NREL is a national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

Operated by the Alliance for Sustainable Energy, LLC

This report is available at no cost from the National Renewable Energy

Laboratory (NREL) at www.nrel.gov/publications.

Contract No. DE-AC36-08GO28308

Pre-Feasibility Analysis of Pellet 

Manufacturing on the Former 

Loring Air Force Base Site

A Study Prepared in Partnership with the 

Environmental Protection Agency for the 

RE-Powering America’s Land Initiative: 

Siting Renewable Energy on Potentially 

Contaminated Land and Mine Sites

Randolph Hunsberger and Gail Mosey

Produced under direction of the U.S. Environmental Protection 

Agency (EPA) by the National Renewable Energy Laboratory (NREL) 

under Interagency Agreement IAG-09-1751 and Task No. 

WFD3.1001.

Technical Report

NREL/TP-5D00-60755

April 2014
NREL is a national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

Operated by the Alliance for Sustainable Energy, LLC

This report is available at no cost from the National Renewable Energy

Laboratory (NREL) at www.nrel.gov/publications.

Contract No. DE-AC36-08GO28308

National Renewable Energy Laboratory

15013 Denver West Parkway

Golden, CO 80401

303-275-3000 • www.nrel.gov

Pre-Feasibility Analysis of 

Pellet Manufacturing on the 

Former Loring Air Force Base 

Site 

A Study Prepared in Partnership with the 

Environmental Protection Agency for the 

RE-Powering America’s Land Initiative: 

Siting Renewable Energy on Potentially 

Contaminated Land and Mine Sites

Randolph Hunsberger and Gail Mosey

Prepared under Task No. WFD3.1001 

Technical Report

NREL/TP-5D00-60755

April 2014
NOTICE

This report was prepared as an account of work sponsored by an agency of the United States government. 

Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, 

express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of 

any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately 

owned rights. Reference herein to any specific commercial product, process, or service by trade name, 

trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, 

or favoring by the United States government or any agency thereof. The views and opinions of authors

expressed herein do not necessarily state or reflect those of the United States government or any agency thereof.

This report is available at no cost from the National Renewable Energy

Laboratory (NREL) at www.nrel.gov/publications.

Available electronically at http://www.osti.gov/scitech

Available for a processing fee to U.S. Department of Energy

and its contractors, in paper, from:

U.S. Department of Energy

Office of Scientific and Technical Information

P.O. Box 62

Oak Ridge, TN 37831-0062

phone: 865.576.8401

fax: 865.576.5728

email: mailto:reports@adonis.osti.gov

Available for sale to the public, in paper, from:

U.S. Department of Commerce

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

phone: 800.553.6847

fax: 703.605.6900

email: orders@ntis.fedworld.gov

online ordering: http://www.ntis.gov/help/ordermethods.aspx

Cover Photos: (left to right) photo by Pat Corkery, NREL 16416, photo from SunEdison, NREL 17423, photo by Pat Corkery, NREL 

16560, photo by Dennis Schroeder, NREL 17613, photo by Dean Armstrong, NREL 17436, photo by Pat Corkery, NREL 17721.

Printed on paper containing at least 50% wastepaper, including 10% post consumer waste. 
iii

Acknowledgments

The National Renewable Energy Laboratory (NREL) thanks the U.S. Environmental Protection 

Agency (EPA) for its interest in securing NREL’s technical expertise. 

Special thanks go to Fred Corey of the Aroostook Band of Micmacs; Mike Daly and Bryan 

Olson of EPA Region 1; Lura Matthews, Shea Jones, and Jessica Trice from EPA; and Katie 

Brown, AAAS Science & Technology Policy fellow hosted by the U.S. EPA. 

The following provided significant contributions to this analysis: William Strauss of 

FutureMetrics, LLC, did the majority of the analysis and writing appearing in this report; Eric 

Kingsley from Innovative Natural Resource Solutions, LLC (INRS), performed the biomass 

resource assessment, which was based, in part, on reports from Ernest Bowling of James W. 

Sewall Company; and Steve Walker of New England Wood Pellet provided photos for the pellet 

manufacturing photo tour. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
iv

Executive Summary

The U.S. Environmental Protection Agency (EPA) Office of Solid Waste and Emergency 

Response, in accordance with the RE-Powering America’s Lands initiative, engaged the U.S. 

Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL) to conduct 

feasibility studies to assess the viability of developing renewable energy generating facilities on 

contaminated sites. 

This site, in Limestone, Maine—formerly the location of the Loring Air Force Base but now 

owned by the Aroostook Band of Micmac1—was selected for the potential to produce heating 

pellets from woody feedstock. 

Biomass was chosen as the renewable energy resource to evaluate based on abundant woodybiomass resources available in the area. NREL also evaluates potential savings from converting 

existing Micmac property (not located at the Loring site) from oil-fired heating to pellet heating. 

Results

A wood pellet production plant constructed on the Loring site would have a high chance of 

economic success, while providing jobs and money to the local economy. Combined pellet 

production with conversion of Micmac buildings from fuel oil to wood chip heating systems 

shows even more promise. 

A 10,500 tons-per-year (tpy) pellet manufacturing facility (9,800 tpy at 93% capacity factor) was 

evaluated based on the expected local market and on biomass feedstock availability. It is 

estimated that 19,000 green tons per year of suitable biomass would be required to supply this 

facility. Locally available biomass resources appear to be adequate for the described facility, but 

these numbers should be confirmed, as described below. 

Recommendations and Next Steps

Based on very preliminary numbers, wood pellet manufacturing is a good option for the Loring 

site. Further analysis can confirm assumptions used in this report, particularly biomass 

availability and cost, equipment sizing and cost, and operation and maintenance costs. At a 

minimum, the following tasks should be included in a more detailed study. 

• Determine the location within the available land for the pellet manufacturing facility, 

including fuel storage 

• Perform a site-specific and project-specific biomass resource assessment

• Contact foresters, wood utilization specialists, lumber mills, and others to get a firmer 

analysis of available biomass, biomass properties, and biomass cost 

• Study rough order of magnitude capital costs and operation and maintenance costs further 

to refine those costs 

 

1 For the purposes of this study, we will refer to the site as “the Loring site” and to the Aroostook Band of Micmac 

as “the Band.”

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
v

• Perform an updated economic analysis on various sizes of pellet manufacturing facilities 

to determine the optimum size after more accurate numbers for costs and energy savings 

are acquired

Evaluate costs of retrofitting existing buildings to replace oil heating equipment with 

pellet heating.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
vi

Table of Contents

1 Background........................................................................................................................................... 1

1.1 Scope of Work ................................................................................................................................. 1

1.2 Study Level and Uncertainty ........................................................................................................... 1

2 Development of Biomass Energy on Brownfield Sites .................................................................... 2

3 Site Description .................................................................................................................................... 3

3.1 Site Ownership and History ............................................................................................................. 6

3.2 Recommended Activities for Next-Level Analysis ......................................................................... 6

Site Review............................................................................................................................................ 7

5 Biomass Feedstock: Properties, Cost, and Availability ................................................................. 10

5.1 Resource Assessment ..................................................................................................................... 10

5.2 Aroostook Band of Micmac Lands ................................................................................................ 10

5.3 USDA Forest Inventory & Analysis .............................................................................................. 10

5.3.1 Land Ownership .............................................................................................................. 12

5.3.2 Annual Growth ................................................................................................................ 12

5.4 Existing Major Users of Low-Grade Wood ................................................................................... 13

5.4.1 Major Landowners .......................................................................................................... 14

5.5 Wood Pricing ................................................................................................................................. 14

5.6 Conclusion of Wood Study ............................................................................................................ 15

5.7 Recommended Activities for Next-Level Analysis ....................................................................... 17

6 Wood Pellet Manufacturing Technology.......................................................................................... 18

6.1 Wood Pellets Basics ....................................................................................................................... 18

6.2 Photo tour of an Existing Pellet Plant ............................................................................................ 18

7 Market Assessment............................................................................................................................ 28

7.1 The Potential Micmac Direct Market for Pellet Fuel ..................................................................... 28

7.2 The Potential for Selling Pellets Regionally .................................................................................. 29

7.3 Recommended Activities for Next-Level Analysis ....................................................................... 31

8 Project Technical and Economic Analysis ...................................................................................... 32

8.1 Optimal Sizing of the Project ......................................................................................................... 32

8.2 Analysis of Cash Flows and Estimated Return on Investment ...................................................... 34

8.3 Probabilistic Analysis of the Cash Flow Model............................................................................. 39

8.3.1 Key Inputs to the Cash Flow Simulations ....................................................................... 40

8.3.2 Results of the Simulations ............................................................................................... 43

8.4 Recommended Activities for Next-Level Analysis ....................................................................... 47

9 Conclusions ........................................................................................................................................ 48

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
vii

List of Figures

Figure 1. Overview of the site .................................................................................................................... 3

Figure 2. Map showing location of the former Loring Air Force Base in eastern Maine..................... 4

