Converting 10% homes to Pellet Boilers!?

[ugenetoo]

Fuel oil delivery as of today is $4.399 per gal. here in western Ma. (Pittsfield) and that`s the lowest price available.
Crude might be down $8 but we probably won`t see it .
I`m actually thinking of another stove and chimney on the main floor to nearly eliminate the oil I buy.
And I can forsee the possibility of not heating the finished basement in the future and getting by with a pellet stove on the main floor. I could live with that if I have to.
Maybe even restore some of the (former) electric heat in rooms that would need minimal or occasional heat.
Only have to move my computer upstairs .
Drastic times call for drastic measures. Heh, heh , heh.
Really now, As a youngster (1950s) I can recall having to cut firewood in the summer to burn in the coal furnace in the late fall before it got cold enough to burn coal safely and efficiently and never having much if any heat in the bedrooms all winter. Still that old coal furnace in the cellar was a luxury back then.
But I can go back even further to the 40s to our other home and recall our weekly baths in front of the old kitchen cook stove, wood, coal , oil ? Can`t remember what combination it was but it had a side heater of some sort in it. We also had an kerosene stove (vented space heater) in the living room. I can recall the white kerosene cans placed upside down behind the stove
glug,glug,glugging periodically as it slowly fed into the pot burner that needed it`s dual wicks trimmed occasionally. There was a 50 gal oil/kerosene drum outside near the porch door setting atop a pair of cross bucks and I assume it was filled on a regular basis. Let`s see now, 50 gals at maybe .10 per gal or less was possible because I do remember oil at .14 a gal in the mid to late 50s.
There was no heat in the bedrooms for sure but I never remember being cold however I remember like it was yesterday having my fathers WWI long woolen brown Army coat on top of me to keep me warm. How I loved that old coat. How I loved my father. It had my fathers smell to it or at least I imagined it.
It seems some of us might be destined to return to the old space heater scenario and maybe that`s not a bad thing either since we have become far too accustomed to the excesses and waste of the modern lives we live.
John

well said!

 

[thomcoastal]

I am waiting on the details from the tech rep for 3 seperate models of boiler stoves to let me know the specifics on running in the US (60 Hz rather than 50Hz). The models are the ECOTHERM H2O 34 (34 Kw total 15% to room and 85% to the water - cost 7100 to get here but it is great to look at in our living room and would add more than my maximum heat load to my existing setup), the Artel 14 Boiler stove (14 Kw 5% to the room and 95% to the water but if I add storage it should supply nearly all my heating needs with the exception of the coldest days below Zero F), the last one is actually a series, MCZ makes several models of Pellet boiler stoves which could meet my needs as well.

The Artel rep just responded, it will operate fine on 60Hz and the total cost of getting the stove here is $7094.60 - a lot of money but it vents through the wall, is located in living space and would meet my heat and hot water needs for 350 days per year. I need to get a bit more info on the other stoves before I jump.

 

[webbie]

Make sure you read he stickies at the top of the Pellet Room Forum - about the dangers of venting directly out through the wall.

You don't want to spend that much money and then still have problems.

 

[Amaralluis]

My take on pellet pricing is that it wont be too far from other heating sources.

People need to rethink carefully if they think they will save thousands a year by switching to pellets.

I understand the benefits of switching to pellets if not for anything else let it be because you are buying a local product and thus helping the wood insustry that needs to be revitalized and this could be a big boost to the industry.

Nonetheless humans are greedy and pellets will not stay cheaper for very long especially if the the demand increases.

These pellet boilers are a great idea, especially if they can replace easily old oil/gas furnaces. The only drawback is the space needed for the fuel.

I just wish that pellet prices would remain stable and low, heck if necessary have the governement subsidize this heating source.
IMO pellet burning should be a priority for the government when you look at all the benefits of it.

Clean energy, renewable energy (environment), local industry/jobs (more taxes), easy maintenance, easy and safe to transport (imagine a tank full of oil/gas has an accident and the tank ruptures?), you get that wood heating feeling, and doesnt have to be expensive.
Its a win win situation for everybody... unfortunatly greed will settle in sooner or later.

Btw those trucks are a great idea, hopefully the idea will expand all over the place.

In the end dont count on pellets stying cheap... it wont happen.

