November of 2009 we hit a wall. There was too much product out there, the winter was warm, and heating oil much cheaper, and we had to shut down production for much of the winter to balance things out.” That harsh reality gave Arsenault time to accelerate a couple of projects. For starters, the collapse of the North American pellet market in November 2009 shocked more than just Energex. Few in the industry saw it coming. Yet looking back, Arsenault has uncovered a set of parameters that would have helped predict the collapse, had the industry known the signs. “There are a number of factors, but it comes down to the price differential be-tween heating oil and wood pellets at the end of the heating season. As homeown-ers, we look at our heating costs at the end of the year and either say, ‘I’ve got to do something about this,’ or not. In the summer of 2008, that difference was large enough to cause many homeowners to do something about it, and we had a great season in 2008–2009. We were so busy trying to keep up and raising prices that we didn’t realize what was happening. We were in the midst of a recession, heating oil prices had dropped dramatically, and pellet prices had gone up. The differential had vanished. Sales in the spring were still good because people were responding to a perceived shortage, so we didn’t notice the wall until we hit it hard in November.” In fact, heating oil prices per litre (ac-cording to Statistics Canada) hit $1.29 in Montreal in July 2008, creating that mas-sive gap. Just one year and a recession later, pricing had dropped to just over 71 cents/litre. This past July, heating oil pric-es in Montreal had climbed back to almost 87 cents/litre, setting the industry up for a better season this coming winter, or at least that’s what Arsenault is predicting. “We’ll be able to test it out this year, but it seems that a heating oil price of at least 75 to 80 cents/litre, and thus a 15% differ-ential, is a key factor. There are others— another really mild winter will hurt—but we’re expecting that demand will be sig-nificantly better this year. There is a lot of inventory out there, so pricing may not be great, but at least demand will be there.” GENERATING A FUTURE Predicting poor markets is one thing; re-sponding is another. That’s where Arsenault’s second project comes into play. Energex took The solution behind the solution. advantage of its slow winter to push its pellet torrefaction development into high gear. “It’s a question of necessity,” Arsenault explains. “It’s hard to invest in new tech-nology and market development in ugly markets, but we can’t afford to wait, ei-ther as a company or an industry. Things like developing the market for residential heating are great, but it will take a long time to add any significant volumes. Let’s say we double it over the next 10 years to 120,000 tonnes in this area, there are two problems. We’re only adding 60,000 tonnes when more capacity than that has come into the market in Canada in the past year alone. And we’re taking 10 years to do it. We can’t survive another 10 years like this. We need to create a bang in the market, not a whimper.” For a faster and larger bang, Arsenault and his colleagues at WPAC are targeting the coal-fired power generating industry in Canada. We’re a hydro-rich nation, but parts of the country still burn a lot of coal to meet Quality pellets, guaranteed. For perfect pellets the entire produc-tion system must work together flawlessly. Buhler enables total process control by providing a complete process design package and key equipment for drying, grinding, pelleting, cooling, bagging and loading. This, combined with Buhler’s integrated automation system, unrivaled after sales support and training provides a seam-less solution, guaranteed. Buhler Inc., 13105 12th Ave N., Plymouth, MN 55441, T 763-847-9900 [email protected], www.buhlergroup.com CanadianBIOMASS 19
Canadian Biomass September/October 2010: Page 19