Figure 3. Tanks at Loring site .................................................................................................................... 5

Figure 4. One of the larger tanks at the Loring site................................................................................. 5

Figure 5. Loring Air Force Base site map; the land owned by the Band is the shaded area south 

of the runways ...................................................................................................................................... 8

Figure 6. Map of the Loring site (green dot) in relation to the surrounding area................................. 9

Figure 7. 60-minute drive time and 25-mile radius around Presque Isle, Maine ................................ 11

Figure 8. Land ownership (acres) within 25-mile radius of Presque Isle, Maine (United 

States only) ......................................................................................................................................... 12

Figure 9. Wood-using facilities in northeast Maine............................................................................... 13

Figure 10. Major landowners in northeast Maine .................................................................................. 14

Figure 11. Historical market prices for hardwood and softwood......................................................... 15

Figure 12. Active wood mills in Maine .................................................................................................... 16

Figure 13. Load of raw biomass being delivered................................................................................... 19

Figure 14. Truck dumping ........................................................................................................................ 19

Figure 15. Front end loader transferring materials ............................................................................... 20

Figure 16. Biomass in-feed system......................................................................................................... 20

Figure 17. Pre-grinder............................................................................................................................... 21

Figure 18. Silo for sawdust ...................................................................................................................... 21

Figure 19. Dryer......................................................................................................................................... 22

Figure 20. Biomass boiler for dryer ........................................................................................................ 22

Figure 21. Burner feed augers and metering bin................................................................................... 23

Figure 22. Cyclones for separating out water vapor............................................................................. 23

Figure 23. Sawdust screen separator ..................................................................................................... 24

Figure 24. Hammer mill............................................................................................................................. 24

Figure 25. Silo for fine sawdust............................................................................................................... 25

Figure 26. Sawdust pelletizing equipment ............................................................................................. 25

Figure 27. Pellet cooling equipment ....................................................................................................... 26

Figure 28. Pellet storage silo ................................................................................................................... 26

Figure 29. Bagged pellets and stacker ................................................................................................... 27

Figure 30. Population centers within a three-hour drive time and within a 100-mile radius of the 

Loring site; the sizes of the circles represent population ............................................................. 30

Figure 31. Projected costs of diesel fuel and wood pellets, 2013–2023.............................................. 37

Figure 32. Distribution of values of expected capital costs ................................................................. 40

Figure 33. Forecast diesel fuel prices ($/gal) by month for 10 years .................................................. 41

Figure 34. Wood price forecast ($/green ton) for 10 years ................................................................... 41

Figure 35. Pellet selling price forecast for a 10-year period................................................................. 42

Figure 36. Distribution of annual pellet production capacity factor.................................................... 43

Figure 37. Estimated range of return on investment for 1.2 t/h pellet facility .................................... 44

Figure 38. Estimated range of return on equity for 1.2 t/h pellet facility............................................. 45

Figure 39. Net equity cash out (excess cash in year 10 minus the equity investment) for 

pellet facility........................................................................................................................................ 45

Figure 40. Primary factors contributing to uncertainty in calculation of return on investment....... 46

Figure 41. Relationship between distribution of pellet price escalation and ROI—Scenario 1 ........ 47

Figure 42. Relationship between distribution of pellet price escalation and return on 

investment—Scenario 2..................................................................................................................... 48

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
viii

List of Tables

Table 1. Annual Net Growth, Green Tons per Year, within a 25-Mile Radius of Presque Isle, 

Maine (United States only)................................................................................................................. 12

Table 2. Major Regional Users of Low-Grade Wood ............................................................................. 13

Table 3. Current Heating Fuel Usage by Micmac Properties................................................................ 28

Table 4. Pellet Plant Capital and Installation Costs............................................................................... 33

Table 5. Operation and Maintenance Costs for 1.2 Ton per Hour Pellet Manufacturing Facility...... 35

Table 6. Electric Loads for 1.2 Ton per Hour Pellet Manufacturing Facility ....................................... 36

Table 7. Operating Labor Requirements for Pellet Plant Operating 24 Hours per Day, Seven 

Days per Week .................................................................................................................................... 36

Table 8. Economic Analysis of Pellet Facility, Scenario 1.................................................................... 38

Table 9. Economic Analysis of Pellet Facility, Scenario 2.................................................................... 38

Table 10. Scenario 1, Second-Year Free Cash Flows; Pellet Prices versus Wood Cost................... 39

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
1

1 Background

The U.S. Environmental Protection Agency (EPA) Office of Solid Waste and Emergency 

Response, in accordance with the RE-Powering America’s Lands initiative, engaged the U.S. 

Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL) to conduct 

feasibility studies to assess the viability of developing renewable energy generating facilities on 

contaminated sites. This site, in Limestone, Maine—formerly the location of the Loring Air 

Force Base but now owned by the Aroostook Band of Micmac2—was selected for the potential 

to produce heating pellets from woody feedstock. 

The area surrounding the site has ample woody biomass to support a biomass pellet 

manufacturing facility (see Section 4). There is potential for Micmac to use pellets to displace oil 

for internal heating loads (e.g., residential and commercial), supply nearby facilities with pellets, 

and market pellets in the local region, including to nearby regions in Canada.

1.1 Scope of Work

The primary purpose of this report is to analyze the feasibility of building and operating a woodpellet manufacturing facility. The report provides summary results of a biomass resource 

assessment, a market assessment, and technical and economic analyses. It also includes a highlevel assessment of replacing current Tribal heating fuel—primarily heating oil—with pellets.

1.2 Study Level and Uncertainty

This study is a high-level analysis that serves as a first step toward deciding whether conditions 

seem favorable for a biomass pellet manufacturing facility at the Loring site. As such, there is a 

high level of uncertainty in most of the study components, including biomass availability and 

cost, equipment costs, operation and maintenance costs, annual energy use, and other figures. 

Recommend steps to reduce these uncertainties are provided in each section, as appropriate, for 

the next level of analysis.

 

2 For the purposes of this study, we will refer to the site as “the Loring site” and to the Aroostook Band of Micmac 

as “the Band.”

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
2

2 Development of Biomass Energy on Brownfield

Sites 

One very promising and innovative use of contaminated sites is to serve as locations for various 

types of biomass projects, such as heat, power, and pellet manufacturing. Biomass installations

work well on brownfield sites where there is an adequate biomass fuel supply and favorable 

market conditions. 

Cleaning and reusing potentially contaminated properties provides many benefits, including: 

• Preserving greenfields

• Reducing blight and improving the appearance of a community 

• Raising property values and creating jobs

• Allowing for access to existing infrastructure, including electric transmission lines 

and roads 

• Enabling a potentially contaminated property to return to a productive and 

sustainable use.

By taking advantage of these benefits, biomass can provide a viable, beneficial reuse—in many 

cases generating revenue on a site that would otherwise go unused. 

The site evaluated in this analysis is in Limestone, Maine, and is owned by the Aroostook Band 

of Micmacs (the Band). As with many contaminated or formerly contaminated sites, the local 

community has significant interest in the redevelopment of the site; community engagement is 

critical to match future reuse options to the community’s vision for the site.

The subject site has potential to be used for other functions beyond the biomass project proposed 

in this report. Any potential use should align with the community vision for the site and should 

work to enhance the overall utility of the property. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
3

3 Site Description

This analysis concerns property located at the former Loring AFB in Limestone, Maine. The 

portion of the property owned by the Band is approximately 650 acres, of which about 100 acres 

could be available for a biomass project. 

Figure 1 is an overview of a potential area for installation of a pellet manufacturing site. The site 

is fairly flat, with plenty of room for all manufacturing operations, as well as storage of 

raw materials.

Figure 1. Overview of the site. Photo from Mike Daly, EPA

The map in Figure 2 shows the area around the site—which is in northeastern Maine—with the 

Loring site in the center.3 The site is very close to the border with Canada, which is to the east of 

the site and depicted primarily in darker green. 

 

3 OpenStreetMap. Accessed November 20, 2013: http://www.openstreetmap.org/?lat=46.951&lon=-

67.868&zoom=11&layers=M. Map source is © OpenStreetMap contributors. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
4

Figure 2. Map showing location of the former Loring Air Force Base in eastern Maine

Illustration generated in OpenStreetMap

There are several tanks on the site, formerly used to store oil or jet fuel (see Figure 3 and 

Figure 4). We considered the potential for using these tanks as storage, or as part of the pellet 

manufacturing process, but the consensus opinion was that they will need to be removed as part 

of the site clean-up process. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
5

Figure 3. Tanks at Loring site. Photo from Mike Daly, EPA

Figure 4. One of the larger tanks at the Loring site. Photo from Mike Daly, EPA

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
6

3.1 Site Ownership and History

The Loring site was originally chosen as an AFB because of its proximity to Europe.4 

The Band, which have no reservation but have about 1,350 acres of land in northern Maine,5

acquired part of the former Loring AFB in 2009. Since that time, the Band has been investigating 

potential uses for the site.

