Wood pellets may be scarcer, and more costly, this winter

The supply situation is dicey enough that the national Pellet Fuels Institute is cautioning users who depend on them to stock up soon
Wood Pellet Biomass

The price hikes and supply crunches that have clobbered fuel supplies and raised prices throughout the world are starting to affect the one fuel we can call ours: wood pellets.

“There is quite a bit available right now but with the ongoing situation, there might be a rude awakening. … We’re preparing for the fact that we might not have all our brands available this winter,” said Lee Hughston, manager of Osborne Agway in Concord.

The supply situation is dicey enough that the national Pellet Fuels Institute is cautioning users who depend on them to stock up soon. And even though there is no shortage yet, the possibility of one combined with pressure from high diesel prices and labor shortages is showing up in higher prices.

“We used to have quarterly issues on pricing. Now the mill is calling essentially the first of each month … with $10 or $20 a ton,” Hughston said. He pointed to local hardwood pellets, a staple of New Hampshire’s market. “Right now it’s $330 a ton, almost $50 higher than this time last year.” And more increases are likely.

More pressure comes from increased demand. The sharp spike in the cost of heating oil, used by about 40 percent of New Hampshire homes, propane and electricity has raised interest in adopting at least supple mental heat from a pellet stove.

“People are looking for alternatives,” said Kyle McGarr, assistant manager at Stove Barn. “Last year, a lot of gas fireplaces were being sold; this year it’s wood and pellet stoves.”

The existence of a 26 percent federal tax credit for wood or pellet heating systems is also an incentive. The NH Dept. of Energy’s Sustainable Energy Division also provides a rebate payment of 40 percent of the price of high-efficiency, bulk-fed, wood-pellet boilers and furnaces, capped at $10,000 for homes.

However, many stove manufacturers are back-ordered, often by months. If you try to buy one now, you may not get an installation until well into winter.

Supply constraints

Most pellets in New England are made from either low-grade wood left over from logging operations or sawdust and other wood byproducts from mills and manufacturing. Cutting down mature forests to create biomass for heating and power production, an issue that is causing an uproar in Europe, is not usually done here.

Local sources of raw material for pellets are under pressure, however. High diesel prices led many loggers to cut back on operations this summer, reducing the supply of wood from forests, while the rise in interest rates is affecting home building, the source of a lot of wood residue for pellet mills.

“The bigger issue, quite frankly, is labor,” said Brett Jordan, CEO of Lignetics. “We can’t take plants to 24/7 because we don’t have enough headcount. We’re hiring everybody we can hire, but it’s not enough,” he said.

Another problem is the one that has roiled fossil fuel markets: Russia’s invasion of Ukraine. The war has reduced supplies from Russia and Belarus even as the Russian cutback on natural gas and oil has made biomass heat and power more desirable. The result is that European nations want to buy a lot more wood pellets from the U.S.

With its hardwood forests, New England doesn’t export many pellets. Southern states, where huge pine estates are grown specifically to become fuel, is the nation’s leader.

But New England states still could see a trickle-down effect in supplies if exports surge.

Cheaper heat

Pellets have revolutionized wood heat in the past decade, because refueling can be controlled by a thermostat via augers feeding more pellets to the fire as needed. Wood pellet boilers can heat commercial buildings, and wood pellet stoves are a common secondary source of heat in homes, much cleaner and easier than wood stoves.

Even so, pellets or similar processed wood such as sawdust bricks are not a huge part of New Hampshire’s energy scene. About 6 percent of homes use wood as a primary heat source, and much of that is traditional wood stoves, which don’t need electricity to heat a house during power outages.

Current volatility in prices makes predictions difficult, but pellets have been slightly cheaper on a per-unit basis than heating oil in recent years, according to an analysis by Eric Kingley of Innovative Natural Resource Solutions LLC. Using data from the federal Energy Information Agency and historical data from the New York State Energy Resource and Development Agency, he calculated that pellets have been one-third cheaper than heating oil this year and, as of August, were about 15 percent cheaper.

A ton of wood pellets is equal to about 120 gallons of No. 2 heating oil or about 180 gallons of propane, according to federal estimates. At current prices, the pellets are much cheaper than the oil — less than $400 vs. about $550 — but oil prices have stabilized while pellets are still increasing, so it’s hard to say how big the difference will be this winter.

This article is being shared by partners in the Granite State News Collaborative. For more information, visit collaborativenh.org.

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