From the Director’s Desk: May EIA Data Published, The Price of Electrons
May EIA Data Published
Last week the EIA released the May data from its Monthly Densified Biomass Fuel Report. The data was welcome, but the report’s publication schedule is still lagging a full two months behind. In the first week of October 2024, July data was published, so the data set now lags the calendar by four months instead of the customary two.
Frustration among pellet manufacturers is mounting because the data set has become such a crucial piece of how producers build their understanding of what is happening in the market. Our industry had grown accustomed to having access to comprehensive metrics on production, sales, and inventory levels with a 60-day lag. Operating with less than that is, as the kids say, “less than.”
So what did we learn from the May data?
The total U.S. inventory position for this May (342,064 tons), like last May (393,404 tons), shows a significant departure from the 5-year average (274,978 tons). It is important to note that each 100,000 tons represents $25 million in product. Until it ships, it’s just product. It isn’t revenue, and it isn’t cash flow. This is, of course, a reality for manufacturers of all kinds that make and sell things, carrying the financial burden of finished goods. However, as marketplace conditions change or the cost of capital goes up, the consequences of holding a higher percentage of the inventory that will sell in the upcoming heating season start to add up.
I always try to identify any records that have been set, and the May 2025 inventory levels in the West reached their highest level ever at 128,173 tons. As we’ve learned to expect, these high inventory levels tamp down production levels, and for the fourth straight month, the West has produced less than 30,000 tons of product. The 5-year average for May is 36,943 tons, and producers in the West made 28,000 tons of product this May, down 25% from the 5-year average. It’s hard to make an argument to produce more when your operation is running low on storage.
While these eye-popping inventory numbers lead one to believe that tightened supply is an impossibility for the 2025–26 heating season, the accumulated data warns against that. The calendar flipped to October this week. A review of September, October, and November 2019 data shows sales of nearly 750,000 tons. Over that same time frame, producers were able to make 540,000 tons, meaning they were very happy to have the 200,000 tons of inventory they had on hand going into that stretch.
This inventory dance will continue to play out for years to come, but access to data has helped our industry offer as close to a guarantee as can possibly be offered that consumers will have access to high-quality wood pellet heating fuel regardless of the level of cold Old Man Winter throws at them. Access to high-quality, timely data is a big factor in this, and I’m hopeful we can return to the predictable publication pattern wood pellet producers have come to expect.
May Data (5-year average) in Tons
East
Sales – 61,481 (81,341)
Production – 73,879 (87,011)
Inventory – 188,839 (160,015)
West
Sales – 18,237 (27,777)
Production – 27,995 (36,943)
Inventory – 128,173 (70,480)
South
Sales – 4,467 (16,885)
Production – 16,105 (14,941)
Inventory – 25,052 (44,481)
All U.S.
Sales – 84,185 (125,111)
Production – 116,791 (139,150)
Inventory – 342,064 (274,978)
The Price of Electrons
In the last edition of the Pellet Wire, I shared that a House Energy & Commerce hearing on energy choice legislation devolved into a disappointing partisan rock fight. Members from both sides of the aisle seemed content to fire sound bites back and forth with little actual discussion around the big question of how best to meet the energy needs of the citizens and businesses of this country. In light of that, I found myself listening for the things that members of both parties said. Hands down, artificial intelligence and the data centers that power this new technological phenomenon—and the immense power they’ll need to do all the things AI promises to do for (to) us—was at the top of the “said by both teams” list.
I’ve got to tip my hat to Severin Borenstein, who started his recent blog post “What Will Data Centers Do to Your Electric Bill?” thusly: “Electricity has recently replaced eggs, beef, and gasoline as the inflation concern du jour.” Borenstein’s blog echoes the angst that both Democrats and Republicans from the committee hearing displayed when they were nibbling around the edges of a discussion/debate that absolutely needs to happen.
On the one hand, we are all clear-eyed that the supercomputers we are standing up all over the country will need vast quantities of new electrons. Some estimates place that number at one hundred gigawatts of new power. As a reminder, one gigawatt can power about 750,000 homes, so 100 gigawatts is a lot.
How we’ll meet this demand, and what that means for other users of electric power, is at the heart of the debate that is unfolding, however clumsily, in the halls of Congress and the editorial offices of the media outlets that cover energy issues. It is upon this sea that our little corner of the energy market floats.
Interestingly, despite data centers’ insatiable appetite for electricity, policymakers and other energy thinkers and thought leaders continue to advocate for more use of the incredible, inedible electron. Vehicle transport? Electrify it. Space heating? Electrify it. The challenge, of course, comes down to simple supply and demand. When we put too many demand centers on one type of energy, marketplace distortions and the inevitable price instability typically follow. In the case of electrons, sometimes brownouts and blackouts happen too.
How, then, are we still seeing legislation introduced that would shorten the list of energy sources available to consumers? Narrative. The story we tell one another about this energy source versus that one. Imagine being the coal sector and simultaneously watching the unchecked, rapid increase in demand for electric power and the persisting insistence that our society needs to put coal power in our rearview mirror sooner rather than later. Or, how about being a homebuilder in the state of New York and not being able to install a natural gas, forced-air furnace in the homes you are building. In the context of surging electric prices and more uncertainty on the horizon, the state’s legislation with the moniker “All-Electric Buildings Act” seems in danger of not aging well before it even gets going.
Our industry needs consumer choice and I would argue so too does our national energy policy.
—Tim Portz
Executive Director