3.2 Recommended Activities for Next-Level Analysis

Pellet production facilities range in size from a few acres up to about 100 acres. The available 

site should be reviewed for an appropriate location for the manufacturing facility. 

An engineering feasibility study should be performed to determine the suitability of the location 

for construction and to ensure that there are no environmental concerns. The location should also 

be evaluated for truck access.

 

4 More information about the base can be found at the following links:

http://yosemite.epa.gov/r1/npl_pad.nsf/8b160ae5c647980585256bba0066f907/01550369a32b31bb8525691f0063f6d

6!OpenDocument and http://www.loringairforcebase.com/. 5 EPA. “The Aroostook Band of Micmacs.” Accessed November 20, 2013: 

http://www.epa.gov/region1/govt/tribes/aroostoockmicmacs.html. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
7

4 Site Review6

A recent visit to the Loring AFB site on April 17, 2013, indicates that it appears suitable for a 

pellet manufacturing operation. The site has easy access to high voltage power and has very good 

road access. Water and sewer utilities are available.

A walk around the site did not reveal any obvious obstructions to construction. However, if the 

project does proceed, an engineering feasibility study would be necessary to determine the 

suitability of the location for construction and to ensure that there are no environmental concerns 

with the location.

Maps of the site are provided on the following pages, which show the site in relation to Presque 

Isle and the surrounding area. The land owned by the Band is inside the whited areas.

 

6 The analysis and writing in this section are provided under contract by Dr. William Strauss of FutureMetrics, LLC. 

Additional biomass analysis can be found on their website at www.futuremetrics.com. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
8

Figure 5. Loring Air Force Base site map; the land owned by the Band is the shaded area south of the runways

Illustration created in Google Earth

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
9

Figure 6. Map of the Loring site (green dot) in relation to the surrounding area

Illustration created in Google Earth

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
10

5 Biomass Feedstock: Properties, Cost, and 

Availability

This section assesses the woody feedstock availability for a biomass pellet manufacturing facility 

on the site.

7

 

5.1 Resource Assessment

For the purposes of this analysis, Innovative Natural Resource Solutions, LLC (INRS), was 

contracted to conduct a preliminary wood supply analysis for a community-scale wood pellet 

mill near Presque Isle, Maine.

5.2 Aroostook Band of Micmac Lands

INRS was provided several documents pertaining to lands owned and managed by the Band in 

the vicinity of Presque Isle, Maine. These documents included two that were relied upon for 

key information:

• Micmac Forest Inventory Analysis, May 25, 2012, prepared by Ernest Bowling of James 

W. Sewall Company

• Forest Management Plan, Aroostook Band of Micmacs, May 25, 2012, prepared by 

James W. Sewall Company.

INRS accepted these documents as accurate and relied upon them for certain information.

According to the information contained in these documents, the annual allowable cut on the 

Band’s forest holdings is 588 cords. Assuming harvest levels proportional to the current species 

mix, INRS expects the annual harvest to be 33% hardwood and 67% softwood. If 70% of the 

annual harvest is low-grade roundwood (with 30% as sawlog material), INRS would expect that 

roughly 1,015 green tons of low-grade roundwood would be available for pellet manufacturing 

annually from the Band’s land. As this is enough feedstock for roughly 500 tons of pellets per 

year, this volume will need to be augmented significantly in order to justify the investment in a 

community-scale pellet mill.

5.3 USDA Forest Inventory & Analysis

Using the U.S. Department of Agriculture (USDA) Forest Inventory & Analysis (FIA)8

database,

9

 INRS determined the growth and loss (harvest) for a region within a 25-mile radius of 

 

7 This analysis was performed by Eric Kingsley of Innovative Natural Resource Solutions, LLC (INRS), under 

contract to FutureMetrics, LLC.

8 Since 1930, the Forest Inventory & Analysis program of the USDA Forest Service collects, analyzes, and reports 

information on the status and trends of America’s forests. 9 USDA Forest Service EVALIDator 4.01, http://fiatools.fs.fed.us/Evalidator401/tmattribute.jsp , using “Net growth 

of growing stock on timberland” categories for dynamic measurements. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
11

Presque Isle, Maine (Figure 7). INRS used the most recent complete FIA information, which 

incorporates data collected between 2007 and 2011.10 

Figure 7. 60-minute drive time and 25-mile radius around Presque Isle, Maine

Within this area of analysis, INRS used data only from land that met the following criteria:

• Located within the United States (based upon data limitations)

• Has a slope of less than or equal to 40% (roughly 22 degrees) 

• Is privately owned (no public lands are included as part of supply analysis). 

These restrictions are used to provide a conservative estimate of potentially available feedstock.

 

10 Maine has ±3,500 total FIA plots randomly distributed around the state. Lausten, K., personal communication, 

Maine Forest Service, February 14, 2012.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
12

5.3.1 Land Ownership 

In the region within 25 miles of Presque Isle, Maine (United States only), there are 753,184 acres 

of timberland.

11 Of this, 93% is in private ownership (Figure 8). 

Figure 8. Land ownership (acres) within 25-mile radius of Presque Isle, Maine (United States only)

5.3.2 Annual Growth

Within the 25-mile radius region, INRS used the USDA Forest Service EVALIDator tool12 to 

estimate annual growth of roughly 230,000 green tons annually.13 Of this, roughly 125,000 green 

tons are non-sawlog material and would be economically appropriate for use in wood pellet 

manufacturing.

14 See Table 1 for details.

Table 1. Annual Net Growth, Green Tons per Year, within a 25-Mile Radius of Presque Isle, Maine 

(United States only)

Net Growth Softwood Hardwood Total 

All 124,998 106,581 231,579 

Sawtimber 86,564 21,230 107,793 

Non-Sawtimber 38,434 85,352 123,786 

 

11 “Timberland” is land that is physically and legally capable of producing commercial timber. The FIA definition of 

“timberland” is “Forest land that is producing or capable of producing in excess of 20 cubic feet per acre (1.4 cubic 

meters per ha) per year of wood at culmination of mean annual increment (MAI). Timberland excludes reserved 

forest lands.” FIA. “FIA Glossary.” Accessed November 20, 2013: http://socrates.lvhrc.nevada.edu/fia/ab/issues/pending/glossary/Glossary_5_30_06.pdf. 12 USDA Forest Service EVALIDator 4.01, http://fiatools.fs.fed.us/Evalidator401/tmattribute.jsp. 13 USDA Forest Service data is presented in cubic feet. INRS calculated green tons assuming 85 cubic feet of solid 

wood per cord and that a green cord of wood weighs 2.6 tons for hardwood and 2.3 tons for softwood.

14 This does not account for current harvest/removal levels.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
13

5.4 Existing Major Users of Low-Grade Wood 

It is important to note that, in the Limestone region, there are a number of existing large users of 

low-grade roundwood and biomass chips (which can contain some percentage of low-grade 

roundwood), and that a competitive and dynamic market exists for wood in this region. Major 

users of low-grade wood in the region are shown in Table 2. 

Table 2. Major Regional Users of Low-Grade Wood

Facility Wood Used Distance 

(road)

Huber – Easton OSB Plant Roundwood 7 miles

ReEnergy – Ft. Fairfield Biomass chips 11 miles

ReEnergy – Ashland Biomass chips (idle) 20 miles

Northeast Pellets Roundwood, clean chips, 

sawdust

20 miles

Louisiana Pacific – New Limerick OSB 

Plant

Roundwood 49 miles

Twin River Pulp Mill (Edmundston, NB) Roundwood 62 miles

Figure 9 shows these facilities on a map.

Figure 9. Wood-using facilities in northeast Maine

This figure is extracted from a map of wood-using facilities prepared in 2011 by the Maine Forest 

Service. A complete map is provided at the end of this section (Figure 12). 

Site location

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
14

5.4.1 Major Landowners 

In northeastern Maine there are a number of large landowners, as well as some smaller “family” 

owners. Figure 10 shows the major land ownerships identified by the owner/manager. None of 

these lands are known to have fiber supply agreements with regional wood-using facilities that 

would restrict a new project from accessing fiber.

Figure 10. Major landowners in northeast Maine

5.5 Wood Pricing

As noted above, northeast Maine has a number of existing markets for low-grade roundwood. 

Figure 11 shows quarterly average prices for pulpwood from both hardwood and softwood, 

delivered. A new pellet mill in this region should expect to pay slightly above market prices, at 

least during the first several years of operation, while it is establishing its supply relationships. 

Site Location 

(approximate)

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
15

Figure 11. Historical market prices for hardwood and softwood

For a facility purchasing 15,000 to 30,000 green tons of pulpwood15 annually, INRS would 

recommend using $45.00 (2013 dollars) as an initial wood price for any business plans or pro 

forma estimates. This could change as regional market conditions or input prices—including but 

not limited to diesel prices—change.

