Duke University Study Sees Huge Growth Potential in Southern Wood Pellet Market

A new study by researchers at Duke and North Carolina State universities shows that Arkansas’ fledgling biomass and wood pellet businesses could see huge growth over the next decade or so as the European Union (EU) pushes to meet its 2020 policy goals for increased renewable energy and reduced greenhouse gas emissions.

The new analysis by researchers at Duke University’s Nicholas Institute for Environmental Policy Solutions and North Carolina State University examined the contribution by forests in the southeastern United States to EU wood pellet markets.

The study, published in the journal Global Change Biology-Bioenergy, examined how participation in those markets will affect forest inventories and carbon storage in this region and whether EU sustainability guidelines for pellets can be met.

The study concludes that pellet supplies from the southeastern U.S., which includes Arkansas, could assist the European Union (EU) to meet its 2020 policy goals for increased renewable energy and reduced greenhouse gas emissions without decreasing U.S. forest inventories or diminishing their carbon storage capacity.

In May, top executives with Highland Pellets LLC in Pine Bluff and Zilkha Biomass Energy in Monticello told Talk Business & Politics that their respective companies’ planned full-scale biomass plants are still scheduled to come online by the end of 2016, just in time for the wood pellet market to gain steam in Europe as industrial power generators switch from coal to renewable fuels.

Once in production, officials at both companies said they will be ready to quickly get up to full operational mode with interested buyers and commitments already in place from European sources. According to the U.S. Energy Information Administration (EIA), almost three-quarters of all U.S. wood pellet exports were delivered to the United Kingdom (UK), mainly for the purpose of generating electricity.

The main driver for growing wood pellet consumption in Europe is the European Commission’s 2020 climate and energy plan, which aims to reduce greenhouse gas emissions and increase the contribution of renewables to total energy consumption in the European Union, according to the EIA.

“In our modeled scenarios, we found that future increases in wood pellets from the Southeast United States could meet sustainability guidelines set by the EU to achieve its larger renewable energy and greenhouse gas emissions goals,” said Chris Galik, lead author of the study at Duke University’s Nicholas Institute Senior Policy Associate “In fact, (our) analysis indicates that the projected level of future demand could actually promote increases in forest area and forest carbon storage in the U.S.”

In gathering state-level information on the woody biomass supply across the Southeastern U.S., the Duke University study used land-cover data from the University of Arkansas’ Center for Advanced Spatial Technologies (CAST) in its analysis.

Galik and co-author Robert Abt were able to create – for the first time – an economic model of forest markets in the southeastern United States with spatially explicit information on sensitive forest lands to examine the implications of new demand for biomass sources under these guidelines and to track how that demand feeds into the economy, university officials said.

According to the EIA, EU sustainability guidelines require that biomass sources of heat and electricity, including wood pellets, meet initial greenhouse gas reductions of 35% – increasing to 60% by 2018.

The Duke University study shows that increased biomass demand would expand the area of southeastern forests by over 6 million acres and lead to a small increase – roughly 1.5% – in forest carbon storage by 2040 as compared with a scenario in which biomass demand remained at current levels.

“Our approach allows us to observe the complex interactions between local forest conditions and broad market feedbacks triggered by the increase in biomass demand,” Galik said. “In doing so, we provide a more realistic account for how applying EU sustainability guidelines to actual locations could positively or negatively affect evolving forest markets and landscapes in the southeastern United States.”

The study was conducted, in part, with funding from the Southern Forest Resource Assessment Consortium.