New Venture That Could Make Pellets Hard To Find In Maine This Year

interesting article. I doubt he would impact just Maine, but also NH, and potential MA. Especially if he's looking to start storing up future pellets in the area.

I don't think the pellet manufacturers are going to let him buy up 100% of the supply in bulk. They have establised distributors to take care of first. I'm sure there will be a new mill come on line that will cater to him just because they don't want to invest in a bagging system.

12,500 for an installed boiler.
Even if oil hits 7.00 per gallon you are talking about a lengthy payback period on his imports.

The guy seems motivated enough to make a splash, but I don't understand the business model well enough to really see how he is going to pull it off.
I'm glad we're seeing some competition in the pellet boiler space though. Having lots of options in the marketplace should ultimately help to drive the prices down a bit. My price point would probably be around 2500. As of right now i'm happy with the flexibility and efficiency of 2 separate pellet stoves. 5 years ago central heating seemed like a fine idea to me, but i've definitely undergone a shift in thinking. Now I feel like central heating is a waste (kind of a luxury) and i'm focusing more on heating the areas we're in, when we're in them.
Ditto for Cenral AC. Window units for the bedrooms, thats it.

Agree completely. It's a great concept, but a $12,500 initial cash investment on (yet) unproven distribution network........ I'd love to have one, but not for that much up front.

IF home heating oil were to hit $10+/gal, $12.5 K would seem like chump change ! Everyone that had equity in their home would be goin' to the bank.

This is not news to us in Maine. There is a lot of information being left out in the news and on MES' site. The systems cost $8400 or $9500, BUT does not come with a hopper! You would need to purchase a storage bin as well as the auger system, say another $2000 (this is a guess, since atm MES has not announced their actual cost). Then there is installation, which we all know varies from set up to set up, but for materials alone (piping, pex, valves, and flue, etc) ~ you have to think that it would be at least $1500. LABOR? For the plumbing/heating guy, electrician..... let's say conservatively (again) $2000. OHHHhhhhhhhhhhhh! You want someone to show you HOW to use it? MES does not do that either, that is up done by the contractor, and I am sure, it will not be included in the installation cost.

Overall, the $12,500 is a low ball number. It will more likely be in the $14 - $15K+ price range. THAT is assuming MES can actually pull this off. ALL the installation, set up, customer service, repairs, etc. are to be done by the contractor. How many contractors are going to want to take on that headache? AND as of a few weeks ago, MES only had 100 units being shipped over for June/July.

While Les and his group have deep pockets, they are business people. As such, if this doesn't look like it is going to work, they will pull out before losing it all. That leaves the customer where?

Finally, if this works ~~~ it will bring more pellets to Maine, or at least keep more pellets here.

P.S. I find it funny how his only true competition was left out of the article - Traeger PB150 with 16 years of performnce AND a there is one of the few US dealers in Maine. (Otten was not aware of this until after he started MES)

That's exactly where I'm at with my house as well. We had a wood stove before, and we would run it to keep the house warm in the dead of winter... never to have the furnace kick on at all.

That means, the room the stove was in was really quite warm, and the rest of the house cold, but with an older - drafty house, I don't see the point in heating a 2nd and 3rd floor which no one is in during the day.

I would not be surprised to see them produce there own pellets in the future. Buy the equipment and we can supply you with all the pellets you need.

Yeah it sounds like that is what they're going for...but I doubt they have enough capital to buy up the whole supply and keep people from going to competitors for pellets.
Craig had an interesting point about possibly mirroring some of whats been done in the solar world.

Sell the boilers at a loss for 5K then make people sign a contract for their pellets (lets say locked in at 375 per ton)
It could work, but it seems like that could be a risky strategy since the boilers might be prone to failures in the early going.

It'll be interesting to see how the whole thing plays out.

They are not going to make their money off of the pellets. It will be made in the "unforeseen" costs that the customer who thinks they can get this system for $12,500 installed is charged.

I would say it's a good bet too. I tried years ago when pellet stoves were just coming about to start up a wood/pellet stove dealership and most of the manufacturers wouldn't even return my calls. I had the facility and the customer list to start from without even advertising.It was a no brainer. I did talk to a couple of manufacturers but they were very tight lipped. I think the situation is that they can sell ALL the pellets they can make and not piss off established distributors at a good profit without catering to someone like me (an unproven distributor) or Les who will likely use his big bank account as buying power to dicker price. I don't think established pellet manufacturers have anything to gain by seling to Les. A new manufacturer just coming online on the other hand would have an easy startup by selling to Les. It will be interesting and I hope he succeedes because we need every form of alternative energy as fast as possible in this country.

I think his business plan is too make the money selling the pellet boiler and the peripheral equipment like the hopper and auger.

Notice he has the subcontractors do the installs and he doesnt even stock or inventory any boilers, bet the customer waits until he has them come in, so he ties up very little money. Then he off loads responsibility to maintain the system on the contractor who installs and probably the factory. Maybe if the customer needs financing, he gets a cut with the bank or whatever.

Somehow I think his gameplan is to import the boilers and sell some pellets. He doesnt want to get into the install and service end since that would require a lot of bodies.

Per the pellets, if he only installs 150 units per year and each needs say 6 tons that is only 1000 tons or about 1% of the output of the new plant in Athens. I am sure the local plants can scale up production as demand increases.

Hi, my name is Dan and I represent Maine Energy Systems.

The systems cost $8400 or $9500, BUT does not come with a hopper!

The total system cost, including installation, for a typical house is around 12.5k. It's not an actual cost, just an estimate. The smaller boiler costs $8400, and the bin should be another $1500-$2500. We decided not to go with a hopper because of the burnback problems a competitor is having.

