Enviva bankruptcy fallout impacting biomass industry

Enviva bankruptcy fallout impacting biomass industry

Friday 12 Apr 2024

In March, Enviva, the world’s largest woody biomass producer for industrial energy, declared bankruptcy. That cataclysmic collapse triggered a rush of political and economic manoeuvring in the U.S. (a key wood pellet producing nation), and in Europe (a primary industrial biomass energy user in converted coal plants).

While Enviva publicly claims it will survive the bankruptcy, a whistleblower in touch with sources inside the company says it will continue failing to meet its wood pellet contract obligations, and that its production facilities — plagued by chronic systemic manufacturing problems — will continue underperforming.
Enviva and the forestry industry appear now to be lobbying the Biden administration, hoping to tap into millions in renewable energy credits under the Inflation Reduction Act — a move environmentalists are resisting. In March, federal officials made a fact-finding trip to an Enviva facility and local communities who say the firm is a major polluter.
Meanwhile, some EU nations are scrambling to find new sources of wood pellets to meet their sustainable energy pledges under the Paris agreement. The UK’s Drax, an Enviva pellet user (and also a major pellet producer), is positioning itself to greatly increase its pellet production in the U.S. South and maybe benefit from IRA subsidies.

The bankruptcy filing in March by Maryland-based Enviva — the world’s largest maker of wood pellets from forest biomass — is rattling a European Union that relies heavily on biomass as a significant though contested renewable energy source.

The bankruptcy is also invigorating U.S. forest advocates determined to keep the Biden Administration from using new renewable energy credits to bail out the flailing company. On March 21, officials from five federal agencies visited North and South Carolina to see an Enviva pellet-making plant firsthand and hear environmental justice complaints over the impacts it is having on low-income communities.

But the company faces immediate threats to its ongoing viability that transcend its US$2.6 billion debt and negative community impacts, according to a former maintenance manager at two Enviva pellet-making plants in North Carolina and Virginia between 2020 and 2022, and an exclusive Mongabay source.

As many as eight of Enviva’s 10 pellet mills in the U.S. Southeast, he said, are in such poor condition that they are producing fewer pellets monthly at a much higher cost due to intractable and costly maintenance issues.

“There’s no way Enviva is coming out of Chapter 11,” the former employee told Mongabay, referring to a court-ordered reorganisation process by which the firm has a set time to restructure its debt and begin paying back creditors. “Their manufacturing equipment is not fit for the service it’s required to deliver. Only two of its 10 plants (one in Florida, one in Georgia, neither built by Enviva) are hitting their maximum achievable targets for pellet production.”

He added: “They also are not replacing equipment at the plants with the materials that will fix the problems. Plants keep going out of service for days at a time, and Enviva keeps spending millions to patch them up. Every ton of pellets they produce is at a loss. The more they produce, the more money they lose.”

These observations are reflected in Enviva’s public statements: In its March 13 bankruptcy filing, the company said it shipped 5 million metric tons of pellets overseas in 2023. That’s down from 6.2 million metric tons shipped in 2022, a 19.3% decrease at a time when demand for wood pellets in Europe and Asia was increasing.

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Source: Mongabay

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