Atlantic Forestry March 2015

Plink, plink . . .
Dwindling pellet supply augurs ill for consumer confidence

by David Palmer
    According to NASA and NOAA (National Oceanographic and Atmospheric Administration), 2014 was the warmest year on record. Geez, Louise, it sure didn’t feel like it here in Atlantic Canada, as the snow kept piling up long into late March and refused to melt even in April. 
    When one’s personal memory conflicts with official records, it’s time to dig a little deeper. As it turns out, our minds weren’t playing tricks on us. That extra warmth wasn’t distributed evenly over the whole globe, nor throughout the year. NOAA’s world map of global temperatures shows that central and eastern North America were colder than normal in 2014. In fact, March in the Maritimes was particularly harsh, three to four Celsius degrees colder than normal. And April wasn’t much better, at one to two below normal. 
    Reserve fuelwood supplies were consumed, natural gas bills went through the roof, and pellet stove sales were brisker than ever. As 2014 closed out, Maritimers stoically prepared for the possibility of a repeat of last winter by stocking up on pellets and boosting firewood reserves. Those with oil or gas heaters prayed for a price reprieve, while the majority of New Brunswickers with electric heat turned the thermostat up and shuddered when they opened their next power bill.

    All those cranked-up electric baseboards create a huge extra demand for electricity, particularly first thing in the morning on a cold January day. That’s a problem for the public utility, which has to either buy extra power from other utilities that have excess to sell (usually at a premium) or maintain standby generating units ready to kick into service when the need arises (also very expensive).
    That’s why NB Power launched a “Beat the Peak” contest to come up with ideas to reduce peak demand – ideas like setting your dishwasher or washing machine to come on in the middle of the night instead of running it first thing in the morning or as soon as you get home from work. But most people won’t change their behavior unless it saves them money to do so. Many utilities provide a financial incentive, charging a lower electricity rate at night. There is no indication of whether NB Power might adopt such a system.
    At any rate, modest changes to power consumption won’t do much to smooth out the peak – not while a majority of New Brunswickers continue to rely on electric baseboard heaters. The only way to achieve significant reductions is to get people to switch to oil, gas, wood, or pellets.
    Although burning oil directly for heat is vastly more efficient than burning it to generate electricity, oil prices are volatile. Natural gas prices are mired in a pricing formula that virtually guarantees no break for customers. And using fossil fuels for heat is just disagreeable to many people. That leaves wood and pellets.
    I’ve burned wood for 40 years and I love it, so I’m a bit biased. But I’ve got to admit that it’s a lot of work, very messy, and sometimes hard to get. And at $275 or so a cord, it’s becoming expensive. Will I still be burning wood in 20 years? Possibly, but if not, I must have something else that gives me direct radiant heat. That just leaves pellets.

    The popularity of pellets picked up back in 2008 when oil prices went crazy. That year there weren’t enough pellets to keep up with demand. In mid-winter, supply dried up, leaving many hapless consumers wondering if they had done the right thing by buying a pellet stove. After a year or two of ups and downs, production and demand aligned and the market normalized for several years. There were multiple brand choices for consumers, stable prices, adequate supply, modest profits for producers, and moderate growth in the industry.
    That all ended in early 2015, when pellet stocks in New Brunswick and Maine once again ran low. After becoming aware of a supply problem in mid-February, I visited seven retail stores in Fredericton that normally sell pellets: Kent, Home Hardware, Walmart, Costco, Co-op Farm Supply, Simms, and Shur-Gain. All were sold out! One expected a shipment from Crabbe, and got it the next day, but was again sold out in two days. Devon Lumber was the only local store that still had pellets on hand.
    Some sales staff were able to predict when a shipment was expected, while others had no idea when they were going to get any. “Maybe March,” said one. A Walmart employee obligingly checked to see how many were in inventory (none), how many were in transit (none), and how many were in the warehouse, wherever that was (none). When asked if the company she worked for was looking for alternative suppliers, a Costco employee said, “Those decisions are made at a lot higher level than me.”
    There are six pellet plants in the Maritimes, down from nine six years ago. Two produce solely for the export market, leaving only four to service the domestic market: Crabbe Lumber in Bristol, N.B.; Groupe-Savoie in Kedgewick, N.B.; Marwood in Tracy, N.B.; and Shaw in Shubenacadie, N.S. In the Fredericton area where I did my research, the only pellets to be found were Crabbe’s, and at least one retailer that had carried another brand was turning to Crabbe as an alternative supplier. Crabbe has been working hard to keep up with the increased demand by extending production hours, buying extra sawdust, and even grinding up higher-value wood chips on occasion, but this suppler can’t take up all the slack.

    At Sunpoke Energy in Fredericton, long-time senior employee Paul Jackson attributes the shortage to the long, cold winter and the steady increase in pellet stove sales. His shop has seen 50 or 60 stoves go out the door this winter. Nobody tracks this regionally, but if you extrapolate from Sunpoke’s numbers, it would not be unreasonable to conclude that pellet stove sales in New Brunswick may have topped 1,000 in the past year. At four tons of pellets per season, that’s new demand of 4,000-5,000 tons in this province alone. Given such robust growth in demand, it’s easy to understand why a shortage might develop.
    Another factor in the supply shortage, particularly in Maine and western New Brunswick, is that one of the big plants in Maine was temporarily out of production. Corinth Wood Pellets, one of four producers in the state, was recently purchased by E.J. Carrier Inc., of Jackman, Maine, which embarked upon a $7.5 million upgrade. The plant was shut down in November for work that was expected to take four to six weeks but instead took 12 weeks. If things have gone well since production resumed, the pellet supply crunch should be alleviated for the tail end of the heating season.
    Clearly the domestic pellet market is growing in the northeastern U.S. and Atlantic Canada, but at an unknown rate. Somebody – whether it’s the Department of Energy, a pellet producers’ association, or CanBio – ought to be tracking pellet stove sales and making demand projections so that the industry can respond accordingly. Shortages of this critical fuel, in the middle of a severe winter like the one we are once again experiencing, results in frustration and loss of confidence among consumers, thus putting the brakes on expansion. For an industry that is seeking to build credibility, this is unacceptable.