5.6 Conclusion of Wood Study

Presque Isle, Maine is a competitive region for wood but benefits from a strong and diverse 

existing wood harvesting and transport infrastructure. The Band can supply a limited volume of 

low-grade wood to a pellet manufacturing facility from its own lands but will need to supplement 

this significantly with purchased wood. 

Given forest growth patterns in the region and the competitive nature of the regional fiber basket, 

INRS recommends a facility be sized to meet the needs of the Band, potentially with a slight 

buffer capacity to account for unplanned outages. 

 

15 INRS expects the feedstock requirement for the facility to be roughly identical to pulpwood specifications.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
16

Figure 12. Active wood mills in Maine

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
17

5.7 Recommended Activities for Next-Level Analysis

The range of predictions of available biomass for this region highlights the importance of 

performing a site-specific biomass resource assessment for a biomass pellet 

manufacturing facility. 

As a next step, we recommend contacting foresters, wood utilization specialists, and lumber 

mills to get a firmer analysis of available biomass, biomass properties, and biomass cost.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
18

6 Wood Pellet Manufacturing Technology16

This section presents the basics of woody biomass pellet manufacturing. 

6.1 Wood Pellets Basics

Wood pellets are compressed wood fiber. They are about 30% denser than whole wood and are a

renewable energy source that is manufactured using an established and proven production 

process. The pellets have a cylindrical form and are typically 5/16 inch in diameter and 1.5 

inches long. They are an easily managed, free-flowing, and dust-free fuel. The average wood 

pellet made from non-resinous species has an energy content of about 8,500 Btu per pound. 

Wood pellets are sold in 40-pound bags or can be bulk delivered. 

The Micmac facility would produce pellets using a typical well-established process flow. The 

basic process is as follows:

1. The raw materials are delivered. The raw materials are wood chips (no bark) or green or 

kiln-dried sawdust. 

2. The wood chips are screened for tramp materials (dirt, metal) and pre-shredded to a 

specific size.

3. The wood chips (and sawdust if necessary) are dried in a rotary dryer to 10%–12% 

moisture content. 

4. The chips and sawdust are further milled to a fine size. 

5. The wood fiber is extruded in pellet mills and made into pellets. There are no additives 

because the wood lignin softens under temperature and pressure to become the 

binding agent.

6. The pellets are cooled and screened for residual fibers (fines).

7. The pellets are packed for delivery.

6.2 Photo tour of an Existing Pellet Plant

The following photos of a New England wood pellet manufacturing plant in Jaffrey, New 

Hampshire, illustrate equipment found in a typical pellet plant similar to the one analyzed in 

this report.

As shown in Figure 13, the manufacturing process begins when tractor trailer-loads of raw 

material (wet and dry sawdust, chips, etc.) arrive at the plant. The material is unloaded by a skid 

steer, a live-floor or a truck dump. 

 

16 The writing in this section is provided by Dr. William Strauss of FutureMetrics, LLC. The photos are courtesy of, 

and used by permission of, Steve Walker of New England Wood Pellet. They were taken in 2007. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
19

Figure 13. Load of raw biomass being delivered

Figure 14 shows a truck dump being used to empty a trailer-load of wood chips. 

Figure 14. Truck dumping

In Figure 15, a front end loader is being used to move feedstock materials from piles to the pellet 

plant feed system.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
20

Figure 15. Front end loader transferring materials

The in-feed system meters the raw materials into a screener, which separates the chips from the 

sawdust (Figure 16).

Figure 16. Biomass in-feed system

The chips pass through a pre-grinder and then mixed back in with the sawdust (Figure 17).

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
21

Figure 17. Pre-grinder

The material resulting after the chips are ground and mixed with sawdust is stored in a silo, as 

shown in Figure 18, from which it is metered into the wood dryer. 

Figure 18. Silo for sawdust

Figure 19 shows the dryer, which, in this case, is 12-feet in diameter and 60-feet long.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
22

Figure 19. Dryer

Figure 20 shows the boiler that supplies heat to the dryer. This boiler is fueled with 

waste biomass.

Figure 20. Biomass boiler for dryer

The metering bin can be seen in Figure 21; these augers deliver fuel to the burner/boiler. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
23

Figure 21. Burner feed augers and metering bin

Figure 22 shows cyclones, which separate water vapor from the sawdust. The moist air is 

then exhausted.

Figure 22. Cyclones for separating out water vapor

A screener separates the fine and coarse sawdust (Figure 23).

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
24

Figure 23. Sawdust screen separator

Figure 24 shows a hammer mill, which is used to further reduce the particle size of the 

coarse sawdust. 

Figure 24. Hammer mill

Figure 25 shows another silo. This one is used to store the fine sawdust. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
25

Figure 25. Silo for fine sawdust

Figure 26 shows the pelletizing equipment.

Figure 26. Sawdust pelletizing equipment

The pellets are hot when they come out of the pelletizers and need to be cooled. Figure 27 shows 

the pellet cooling system.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
26

Figure 27. Pellet cooling equipment

After being cooled, the pellets are conveyed to a large storage silo, as shown in Figure 28. 

Figure 28. Pellet storage silo

Pellets can be delivered in bulk, but are more typically packaged in 40-pound bags, as shown in 

Figure 29. This figure also shows an automated packaging system, which is more common for 

large-scale production. For the system recommended for Loring, the bags would be filled and 

stacked manually.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
27

Figure 29. Bagged pellets and stacker

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
28

7 Market Assessment17

There are two potential markets for pellets manufactured at the Loring site: The Micmac’s own 

set of buildings and the retail market in the region. The size of the potential market and existence 

of another pellet manufacturing facility in Ashland, Maine, will help to set the upper bounds for 

the capacity of the facility.

7.1 The Potential Micmac Direct Market for Pellet Fuel

The Micmac Band properties include a number of buildings and residences near Presque Isle in 

northern Maine. The cost savings for heating those buildings with pellet-fueled furnaces and/or 

boilers versus heating oil would be very significant. Heating fuel cost savings primarily drive the 

wood pellet market. However, if the Tribe were to manufacture its own pellets, it could sell the 

pellets into its own buildings at cost.18

Table 3 shows the most recent heating oil consumption data. The table also shows the equivalent 

number of tons of wood pellets that would be consumed if the buildings were converted.

Table 3. Current Heating Fuel Usage by Micmac Properties

Given the data and assumptions in Table 3, the Tribe would save $227,300 per year. That would 

set the cost of heating at about 40% of its current cost. 

 

17 The analysis and writing in this section are provided under contract by Dr. William Strauss of FutureMetrics, 

LLC. Additional biomass analysis can be found on their website at www.futuremetrics.com. 18 The Band would sell to itself at mill cost of about $145/ton (not the wholesale cost to external buyers of $174/ton 

as shown in the cash flow analysis below). The loss of revenue from 1,050 tons per year sold at cost is about 

$30,500. The savings to the Band are about $227,000/year as the table above shows. The net savings for the Band 

are about $197,000/year.

One Year Fuel Usage (June, 

2010 - May 2012)

Heating Oil 

Gallons Cost $/gal

Pellet 

Equivelant 

Tons

Cost at $145 

per ton

Micmac Service Unit 1,156 $3,716 $3.216 9.38 $1,360

Admin - 7 Northern Rd. 5,365 $17,255 $3.216 43.55 $6,315

Little Feathers Head Start 2,061 $6,435 $3.123 16.73 $2,426

Spruce Haven 3,418 $11,096 $3.247 27.74 $4,023

Farm 650 $2,090 $3.216 5.28 $765

Employees 21,543 $67,710 $3.143 174.88 $25,357

Housing Vacancies 11,361 $35,255 $3.103 92.22 $13,372

LIHEAP/CITGO Housing Fuel 83,977 $236,254 $2.813 681.70 $98,846

TOTALS 129,531 $379,812 1051.48 $152,465

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
29

7.2 The Potential for Selling Pellets Regionally

The Houlton/Presque Isle area has very strong growth both in the pellet stove and pellet boiler 

market. Daigle Oil, located in Presque Isle, Caribou, Houlton, and other nearby towns, has the 

only bulk pellet fuel delivery truck in northern Maine. Because heating oil prices are very high in 

the region—about 75% higher than pellets19—and because natural gas infrastructure does not 

exist in the region, a significant percentage of people have been converting their heating systems 

from oil to pellet fuel.

The current total demand for pellets in the region is at least 15,000 tons per year.20 Growth in the 

region is expected to double that demand in the next five years.

21 

There are several large users of pellets near the site, as listed below: 

• The Northern Maine Community College (directly across the street from the Micmac 

properties in Presque Isle) uses pellets for heating. Their annual consumption is about 

600 tons per year. 

• The University of Maine at Presque Isle (about 23 miles from the Loring site) uses pellets 

for heating. Their annual consumption is about 200 tons per year. 

• The University of Maine at Fort Kent (about 50 miles from the Loring site) uses pellets 

for heating. They consume about 300 tons per year. 