 

[thomcoastal]

My take on pellet pricing is that it wont be too far from other heating sources.

People need to rethink carefully if they think they will save thousands a year by switching to pellets.

I understand the benefits of switching to pellets if not for anything else let it be because you are buying a local product and thus helping the wood insustry that needs to be revitalized and this could be a big boost to the industry.

Nonetheless humans are greedy and pellets will not stay cheaper for very long especially if the the demand increases.

These pellet boilers are a great idea, especially if they can replace easily old oil/gas furnaces. The only drawback is the space needed for the fuel.

I just wish that pellet prices would remain stable and low, heck if necessary have the governement subsidize this heating source.
IMO pellet burning should be a priority for the government when you look at all the benefits of it.

To make the change in price needed for the price of pellets and oil comparable is over $500/ton. The highest prices I have seen in Maine (prior to the opening of three new pellet mills in the past 6 months) is $260/ton. The actual price in Maine has dropped to around $225/ton (many suppliers are expecting prices to remain the same or slightly increase during the heating season coming up). Oil prices are not going to drop to $2.20/gallon to equal the price comparison to current pellet prices of $250/ton (New England Average).

There is no world futures market with nearly 280 Billion gambled on future prices of oil. Oil futures trading has an average of over 25 Billion a month in increased influx for the past 6 months. The price for oil will fluctuate in a range but will not likely drop unless the US/Europe/Asia finds a major source of oil which has gone undiscovered. Don't look for an incredible increase in pellet prices either as the inventory of standing trees in the US has never been higher (even during Colonial days). The new pellet mills are able to make quality pellets from wood that has little of no value for building material, pulp production or most other uses. They can also utilize the excess wood production in areas of the country where the paper industry has dropped due to increased costs and re-cycling.

The speed of payback (which may flucuate slightly) is slightly variable but most homeowners (who choose to change to or suppliment with pellet heat) will have a very qucik return on investment (2-6 years). The local pre-buy price of #2 oil this morning in the Bangor, Maine are is $4.67.9/Gallon - minimum purchase is 1000 gallons. Lat year I pre-bought for $1.79.9/Gallon. My payback period for my 1600 gallons ($43/million BTUs oil to $16/million BTUs pellet) will be fast when I replace them with pellets and a pellet boiler.

 

[webbie]

One interesting thing about the Human condition is that we ALWAYS seem to forget quickly.......when it is convenient for our point of view.

Less than 2 years ago, Pellets were $300+ (and hard to get) and Heating oil was $2.50 a gallon. If we debated this EXACT point at that time, what would the calculations have been? It is JUST AS SILLY to use current pricing to do so......

We can always come up with "reasons", but having heard them since 1972-4 (first oil crisis) and then buying fuel oil at 69 cents a gallon ten years later, I would ask for a more compelling argument.

Rather than outright say "it pays to switch", it might be best just to give the figures based on a range of prices for both fuels and include the financing, interest, maintenance, etc......

BTW, all the same reasons above (about why pellets would be cheap) were given to me in 1994 when we first started selling Pellet stoves. We were told there would be endless supplies at cheap prices in the years ahead.

The only REAL way to calculate payback is looking back after a number of years.

 

[thomcoastal]

It would be difficult to say the "same reasons...were given" to you in 1994 would not be applicable as the new-style pellet making process was 1st used in the United States in 2001. Prior to that time over 90% of the pellets manufactured in the US were from scrap wood or sawdust. The new pellet mills are capable of usig every bit of a tree not just selected parts which had the appropriate moisture content and were the right size and shape.

I realize that figuring a payback period is best accomplished in hind-sight, it would be foolish to do nothing at this point in time. If you believe the price of oil will be low enough to recommend to the readers of this website to do nothing, please do but I am doing all I can to protect my financial resources and the well being of my family.

Winter will come and everyone in the Northeast will require heat and hot water! You indicate it would be "JUST AS SILLY to use current pricing to do so......" (to figure heating costs for this year), do you suggest using historical prices such as those you indicate ($.69/gallon). I wish you well and I will no longer contribute to this forum as it seem you (as the Moderator) are more interested in telling people to do nothing rahter that be educated and make plans to ensure their family's health and well being this winter.

 

[webbie]

Uh, perhaps you have so strong a point of view that you didn't read this part of my post:
"Rather than outright say “it pays to switch”, it might be best just to give the figures based on a range of prices for both fuels and include the financing, interest, maintenance, etc......"

