Once a green energy novelty, bioenergy has become a vital part of most forest companies' bottom line.
"There are stories of people who invested in bioenergy plants and if they hadn't, they might not have made it through the recession," said Michael Weedon, executive director of the BC Bioenergy Network.
The forestry sector first got serious about bioenergy in the early 2000s. A decade later, bioenergy has become an essential part of the bottom lines of many businesses. The energy created from waste wood can be used to power sawmill or pulp and paper operations or sold to BC Hydro.
Between 2009 and 2012, the sector got a boost from $1 billion in federal funding intended to improve the environmental and economic performance of Canadian pulp mills. Canfor's (TSX:CFP) Prince George pulp mill, Domtar's (TSX:UFS) Kamloops operation, Catalyst Paper (TSX:CYT), Tembec (TSX:TMB) and West Fraser (TSX:WFT) all took advantage of the funding to put bioenergy in place.
Companies are now confident enough in the performance of bioenergy that they are investing their own money and trying out new technologies.
Conifex (TSX-V:CFF) is working on an $80 million bioenergy project in Mackenzie, which will sell power to BC Hydro. However, the project is currently on hold as the company seeks financing.
"Domtar … is working with lignol-boost, which is taking the lignan material and using it as a higher-grade product," said Weedon. "They have a nano-crystalline product as well, which produces more value to the producer."
Weedon compared the forest product industry to an oil refinery, because its companies are increasingly able to produce various grades of fuel from wood.
"They are going to find those higher-value products that dramatically improve the profitability of the industry," said Weedon, "and you've got a sustainable product as opposed to one that's a fossil fuel."
The sale of wood pellets has also been a growing market for B.C. forest products companies, especially to European Union countries that have turned to bioenergy to produce renewable energy as part of commitments to reduce greenhouse gas emissions.
According to the BC Bioenergy Network, the sale of wood pellets represents a $275 million industry in B.C. "It became a huge draw for wood producers to ship wood pellets to Europe, because there's a subsidized price they're paying because it's green energy," said Russ Taylor, president of International Wood Markets Group.
While the province was the largest exporter of wood pellets up until a few months ago, Taylor said the U.S. south recently overtook B.C. Because many of the pellets are made from trees killed by the mountain pine beetle infestation, Taylor said future supply is unknown.
"Biomass is the last great resource we have to create an industry," he said. "How economical it is in the future when that dead timber runs out is a wild card."
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