestry Source in 2011, Clash of the Titans. I encourage you to read both.)

Overall, the conference demonstrated that the southern US is poised and ready to meet EU demand for wood pellets. The US Industrial Pellet Association and its member companies are dedicated to the development of the business, technical and environmental standards that will define how the US Pellet Export market will operate for many years to come.  From my perspective, an opportunity to be involved in such an endeavor is rare and exciting and one worthy of pursuit.  (Full disclosure Forest2Market is a USIPA member, and I sit on the Board of Directors).


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Initiative Wood Pellets Buyers Works to Smooth Sup

04-13-2012

[...] wood pellets. Founded in early 2011 specifically to represent US makers of industrial pellets, the US Industrial Pellet Association (USIPA) has been well represented in these meetings. Final documentation from each of the Work [...]