That is called education. Your tack is called fear. It is best not to operate out of fear - because that is the same emotion that would tell me to buy the biggest hummer I can find so I protect by brood when I am driving around.

We pursue all sides of subjects here. What is good for you may not be good for someone else. If that offends your sensibilities, that is really not the intent, but we certainly are not going to change our 12+ years of educating the public based on your fear for your survival next winter.

 

[Amaralluis]

I too believe that oil prices are artificially high and will not stay this way very long.

With this said, dont fool yourselves thinking that pellet prices will remain at the same price as they are right now.
If oil prices stay this high, you can expect gas/propane/pellets/wood to follow the same trail.

 

[compressedwoodsupplier]

im in the pellet business and im locked on to my ton price but the only thing that may go up is the trucking.

 

[webbie]

im in the pellet business and im locked on to my ton price but the only thing that may go up is the trucking.

Do you mean for the year?

Southwest Airlines has bought 70% of their jet fuel at about 2.50 a gallon for this year.......but next year is another matter.

As the old saying goes "the further the squirrel goes out on the branch, the shakier it gets"....

But looking at the last 4 years, we have seen:
Oil prices from $2.25 to $4.50 (approx)
Pellet prices from $200 to $350 (delivered, approx)

Maine Energy has a fairly accurate calculator on their site, so they are not trying to fool anyone. I would hope, only, that people actually use it and set the different variables up and down to see what happens when one fuel gets cheaper and another more expensive.
http://www.maineenergysystems.com/savings_calculator.htm

I immediately set the term to 10 years instead of 20, figuring that it is the rare bird that wants to figure out savings that far in the future...people generally move, etc.

Then I took 1000 gallons of oil and 250 pellets and $3.75 oil (just for guesswork).

That provides a savings of $126 a year, not enough to make me salivate. The truth of the matter is that most of the savings go one place - INTEREST on the financing. As they say, pay now or pay later!

 

[sinnian]

im in the pellet business and im locked on to my ton price but the only thing that may go up is the trucking.

Can you PM me where? (hopefully it is near me!)

 

[Amaralluis]

That provides a savings of $126 a year, not enough to make me salivate. The truth of the matter is that most of the savings go one place - INTEREST on the financing. As they say, pay now or pay later!

Unfortunately I agree with you.
Alot of people will be fooled this year thinking that they will be saving alot of money by switching from Oil/gas to another source and the truth is that either oil price cannot stay this high or pellets will increase in price considerably (which is what I am afraid of).

People do your research carefully and do not assume that the price will stay this apart for very long...

 

[JustWood]

Also, when your relatively unreliable oil burner breaks, you have a heating solution that can keep you warm for months instead of hours.

The price of pellets will be stable for several years. MEsys has a relatively large amount of money, and I'm sure they have a contract for their entire projected winter fuel needs. Also, I heard that someone was purchasing multiple pellet mills at the Hearth, Patio, and Barbecue Expo, so I wouldn't worry too much about the stability of pellet prices. Europe has plenty of pellet production, it's just cheaper over here due to the difference between the dollar and the euro. Maine's forest industry is doing terribly right now, and a chance to let them run their machines and actually turn a profit will drive an increase in production capacity.

From what I hear, half a year (4 ton delivery) of fuel is going to cost about a grand, meaning a 2k (plus or minus $100) total cost for your winter's fuel.

Relatively unreliable oil burner? What makes you think a pellet furnace is going to be reliable ?
And what crystal ball are you viewing that makes you not think the price of pellets are stable?
John

If your pellet burning system is automated, then yes, it's much more reliable than oil heat. If you have a cheap $3k pellet burner/boiler that you have to refill with 40lb bags, then no, you'll have to clean it, scrape it, remove the ashes, and lug around your pellets, and it will only be as reliable as you are.

Maine and the surrounding area has a flagging timber business that's just waiting for some demand. Multiple pellet mills have been purchased in the area, and pre-existing domestic pellet production is so high they have to export it anyway. With several pellet mills coming online that will dramatically increase pellet production in the area (think 2x or 3x the pellet production capacity we have now) and flat pellet demand the price of pellets should either plummet or stabilize (in a perfect free market )

Now, if Germany, Norway, Austria, and Sweden suddenly found themselves without any trees, we might see a spike in pellet prices. As it stands, they're importing from the US because the dollar sucks, not because they can't make them over there.

