I'm sure they are, but you'll have to call them “granules” in French—granules de bois.
You probably have copies of my presentation, which was distributed. I'm going to give you a small course on pellets, starting with the samples here, and give you some information on production statistics and export markets; on sustainability, which is a main issue for our producers; and on some market opportunities in Canada that we'd like to talk about—and also NRCan support, which is critical to our organization right now.
Wood pellets are renewable fuel. They're made out of forest residues, mostly sawdust from sawmills. You can press them. The lignin binds the fibre.
Just to give you an idea of the pressures we're working with, we compress the wood hard enough that if you can imagine the fibre as a piece of sponge.... When you squeeze a piece of sponge, the water comes out of it. Well, we do that to the fibre. You can try to do it on the corner of your table and you'll see that it takes a lot of pressure to squeeze the juice out of a piece of wood. That is the kind of pressure we're putting into this.
No additives are needed, because the glue comes out of the wood naturally and binds.
We use mostly sawmill residues. We also have access to logging residues—the forest residues that were mentioned previously—but right now most of the markets are looking for the cleanest fibre possible, and we're using sawdust. There is a lot of logging residue available, and the pellet industry has become over the years a complementary industry to the forest industry, using up some of the fibre that has been left behind traditionally and also unfortunately by the paper industry's receding slightly.
We basically compress the fibre into dies, and the product comes out hot and compressed, as you've seen here.
There are two main uses for pellets currently in the world. A large proportion of pellets is used to produce electricity, in replacement of coal. Wood pellets are one of the easiest ways to replace coal in the production of electricity, in large industrial boilers. We've seen several conversions, in Europe originally, and now we're starting to see conversions in Canada. Ontario has converted two power plants over the last few years, in Atikokan in western Ontario and most recently in the Thunder Bay plant, which has been converted to being able to use wood pellets as they phase out the use of coal in the province.
The second aspect is for heating, cooling, and hot water in residential and industrial applications. This is what Mr. Regan does—he heats his house with pellets. He has a pellet stove, and it replaces any other form of energy that can be used for heating in the house.
Now, producing electricity with this type of product is not the most efficient way of using the energy. You only get 35% efficiency when you make electricity. You get 90% efficiency when you heat the house. Ideally you do both. They call these cogeneration systems. We see them in the paper industry, for instance; it has promoted them over the years. They produce electricity and steam for the process, and there you go back up to 90% efficiency and get a form of energy that is more valuable, with electricity.
The global demand for pellets will make the paper industry jealous. It's going up by 2 million tonnes a year, basically. It has been doing so for the last 10 years and it keeps on growing. It's powered by both markets, the heat market and the electrical generation market. We've seen recently, for instance, that the U.K. has considerably increased their intake of pellets, and Korea has also started to become a major player.
We get the opportunity to serve all of these markets through overseas shipments. Europe is still the biggest player, as you see in my graph. More than half of the consumption takes place in Europe, and Europe has both of the markets that are pulling here.
We ship a lot pellets overseas, mostly from B.C. right now. There's a bit of product coming out of Halifax and Belledune, in New Brunswick, and shortly there will be some pellets coming out of Quebec City, from Ontario, being shipped through the Port of Quebec to the U.K. But historically most of the export pellets have been shipped out of B.C. through the Panama Canal to Europe. Now we're seeing more activity into Asia. We're hoping that the Asian market's opening up will free up some markets for the eastern producers to ship to Europe.
The main reason the B.C. players manage to ship more volumes to Europe than the eastern players is the cost of fibre. There's an abundant supply of low-cost fibre in British Columbia. The Prince George valley is home to about 25% of all the sawmilling activity in Canada, and there are fewer buyers of the secondary products, such as sawdust, so pellets have grown there into a huge industry. They are exporting close to two million tonnes a year just out of that segment.
In the east we have a more diversified market for the use of the secondary fibre. They use it to make cardboard, they use it to make panelboard for making furniture, they use it for heating the plants themselves, for drying the kiln-dried wood or operating the paper mills. So the fibre in the east is more expensive, and therefore there are fewer exports to overseas markets. We prefer to serve the local heating market in the east.
Most of the volumes going overseas right now are going to the United Kingdom, which has put in an incentive program for replacing electricity production with renewables. It extends from wind farms to solar, and to biomass in power plants. It's had considerable success. The U.K. had basically zero production or imports of pellets five years ago, and they've become the biggest destination for export pellets from Canada and from the U.S. south, which is also serving them.
In contrast, the Netherlands used to be one of the biggest destinations and has dropped off, because the support schemes for replacing pellets went through some changes. For a period there was no incentive program to encourage the use of pellets, and so we saw the volumes considerably reduced.
One of the big issues with using biomass to replace fossil fuels involves the notion of sustainability. Many people have come up with the idea that burning biomass is worse than burning coal, for instance, which doesn't make any sense to me. There have been several big users of biomass, and producers and associations such as ours have come together to put in criteria to determine the sustainability of biomass for uses such as these. It's called the Sustainable Biomass Partnership. We worked with partners in Europe to get this going.
There's opportunity In Canada to use the fuel right now. Most of the pellets are being used to replace heating fuel. We see that natural gas has most of the pie for heating in homes and that pellets are a very small part of it—you can barely see the slice there. I guess it's part of keeping thin, and that may may be the way to go right now.
But even though pellets are cheaper than most other forms of energy except natural gas in most regions, we are still not penetrating as much as we want. We aim to multiply by ten the use of pellets. Right now, that would mean that all of you would be heating with pellets rather than just one of you heating with them.
I guess there are two of us, because I heat with pellets also.
That would create a huge market for the producers, and with small incentive programs such as we have seen in the United States, where they subsidize the conversion by tax reductions to high-efficiency appliances in the homes.... We've seen considerable success for that.
It would also create a whole line of economic activity. It's not just the pellet producers who would gain, but the installers of equipment, the manufacturers of equipment. And there's the maintenance of equipment, the design of equipment—there's a whole chain that would be helped along by encouraging this renewable energy. We have some nice examples of this being done in the Northwest Territories.
I thought there was a member from Yukon here. He may not be today.