The cost of pellets delivered depends upon feedstock costs and the distance that the pellets have 

to travel to market. Figure 13 shows population centers within a three-hour drive time and within 

a 100-mile radius of the Loring site. The sizes of the circles represent population. 

 

19 Pellet prices of $220/ton equate to a heat cost of about $0.05/kWh. Heating oil at $3.59 (average price in the 

region on May 20, 2013) is equivalent to a heat cost of about $0.09/kWh. 20 Based on production from the Ashland, Maine, mill. 21 Based on analysis by FutureMetrics on the development of bulk and bag pellet demand in Maine.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
30

Figure 30. Population centers within a three-hour drive time and within a 100-mile radius of the 

Loring site; the sizes of the circles represent population

Within a 100-mile radius of the site, the population in the U.S. segment is about 70,00022 and the 

Canadian population is about 176,000.23 Of the Canadian population, 47,000 are in Fredericton 

(the large red circle in the lower right). 

Most of the Canadian population, with the exception of Fredericton, does not have natural gas 

pipelines nearby, which means that they would have a significant incentive to switch to 

pellet heat.

 

22 U.S. Census data by town. 23 Statistics Canada by town.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
31

There is another pellet manufacturing facility in the region in Ashland, Maine. Ashland is about 

20 miles west of Presque Isle. The Ashland facility has the capacity to produce about 30,000 tons 

per year and relies entirely on residuals (sawdust) from sawmills. The mill has been running at a 

much lower output than its nameplate. Maximum production has been about 14,000 tons per 

year. That output level defines the market in the region. However, operating at below 50% of 

capacity also presents that operation with challenges. Primarily, the facility is constrained on 

how low it can price its pellets with such low production volumes relative to the capital cost. The 

production from the Loring facility would likely compete with the Ashland production for some 

market share in the early years. 

However, the modest size of the proposed facility at Loring and the local existing markets nearer 

to the facility than Ashland (particularly Grand Falls, the Rivière-du-Loup region in Canada, and

the relativity high density population along the Caribou-Presque Isle-Houlton corridor on U.S. 

Route 1) would suggest that the Loring location will have lower transportation costs and thus be 

able to deliver lower-cost pellets. The potential for some 40,000 to 60,000 households in the 

region to convert from heating oil to pellet fuel,24 each of which would use about 8 to 10 tons per 

year, suggests that the plant at Loring will be able to sell its production in 2015. 

If the Band converts its buildings, and the schools near the Loring facility are customers, the 

project will already have about a quarter of its annual production accounted for. 

Locating a wood-pellet plant and converting local buildings to pellet heat would add jobs, keep 

money in the local community, and reduce heating expenses for the community. 

7.3 Recommended Activities for Next-Level Analysis

We recommend that the following steps be taken as part of a follow-on analysis to clarify the 

market for pellets in the region: 

• Perform an evaluation of existing Micmac facilities for conversion to pellets

• Contact other local pellet users (e.g., Northern Maine Community College, University of 

Maine at Presque Isle, and University of Maine at Fort Kent) to evaluate their potential as 

pellet customers

• Define the seasonality of the pellet market 

• Review the regulations and duties for selling pellets into the Canadian market 

• Determine the status of the Ashland, Maine, pellet manufacturing facility. 

 

24 For a complete overview of modern fully automatic high-efficiency pellet-fueled central heating systems, go to 

www.MaineEnergySystems.com. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
32

8 Project Technical and Economic Analysis

8.1 Optimal Sizing of the Project

Given the current demand in the region, current production from the Ashland mill, the expected 

growth in demand over the next 10 years, and the sensitivity of the local wood market to demand 

for feedstock, the project should be modestly sized to manufacture about 9,800 tons per year of 

pellets. This is 93% of the nameplate capacity of the system evaluated. The facility is expected to

operate at a rate of 1.2 tons per hour and produce up to 9,800 tons of pellets per year, operating 

three shifts per day, 7 days per week. 

This sizing will have a negligible impact on the regional wood basket and therefore will have an 

insignificant impact on regional wood pricing. The operation will have to source about 19,000 

tons per year of clean white wood chips. 

The total capital cost for the project is estimated to be $2,113,000. This includes all process 

equipment, buildings, engineering, construction, and working capital needs. Details of the 

estimate are in Table 4.25 The project financing assumptions used in the analysis include: 75% 

debt + 25% equity, a loan term of 10 years, and a 4% interest rate.

Table 4 presents the estimated capital costs for a 1.2 ton-per-hour plant. These costs were 

derived by scaling known cost data from previous analysis. 

 

25 The capital cost and operating cost data are based on generic models scaled to the size of this project. The actual 

costs will need to be refined by a technical engineering study of the project.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
33

Table 4. Pellet Plant Capital and Installation Costs

Equipment Requirements Approximate Cost

Truck Scales $50,000

Truck Dumper $0

Raw Material Infeed Station and Silo $17,500

Raw Material Transfer Conveyor $6,650

Suspended Magnet $3,220

Dryer Infeed and Discharge Conveyors $5,250

Dryers $175,000

Dryer Fuel Storage Silo, Unloader, and Discharge Conveyor $50,000

Dryer Burner Fuel Conveying System (pneumatic) $50,000

Dryer Burner (wood fueled with controls and feed system) $90,000

Chip Screeners $14,000

Screener Output (Acceptable and Oversized) Conveyors $2,800

Hammer Mills (course input and processed chips mills) $53,900

Pneumatic System (Hammer Mill Take-Aways pre-dryer and post dryer) $14,850

Dry Material Silos, Unloaders, and Conveyors (dust and dryed chips) $39,600

Pellet Mill Surge Hoppers $5,950

Pellet Mills, Conditioners and Motors $275,550

Start-up Dies for Pellet Mills $8,250

Spare Rollers and Shells for Pellet Mill $20,000

Pellet Mill Discharge Conveying System $3,500

Pellet Cooler $5,250

Cooler Air System and Filters $7,000

Screener for Removing Fines $2,450

Fines Conveying System $1,750

Finished Pellets Screener Discharge Conveyor and Bucket Elevator $3,220

On Site Pellet Storage Silos $40,600

Pellet Storage Discharge Conveyor and Fines Screener $5,950

Bagging System (Hopper, Scale, Fill and Seal Bagger, Stacker, Wrapper) $180,000

Structural Steel (not including buildings) $33,600

Electrical Service, Controls, and Control Systems $36,400

Engineering (includes permitting) $35,000

Boiler & Hardware (Office and Maintenance Area Heat) $20,000

Miscellaneous Spare Parts $24,500

Process Equipment Budget $1,281,740

Other Costs

Front End Loaders $42,000

Fork Lift $12,950

Land $0

Buildings (Process and Warehouse - Includes all site prep work and erection) $129,500

Site & Driveway Work $66,500

Fire Protection and Spark Detection Systems $41,650

Start-up Bags, Slip-Covers & Pallets $10,000

Other Start-up Costs (including payroll and vendor oversight) & Working Capital $16,800

Freight $18,550

Marketing & Administrative Costs $0

Total Other Costs $337,950

Contracting and Construction Costs (mechanical and electrical other than 

buildings) $66,500

Debt Contingency for Construction Period and Startup $70,000

20% Contingency (due to small project scale) $351,238

Total Debt $526,857

Total Equity Investment $1,580,571

Total Capital Cost $2,107,428

9,800 Ton Per Year Wood Pelleting Plant Capital Costs to Startup Projections

1.2 Tons Per Hour Full Capacity Production (7 days, 3 shifts, 93% CF)

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
34

8.2 Analysis of Cash Flows and Estimated Return on Investment

The pellet manufacturing facility is expected to have annual operating costs of about $1,021,000 

in the first year of operation. Revenues in the first year are expected to be $1,219,000 for a gross 

operating profit of about $198,000. The first year of operation is expected to be at 65% of full 

nameplate capacity (about 6,800 tons per year). All following years are expected to be near 93% 

of nameplate (about 9,800 tons per year). 

Wood costs in the Loring region are higher than in some other regions of Maine. As the wood 

study section of this analysis suggests, the cash flow model assumes a cost of $45/ton for all tons 

procured outside of the Band’s lands. The assumption is that about 1,000 tons per year will be 

procured from Micmac lands at a cost of $30/ton. 

The model assumes the price for pellets at the mill will be $174/ton at the time the project begins 

to manufacture pellets (early 2015 if the development follows a typical trajectory and proceeds 

with little delay). 

The operating cost assumptions shown in Table 5 are based on experience developing previous 

pellet plants.