Edit:
As to your corn comparison, corn is something that is not only being used for fuel, food, feed, and furniture, but is also something that must be produced in a field. You have to water it, tend it, fertilize it, keep it safe from pests, and harvest it. Corn does not occur naturally in thousands and thousands of hectares across North America. Trees are much easier to maintain than corn. Corn prices spiked because there is much less unused market capacity, whereas the timber industry is not doing as well as it could and there is plenty of out-of-work labor in foresting towns.

It doesn't matter if every square inch of unused land in the USA is forested.
It doesn't matter if there is a pellet plant in every town.
And it doesn't matter if everybody and there brother is a logger.
I have 3 pellet mills within 80 miles of me and not one of them is willing to pay enough $ for me to ship them product from my mill or logging jobs (if I wasn't already shut down). For anyone to invest the kind of money it takes to start an operation to supply pellet mills your looking at a 1-2 million dollar investment. At $30/ton it isn't going to happen. Tons of loggers and timberland here but NO ONE is going to log for $30/ton and NO landowner is going to sell at current stumpage prices.

Secondly, sawdust and pulp are BYPRODUCTS of logging and milling. ie No logging and milling, no raw material for pellet mills. Another way of looking at it is , high grade logging has to take place for there to be low grade pulp on the market. Not many loggers are going to go to work for $30/ton just for pulp.

 

[PelletOwner]

The difference between this energy crisis and the 1970's oil crisis is that we're currently past the point where the most oil can be sucked out of the ground. We're running out of easy oil, and the oil we are taking out of pre-existing oil fields is even harder to get to because we've been running the fields out too fast. We're running into all sorts of energy problems in the near future, and suggesting that an oil burner can do a typical middle-to-low income household for the next 20 or 30 years - when fuel oil has doubled in a year it is shortsighted at best.

Panicking about diesel oil isn't going to help matters either: it's going to cost the same to truck a load of oil and a load of pellets. You'll save with pellets because you don't need three, four, or even five loads of #2 every year. By saving on transportation, you're saving on the biggest heating delivery variable this season: diesel transportation fuel.

I have formally heard from MEsys regarding their pellet prices for the year: $260/ton delivered, maximum. They have contracted for "multiple thousands" of tons of pellets this year, and are taking a quarter of the new mill in Strong, NH's production as well.

I don't think we need to worry about pellet prices this year

 

[Wet1]

That provides a savings of $126 a year, not enough to make me salivate. The truth of the matter is that most of the savings go one place - INTEREST on the financing. As they say, pay now or pay later!

Unfortunately I agree with you.
Alot of people will be fooled this year thinking that they will be saving alot of money by switching from Oil/gas to another source and the truth is that either oil price cannot stay this high or pellets will increase in price considerably (which is what I am afraid of).

People do your research carefully and do not assume that the price will stay this apart for very long...

I also have to agree. My guess is oil will come down a little and pellets will rise. Either way, I can't imagine we'll continue to see the disparity we see today continue for all that long... I'd be amazed if it lasted long enough to realized a reasonable pay back period to justify paying $12k (or even $10k) for a central pellet boiler.

One thing I wouldn't do is rip out my existing system in order to convert solely to pellets. If I were going to spend all this money on one of these systems, I'd leave my existing oil (or gas) system in place so I had options in the future, not to mention the redundancy should there be mechanical problems or supply issues.

Personally, I think leaving the central oil/gas heating system in place and adding one or two pellet stoves in the living area makes the most sense at this point. I just updated my existing stove to a Harman P38 for $1500, even if I needed two to cover all the living area ($3000), this is still a small fraction of what these central units cost. Yes this takes a little more work, but I just can't see investing $10k-$12k to be a sound move given the uncertainty of the markets and relatively small market share pellets have today. . If 15 years from now oil is insanely expensive, pellets are cheap & more widely used, and the industry has moved from central oil to pellet, then I can certainly see justifying such a move... But today is just to early for me to consider making such a move. There are just too many "what ifs"... What if oil settles back to under $3.00/gal.? What if pellets raise to well over $300 + delivery? Both could certainly happen. What's the pay back period then? What if five or ten years from now these systems are no longer made or supported? What if pellets aren't around 10 years from now due to some newer technology replacing them? I know I won't be gambling my $12k today!

