Tuesday, March 25, 2008

Pellet suppliers BULKING UP

Portland Press Herald

As long as burning a mix of sawdust and wood waste stays cheaper than heating with oil and gas, its future is assured. That's why fuel suppliers are beginning to invest in storage and delivery systems to meet anticipated demand for the product.

By TUX TURKEL Staff Writer March 23, 2008

Coal bins still stand along a railroad siding at Spring Brook Ice and Fuel Co. in Waterville, a reminder of how heat was delivered in Maine 75 years ago. The shift to oil and propane eliminated the need for solid fuel storage by the 1960s, but now Spring Brook is going back to the future.

Early this summer, Spring Brook is expecting its first trailer load of bagged wood pellets. The next step will be to put up storage silos along the rail siding and start delivering bulk truckloads of pellets to large commercial customers that plan to switch from oil to wood. That practice is common in Europe, and Spring Brook is trying to position itself for a similar conversion here.

"We're in the energy business," said Bill Peebles, the company's general manager. "Whatever it takes to keep people comfortable."

Eight of every 10 Maine homes are heated with fuel oil or kerosene, and the state's oil dealers certainly aren't getting out of that business. As petroleum prices set new records and consumers clamor for alternatives, however, some Maine dealers are looking to hedge their bets. After decades of perfecting the infrastructure to store and deliver liquid and gas fuel, they're pondering how to finance, move and service what could become the 21st-century version of coal in Maine.

"Sticking primarily with oil is great," Peebles said, "but we need to look at what's coming down the tracks."

Pellets, which are made from sawdust and wood waste, are becoming common in Maine. They burn efficiently and are much cheaper than oil. They also can boost the state's forest products economy. Plants in Ashland and East Corinth make them now, and a company in Athens is starting production. Another plant is expected to start construction this summer, just over the border in Berlin, N.H.

Virtually all wood pellets are sold in bags and burned in special stoves. Few homes have central heating systems fired by pellets, and big units that can heat a hospital or warehouse, for example, are a novelty.

That level of bulk demand must grow before oil dealers can turn pellets into a profitable business model, according to Averill Cook, president of Biomass Commodities of Williamstown, Mass.

"They sell oil in bulk," Cook said. "They certainly don't sell it in cans."

Cook sells pellet equipment and consults for the industry worldwide. He's working with Peebles at Spring Brook and talking to potential commercial customers that are considering a switch from oil to wood, including the University of Maine, in Orono, Colby College and Thomas College, in Waterville, and the Maine Military Authority, in Limestone. Cook also has installed a commercial-size pellet boiler at the new plant in Athens, where he plans to erect silos for a distribution center.

To operate with a bulk fuel supply, Cook said, an oil dealer needs at least one delivery truck and a silo that could hold 500 tons. That's a minimum investment of $500,000, he estimated.

"Dealers are starting to put their toes in the water," he said, "but to get into this now, it's still risky business."

At Spring Brook, pellets are a logical way to diversify. The company sells oil heating equipment, gas water heaters and fireplaces, central air conditioning and even solar hot-water systems.

Peebles said his garage may have the expertise to fabricate pellet storage bins. The investment will make sense, he said, because he now sells hundreds of thousands of gallons of oil to customers such as Colby College and Thomas College. If they switch fuels, he'll lose a lot of revenue.

"But as long as they go to pellets, we're not losing anything," he said.

One Maine oil dealer already is selling wood pellets and trying to promote larger quantities.

Dysart's, the widely known truck stop and restaurant in Hermon, also sells heating oil and operates a trucking company. It began selling bagged pellets this winter, charging $5.25 for a 40-pound bag. A pallet loaded with 50 bags can be delivered for $249 or picked up for $219.

"The reaction has been good," said Dave Oxley, the company's fuel dispatcher. "We've sold 300 to 400 tons, without much advertising."

Dysart's also offers a 1-ton "tote," essentially a heavy plastic sack that's delivered on a pallet that can be stored in a garage. It goes for $219, a $30 savings over the bagged product.

"We try to push that," Oxley said.

Dysart's also sells firewood, although not in stove lengths. Anyone with a pickup truck can stop by and load 4-foot logs for $109 a cord.

"We want to offer our customers alternatives," Oxley said.


Firewood is part of the heritage of many Maine oil dealers, so the move to a modern wood product isn't such a stretch.

A century ago, the original company behind Downeast Energy & Building Supply sold firewood and coal in Brunswick. It expanded over time to offer heating oil and propane, as well as building materials.

Next heating season, Downeast plans to sell BioBricks, a small briquette made from compressed sawmill waste. BioBricks are burned in wood stoves and fireplaces. They take up less room than cordwood and contain more heat energy.

Downeast expects to test the market by selling BioBricks at its building supply store in Brunswick, according to John Peters, the company's president. There's room in lumber sheds to store the fuel, and delivery trucks are available to transport it.

Downeast is one of the state's largest oil dealers. It continues to promote oil as a convenient, dependable heat source that remains a good value for many people, but record prices have forced customers to conserve, cutting sales by up to 15 percent this year, Peters estimated. So the company has to look ahead.

Downeast hasn't decided whether to sell wood pellets or pellet heating equipment, Peters said. Because pellets must be burned in special stoves and boilers, they won't appeal to as many customers, he reasoned.

Peters isn't closing the door on alternatives, however. He recently examined a home-sized cogeneration system, fired by propane, that makes electricity and uses waste heat to warm living space.

"If the price of oil continues to go crazy, we may need to consider selling all kinds of things," Peters said.

Staff Writer Tux Turkel can be contacted at 791-6462 or:


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