Table 6 shows motor loads for the facility, which can be used to estimate typical peak demand 

and annual electric consumption. Past experience has shown that not all motors will be operating 

simultaneously and that a 60% scaling factor can be used to estimate the operating load.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
35

Table 5. Operation and Maintenance Costs for 1.2 Ton per Hour Pellet Manufacturing Facility

Wood Cost (avg delivered from outside Micmac lands) $45.00 per ton

Wood Cost (avg delivered from Micmac lands) $30.00 per ton

Ratio of Outside Wood to Micmac Wood 19.00

Average Wood Cost 44.25 Chips/Pellets

Sawdust/Pellets

Tons per hour of Pellets Produced 1.20 tons/hour

Electricity Cost $0.08 per kWh

Operator and Maintenance Labor + Benefits $17.00 per hour

Loader and Fork Truck Driver Labor + Benefits $17.00 per hour

Office Staff + Benefits $14.00 per hour

Plant Manager $75,000 per year

Material Supply Manager $0 per year

Sales Manager $0 per year

Delivery Costs to Buyers $0.00 per ton mile (truck)

Average Delivery Distance per ton Delivered - miles

Kilowatts/HP 0.7457 kW/HP

Moisture Content of Raw Material 45%

Btu per Ton of Dry Chips and/or Sawdust 17,400,000 Btu/Ton

Tons per Hour of Chips and Sawdust to Run Dryer 0.27 ton/hour

Cost of Wood for Dryer Burner $15.00 per ton

Sales Price of Pellets Delivered (current price) $165.00 per ton

Percent of Full HP Load Converted to kWh 60%

Other Electricity Usage 2% of kW Demand

Die Capacity 2,000 tons

Die Cost $4,000 per die

Roller Shell Capacity 3,000 tons

Roller Shell Cost (3 shells per set) $1,200 per shell

Roller Bearing Capacity 2,500 tons

RTO Operating Cost -

Roller Bearing Cost (three rollers) $900 per bearing

Other Parts and Maintenance Cost $49,932 per year

Bag Cost $0.28 per bag

Shrink Wrap Cost $0.75 per pallet

Pallet Cost $5.00 pallet

On-Site Fuel Usage (loaders and fork trucks) 11 gallons/day

On-Site Fuel Cost $3.60 gallon

Tax Rate 0%

Cost of Borrowing 4%

Working Capital 3% of annual revenue

Useful Life of Equipment 10 years

Term of Debt 10 years

Average Annual Inflation Rate (cost of goods and parts, and wages) 3.00% per year

Fuel (pellet) Price annual escalator above baseline 2.50% per year

Annual Plant Production (except first year) 93% of capacity

Operating and maintenance costs for 9,800 tons per year pellet production

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
36

Table 6. Electric Loads for 1.2 Ton per Hour Pellet Manufacturing Facility

Estimated staffing levels, hours, and hourly rates are shown in Table 7. 

Table 7. Operating Labor Requirements for Pellet Plant Operating 24 Hours per Day, Seven Days 

per Week

Ten-year cash flows are calculated for two scenarios: Scenario 1 is for the pellet plant only; 

Scenario 2 includes cost savings from converting tribal buildings from heating oil to pellet fuel.

26

We assume that the conversions from heating oil to pellet fuel take place over 4 years with an 

equal number of conversions each year. After four years it is assumed that all of the buildings 

and residences are heated with high-efficiency automatic pellet boilers. 

Note that the pellet price inflation is assumed to be a combination of both the overall inflation 

rate and an increase on top of inflation that is a proportion of the rate of increase in heating oil 

price. Heating oil and diesel fuel prices are highly correlated.

27

 

26 This assumes a comingling of the finances of the pellet project with the heating costs for the Band’s offices 

and housing. 27 See research by FutureMetrics at www.FutureMetrics.com. 

Horsepower Needed ==> Annual Pellet Output 10,512

Bark handling 22.3

Bark Hog 27.9

Bark Burner 13.5

Chip Hog 69.8

Wet chip handling 44.8

Dryer motors and ID fan 46.2

Dry chip handling 3.2

Dry hammermill 48.8

Milled wood handing 10.5

Pelletizers 111.6

Pellet handling and cooler 20.2

Pellet conveying 7.7

Bagging and wrapping system 14.0

Plant air compressor 3.5

Total Horsepower 444

Total Connected HP MAX Electricity Demand (kW) 331

Total kW Demand at 60.0% of MAX 199

# Shifts Rate Hours $/year % Soft $/year $/position

Plant Manager 1 1 $ 75,000 30% $ 97,500 $ 97,500

Raw material handler 1 4 $ 17.00 2,200 37,400 $ 30% $ 48,620 $ 194,480

Plant operator 1 4 $ 17.00 2,200 37,400 $ 30% $ 48,620 $ 194,480

Utility Operator 1 2 $ 17.00 2,200 37,400 $ 30% $ 48,620 $ 97,240

Mechanical / Electrician 1 2 $ 17.00 2,200 37,400 $ 30% $ 48,620 $ 97,240

Total Labor cost 13 $ 680,940

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
37

By 2023 if heating oil and diesel fuel are about $5.50/gallon, pellet prices are expected to be 

about $282/ton.28

Figure 31. Projected costs of diesel fuel and wood pellets, 2013–2023

 

28 This is a very conservative estimate on future prices based on U.S. Energy Information Administration data. 

FutureMetrics estimates that heating oil will be close to $8/gallon in 2023. 

 $150.00

 $200.00

 $250.00

 $300.00

 $350.00

 $400.00

 $450.00

 $500.00

 $550.00

 $600.00

 $2.00

 $3.00

 $4.00

 $5.00

 $6.00

 $7.00

 $8.00

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$/Ton

$/Gallon

Heating Oil and Pellet Prices per MMBTU (and per ton) if Diesel Fuel and Heating Oil Increase at 4.0% per year, 

yielding a pellet price increase of 2.79% per year. Assumed 2.50% underlying inflation included

Heating Oil

Wood Pellets

Diesel at 60% of wood cost

Wood cost at 55% of pellet cost

Analysis by FutureMetrics

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
38

Table 8. Economic Analysis of Pellet Facility, Scenario 1

Table 9. Economic Analysis of Pellet Facility, Scenario 2

extra borrowing for early cash flow needs ====> $ 200,000 1 2 3 4 5 6 7 8 9 10

Capacity 65% 93% 93% 93% 93% 93% 93% 93% 93% 93%

Tons 6,833 9,776 9,776 9,776 9,776 9,776 9,776 9,776 9,776 9,776

Pellet Price Delivered $174 $184 $194 $204 $216 $228 $240 $253 $267 $282

Debt Percentage 75%

Equity Percentage 25%

Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Capital Costs (less "other startup" and contingency costs) $2,021,328

Change in Working Capital $36,575

Revenue $0 $1,219,155 $1,886,275 $2,039,770 $2,205,756 $2,385,250 $2,579,350 $2,789,244 $3,016,219 $3,261,664 $3,527,082

Subtract Cost of Goods (includes labor) $0 1,021,217 1,503,691 1,547,659 1,593,827 1,641,903 1,692,275 1,744,523 1,798,944 1,855,977 1,915,398

Gross Operating Cash Flow 197,938 382,583 492,111 611,929 743,346 887,074 1,044,721 1,217,275 1,405,686 1,611,684

Subtract General Selling and Admin (includes Plt.Mgr.) $75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000

Potential Heating Cost Savings Scenario - - - - - - - - - -

Subtract Annual Debt Service (includes interest) $70,000 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917

Annual Taxes - - - - - - - - - - -

Salvage Estimates

Net Operating Cash Flows ($2,002,903) ($96,979) $87,666 $197,194 $317,013 $448,430 $592,158 $749,804 $922,358 $1,110,770 1,316,767 

Cash at the start of the period $2,111,628 $108,725 $11,746 $99,413 $296,607 $613,620 $1,062,049 $1,654,207 $2,404,011 $3,326,369 $4,437,139

Cash inflow (outflow) during the period ($2,002,903) ($96,979) 87,666 197,194 317,013 448,430 592,158 749,804 922,358 1,110,770 1,316,767

($527,907)

Cash at the end of the period $108,725 $11,746 $99,413 $296,607 $613,620 $1,062,049 $1,654,207 $2,404,011 $3,326,369 $4,437,139 $5,753,906

EBITDA (25,630) 153,073 256,420 369,811 494,543 631,319 781,735 946,769 1,127,361 1,325,226

ROI for total CAPEX (10 Yrs.) 14.10% NPV (@ 8%, 10 Yrs.) Equity Cash Out ==> $5,225,999

Scenario 1 - Projected Cash Flows -- Return on Investment (ROI) -- Net Present Value Calculation (NPV)

$1,043,047.17

extra borrowing for early cash flow needs ====> $ 200,000 1 2 3 4 5 6 7 8 9 10

Capacity 65% 93% 93% 93% 93% 93% 93% 93% 93% 93%

Tons 6,833 9,776 9,776 9,776 9,776 9,776 9,776 9,776 9,776 9,776

Pellet Price Delivered $174 $184 $194 $204 $216 $228 $240 $253 $267 $282

Debt Percentage 75%

Equity Percentage 25%

Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Capital Costs (less "other startup" and contingency costs) $2,021,328

Change in Working Capital $36,575

Revenue $0 $1,219,155 $1,886,275 $2,039,770 $2,205,756 $2,385,250 $2,579,350 $2,789,244 $3,016,219 $3,261,664 $3,527,082