The auger system is 100% included in the price of the boiler.

You're right about the cost of materials and labor - it could be variable. We used estimates from three different HVAC contractors with master solid fuel licenses to arrive at our $12.5k figure.

Using a Bosch/MEsys burner/boiler system is straightforward - you turn up the thermostat, the augers work, and your house gets warm. Every few months you have to remove a tray from the bottom of the boiler and throw out the ash. There's no bags to buy, no pellets to spill, no bulk pellet storage hassle, and best of all, no constant "tending".

We've had over 40 master solid fuel HVAC technicians go to our training sessions in Bethel over the past two weeks. A majority of these contractors are excited to be on the forefront of installing the Next Big Thing and have between 2 and 5 installations slated each.

Our current orders are well over 150, and we anticipate needing another, larger shipment from Bosch later this summer, which Bosch has assured us is already being manufactured at no additional cost.

If MEsys folded after this heating season, there's still manuals available from Bosch and Janfire, and the contractors and installers have copies of everything that we know relating to the installation and care of the system.

Mr. Otten is definitely aware of the Traeger offerings, as well as those from Tarm and other American manufacturers. However, these burner/boiler systems haven't been in widespread, typical home use in the US, and our systems have had decades of field testing in Europe's pellet fired market. We're also very concerned about the burnback problems a few American manufacturers are having - if we had a new company whose offerings caught fire on a regular basis, we'd be out of business tomorrow.

I hope this answers your questions, and if you have any more, feel free to post here or e-mail me directly at dan A_T maineenergysystems.com

Edit: some new concerns!

First and foremost, we're looking to sell pellets at a very competitive rate. We're not trying to cause any problems with the pellet market, and our contracts have already been accounted for in terms of the mills' production and pricing.

We are anticipating stocking and inventorying boilers here in Bethel. We're looking at buying up some warehouse space, and we anticipate stocking at least 30 boilers on hand (unless they're bought out too fast). We aren't having the boilers shipped individually (otherwise you'd be looking at another thousand dollars a boiler, at least), so we can pass the transport savings on to the customer.

Next heating season we anticipate owning multiple online and producing pellet mills.

Interesting that not all of my points were spoken to, and that the ones that were, were confirmed. At $8400 for the boiler and $1500-$2500 for the storage bin, you would be looking at $9900-$10900. There is no way that materials and installation are only going to cost $1600-$2600.

I really am not slamming them. I think it is a wonderful idea and would have gone with them IF I knew up front how much it was going to cost, AND they were being installed and serviced by people who had been doing it for a while.

What points remain unaddressed? As with any other heating system, your cost is going to vary depending on the installation. Our costs were based off a typical installation, but if you have something tricky in the way, then you have to work around it. As to experienced installers, I think you'd have no problem if you spoke German. As it is, there's nobody installing this type of system anywhere in the US.

Is this the same Bosch that puts out the high quality power tools, washers and dryers and more?

Yes, and indirect hot water tanks out of Londonderry, NH.

(big) Points 'not' addressed:

1. At $8400 and then $1500-$2500 for the bin, you would be up to $9900-$10900, take that away from your estimated "$12,500" and that would leave $1600-$2600 for materials (flue, piping, wiring, valves) and installation (flue, plumbing, electrical, delivery), set up, walk through, etc. There is NO WAY a contractor is going to do all that for $1600-$2600.

2. You may be training 40+ master solid fuel HVAC technicians, but how many of them want to accept 100% of the responsibility? If it works out for you and your customers, I think that is great and makes for a great business (for you). Sell the product and, sell and deliver the pellets, and not be responsible for anything with the actual boiler or customer issues.

3. Thank you for making this point for me....

Again, I hope MESy succeeds in changing 10% of Maine to pellet boiler owners. I am simply stating things that ought to be considered, and pointing out that the $12,500 estimate is at least on a straight forward installation a minimum of a grand off, and more likely more then a grand. That and MESy is not taking any responsibility for the boiler, but rather the contractor assumes all the responsibility.

If I was assured the final price (for a straight forward installation) was $12,500 AND MESy was the party standing behind the unit, I probably would have bought one. As you can see by my signature, I went with the Traeger PB150 instead. It has 16 years of a proven track record, and if you maintain the system as you should, there would not be any burn back problems with the auger. Traeger actually has several things in place for it NOT to happen, but as with any of these units, including MESy's, if it is not maintained, anything can happen. Finally, the company I bought my system from does that for a living. They do not sell pellet stoves, pellets, oil boilers, etc. The master solid fuel HVAC technician has installed a lot more then 2 -5 of them, so I won't feel like a guinea pig either.

I wish MESy luck, because the alternative would be bad for the industry, but more importantly ~ bad for the people of Maine.

~Jeff

BLAH BLAH BLAH

Maybe not to a "T" but this is similar to how many two step distribution networks operate. We would buy stoves etc from distributor, then when warranty issues arose we would take care of it and file paper work with the factory. We took 100% responsibility for installation and all warranty work. The manufacturer paid for parts and a pittance for labor but the distributors didn't really have a hand in the handling of warranty issues. This wasn't always the case, but it was with a few distributors.

I understand that. However, this is really a three step distribution network. With the responsibility falling on Bosch/Janfire and the contractor.

Yes

The warrantly questions would be

1) who will handle this and determine who will pay

2) will the contractor who installed be adequatly compensated for warranty

3) who will stock parts on this side of the pond or will customer wait weeks for repair parts

4) If MES goes belly up where does that leave the customer?

5) if local contractor who installed goes belly up or gets out of the business will MES pick up the mess

6) if MES goes belly up and customer has funky storage system which uses the new pellet truck to fill
his hopper who would he turn to??