I guess I'd just suggest folks weigh historical data and not make any expensive commitments today based on today's abnormal and unsettled commodities markets.

 

[webbie]

I would agree it is unlikely that pellet prices will rise to over $300 this coming season - although the demand might outstrip supply (already has in many areas), which provides another big mess! That means people who already have and buy freestanding stoves cannot get pellets. For instance, Pelletsales.com, the largest (by far) supplier in the USA, has stopped taking orders!

So pellets are likely to beat oil for the next few months.....I'll give you that. And given the extra work and expense, they are always likely to track somewhere below oil - unless some (stupid) buyers decide to pay $400 a ton. If they do, then that will be the price.

I would doubt that pellet deliveries will cost less than oil. Remember that the oil depot is usually relatively local and the truck makes multiple deliveries in the same area. Pellet will usually come from further away. I would call this a draw for both fuels in the end (transportation)....in fact, up until perhaps this year, transportation is a large portion of the energy in pellets (been brought from as far away as British Columbia).

I do think Pellet central heating will grow and occupy a small niche in the Northeast and perhaps other areas near pellet supply. There is a subset of people with the $$, plus a lot of folks who want to go "local" and "greener". My (usual) concerns are that folks should be more careful when:
1. Borrowing money for such projects
2. Relying 100% on a single or few vendors

For those who have the money - well, heck, it is certainly a better project than a new boat or an upgraded pick-me-up. If I had oil heat (I have NG, cheaper than pellets), I would strongly consider a pellet furnace myself!

 

[Wet1]

The difference between this energy crisis and the 1970's oil crisis is that we're currently past the point where the most oil can be sucked out of the ground. We're running out of easy oil, and the oil we are taking out of pre-existing oil fields is even harder to get to because we've been running the fields out too fast. We're running into all sorts of energy problems in the near future, and suggesting that an oil burner can do a typical middle-to-low income household for the next 20 or 30 years - when fuel oil has doubled in the past is shortsighted at best when the price of oil has doubled in the past 12 months:

I don't know that I completely agree with everything you've said here, I think the folks on Wall St. have a lot more to do with this than typical supply and demand issues. It's not like oil has suddenly dried up in the last 12 months! We are seeing a spike today. Post the same chart for oil prices over the last 25 years, it's quite a contrast to the chart you've posted here. Will prices be higher in the distant future? Sure they will, but I can assure you wood/pellet prices aren't going to be a today's prices either!

Panicking about diesel oil isn't going to help matters either: it's going to cost the same to truck a load of oil and a load of pellets. You'll save with pellets because you don't need three, four, or even five loads of #2 every year. By saving on transportation, you're saving on the biggest heating delivery variable this season: diesel transportation fuel.

Using your logic, let's keep in mind it takes significantly more weight and volume of pellets than it does to create the same btu's in oil. For example, 1600 gal of oil only weighs about 9600 lbs. To get the same btu in pellets you'd need about 13 tons of pellets. 13 tons of pellets also take up a lot more volume that 1600 galls does.

Keep in mind we already have trucks and tankers designed to mass distribute oil. The same is not so for pellets. Also, how many houses can these same trucks sevice on routine residential service calls? I know a typical oil truck residential oil truck can deliver to a lot of houses w/o having to run back and forth to refill. How many homes can even a full sized tractor-trailer service w/o out having to run back to grab another load? I can tell you that they are pretty much limited to 23 tons of pellets per load. Even so, these things are certainly more expensive to operate than a typical residential oil truck, and they certainly aren't designed to operate in residential areas! And let's not forget how far the trucks have to go to reload!

Further more, are you suggesting that everyone wants a giant pellet $ilo outside there house? I can tell you that won't fly where I live! I'd much rather have 2 oil tanks in my basement than a 4+ ton silo on the side of my house if given the choice...

I don't think we need to worry about pellet prices this year

Maybe not, but what about 2, 5, or even 10+ years from now???