Subtract Cost of Goods (includes labor) $0 1,021,217 1,503,691 1,547,659 1,593,827 1,641,903 1,692,275 1,744,523 1,798,944 1,855,977 1,915,398

Gross Operating Cash Flow 197,938 382,583 492,111 611,929 743,346 887,074 1,044,721 1,217,275 1,405,686 1,611,684

Subtract General Selling and Admin (includes Plt.Mgr.) $75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000

Potential Heating Cost Savings Scenario (56,837) (119,143) (187,285) (261,651) (274,120) (287,145) (300,747) (314,953) (329,788) (345,279)

Subtract Annual Debt Service (includes interest) $70,000 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917 219,917

Annual Taxes - - - - - - - - - - -

Salvage Estimates

Net Operating Cash Flows ($2,002,903) ($40,142) $206,809 $384,479 $578,663 $722,550 $879,302 $1,050,552 $1,237,311 $1,440,558 1,662,046 

Cash at the start of the period $2,111,628 $108,725 $68,583 $275,392 $659,871 $1,238,534 $1,961,084 $2,840,386 $3,890,938 $5,128,249 $6,568,807

Cash inflow (outflow) during the period ($2,002,903) ($40,142) 206,809 384,479 578,663 722,550 879,302 1,050,552 1,237,311 1,440,558 1,662,046

($527,907)

Cash at the end of the period $108,725 $68,583 $275,392 $659,871 $1,238,534 $1,961,084 $2,840,386 $3,890,938 $5,128,249 $6,568,807 $8,230,852

EBITDA 31,207 272,215 443,705 631,461 768,663 918,463 1,082,483 1,261,723 1,457,149 1,670,504

ROI for total CAPEX (10 Yrs.) 21.84% NPV (@ 8%, 10 Yrs.) Equity Cash Out ==> $7,702,945

Scenario 2 - Projected Cash Flows -- Return on Investment (ROI) -- Net Present Value Calculation (NPV) WITH COST SAVINGS FROM FUEL SWITCHING

$2,576,873.64

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
39

Given the assumptions shown above, the estimated return on investment (ROI) on the full capital 

cost for Scenario 1 is about 14%.29 The net present value (NPV) of the project over 10 years at a 

discount rate of 8% is $1,043,000. 

The accumulated excess cash in year 10 netted against the equity investment will give the equity 

investor(s) an expected payout of $6,227,000 in year 10. This is an annualized return on equity 

(ROE) of about 46% over the 10 years. 

Scenario 2, in which the cost saving from converting the Band’s buildings over 4 years to pellet 

fuel is included in the cash flow analysis, has an expected ROI of about 22%. The ROE is 

about 62%.

Table 10 shows the sensitivity of free cash flows for Scenario 1 in the second year (when the 

project is operating near capacity) to different pellet prices and wood prices. 

Table 10. Scenario 1, Second-Year Free Cash Flows; Pellet Prices versus Wood Cost

8.3 Probabilistic Analysis of the Cash Flow Model

The expected values for the ROI, ROE, and NPV are based on a series of fixed assumptions. 

However, the actual values of key parameters will never be exactly equal to the mean values 

used in the cash flow analysis. The uncertainty in the estimation of the values can be quantified 

by estimating probability distributions for the inputs that are based on actual project data from 

similar projects or from historical price and cost data.

The modeling that follows incorporates uncertainty of some of the key inputs to both the capital 

cost and the operating cost models. The modeling is based on Monte Carlo simulations. Monte 

Carlo simulations reveal the expected distributions of key cash flow metrics and the sensitivity of 

the key cash flow metrics to changes in inputs. The analysis shows the risk of insufficient cash 

 

29 This is the internal rate of return (IRR) on the full investment against the net operating cash flows over 10 years.

$155 $160 $165 $170 $175 $180 $185 $190 $195

$35 $112,942 $164,297 $215,652 $267,007 $318,362 $369,717 $421,072 $472,427 $523,782

$36 $95,345 $146,700 $198,055 $249,410 $300,765 $352,120 $403,475 $454,830 $506,185

$37 $77,748 $129,103 $180,458 $231,813 $283,168 $334,523 $385,878 $437,233 $488,588

$38 $60,151 $111,506 $162,861 $214,216 $265,571 $316,926 $368,281 $419,636 $470,991

$39 $42,554 $93,909 $145,264 $196,619 $247,974 $299,329 $350,684 $402,039 $453,394

$40 $24,957 $76,312 $127,667 $179,022 $230,377 $281,732 $333,087 $384,442 $435,797

$41 $7,360 $58,715 $110,070 $161,425 $212,780 $264,135 $315,490 $366,845 $418,200

$42 ($10,237) $41,118 $92,473 $143,828 $195,183 $246,538 $297,893 $349,248 $400,603

$43 ($27,834) $23,521 $74,876 $126,231 $177,586 $228,941 $280,296 $331,651 $383,006

$44 ($45,431) $5,924 $57,279 $108,634 $159,989 $211,344 $262,699 $314,054 $365,409

$45 ($63,028) ($11,673) $39,682 $91,037 $142,392 $193,747 $245,102 $296,457 $347,812

$46 ($80,625) ($29,270) $22,085 $73,440 $124,795 $176,150 $227,505 $278,860 $330,215

$47 ($98,222) ($46,867) $4,488 $55,843 $107,198 $158,553 $209,908 $261,263 $312,618

$48 ($115,819) ($64,464) ($13,109) $38,246 $89,601 $140,956 $192,311 $243,666 $295,021

$49 ($133,416) ($82,061) ($30,706) $20,649 $72,004 $123,359 $174,714 $226,069 $277,424

$50 ($151,013) ($99,658) ($48,303) $3,052 $54,407 $105,762 $157,117 $208,472 $259,827

Pellet Sales Prices [$/ton]

Wood prices [$/ton]

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
40

flows to the project and identifies those cost inputs whose changes generate the greatest risk of 

project failure.

All of the simulations that follow have 5,000 iterations. That is, the cash flow model is 

recalculated 5,000 separate times and each recalculation randomly samples from the input 

distributions to create a set of outputs. All of those outputs are stored and aggregated into a 

single probability distribution. Those distributions and the inputs that contribute significantly to 

the variability of the outcomes are shown in the follow pages. 

8.3.1 Key Inputs to the Cash Flow Simulations

As this is a high-level feasibility study, there is a significant amount of uncertainty in the capital 

cost estimates; therefore, the total capital cost was modeled using a PERT distribution,30 with the 

median value of about $2.1 million. Figure 32 shows the distribution representing the 

capital costs.

Figure 32. Distribution of values of expected capital costs

The wood cost is critical to the project’s ROI. Wood prices are primarily influenced by diesel 

fuel costs.

31 Figure 33 is a chart of historical (shown by the blue line) and forecast diesel fuel 

prices in the region. The price has a 50% chance of being within the dark grey bands and a 90% 

chance of staying within the overall grey region. A sample time series path is indicated by the 

 

30 The PERT distribution is used for modeling expert estimates, where one is given the expert's minimum, most 

likely, and maximum estimates.

31 See FutureMetrics research on the components of wood costs. Diesel fuel contributes between 50% and 65% to 

the cost of wood delivered to the mill.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
41

red line. The model predicts a sample diesel price time path based on the probability model and 

uses that price to estimate wood costs. 

Figure 33. Forecast diesel fuel prices ($/gal) by month for 10 years

Figure 17 shows the wood price forecasts for the next 10 years and the distribution of 

those forecasts.

Figure 34. Wood price forecast ($/green ton) for 10 years

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
42

Figure 35 shows the expected sales price for pellets over the next 10 years. Notice that the price 

uncertainty increases with time.

Figure 35. Pellet selling price forecast for a 10-year period

A key factor in estimating pellet prices is the expectation that pellet prices will escalate at a rate 

that is faster than general inflation. They will increase as a proportion of the increase in heating 

oil prices. That parameter is also connected to wood costs (pellet feedstock). If diesel fuel (and 

therefore heating oil) prices escalate less than forecast, pellet prices will also escalate at a lower 

rate than forecast, and wood costs will be lower than the forecast, contributing an offsetting 

effect to the ROI. So, although a lower pellet price escalator lowers the ROI, lower wood costs 

raise the ROI. The model incorporates this relationship between costs for diesel fuel, heating oil, 

and wood. 

For this analysis we use the lower end of the influence that diesel has on wood prices—wood 

costs are modeled to have a positive 0.50 correlation to diesel price changes and, therefore, to 

heating oil prices. That means that higher wood prices will translate into higher pellet prices and 

vice versa.

Plant capacity utilization is also important. Figure 20 shows the input to the cash flow model for 

plant uptime.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
43

Figure 36. Distribution of annual pellet production capacity factor

8.3.2 Results of the Simulations

Each simulation was run with two scenarios. Scenario 1 is only for the pellet production plant 

and does not include the savings from conversion of the buildings and residences on the Band’s

land. Scenario 2 includes the pellet production as well as those conversion savings in the cash 

flow model. 

