F2M Market Watch
Posted on April 13, 2012 by Suz-Anne Kinney
As the industrial pellet market in Europe absorbed excess supply caused by the fire at RWE’s Tilbury plant, new questions have arisen about pellet quality. According to Montel’s Weekly Biomass Report, “market chatter [during the week of April 2] is being dominated by a spat over the agreed specifications of industrial wood pellets between US suppliers and European buyers.”
As events like the fire at the Tilbury plant illustrate, in order for the industrial pellet market to absorb excess supply caused by disruptions in the supply chain, consistent standards are required for both the physical specifications and the sustainability criteria.
As a way of managing supply chain risk, major European utilities firing wood pellets in large power plants formed the Initiative Wood Pellet Buyers (IWPB): “All biomass-fired power plants rely on long-term contracts. When one of them needs to shut down unexpectedly, it is in the plant’s best interest to trade its wood pellet supply. Hence, contract forms and legal conditions must be harmonized to ensure appropriate trading conditions. In addition, technical specifications and sustainability requirements for wood pellets need to be standardized. The IWPB achieves all this in complete transparency.” Members include GDF Suez, RWE Essent, Dong, E.ON, Drax and Vattenfall among others; since June 2010, representatives from these companies and other affected parties have been meeting in working groups to discuss a uniform approach to the following issues:
- The layout and conditions of the respective procurement contracts for wood pellets—according to the most recent minutes, which can be found here, a contracting strategy will be voted on at the next plenary session meeting on April 18 in London (see the minutes of the Feb. 27 meeting for details).
- The technical specifications for the wood pellets product—The current working version of the standardized technical specifications can be found here (see link to IWPB-Industrial pellets specifications).
- The Work Group on Sustainability has specifically addressed the fact that each IWPB member has its own sustainability standard, and therefore producers must meet different standards for each of the facilities it sells to. This lack of consistency makes it difficult for companies to trade with each other when supply gets tight or when downtime leaves shipments already headed to Europe without a home. As a result, the Work Group developed the following standards:
A draft of the full document on sustainability principles applicable to wood pellets sourcing can be found at the IWPB website. The Work Group appears to have agreed that it will base its sustainability program around the Green Gold Label (GGL) that is currently being used by RWE. The GGL accepts certification under the following current schemes: Forest Stewardship Council (FSC), Pan European Forest Certification (PEFC), Sustainable Forestry Initiative (SFI), the Canadian Standards Association’s Sustainable Forest Management (CSA FSM) and the Finnish Forest Certification System (FFCS). The PEFC, it should be noted, accepts the American Tree Farm System (ATFS) certification scheme as well. Major US wood pellet producers—Georgia Biomass, Green Circle Bio Energy and Enviva already have GGL certification.
The output of the IWPB working groups in these three areas of critical importance for US producers of industrial 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 Groups is expected soon. USIPA Board member and Forest2Market’s VP of Marketing and Sales, Suzanne Hearn will keep us posted.
Comments
John Arsenault
04-20-2012
I believe the group is called Industrial Wood Pellet Buyers
