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In this Week's Pellet Wire:
From the Director's Desk:
2020-21 Heating Season: A Complete Picture
Last week the Energy Information Administration published its March 2021 data set, making complete the statistical picture of the 2020-21 heating season. I recognize that increased summertime buying has extended the heating season into the summer months with early-buy offerings, but pellet usage remains an October – March thing. While volumes can and do begin to flow mid-summer, the relative success of a heating season is determined by what happens October – March.
Two things jump out at me when parsing the data. First, producers got into the production throttle early and stayed in it throughout the season. While it's true that production slowed in the back half of the heating season, production totals were still well ahead of the 5 (or 6) year average. I suspect that producers had January of 2020 in their mind when robust sales eroded inventory levels to just 50,000 tons and were committed to shoring up standing inventory in the event of deep and prolonged winter.
Except for January, total monthly production was well ahead of recent averages and sometimes as much as 25% beyond the norm. The data would suggest producers were preparing for a cold snap that ultimately never came.
At this year’s annual conference just a handful of weeks ago, I specifically mentioned summertime sales and our success as a supply chain in moving more products out of pellet plant yards into retail locations and eventually into consumer homes. The summer of 2020 was our best summer yet (602,000 tons June – August), but without a decent and prolonged cold winter, strong summertime sales really curtail sales throughout the heating season. The 2020-21 heating season offered a disappointing case study in this marketplace reality.
The sales data from October – March show a heating season that never really got started, failed to gain any steam during the middle of winter, and finished in a lackluster fashion. Only February held strong, and January was the softest January in the EIA’s data records. These softer sales totals certainly allowed the sector to shore up its inventory position. March closed with 170,000 tons of product on the ground, a number the sector didn’t achieve last year until the end of April, and in 2019 we were well into May before we had 170,000 tons on the ground.
The next few months will say a great deal about how much inventory producers think they need in the run-up to early-buy season, as at the end of March, the sector was within 41,000 tons of last July’s high-water mark of 211,000 tons on the ground. Either the sector will lay in greater inventories, or summertime production will decelerate quickly.
I suspect we will top-out somewhere around 280,000 tons at the traditional inventory apex in July. We all heard about the impact of the tax credit already on pellet appliances during the retail panel at the annual conference, and I suspect sales teams are hearing the same thing as they speak with customers this summer. I think the sector will be willing to build an inventory position beyond last years in anticipation of increased stove counts and a pinch of good old-fashioned “this year is sure to be better” optimism. If appliance sales are surging and a proper winter does come along this year, we’ll be happy to have a strong inventory position on the ground.
Seeking Sustainability Working Group Members
Since February, a small group of members have been working on a freshen-up of the Pellet Fuels Institute’s message of sustainability. This working group has a dotted-line relationship to the Marketing & Promotions Committee, reporting its progress during monthly committee calls, but establishing more regular and independent work sessions. The working group’s efforts and activities will be ramping up this summer, and we would welcome other contributors to the effort. If articulating the benefits of wood pellet production and use aligns with your current responsibilities or interests, please contact me at [email protected] and I will get you added to the meeting invitation list.
—Tim Portz
Executive Director
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Industry News
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The Biomass Thermal Energy Council and Life Cycle Associates today announced the release of the “Life Cycle Analysis of Renewable Fuel Standard Implementation for Thermal Pathways for Wood Pellets and Chips” study. The Study found that biomass fuels, in the form of wood pellets and chips, result in a 65 to over 100 percent reduction in greenhouse gas (GHG) emissions in comparison to heating oil, which exceeds the targeted 60 percent GHG reduction requirement for cellulosic biofuels replacing heating oil under the U.S. EPA’s Renewable Fuel Standard Program...
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Netherlands temporarily ceases new subsidies for biomass heat
The government of the Netherlands on June 9 announced it will temporarily cease issuing new subsidies for wood biomass-fueled low-temperature heating projects until a phase-out plan is established. The government said the action will not impact currently approved subsidies.
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