June 20, 2008

Largest US Pellet Project - Revealing Economics


Green Circle Bio Energy Inc. has announced the opening of what they consider to be the largest wood pellet plant in the world. It is located in the panhandle of Florida and has an operating capacity of 550,000 tons a year.

The pellets will be shipped overseas to be used.

Huh? Why would you ship biomass half way around the world when the US is interested in increasing energy consumption through renewables? Can this be right?

What this says, is that the displaceable cost of energy in the consuming country is high enough to make this renewable source economical even when you factor in the cost of transportation or the consumer is a "renewable at any price" buyer.

I'm going to try and find out because:

1) The cost of electricity in the target country, minus the cost of transportation will give us an idea of the economical price point for large scale biomass.

2) This company must have compared the cost of torrefaction to the cost of just pelletizing the wood. One of the key advantages of the torrefaction process is that it dramatically reduces the size and weight of the biomass thus reducing transportation costs. Given that they have chosen to simply pelletize, one might conclude that the economics of torrefaction over pelletizing are not there.  If torrefaction doesn't pay when you are shipping half way around the world...... 

I'll report back. Stay tuned.

Here's a link to the full article

http://www.wmbb.com/gulfcoastwest/mbb/search.apx.-content-articles-MBB-2008-06-10-0006.html

2 comments:

Scott Davidson said...

Even Stranger Economics:

100 acres a day.

In one year that’s equal to 26,000 acres!!! In 5 years they will have deforested an area the size of Montana. I don’t think this plan has a long shelf life.

Smart Juice said...

I promised an answer and here it is.

SUBSIDIES:

In Europe, a ton of wood pellets goes for between $ 150 and $180 per ton!

That's because of Quotas (Kyoto) and Subsidies:

Isn't this rich, we're cutting wood in the US that could be used for biomass, and shipping it to Europe in Diesel fired boats, to take advantage of European Subsidies.

This is another example of the unintended consequences of Subsidies.

Let the price of energy rise to its pollution cost adjusted price, and we'll just harvest this biomass for US consumption and save the Co2 spent in transportation!