Wood pellet market cools after a hot start

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LEWISTON — A couple of years ago, Finest Hearth and Home’s five Maine stores were selling 10 to 20 pellet stoves a day. Today, the company is lucky if it sells that many in a week.

Last year, Corinth Wood Pellets was running 24 hours a day, seven days a week to produce enough pellets to keep up with demand. Four shifts, 50 people. This year, it’s running half of that.

Last year, companies across the state delivered pellets, installed boilers and created new technologies to take advantage of the wood-pellet boom. Today, that boom is over and those companies are struggling to keep business up after a winter of low oil prices, high temperatures and cash-strapped consumers who didn’t have the money to spend on new heating systems.

One national news story called this the worst year the pellet industry has had, but Maine’s industry insiders say a single slow season doesn’t mark pellets’ demise. They’re optimistic about the future. 

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“Pellet is a fuel that’s here to stay,” said Michael Doughty, a manager for Finest Hearth and Home. 

Although they’ve been around for years, wood pellets suddenly skyrocketed in popularity about two years ago. Heating oil had peaked at nearly $5 a gallon over the summer of 2008 and people panicked. Residential customers feared having to chose between heating their homes and feeding their families if oil prices stayed high.

Towns, schools and businesses feared the high cost of heat would decimate their budgets. Although buying a wood pellet stove or boiler cost thousands of dollars, wood pellets were dramatically cheaper as fuel — roughly $250 a ton, or the equivalent of $2.15 per gallon for heating oil — and it seemed like a wise investment.

Dealers ran out of stoves and boilers. Stores sold out of their pellet supplies, then kept waiting lists. Producers could hardly keep up with demand.

Maine’s industry insiders called that period “crazy,” “insanity” and “a nightmare.”

“We sold out of everything we had. People rushed toward everything but oil,” said Lee Landry, managing partner for Portland-based ReVision Energy, an alternative energy company that installs pellet boilers.

Around that time, Les Otten of Greenwood and his business partners created Bethel-based Maine Energy Systems to sell automatic wood-pellet boilers. Heutz Oil in Lewiston branched out to create Heutz Premium Pellet Systems to deliver pellets and install stoves, boilers and storage systems. Four pellet producers popped up around Maine, and others showed interest in locating here.

But over the winter of 2008, heating oil prices plunged below $2 a gallon. They stayed low through the winter of 2009, which was unseasonably warm.

New customers stopped flocking to stores and distributors. People who had pellet stoves as a backup heat source didn’t feel the need to fire them up. And those who did use pellet stoves didn’t necessarily have to buy pellets since many had stockpiled pellets the year before, hoarding them in case the initial scarcity continued.

“It’s a perfect storm, all in the wrong direction,” said Pat Coon, a managing partner for ReVision Energy.

Some in the pellet industry say their business was flat this winter. Others say they were crushed.

Pellet-maker Corinth Wood Pellets falls somewhere in between. It is now running at half the capacity it was a year ago, its peak.

“It hurts in terms of reinvestment, because we want to continue to grow, but why should we be growing and adding capacity when there’s no demand? So, it hurts in that level,” Corinth Wood Pellets CEO George Soffron said. “But on the other hand, you’ve got to take the long view.”

Although an Associated Press story recently questioned the strength of the wood-pellet market, Soffron and others in Maine believe the industry is strong. None of Maine’s four pellet producers has gone out of business even though one experienced a devastating fire and another an explosion.

New pellet producers continue to consider setting up shop in Maine, including one with firm plans to put a plant in Unity, according to the Maine Pellet Fuels Association. Experts are still working on the technology, making stoves and boilers easier to use and more consumer-friendly.

A single weak winter doesn’t mean pellets are past their prime, Maine’s pellet experts say.

“The pellet industry is alive and well, but I would say right now it’s in a ready mode as opposed to being in a full-on, pedal-to-the-metal mode,” Otten said.

Although Otten believes pellets are a “risk venture” as a new industry, he believes something else is riskier. 

“For us to assume that oil is going to stay stable is a very, very risky assumption,” he said.

Others in the pellet industry agree and say people will return to pellets as oil prices climb. And they believe oil prices will definitely continue to climb. In the meantime, they would like to see greater incentives — grants, low-interest loans and tax breaks — for families, towns, schools and businesses that want to buy pellet stoves or boilers. They would like to see the technology improve so it’s as easy for the average homeowner to deal with as oil.

They would like consumers to know pellets aren’t a fad.  

“We’re in it for the long haul,” Otten said.

ltice@sunjournal.com

Tim Heutz, president of Heutz Premium Pellet systems in Lewiston, holds a handful of the fuel pellets in front of one of his delivery trucks. Storage silos are in the background.

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