Waseca, Minn. — Businesses hoping to leap into biomass-pellet production should keep their eyes wide open, cautions a recent AURI sponsored study.
The evaluation by Cooperative Development Services and researcher Ken Campbell looked at the challenges and competitive disadvantages that entrepreneurs and new businesses marketing ag-based biomass pellets could face.
“We’ve seen a great deal of interest from people who want to produce biomass pellets for home- eating or industrial applications,” says Al Doering, head of AURI’s coproduct utilization program in Waseca. “There are some real challenges with trying to enter the market with a product that has to compete with corn or even wood pellets.
“We wanted to produce a guide that includes all the variables that need to be considered before someone purchases equipment or builds buildings with the intention of going into business,” adds Dennis Timmerman, AURI project director.
The guide isn’t a business feasibility study, rather a reference document that contains technical and financial information, cost estimates, industry data and other relevant information for a commercial enterprise with a stand-alone pellet plant.
While many businesses are interested in such facilities, the study warns that the pellet market is limited. A number of residential and small industrial pellet stoves and industrial boilers can burn biomass pellets. And currently no companies are selling large quantities of biomass pellets to those markets, but there also doesn’t appear to be great demand.
The fuel-pellet industry is emerging, but future growth is not a certainty, the study found. “Economics will always drive the viability of opportunities like biomass pelleting for energy,” Doering says.
“We know it is technically feasible to make biomass pellets from corn stover, processing waste, grasses or other sources, but they have to compete economically with things like coal, natural gas or electricity.”
The 127-page evaluation assessed permitting processes, technical feasibility, plant requirements and capital costs, project financing and the political environment. It also assesses issues surrounding various agricultural feedstocks including costs for raw materials, handling and transportation.
“People are enthused about the opportunity to use coproducts and biomass for pellet fuels,” Doering says. “Industrial and commercial opportunities will continue to grow; however, we strongly encourage anyone looking to build a plant or start a business to take a good hard look so they don’t make an expensive mistake.”
A copy of the full report is available to Minnesota residents by contacting the AURI Marshall office at (507) 537-7440.