 

[PelletOwner]

It doesn't matter if every square inch of unused land in the USA is forested.
It doesn't matter if there is a pellet plant in every town.
And it doesn't matter if everybody and there brother is a logger.
I have 3 pellet mills within 80 miles of me and not one of them is willing to pay enough $ for me to ship them product from my mill or logging jobs (if I wasn't already shut down). For anyone to invest the kind of money it takes to start an operation to supply pellet mills your looking at a 1-2 million dollar investment. At $30/ton it isn't going to happen. Tons of loggers and timberland here but NO ONE is going to log for $30/ton and NO landowner is going to sell at current stumpage prices.

Secondly, sawdust and pulp are BYPRODUCTS of logging and milling. ie No logging and milling, no raw material for pellet mills. Another way of looking at it is , high grade logging has to take place for there to be low grade pulp on the market. Not many loggers are going to go to work for $30/ton just for pulp.

Just to clarify, are pellet mills paying $30 a ton for sawdust or $30 a ton for whole wood? If it's $30/ton for whole wood, I understand, but $30 a ton for sawdust is probably a different, lower price than whole wood. (Just guessing, but it makes sense that a tree is more valuable than tree dust, right?) When mills start demanding whole wood because the sawdust market is drying up, whole wood prices will increase and suddenly a logging operation is viable again.

Also, most of the new plants coming on-line deal with whole trees as well as sawdust. I know that there may be a sawdust drought, but you have to remember that there is going to be solid demand for wood, not just sawdust. When you take out "produce and ship sawdust" from the production chain, you suddenly save money on diesel, processing costs, and fine loss.

I'm not seeing how pellet prices are going to skyrocket faster than oil, or that a new heating technology will catch on within the next ten years. With oil on the rise and pellet prices rising only relative to diesel instead of oil, it makes complete sense to switch over to a cheaper fuel that is being rolled out aggressively by a company with everything to lose.

Can anyone explain the mechanism by which oil is going to magically fall a dollar a gallon? OPEC won't or can't increase supply, so that's out. Demand for oil isn't going to fall anytime soon, so that's out. With no increase in supply, and no drop in demand, how is a commodity supposed to lose value? Maybe if the US Dollar achieves Euro parity - but that's not going to happen in the next five years without some serious restructuring of how the dollar works in society.

Not to mention the lack of new refining capacity in the US - there's buzz of another in North Dakota, but that's the first that will be built in over three decades. As in, last time there was an energy crisis, they started building new refineries.

They're building refineries in the US again - but there's no upcoming energy crisis, right, guys?

 

[webbie]

Remember that wood on the stump (or logs) are sold GREEN, and that means 50% of the weight is water. Dust is probably more valuable for pellets since it is partially (sometimes fully) dry - for instance, New England Wood Pellet is largely supplied by furniture factories and the like - that stuff is almost ready to go!

Also, a large quantity - about 16% - of the wood is used to furnaces to dry out the rest of the wood (which is green) to 6% or so moisture. Taken together, my guess is that creates a raw material for dried sawdust at over $70 a ton. Even at that price, $200 pellets should be easily done - seems so from afar, but if you invested tens of millions in a pellet mill, would you take any less than the MOST you could get (which, in our economy, simply means the fools who is willing to pay the most).

As to oil dropping, it is not worth discussing.......it is economics 101. It can drop for MANY reasons, some which are already in play:
Stronger dollar (your oil is priced in dollars)
Perception by oil exporters that they will lose energy market share if people conserve
New producers or existing who are not part of OPEC and therefore have complete freedom in pricing and amount pumped

And others......

The only way to see is to look back in a year, then again in 2 years, etc. - We'll talk then. As of now, I don't see Heating Oil at $4.50 plus once this season starts, but that is only a guess and opinion. Pellets have already gone up 30% or more in the last 60 days also. There were many sources for around $200 reported here just 6-8 weeks ago.

Now if we want to start placing bets on this stuff - Aw....not here! But I am likely to put my money where my mouth is in the stock market (I am calling for stronger dollar, slightly lower oil, but still a boom in alternative energy). When it comes to this stuff, no "expert" is more correct than any other - the market rules (in the end).

