BC – Korea Bioenergy Collaboration

Workshop

Gordon Murray, Executive Director

March 19, 2012

Canadian Wood Pellet Industry Perspectives

An Industry is Born

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• The first load of industrial pellets was shipped from Vancouver Canada to Helsingborg Sweden in 1998

• Today Europe remains the only significant industrial wood pellet market

• South Korea has enacted new GHG reduction laws, but so far no pellet transactions

• Signs of life from US and Canada

• Inquiries starting from other Asian countries

Canadian annual pellet production capacity as of February 1, 2012 – tonnes

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Plants Average Largest Total %

Western Canada

17 118,000 400,000 1.9 mn 64%

Eastern Canada

23 58,000 130,000 1.0 mn 36%

All of Canada

40 79,000 400,000 2.9 mn 100%

New Capacity 2010-11

Name City Province

New Capacity (tonne/yr)

1 Northwest Wood Preservers Vanderhoof BC 30,000

2 Pacific BioEnergy Prince George BC 180,000

3 Pinnacle Pellet - Burns Lake Burns Lake BC 400,000

4 Firemaster Kamloops BC 30,000

5 Highland Pellet Manufacturing Merritt BC 29,000

6 Tahtsa Pellet Burns Lake BC 30,000

7 Groupe Savoie St-Quentin NB 55,000

8 Holson Forest Products Roddickton NL 50,000

9 Granulco Sacre-Coeur QC 20,000

10 Granules de la Mauricie Shawinigan-Sud QC 22,000

11 Trebio Portage-du-Fort QC 130,000

976,000

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Canadian pellet shipping routes

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Canadian Pellet Exports - 2011

• 1.1 million tonnes from Vancouver to power stations in UK, Belgium, Netherlands

• 50,000 tonnes Vancouver to Japan

• 40,000 tonnes Vancouver to Italy, mostly in bulk

• 120,00 tonnes Belledune to EU power stations

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Estimating European wood pellet demand

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0.0

5.0

10.0

15.0

20.0

25.0

30.0

millions of tonnes

*Some experts forecast more than 100 million tonnes by 2020

European Potential

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• Europe is still using 1.3 billion tons of coal annually

• Only 5 of 27 member states are co-firing

• A 15% replacement of coal would mean over 200 million tons of wood pellets annually

• Economies are continuing to grow, thus energy demand is also increasing

• Nuclear energy is now unpopular

Tilbury Fire Consequence a Major Concern

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• Fire took place February 27, 2011

• Plant was to use 2.5 million tonnes next 18 months

Main Use is Co-firing with Coal

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• Lowest cost renewable power

• Relatively easy to implement:

– Covered storage

– Separate feed system

– Separate milling

– No change to remaining process

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Canadian Developments (1)

• Canadian Clean Power Coalition (coal power producers trade association) commissioned KEMA to conduct a biomass feasibility report

• CCPC’s conclusion: pellets are the most cost effective form of biomass

– Lower capital cost than CCS

– Lower capital cost than other forms of biomass

– Lower transportation cost than other forms of biomass

– Could extend the life of coal power plants

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Canadian Developments (2)

• New coal emission regulation gazetted

– Would take effect in 2015

– Cap emissions at 375 tonnes CO2/GWh

– Similar to natural gas combined cycle

– Applies to new units and those aged 45 or higher

– Biomass deemed to have zero emissions

• Biomass can extend the life of coal units!

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Impact will be huge and immediate

• Canada’s coal power fleet is old

• 65% of Canada’s coal power units affected immediately

• Potential Canadian pellet market? Could be 50 million tonnes

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Producer Evolution

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Canadian Perspectives on Korea (1)

• Committed to 30% GHG by 2020

• RPS for power generation: 2012 – 2%

• Increase ~ ½% annually until 2022 – 10%

• Biomass energy target for 2020: 4,211,000 toe

• Pellet equivalent: 10 million tonnes

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Canadian Perspectives on Korea (2)

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• Initially excited about doing business with Korea

• Hosted many visits from Korean companies

• No transactions completed

• Low initial RPS likely reason

• We hear of Korean interest in PKS

• Koreans need to act if they want Canadian pellets

Pellet Fibre Sources

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• Wood residues: sawdust, shavings, harvest waste

• Virtually all acquired via agreements with primary forest industry

• 2011: 3 million tonnes green fibre to make 1.5 million tonnes pellets

Canada’s Forests

• 397 million hectares

• 10% of the world's forest

• Sustainably managed

• 149 million hectares certified by CSA, SFI, or FSC

• 93% is publicly owned—access via licences

• 208 million m3 annual harvest

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Conclusion

• Canadian pellet manufacturers wish to grow

• Interested in doing business with Korea

• Preference is customer/supplier relationship

• Will require new capacity to be constructed

• Competition from Europe and Canadian industrial market

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Questions?

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