Locational determinants for wood pellet plants: A review and case study of North and South America

Abstract

The European Union’s Renewable Energy Directive has led many electricity producers in Europe to use wood pellets in place of fossil fuels. North America has become one of the primary suppliers of wood pellets to Europe. This paper critically examines literature, economic models and data, as well as the supply chain and country risk factors, related to wood pellet production to anticipate where North and South American pellet mills should be built to meet Europe’s demand. Canada, the United States, and Brazil maintain the largest natural forest area, planted forest area, and industrial roundwood production; however, South American countries achieve faster plantation growth rates. The World Bank’s Logistic Procurement Index and IHS’s Country Risk Index were used to score and rank countries’ investment climates, based on their supply chain and risk factors. In this regard, the United States, Canada, and Chile performed best, in contrast to Venezuela, Bolivia, and Ecuador. When considering both wood supply and investment climates, the United States, Canada, and Chile were the most attractive countries to build a pellet mill, while countries, such as Argentina, Brazil, Colombia, Paraguay, and Peru present significant trade-offs between having significant wood resources and riskier investment climates.

Impacts of the US southeast wood pellet industry on local forest carbon stocks

“…The siting of land-based resource-dependent facilities is a non-random process particularly when a large proportion of input expenditures arise from procurement and transportation costs of localized resources, and manufactured products have relatively low value-to-weight ratios 41 . The non-random siting process is well reported in wood pellet industry case studies 42 and optimization applications 43 .…”

“…The estimation of the probability of an NFI plot in our sample ( n ) being within the procurement radius of a wood pellet mill was given by: where R takes on value of ‘1’ if the i th plot was located within the procurement radius of a wood pellet mill at any point during our sample period, and ‘0’ otherwise. Industry location theory and empirical evidence were our basis for choosing PSM covariates in vector M i 42 , 48 , 49 . These included: (a) Geodesic distance to nearest port trading forest products, (b) county’s road density, (c) land ownership (private or other), (d) geodesic distance to nearest wood-using power plant, (e) geodesic distance to nearest pulp mill, and (f) state- and (g) forest group type-specific effects.…”

Risk analysis, practice, and considerations in capital budgeting: Evidence from the field for the bio-based industry

“…The so-called new-bio-based development is emerging mostly via small-and medium-enterprises, which are striving for success among the myriad of challenges inherent to new businesses, along with uncertainties specific to the bio-based industry. Factors such as continuous development of new technologies (i.e., technologies at different readiness levels) (Gonzalez et al 2011a,b), uncertain product prices (de Assis et al 2017a(de Assis et al ,b, 2018, and geopolitical dynamics (Goh et al 2013;Singh et al 2016), in combination with unique uncertainties found in the bio-based sector, such as variability in feedstock composition (Treasure et al 2014) and feedstock availability (Gonzalez et al 2011c), add more complexity to the already intricate investment decision-making environment of the bio-based sector. In order to reduce the chances of project failure and maximize value, it is crucial to incorporate risk assessment into the decision-making processes (Brauers 1986;Curtis and Carey 2012).…”

Impact of woody biomass production and biopower generation on US forests

“…Implementation of EU RED National Action Plans triggered the establishment of new manufacturing facilities pelletizing wood fibers across the US coastal southeast [14,15]. It is important to note that EU RED National Action Plans do not target forests of any particular region, rather, the supply of US wood pellets developed organically partly due to cost competitive and comparative production advantages [16].…”