Gov. Hutchinson quietly pushes EU to support state’s biomass industry as Highland Pellet opens Pine Bluff plant

Gov. Asa Hutchinson has quietly provided the support of his office to help the state’s burgeoning biomass industry get off the ground, including Highland Pellets which on Thursday (Nov. 17) officially opened its Pine Bluff plant.

Since returning from a European trade mission earlier this summer, Hutchinson sent letters to top trade officials in the United Kingdom and European Commission (EU) seeking to expand trade relations with EU member states in order to grow the state’s wood energy sector.

“I believe that this renewable resource can help play a role in the global shift towards cleaner and more sustainable energy sources, as generation energy from wood pellets rather than coal can reduce emissions up to 90%,” Hutchinson said. “As the governor of Arkansas, I aim to maintain both the vitality of Arkansas’ forests as well as the wood energy trade between Arkansas and nations within the EU, since this partnership has been mutually beneficial to date.”

In his letters on Sept. 12 to EU President Jean-Claude Juncker and Greg Clark, Secretary of State for the UK’s Department of Business, Energy and Industrial Strategy, Hutchinson also specifically mentioned Highland Pellet’s new wood manufacturing facility in Pine Bluff.

“This industry is important to Arkansas because it provides another incentive to forest landowners to sustainably manage their forests,” Hutchinson wrote. “Targets like the EU’s 20-20-20 plan for renewable energy, carbon reductions and energy efficiency are aggressive, but necessary. … I seek to continue to help you achieve those goals by providing sustainable wood energy abroad, which in turn make the precious natural resources in Arkansas flourish for generations and centuries to come.”

HIGHLAND READY FOR PRODUCTION
Once fully operational, 100% of the Highland’s wood pellet production will be shipped to Europe. According to the U.S. Energy Information Administration (EIA), global production of wood pellets has increased significantly over the past five years, and demand in the European Union (EU) has led to international trade in this renewable energy source.

The south Arkansas manufacturing plant will utilize up to 1.4 million tons per year of wood feedstock, or fiber, taken from sustainably managed private working forests in the local area. Entergy’s transmission project management group began construction of the Jefferson Industrial substation in April of this year to provide electrical power to Highland’s new plant.

“In addition, Arkansas’ skilled workforce and Pine Bluff’s proximity to southern yellow pine forests and mainline rail make it an ideal location for Highland to successfully compete in the global market,” said Mike Maulden, Entergy’s business and economic development director. “We welcome Highland to southeast Arkansas and look forward to serving them as customers and as business partners.”

As cited by Hutchinson, 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 U.S. Energy Information Administration (EIA), individual EU member states are assigned national renewable energy targets. The United Kingdom’s plan states that 15% of energy demand must be met by renewable sources by 2020. A renewables obligation credit (ROC) program has caused plant operators of large coal-fired power plants to retrofit existing units to either cofire with wood pellets or convert to dedicated biomass.

Highland Pellets officials have said that even after allowing for the energy spent in collecting the wood, processing it into pellets and transporting the pellets by ship to Europe, the amount of greenhouse gas (GHG) emissions released from burning the pellets is around 78% less than if the power station in Europe burned coal.

DOUBLE-DIGIT GROWTH EXPECTED IN EUROPEAN MARKET
Highland and Zilkha Biomass of Houston, which earlier this summer delayed plans to build a proprietary black pellet wood chip in Monticello, first announced in the summer of 2014 plans to make use of Arkansas’ huge inventory of unused forest dregs, logging leftovers, imperfect commercial trees, dead wood and other non-commercial trees that need to be thinned from crowded, unhealthy, fire-prone forests.

Wood Resource Quarterly recently noted that the UK imported record volumes of just over two million tons in the second quarter of 2016, which was 11% higher than the previous quarter and 21% more than in the same period a year ago. The North American Wood Fiber Review report also noted that pellet producers in the southern U.S. continue to be the major suppliers to the U.K., accounting for about 50% of the total import volume in the quarter. The other major supplying countries are Canada and Latvia.

In addition, wood pellet manufacturers in the South have been a reliable and growing supplier to the U.K. over the past five years, the reported noted. In 2012, the U.K. imported less than half a million tons from the U.S. and in 2016, shipments may reach more than eight times as much.

In a recent interview with Talk Business & Politics, U.S. Industrial Pellet Association (USIPA) Executive Director Seth Ginther said he believes the European wood pellet market is maturing and becoming more competitive as some policy changes in the UK have postponed or eliminated many of the new projects that were expected to come online.

In addition, other publicly-traded and highly-financed biomass manufacturers in the U.S. are also competing for contracts in the U.K., the same market that both Arkansas companies are targeting. In June, Bethesda, Md.-based Enviva Partners announced the execution of a new contract to supply wood pellets to Lynemouth Power Limited.

Lynemouth Power said it plans to convert its 420-megawatt coal facility in the U.K. to wood pellet fuel by the end of 2017. Deliveries under this contract are expected to commence in the third quarter of 2017, ramp to full supply of 800,000 metric tons per year in 2018, and continue through the first quarter of 2027.

Ginther said Highland Pellet, which is a USIPA member and privately-funded, is also in a good position because it was able to sign long-term commitments that will enable the Boston-based venture group to compete. Highland’s Chairman Tom Reilly said in a recent interview with Talk Business & Politics that his company has long-term commitments from overseas buyers to purchase its products, which will be shipped down river to Baton Rouge, La., and then transported to the U.K. and other European markets.

And although Zilkha Biomass is partly backed by Houston renewable energy investors Selim and Michael Zilkha and billionaire and former Microsoft co-founder Paul Allen’s Vulcan Capital, the company still has not obtained long-term contracts in the U.K. for the sale of its patented “black pellets.”

In June, Zilkha’s project manager Joe Sy told Talk Business & Politics that the company will delay construction of its $90 million project in south Arkansas until contracts are signed, but also said the Houston company is committed to building and operating the planned 450,000-metric ton (per year) facility in the Monticello Industrial Park.