From January 2012 through the end of June 2018, the Northern Forest Center had provided incentives or other assistance to 163 wood pellet boiler projects, and we estimate that they’ve contributed a total of $3.5 million to the regional economy. Together the boiler owners have spent approximately $1.7 million on locally-made wood pellets and have cut greenhouse gas emissions by more than 4,000 tons.
We calculate the impact of our wood heat program so we can explain the need for supportive public policies, continued funding for conversions from oil to sustainable wood pellet heat, and more. But what’s behind the numbers? It’s time to dust off your algebra skills and find out!
Estimates are necessarily based on assumptions and choices, and we’ve put a lot of thought into deciding how best to calculate the benefits of switching to wood pellet heat. We use a combination of pellet consumption data, fuel prices and a conservative economic multiplier to account for the increased amount of money circulating in the local economy rather than being sent outside the region to pay for fuel from elsewhere. We balance precision with practicability and believe our methodology produces a well-reasoned estimate of the impact that switching to wood pellets for heat has on the region’s economy and environment.
So in the interest of disclosure, and perhaps to help others who are thinking about these questions, here’s how we do it. The factors we consider include:
1. How many tons of pellets were used. Once a year we ask regional pellet vendors to send sales records for their customers who participated in our programs. The vendors have been very helpful in providing this essential data!
2. How much it cost to heat with pellets. This information is available from some states, and we ask retailers for bulk prices as well. We apply a 4-state average to the whole region.
3. How much it would have cost to heat with the fuel previously used. We track average fuel costs annually, by quarter (each state issues reports on fuel pricing), to capture fluctuations in energy costs. From our project records, we know which fuels the pellet boilers are displacing: of the first 140 projects, 85% used oil, 11% used cordwood, 2% used propane, and 2% used bagged pellets. We’ll continue to use those percentages until the number has increased enough to recalculate it. Given the displacement amounts, we can figure out how much it would have cost to get the same amount of heat from the previous fuel.
From these figures we calculate how much money pellet boiler owners saved by heating with bulk wood pellets compared to their previous heating fuels. We consider these dollars to be retained in the community. For total economic impact, we add those savings to what people spent on wood pellets – which directly benefits the regional pellet mill – and then apply an economic multiplier to account for the rippling effects of local spending on the broader forest economy. We use a multiplier value of 1.8 based on early analysis by an economist with experience in the forest products industry.
So, the total economic impact calculation is this:(Fuel Cost Savings + Spending on Pellets) = Total Economic Impact
For the greenhouse gas calculation, we use results of the 2015 lifecycle analysis [link to web page] that showed, among other things, that switching from oil to wood pellets cut greenhouse gas emissions by 54% from day one, and 46% when switching from propane. We use established greenhouse gas emissions factors to calculate what the emissions would have been on the amount of displaced oil or propane if it were still being used, then apply the 54% and 46% figures to determine the reduction in tons.
We’ve evolved our calculations over time when we’ve seen ways to improve their accuracy. For instance, we began using the results of the greenhouse gas lifecycle analysis when it was published because it used data from the Northern Forest.
We’re confident that our results give a realistic approximation of the economic and environmental impact that our wood heat program has helped generate over the years. If you have questions about our methodology or our Automated Wood Heat program, I hope you’ll get in touch!
Photo courtesy of Travis Paige for Froling Energy.