Design and Development of Logistics Models for Residential and Commercial Biomass Pellets for Heat and Power Generation in the U.S.

Abstract

The U.S. is an important wood pellets producer for Europe, but in recent years there is special attention in the domestic market. This project developed mathematical logistics models in MatLab® that estimate distribution channels, transportation, and volumes for the domestic wood pellet demand. The models consider only demand in the northeastern U.S. based on current production in the Southeast. Two cases were studied: distribution to power plants and distribution to retail stores. Once the market needs were identified, logistics engineering principles and models were run to predict the distribution to different markets. Tools used in facility location and freight transportation analysis were run to provide an estimated logistic cost. One bulk pellet with 2 scenarios and 3 bagged pellet models (RISI 2016; 2017; 2018) with 2 scenarios were developed. After analyses for each model, it was concluded that wood pellet industry should direct its efforts to negotiate lower transport rates, which could represent a 70% cost reduction. While the wood pellet industry volume is smaller than the coal and chemical industries, the considerable cost difference indicates an opportunity to negotiate lower rates. The models developed can be used as tools to minimize the cost of distributing wood pellets to the northeast.