Figure 20 shows the ROI from both simulations depicted as a cumulative probability distribution. 

The difference between the two scenarios is significant. 

The probability of the project having a result with a 4% ROI (effective cost of capital) or lower is 

about 12% under Scenario 1 and is about 0.3% with Scenario 2. The probability of an ROI less 

than zero is about 3.9% with Scenario 1 and is zero with Scenario 2. 

The ROI is calculated on the full capital cost for the project against all cash outflows including 

debt service. Thus, a zero ROI is the breakeven for the project.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
44

Figure 37. Estimated range of return on investment for 1.2 t/h pellet facility

If the project’s finances include the economic benefits of the conversion from heating oil to 

pellet fuel, then there is a high probability of a project with a strong buffer against a loss, or even 

a breakeven outcome. 

The conversion costs (capital costs and installation costs) for converting from heating oil to 

pellet fuel are outside of the scope of this analysis. However, many buildings in the area around 

Presque Isle have already converted due to the very compelling reduction in building heating 

costs. That includes the Northern Maine Community College just across the street from the 

Band’s offices and homes. The economics of conversion have been proven to be very good. 

The ROE is shown in Figure 21. The expected equity return for Scenario 1 is an annualized 

40.5% over 10 years. There is a 0.7% probability that the ROE will be less than 12%. Both 

scenarios have a healthy return to the equity investors.

11.9% 85.3% 2.9%

0.3% 57.6% 42.1%

4.0% 20.0%

-20% -10% 0% 10% 20% 30% 40%

0.0

0.2

0.4

0.6

0.8

1.0

ROI for Total CAPEX (Scenario 1)

ROI for Total CAPEX (Scenario 1)

Minimum -19

Maximum 27.

Mean 10.

Std Dev 5.6

ROI for Total CAPEX (Scenario 2 - Including 

Minimum -0.

Maximum 34.

Mean 18.

Std Dev 4.6

 Mean = 10.395% Mean = 18.968%

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
45

Figure 38. Estimated range of return on equity for 1.2 t/h pellet facility

The net equity cash out—excess cash in year 10 minus the equity investment—is shown in 

Figure 39. 

Figure 39. Net equity cash out (excess cash in year 10 minus the equity investment) for 

pellet facility

0.7% 83.1% 16.2%

0.0% 18.8% 81.2%

12.0% 50.0%

-10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0.0

0.2

0.4

0.6

0.8

1.0

IRR Scenario 1 (All Simulations)

IRR Scenario 1 (Scenario 1)

Minimum -4.

Maximum 74.

Mean 40.

Std Dev 10.

IRR Scenario 1 (Scenario 2 - Including Hea 

Minimum 23.

Maximum 92.

Mean 58.

Std Dev 9.2

 Mean = 40.539% Mean = 58.092%

5.0% 91.9% 3.1%

0.0% 57.6% 42.4%

1.92 7.00

-2 0 2 4 6 8 10 12

Values in Millions ($)

0.0

0.2

0.4

0.6

0.8

1.0

Equity Cash Out Year 10 (All Simulations - in $millions)

Equity Cash Out Year 10 (Scenario 1)

Minimum -$6

Maximum $8,

Mean $4,

Std Dev $1,

Equity Cash Out Year 10 (Scenario 2 - Inclu 

Minimum $1,

Maximum $1

Mean $6,

Std Dev $1,

 Mean = $4,250,027.89 Mean = $6,726,974.12

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
46

We can investigate the inputs that contribute the most to the variability of the ROI output. Figure 

40 shows the inputs ranked in order of their influence on the project’s ability to break even. The 

input with the largest effect is the pellet price escalator. This is the parameter that models the 

expected increase in fuel costs over inflation. 

The chart shows that the worst case (the lowest outcome from 5,000 iterations of the simulation), 

all other inputs held constant, will have a negative influence on the ROI, and reduces the ROI to 

about 5.8%. 

As noted above, if pellet prices do not escalate as fast as forecast it will be because heating oil 

(and therefore diesel fuel) have not risen as fast as forecast. Thus, wood prices will be lower than 

the forecast contributing an offsetting effect to the ROI. 

The price of pellets (market risk) and the capital cost of the project (technology risk) are the 

other two leading drivers of ROI variation. 

Other inputs not shown have lower forcing effects on the ROI.

Figure 40. Primary factors contributing to uncertainty in calculation of return on investment

To further illustrate the effects of the pellet price escalator on ROI, below shows the results of all 

5,000 iterations of the simulation. The ellipse shows the 95% confidence boundary. 

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
47

Figure 41. Relationship between distribution of pellet price escalation and ROI—Scenario 1

About 12% of the results fall into the lower quadrants—the region at which the project has an 

ROI of less than 4.0%. 

8.4 Recommended Activities for Next-Level Analysis

Capital, installation, operation, and maintenance costs have been estimated for a generic 1.2 tonper-hour wood pellet manufacturing facility. These costs, and the resultant calculations of 

economic factors such as NPV, ROI, and ROE, contain a high degree of uncertainty. A detailed 

analysis should include manufacturer-provided quotes for equipment and site- and locationspecific refinements of installation, engineering, operation, and maintenance costs.

These costs should be combined with a refined feedstock cost estimate to produce an updated 

economic analysis.

2.176%

4.00%

0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Fuel (pellet) Price annual escalator above baseline / 10,512 tons per year (Scenario 1)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

 EX (Scenario 1)

36.3% 51.8%

9.4% 2.5%

ROI for Total CAPEX (Scenario 1) vs Fuel (pellet) Price annual escalator above baseline / 10,512 tons per year (Scenario 1)

Output vs Key Input Scenarios

ROI for Total CAPEX (Scenario 1) vs Fuel (p 

X Mean 2.1

X Std Dev 0.4

Y Mean 10.

Y Std Dev 5.6

Corr. (Pearson) 0.4

Corr. (Rank) 0.4

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
48

9 Conclusions 

This pre-feasibility analysis suggests that there is enough potential for success with a small pellet 

manufacturing facility located on the former Loring AFB to justify a full feasibility study—

which would include a detailed wood supply analysis, detailed marketing analysis, preliminary 

technical/engineering analysis, environmental (air and land use) analysis, and updated 

financial analysis.

The most challenging risk to the project will be the strength of the wood pellet market and its 

support of prices. Based on the forecasts for heating oil and the lack of alternative heating fuels 

in the region around the plant, it is expected that pellet prices will support the project. Also, 

given the regions of population density near the project with no access to natural gas and the 

advantages the location has over the Ashland location in terms of transport costs, 9,800 tons of 

pellets per year should find a market, while being small enough to not disrupt the existing wood 

markets; wood prices should remain stable relative to their historical values. 

If the project is analyzed with the fuel cost savings from conversion of the Band’s buildings 

factored into the decision metrics, there is a very low probability of the aggregated cash flows 

being below 8.0%. The scatter plot below shows the 5,000 iterations of Scenario 2 relative to the 

annual pellet price escalator with the ROI delimiter set at 4%. Only 0.2% of the simulation’s 

iterations (10 of 5,000) fall into the lower quadrants. 

Figure 42. Relationship between distribution of pellet price escalation and return on investment—

Scenario 2

Because there is an existing small pellet manufacturing plant in Ashland, Maine, the project has 

to be relatively small to serve the local needs of the region, including population clusters in 

nearby Canada. 

2.176%

4.00%

0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Fuel (pellet) Price annual escalator above baseline / 10,512 tons per year (Scenario 2 - Including Heating Oil Savings from Conversion)

-5%

0%

5%

10%

15%

20%

25%

30%

35%

 ario 2 - Including Heating Oil Savings from Conversion)

45.4% 54.3%

0.2% 0.1%

ROI for Total CAPEX (Scenario 2 - Including Heating Oil Savings from Conversion) vs Fuel (pellet) Price annual escalator above ba 

Output vs Key Input Scenarios

ROI for Total CAPEX (Scenario 2 - Including 

X Mean 2.1

X Std Dev 0.4

Y Mean 18.

Y Std Dev 4.6

Corr. (Pearson) 0.4

Corr. (Rank) 0.4

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.
49

As the market analysis suggests, the current demand and expected growth in the market should 

be sufficient to support production of 9,800 tons per year of pellets by the heating season 

of 2015. 

Key recommendations include: 

• Perform a site-specific and project-specific biomass resource assessment

• Contact foresters, wood utilization specialists, lumber mills, and others to get a firmer 

analysis of available biomass, biomass properties, and biomass cost 

• Study rough order of magnitude capital costs and operation and maintenance costs further 

to refine those costs

• Perform an updated economic analysis on various sizes of pellet manufacturing facilities

to determine the optimum size after more accurate numbers for costs and energy savings 

are acquired

• Evaluate costs of retrofitting existing buildings to replace oil heating equipment with 

pellet heating.

This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications.