October 23, 2015
BY Anna Simet
This wet and chilly Friday is reminding me that winter is just around the corner. It’s been unseasonably warm in parts of the country, including here in Minnesota, and it has undoubtedly got pellet producers obsessing over the forecasts and wishing for colder temps. Already battling low fossil fuel prices—in some states, fuel oil is now cheaper than wood pellets—the projected El Niño winter is not welcome news.
So on the pricing note, a couple of weeks ago, I was reading some online forums and came across a discussion about how the cost of wood pellets has not gone down with cheaper diesel prices. It’s much cheaper to haul feedstock to the plant, so why hasn’t that cost been passed on to consumers? Well, during a discussion during Biomass Magazine’s January content meeting yesterday, a couple of my editorial board members—a biomass power plant manager and a wood pellet producer—answered that question. In a nut shell, it’s because wood fuel haulers/suppliers haven’t lowered costs. Though usually quick to add on a fuel surcharge when diesel prices go up, bringing them back down when prices level out—or even dip dramatically—just isn’t a normal occurrence.
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However, the weapon in producers’ back pocket is price stability. Users of pellets right now are grimacing paying a little more for their fuel than they would fuel oil, but they know this is only temporary and that they are protected from oil’s volatility. That’s on top of keeping energy dollars in their local economies, and using a much cleaner-burning fuel.
Now, backpedaling to the El Niño. It is known for bringing mild winters to most of the U.S., especially the northern states. According to meteorologist Doug Gillham at The Weather Network, the two strongest two El Niño events on record prior to this year (1982-‘83 and 1997-‘98) “were quite mild from the Pacific Northwest to the Northeast. Only the southwestern states saw below average temperatures during those winters.”
However…
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That doesn’t mean it’s certain, or that it will be consistent. Other El Niños on record have been different and unpredictable, bringing precipitation-heavy storms and colder-than-usual temperatures toward the end of the season. Forecasts right now expect the beginning of this winter to be mild, but February might be a different story (Read Gillham’s report here).
On a different note, I’m headed to Omaha for the National Advanced Biofuel Conference & Expo on Sunday. If you’re going, find me and say hi. I look forward to reporting on the many interesting discussions that will take place.