 

[PelletOwner]

The trucks are already designed - how do you think pellets get around in Sweden, Austria, Norway, Germany, Denmark, Poland, etc, etc, etc? True, maybe it will cost more per trip - but when you have one or two trips per customer per year, transportation costs are equal or less per BTU in household. Let's say that the delivery trucks can hold 20 tons, because that's what they're specified as from MEsys. Now, when you have a 20 ton capacity truck, you can make five deliveries. Since delivery services will have 300 tons of pellet storage on-site to be an authorized distributor, they don't have to worry about going back to a mill to pick up more pellets until maybe mid-way through the heating season. Think of how silly that sounds - do delivery trucks hook up to a refinery and drive 60 miles to their destination, or do oil distributors have on-site storage? If you don't need routine service calls due to the in-home fuel capacity, then you save money on transportation costs. So much so, in fact, that it makes economic sense to deliver to four or five customers in one go.

When you fill up, you fill up for half a year, not weeks. I also know of a lot of people - according to a survey, 64% of Maine - that would switch to an alternative fuel if given the chance to buy one that was as "hassle-free" as oil.

I'm suggesting people want a silo in their basement. If they want a larger one outside, they can probably do that - but their main silo product is in-basement, four-ton hoppers.

Ten years from now, diesel is going to be a huge cost in heating, no matter what. I'd wager that diesel could be up over $7 a gallon in ten years - making transportation, not heating fuel, the biggest cost. When you don't need enough bunker oil to get your heating oil from Saudi Arabia, and enough diesel to get your heating oil from the terminal to your home, suddenly the 80 miles to a pellet mill looks like a viable alternative for those whose business is transportation of energy sources.

 

[PelletOwner]

Stronger dollar (your oil is priced in dollars)
It's an election year, our currency is incredibly unbalanced, and the Euro (which the international oil market is priced in) keeps going up relative to the dollar.

Perception by oil exporters that they will lose energy market share if people conserve
I'm just not sure how to answer this one - is oil afraid of coal, or nuclear energy? I mean, when you're supplying 62% of the national energy supply alone, I think you have a decent enough market share.

New producers or existing who are not part of OPEC and therefore have complete freedom in pricing and amount pumped
Canada and Mexico are the only ones doing this thus far, and we're sucking them dry. Their production is dropping annually, and we're taking up production from increasingly smaller countries who are host to increasingly smaller and more remote (expensive) oil fields.

 

[JustWood]

The trucks are already designed - how do you think pellets get around in Sweden, Austria, Norway, Germany, Denmark, Poland, etc, etc, etc? True, maybe it will cost more per trip - but when you have one or two trips per customer per year, transportation costs are equal or less per BTU in household. Let's say that the delivery trucks can hold 20 tons, because that's what they're specified as from MEsys. Now, when you have a 20 ton capacity truck, you can make five deliveries. Since delivery services will have 300 tons of pellet storage on-site to be an authorized distributor, they don't have to worry about going back to a mill to pick up more pellets until maybe mid-way through the heating season. Think of how silly that sounds - do delivery trucks hook up to a refinery and drive 60 miles to their destination, or do oil distributors have on-site storage? If you don't need routine service calls due to the in-home fuel capacity, then you save money on transportation costs. So much so, in fact, that it makes economic sense to deliver to four or five customers in one go.

When you fill up, you fill up for half a year, not weeks. I also know of a lot of people - according to a survey, 64% of Maine - that would switch to an alternative fuel if given the chance to buy one that was as "hassle-free" as oil.

I'm suggesting people want a silo in their basement. If they want a larger one outside, they can probably do that - but their main silo product is in-basement, four-ton hoppers.

Ten years from now, diesel is going to be a huge cost in heating, no matter what. I'd wager that diesel could be up over $7 a gallon in ten years - making transportation, not heating fuel, the biggest cost. When you don't need enough bunker oil to get your heating oil from Saudi Arabia, and enough diesel to get your heating oil from the terminal to your home, suddenly the 80 miles to a pellet mill looks like a viable alternative for those whose business is transportation of energy sources.

Distributors won't own the delivery trucks, the mills will and all pellets will be direct shipped. To much extra infrastructure and transportation to be cost effective.

 

[JustWood]

It doesn't matter if every square inch of unused land in the USA is forested.
It doesn't matter if there is a pellet plant in every town.
And it doesn't matter if everybody and there brother is a logger.
I have 3 pellet mills within 80 miles of me and not one of them is willing to pay enough $ for me to ship them product from my mill or logging jobs (if I wasn't already shut down). For anyone to invest the kind of money it takes to start an operation to supply pellet mills your looking at a 1-2 million dollar investment. At $30/ton it isn't going to happen. Tons of loggers and timberland here but NO ONE is going to log for $30/ton and NO landowner is going to sell at current stumpage prices.

