How one BC exporter proves that you can turn waste into wealth.
Who knew that tiny little Canadian wood pellets could make such a big impact on the global stage?
B.C.’s Pinnacle Renewable Energy Group, a self-described “wood garburator,” recycles residual by-products from the forestry industry and converts the waste into wood pellets that generate energy to heat homes and businesses around the world.
Dead twigs, branches, sawdust, wood shavings and other biomass that otherwise would be burned or left to rot on the forest floor, are ground finely, dried and then in a simple six-step process compressed into tiny organic wood pellets. Even the waxy covering that binds the pellets comes from the natural oil in the wood by-products.
“The interesting thing about wood pellets is that they provide a low-tech, low-carbon constant and reliable stream of energy,” says Pinnacle CFO Rick Davis. “To turn waste into something of value that creates jobs and is carbon neutral is a net win for everyone. Wood pellets are becoming an important part of the world’s energy supply.”
Business is heating up
With annual revenues of about $200 million, the privately-owned company doubled its business between 2010 and 2013 and has plans to double again in the next 3 to 5 years.
More than 90 per cent of Pinnacle’s sales are exports, primarily to large industrial electrical generating utilities in the U.K. Strict carbon emission laws in that country make it economical for its customers there to burn biomass instead of coal, making them eligible for attractive government-backed subsidies. Pinnacle has even dipped its toe into the U.S. residential market, selling bagged pellets to customers for wood stoves and to pet owners who use it as inexpensive biodegradable cat litter, guinea pig or horse bedding.
While the real volumes are in providing biomass for large electrical utilities, the residential wood pellet market is becoming very active in Europe, says Davis. For example, they’ve recently discovered a niche in Italy where their customer takes the Canadian pellets in large container shipments then packages it into smaller bags to sell retail to Italian homeowners.
Pinnacle’s first sale to their client in Italy in 2013 was made possible with Accounts Receivables Insurance from EDC. The transaction helped Pinnacle fulfill unconfirmed contracts over the next two years and penetrate a new market.
“It was a new company with no track record so we looked to EDC to put credit insurance in place so we could proceed with the sale with confidence,” says Davis. “We also anticipate getting support from EDC to do the same in the U.S. in 2014 for smaller customers, because without it these sales would be impossible to execute as the risks would be too high” says Davis.
Other countries are slower to catch on to the bio-fuel craze, but new markets are opening up in Asia, including Japan, Korea and China. For exporters like Pinnacle, Canada’s recently announced Free Trade Agreement with South Korea is an important step forward,” Davis says.
“While Koreans is developing its infrastructure to handle biomass energy production, Pinnacle already sold its first shipment to Korea this past September and has a second shipment scheduled for April. Diversification into these new markets adds incredible value for Pinnacle.”
Demand outstrips supply
As more countries embrace clean energy options, some predict global demand for wood pellets will reach 80 million metric tons by 2020. Pinnacle’s biggest constraint is internal production capacity to keep up with worldwide consumption.
A key part of the company’s recent expansion strategy is the construction of a new wood pellet terminal shipping facility in Prince Rupert that will help deliver wood pellets through the system at a lower cost and create a new gateway to Asian and other markets from the West coast.
“For a very small company we’re helping to reduce the carbon footprint all over the world. We are no longer just a Canadian company, we’re a global company and we’re getting bigger every day.”
In November 2013, Pinnacle was named B.C. Exporter of the Year and awarded the Premiers Job Creator of the Year Award from the Canadian Manufacturers and Exporters Association sponsored by EDC. Over the last three years the company has increased their employee base by about 25 per cent and expects this trend to continue.