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Despite concerns over CO2, wood pellet maker courts new industries

101221 Enviva wood pellets.JPG
David Boraks
Wood pellet maker Enviva has mostly sold pellets to be burned in electricity plants, but now it's expanding to new industries, such as biofuels.

The world's largest wood pellet maker, Enviva, says it sees a bright future for its industry as it expands sales beyond the energy sector to industrial customers who need help meeting their climate change goals. 

Until now, the Maryland-based company has focused on selling to energy companies in Europe and Asia that burn pellets in place of coal to create electricity. But two weeks ago, Enviva announced its first contract with an industrial company.

The 10-year deal is with an unnamed European company that plans to refine wood pellets into biofuels, including aviation fuel and biodiesel. As with the energy sector, these would replace fossil fuels in these other industries. 

"This is an important milestone for us, and is the first of many we see ahead as we work with large industrial customers around the world to not only decarbonize their energy supply chain, but also to make their difficult-to-abate industrial processes less greenhouse-gas intensive and more sustainable," CEO John Keppler said during Enviva's quarterly earnings call with investors. 

Enviva harvests trees across the South and turns them into wood pellets. The company operates pellet plants and shipping ports from Virginia to Mississippi. That includes four plants and the port of Wilmington in North Carolina. 

Wood pellets are billed as "renewable energy" to replace fossil fuels because trees can be replanted.    But there's been a lot of pushback on that recently.

For one, scientists say wood pellets actually emit more greenhouse gases than coal when burned. And independent researchers say global rules that allow power plants to count wood pellets as "zero carbon" fail to take into account all the carbon emitted in harvesting, transportation and processing and the initial loss of trees that otherwise would be storing carbon. 

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Chart shows Enviva's projections of growth in wood pellet sales to industrial companies, beyond the energy sector.

Enviva argues that the carbon emissions are counted when trees are cut and notes that the U.N. endorses wood pellets as one solution to climate change.  Enviva officials say emerging technologies to capture carbon from smokestacks are a complement to their renewable fuel. 

Environmental and climate activists had hoped wood pellets would be discussed at the U.N. climate summit, COP26, which ends this weekend in Glasgow, Scotland. But the only formal program was a session Tuesday promoting biofuels as a climate solution.  It was hosted by an industry group, the World Bioenergy Association. Keppler was one of the speakers. 

Enviva acknowledges that it faces a significant risk if there's any change in the rules and government subsidies that have fueled its growth. In federal securities filings it includes this statement:  

"Our business is significantly impacted by greenhouse gas emissions and renewable energy legislation and regulations in the U.K., the European Union, as well as its member states, and Japan. If the U.K., the European Union and its member states or Japan significantly modify such legislation or regulations, then our ability to enter into new contracts as our existing contracts expire may be materially affected."

So diversifying into industrial uses makes sense. 

Since opening its first plant in Ahoskie, N.C., a decade ago, Enviva has expanded quickly. Sales grew almost 90% from 2015 to 2020, and the company sees more growth ahead.  

"The future has truly never been brighter for Enviva," Keppler said. "We are entering 2022 with a contracted revenue backlog of over $21 billion, which is complemented by a similarly large and growing customer pipeline." 

For now, it's still mostly sales to power plants, Keppler said. But he said prospects for diversifying are good: "The full addressable industrial market is truly exponential when you layer in the potential for decarbonizing industries like steel, cement, lime, and the chemical verticals," Keppler said.

This story originally appeared in WFAE's weekly climate newsletter. Subscribe to this and other newsletters here.

David Boraks is a veteran journalist who covers climate change for WFAE. See more at www.wfae.org/climate-news. He also has covered housing and homelessness, energy and the environment, transportation and business.