Thank you, and thanks to the committee for giving me the opportunity to discuss Canada's wood pellet sector.
What I would like to touch on today is how the wood pellet sector fits within Canada's forest industry. I'd like to give you some basic information about wood pellets and some statistics about the global and Canadian wood pellet industry. I'll also tell you about the opportunity to repurpose coal power plants in Canada to use wood pellets and how wood pellets could be used more for domestic heating opportunities in Canada as well.
To put the wood pellet sector into perspective, Canada's annual log harvest fluctuates a little from year to year, but on average it's about 130 million tonnes of trees harvested. Out of that, about five million tonnes are used to make wood pellets. That's about 4% of Canada's harvest that goes towards wood pellets, although the revenue is very much less.
Total forest products revenue in Canada is around $60 billion per year. Revenue from wood pellets is about $300 million. It's only about one half of 1% of the total forest products revenue. We're providing around 2,000 jobs in production plants, fibre procurement, transportation, and terminal operations at the ports.
We have 44 pellet plants in Canada. About 70% of the production is located in British Columbia, and about 30% is in Quebec and the Atlantic provinces. There is some production also in the prairie provinces and central Canada.
Notably, annual capacity is about four million tonnes, of which one million tonnes, or 25%, was built just in the last 18 months. We have another 400,000 tonnes of capacity under construction at the moment, so it's a growing sector.
Wood pellets are a renewable biofuel, a solid biofuel, made from compressed wood fibre. During the process, the fibre is made into small particles and then put under high pressure. The heat and the pressure cause the lignin to liquefy. The pellets are then exposed to cool air and form into a pelletized shape. There are no adhesives or additives, so it's just pure wood fibre.
The raw material we use was formerly wasted. It used to be landfilled or burned in beehive burners. We're using sawdust shavings out of planer mills. We go in after the log harvesting operations and use low-grade material that has been left behind on the roadside after logging.
Globally, roughly half of the wood pellet supply is used for power generation, normally as a replacement for coal in coal power plants. It is also used for heat and hot water through residential furnaces, boiler systems, and stoves.
The pellet industry has grown tremendously. We started in about 1995 at zero and have grown at about 14% per year. Global production right now is about 30 million tonnes, with a 14% annual growth for the last 20 years or so, which we think is fairly impressive.
Turning to export destinations, last year we shipped 1.6 million tonnes to the United Kingdom, all for power generation. We're also shipping into Belgium, Japan, and South Korea—again all for power generation—as well as into the U.S. and Italy for domestic heating.
Most of the pellets that are exported from Canada, about 90%, come out of British Columbia, and most of that ends up going down through the Panama Canal and across into central Europe or the United Kingdom. We also ship west to Japan. Europe makes up about half of global wood pellet production. Also, the U.S. is a very large producer. Canada is the third-largest producing region globally, followed by, surprisingly, Vietnam, Russia, and then all other countries.
In terms of consumption, about 80% of all wood pellets that are consumed globally are consumed in Europe, and about 12% in North America, 2% in Russia, and about 8% in Asia.
About a year ago, Canada announced its intention to phase out coal power. We have coal-powered plants in Alberta, Saskatchewan, New Brunswick, and Nova Scotia. Coal already has been phased out in Ontario, while in Alberta it makes up 55% of the energy mix. In Saskatchewan it's 44%, in New Brunswick 13%, and in Nova Scotia 60%. When coal is phased out, a large number of power plants will still have life left in them and potentially will be stranded assets. We'd like to see Canada follow what's being done in Europe and Asia and repurpose those coal-powered plants to use wood pellets, which are a renewable carbon-neutral fuel.
The benefits of wood pellets are that they can be ground into a small powder similar to coal, and they're dry, handle easily, and flow easily. They have an energy density similar to that of lignite coal. You can use much of the same equipment found in coal-powered plants. Unlike wind and solar energy, bioenergy is dispatchable, which means that it's available on demand and can be used for balancing and for peaking power. It has lower greenhouse gas emissions than you get from coal or natural gas: lower nitrous oxides, lower sulphur oxides, lower heavy metals.
Also, there's a very modest cost to convert Canada's coal-powered plants. Already, in Ontario, OPG has converted two plants in northwest Ontario, in Atikokan and Thunder Bay. Both of those are operating successfully on wood pellets now.
On the opportunity in the heating sector, in Canada we use almost 2,700 petajoules of energy for commercial and institutional heat and to provide residential heat and hot water. About 50% of that is fuelled by natural gas in Canada, but about half of Canadian homes and businesses do not have gas access, and the main alternatives are electricity and oil.
We took some examples of costs from Ontario. Natural gas is the lowest-cost fuel, but wood pellets are significantly lower-cost than heating oil or electricity. By converting homes, businesses, and institutions to wood pellets, using modern, very efficient appliances, there's an opportunity both to lower greenhouse gas emissions and to reduce heating costs in Canada.
To talk about the magnitude of the opportunity, Canada uses around a trillion gigajoules of energy for heat and hot water per year. That's equivalent to about 71 million tonnes of wood pellets. Canada right now is producing only around 2.7 million tonnes. It's just a tiny fraction of the potential for our industry to grow.
I did want to mention the support we get from the federal government for our industry. We work closely with Natural Resources Canada. We also work with the trade commissioners in many foreign countries. Through Natural Resources Canada's expanding market opportunities program, we get assistance in attending conferences and trade missions, in working on sustainability certification for market access, in quality certification for promoting our products in other countries, in addressing trade barriers that come up from time to time, in working on issues to do with shipping and logistics, in pellet standards, in phytosanitary issues, and in new types of products. I just wanted to mention that the expanding market opportunities program through NRCan is extremely important to us, and we very much appreciate the co-operation we get there.
To conclude, Canada's pellet industry is growing, thanks mainly to demand from Europe and Asia. We see that repurposing pulverized-coal power plants for co-firing or dedicated firing with wood pellets is proven and widely used in many countries. We think there's an opportunity for Canada to adopt this approach more widely. There's a huge opportunity to increase the use of wood pellets for domestic heating in Canada.
Thank you to the committee for this opportunity.
