Kremmling, Walden wood pellet plants struggle with sluggish demand
By Reid Armstrong
Sky-Hi Daily News
Six months ago, Gov. Bill Ritter visited the Confluence Energy wood pellet plant in Kremmling, bringing attention to what he hoped would become a major player in the nation’s “New Energy Economy” and the next-best solution to Colorado’s beetle kill crisis.
Today, the plant in Kremmling, like many across the nation, are struggling just to stay alive, according to founder and CEO Mark Mathis.
“There is a glut in the pellet industry nationwide,” Mathis said. “Very few – if any – plants are running. We are at one-third speed and there’s only one other currently running. It’s not just Colorado, it’s nationwide.”
Shelves at retail stores are stocked, but the product is not moving. The storage yards at the plants are at capacity. Enough 40-pound bags of wood pellets were produced at Colorado’s two plants last year to serve the region for the next four years. If the market doesn’t grow quickly, more people are going to lose jobs and plants are going to close permanently.
Historically, the Colorado region has used 50,000-60,000 tons of the product per year, Mathis said. The two plants combined are producing 200,000 tons annually.
“Walden opened at the same time as us and there is simply not enough demand in the region to justify two large facilities,” Mathis said. “The upshot is that we’re the only viable plant in the region right now.”
Production at Rocky Mountain Pellets in Walden recently shut down.
“We are still going through and selling off what inventory we’ve already built,” said John Frink, owner/vice-president of RMP. “We have a good 20 (employees) coming in a day.”
At full run, the plant normally employees about 50 people, Frink said.
The hope, it seems, lies overseas. Wood pellets – cylinders of dried, shredded wood – can be burned alongside coal in existing power plants and are a less-expensive way to generate electricity than windmills or solar panels.
The process of burning the pellets is generally considered to be carbon neutral since trees would emit the carbon naturally when they die and decompose, allowing pellets to meet the European Union’s stringent renewable energy source requirements.
As Europe’s demand for wood pellets increases, the United States has become a major exporter of renewable energy. New pellet plants have opened across the southeastern United States, with factories sprouting in Florida, Alabama and Arkansas in the past year, according to an article published in the Wall Street Journal last July.
The capacity of the three newest plants in the Southeast more than doubled the pellet production in the United States in a single year.
Prior to 2008, there were about 40 pellet factories nationally, producing about 900,000 tons a year, primarily for heating homes. The three new plants in the Southeast alone have the capacity to producing 1.25 million tons of pellets per year. Additionally, five new plants have gone up in the Rocky Mountain region in the last four years, Mathis said.
The United States isn’t the only country jumping on the pellet production bandwagon. Australia, New Zealand, Argentina, Vietnam, Canada and South Africa are also exporting pellets to Europe.
But, here at home, demand has flatlined. Pellets are more expensive than coal, and unless states start increasing regulations for renewable energy sources, demand isn’t likely to increase at home anytime soon.
Tom Pierro, owner of Legacy Building Specialties in Granby, has been stocking his shop with high-end pellet stoves and products for the last few years. Offering a delivery service that forklifts 1-ton pallets directly into customers’ garages, Pierro thought he would see a lot of business in the winter months, given that he’s the only local retail outfit to stock pellets.
Not so. He has a steady 25-30 customers for the pellets, but only sells a handful of stoves and hasn’t seen much of an increase since he started supplying the product.
Pierro had a hard time even getting one of the local plants to stock his store.
“Initially, neither wanted to sell locally because they had so much business back east,” he said. Eventually he got a call back from Rocky Mountain Pellets in Walden and now he stocks their product, although both plants seem more interested in his business these days, he said.
The cascading combination of factors that has flooded the market with pellets has left plants like Walden and Kremmling high and dry.
The collapse of the energy market from $147-per-barrel oil 18 months ago down to $40-per-barrel oil in 2009 took the focus off alternative fuels, Mathis said.
“Fifteen months ago, you couldn’t open the paper without hearing about global warming,” he said. “The pellet market is driven by economics. The economy crashed and burned. People can’t afford to spend $3,000 to $4,000 to put a new stove in their house when they’re wondering if they’ll even have a job tomorrow.”
Despite that, Mathis remains optimistic.
Of the 34 people he employed at the peak of production, Mathis said Confluence has only laid off about seven employees. The plant is still running at about a third of its capacity, which is better than some pellet factories are doing.
“We’ll get through it,” he said. “We have jobs to protect. We understand that people have car payments and mortgages. We’re doing everything we can to stay afloat, and that includes me not taking a paycheck until we get our heads above water.”
Frink said the Walden plant’s staff is working hard to develop new products, from landscape materials to animal bedding, and new uses for the pine beetle kill.
“Our goal is to use the resource,” he said. “We hope to get through as many trees as possible. It’s a huge resource this state has and we don’t want to see it go to waste.”
They are stockpiling trees with hopes of launching back into production as early as March or April.
Mathis said his focus is on growing the market.
“We need to rally support and find greater, larger, industrial applications for renewable energy,” he said.
And, if it comes down to it, Mathis said he’ll personally walk into the region’s Home Depot stores and ask managers why they are importing pellets from out-of-state rather than carrying a local product to reduce their carbon footprint.
“We need to be as aggressive as we can to make sure we earn that business. We’re trying to drive loyalty, to create jobs here in Colorado and to use the resource that’s available out our back door.”
– Reid Armstrong can be reached at 970-887-3334 ext. 19610 or email@example.com.
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