Secondly, sawdust and pulp are BYPRODUCTS of logging and milling. ie No logging and milling, no raw material for pellet mills. Another way of looking at it is , high grade logging has to take place for there to be low grade pulp on the market. Not many loggers are going to go to work for $30/ton just for pulp.

Just to clarify, are pellet mills paying $30 a ton for sawdust or $30 a ton for whole wood? If it's $30/ton for whole wood, I understand, but $30 a ton for sawdust is probably a different, lower price than whole wood. (Just guessing, but it makes sense that a tree is more valuable than tree dust, right?) When mills start demanding whole wood because the sawdust market is drying up, whole wood prices will increase and suddenly a logging operation is viable again.

Also, most of the new plants coming on-line deal with whole trees as well as sawdust. I know that there may be a sawdust drought, but you have to remember that there is going to be solid demand for wood, not just sawdust. When you take out "produce and ship sawdust" from the production chain, you suddenly save money on diesel, processing costs, and fine loss.

I'm not seeing how pellet prices are going to skyrocket faster than oil, or that a new heating technology will catch on within the next ten years. With oil on the rise and pellet prices rising only relative to diesel instead of oil, it makes complete sense to switch over to a cheaper fuel that is being rolled out aggressively by a company with everything to lose.

Can anyone explain the mechanism by which oil is going to magically fall a dollar a gallon? OPEC won't or can't increase supply, so that's out. Demand for oil isn't going to fall anytime soon, so that's out. With no increase in supply, and no drop in demand, how is a commodity supposed to lose value? Maybe if the US Dollar achieves Euro parity - but that's not going to happen in the next five years without some serious restructuring of how the dollar works in society.

Not to mention the lack of new refining capacity in the US - there's buzz of another in North Dakota, but that's the first that will be built in over three decades. As in, last time there was an energy crisis, they started building new refineries.

They're building refineries in the US again - but there's no upcoming energy crisis, right, guys?

 

[PelletOwner]

The trucks are already designed - how do you think pellets get around in Sweden, Austria, Norway, Germany, Denmark, Poland, etc, etc, etc? True, maybe it will cost more per trip - but when you have one or two trips per customer per year, transportation costs are equal or less per BTU in household. Let's say that the delivery trucks can hold 20 tons, because that's what they're specified as from MEsys. Now, when you have a 20 ton capacity truck, you can make five deliveries. Since delivery services will have 300 tons of pellet storage on-site to be an authorized distributor, they don't have to worry about going back to a mill to pick up more pellets until maybe mid-way through the heating season. Think of how silly that sounds - do delivery trucks hook up to a refinery and drive 60 miles to their destination, or do oil distributors have on-site storage? If you don't need routine service calls due to the in-home fuel capacity, then you save money on transportation costs. So much so, in fact, that it makes economic sense to deliver to four or five customers in one go.

When you fill up, you fill up for half a year, not weeks. I also know of a lot of people - according to a survey, 64% of Maine - that would switch to an alternative fuel if given the chance to buy one that was as "hassle-free" as oil.

I'm suggesting people want a silo in their basement. If they want a larger one outside, they can probably do that - but their main silo product is in-basement, four-ton hoppers.

Ten years from now, diesel is going to be a huge cost in heating, no matter what. I'd wager that diesel could be up over $7 a gallon in ten years - making transportation, not heating fuel, the biggest cost. When you don't need enough bunker oil to get your heating oil from Saudi Arabia, and enough diesel to get your heating oil from the terminal to your home, suddenly the 80 miles to a pellet mill looks like a viable alternative for those whose business is transportation of energy sources.

Distributors won't own the delivery trucks, the mills will and all pellets will be direct shipped. To much extra infrastructure and transportation to be cost effective.

Now you're just incorrect - MEsys has no interest in the distribution business, and wants all the oil distribution companies to distribute pellets as well. It's a lot easier to give the delivery guys a chance at a cut instead of forcing them out of the market, plus they have preexisting customer relations. I mean, it makes sense from your perspective, but that's not how MEsys wants to do business.