PELLET FUELS INSTITUTE

WelcomeHilton Head Island , South Carolina

July 2008

To Our 2008 PFI Annual Conference SponsorsThank You

PLATINUMPLATINUM

GOLD

SILVER

BRONZE

To our 2008 PFI Annual Conference ExhibitorsThank You

To our 2008 PFI Annual Conference ExhibitorsThank You

And Thank You to our 2008 Promotions Program Sponsors

Executive CommitteePresidentVice PresidentSecretary-TreasurerImmediate Past President

Board of Directors

MEMBERS

PFI

Professional StaffHPBA Employees

Don KaiserExecutive Director

Jennifer HedrickAssociation Manager

Jason BerthiaumeMembership Coord.Various Support Staff

STANDING COMMITTEESConferenceMembershipPromotion &

CommunicationsStandardsGovernment Affairs

OrganizationOrganization

0 20 40 60 80 100 120 140 160 180 200

2005

2006

2007

2008

Companies Attending the PFI Annual Conference

Companies 50 75 143 137

2005 2006 2007 2008

Preliminary

0

50

100

150

200

250

300

350

PFI Annual Conference

Exhibitors 6 8 7 15 15 22 31 42Attendees 55 66 73 104 95 169 275 285

2001 2002 2003 2004 2005 2006 2007 2008

NOT FINAL

MembershipMembership

PFI Membership

0

20

40

60

80

100

120

140

160

Manufacturers 38 36 38 70 90 57Suppliers 18 19 20 35 47 53Associates 9 7 5 6 5 4

2003 2004 2005 2006 2007 2008 YTD

New PFI Members

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008

Fuel ManufacturersSuppliersAssociates

Financials

PFI Revenue & Expenses

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

YearRevenueExpenses

Year 2003 2004 2005 2006 2007 2008Revenue $133,554 $162,391 $170,919 $200,429 $275,734 $517,200Expenses $105,080 $142,690 $118,781 $125,311 $297,414 $411,500

1 2 3 4 5 6

BUDGETProjected 2008 Revenues In This Range

GOVERNMENT AFFAIRS

ADDITIONAL STAFFING

76.7%

14.5%

2.5%6.3%

$517,200

Fuel Mfgrs DuesSuppliers & Other DuesPromotions ContributionsMeetings, Net

PFI Budgeted Net Revenues - 2008

70.4%

15.4%

2.3%

11.9%

$275,734

Fuel Mfgrs DuesSuppliers & Other DuesPromotions ContributionsMeetings, Net

PFI Net Revenues - 2007

36.5%

6.2%

57.4%

$411,500

Government RelationsPromotionsOverhead

PFI Budgeted Expenditures - 2008

44.6%

7.6%

47.8%

$290,059

Government RelationsPromotionsOverhead

PFI Expenditures - 2007

Fuel

Mfg

rs D

ues

Oth

er D

ues

Prom

otio

ns C

ontr

Mee

tings

, Net

REV

ENU

ES

Gov

t Rel

atio

ns

Prom

otio

ns

Ove

rhea

d, n

et in

t

Spec

ial P

roje

cts

EXPE

NSE

S

NET

$0

$100

$200

$300

$400

$500

$600

Thou

sand

s

June 2008Annual Budget

PFI - Six Months Vs BudgetJune 2008

$0

$50,000

$100,000

$150,000

$200,000

$250,000

PFI Fund Balance

Amount $86,000 $140,000 $217,000 $202,000 $115,000

2004 2005 2006 2007 2008

2008 Projected

Government Relations

Continuing to work with FleishmanContinuing to work with Fleishman--Hillard Hillard Government Relations GroupGovernment Relations GroupPFI member and staff effort to secure $300 PFI member and staff effort to secure $300

tax credit for stove ownerstax credit for stove ownersInvolvement in multiple pieces of legislation Involvement in multiple pieces of legislation Meeting regularly with federal lawmakers and Meeting regularly with federal lawmakers and

staff as well as members of the Executive staff as well as members of the Executive BranchBranchIncreasing awareness of the pelletsIncreasing awareness of the pelletsParticipating in the first annual Washington Participating in the first annual Washington

International Renewable Energy ConferenceInternational Renewable Energy Conference

Biomass Heat Uses ALL the Biomass Heat Uses ALL the Fuel Energy Fuel Energy

0

0.5

1

1.5

2

2.5

3

Cellulosic EthanolCorn EthanolGasoline

From BiomassFrom Coal and Natural GasFrom Petroleum

Btu

s R

equi

red

per B

tu o

f Fue

l

57% Efficiency

81% Efficiency

Fuel-to-Petroleum Ratio = 0.9

45% Efficiency

Energy in the Fuel

Fuel-to-Petroleum Ratio = 10

Wood Pellets

82% Efficiency

Sources: Liquid Fuel Data: National Renewable Energy Lab, originally from Wells to Wheels Analysis of Advanced Fuel/Vehicle Systems” by Wang, et al (2005)Wood Pellets: Based on 15% wood waste firing burner and 6%electricity usage in pelletizing (improves further with cogeneration, which was not assumed.)

Total BTU’s Consumed To Generate One BTU of Usable Fuel Output

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

BioDiesel Biomass Electric Ethanol Geothermal Hydropower Photovoltaics Wind RESA PropsedPellet Appliance

Subsidy

All currently subsidized

ProposedSubsidy

With RESA

RESA Appropriation May Level Playing FieldSubsidy Per Million BTU’s of Fuel Displaced

NOW ZERO

This was RESA in the 2005 Energy Act which was a 25% Rebate that never got appropriated.

Fuel Standards

New RESIDENTIAL DENSIFIED Fuel Standards Being Voted by

PFI Membership

Super Premium 0 Super Premium 0 << .5% Ash.5% AshPremium 0 Premium 0 << 1% Ash1% AshStandard 0 Standard 0 << 2% Ash2% AshUtility 0 Utility 0 << 6%6%

New INDUSTRY WIDEINDUSTRY WIDEQUALITY CONTROL & ASSURANCE PROGRAM

Now Being Voted by PFI MembershipSTANDARDIZED TESTING PROCEDURES

STANDARDIZED TESTING INTEGRALS

STANDARDIZED PRODUCT QUALITY LABELING

PRODUCT REGISTRATION

INDEPENDENT PRODUCT REVIEW & COMPLIANCE

WARRANTY CONSIDERATION FOR STOVE MFR’S

Proposed New Proposed New LabelingLabelingIdentical Sliding Identical Sliding Scale Standards Scale Standards on Both Pellet Fuel on Both Pellet Fuel and Appliancesand Appliances

Purpose: Make Purpose: Make it Easy for it Easy for ConsumersConsumers

Pellet Fuel IndustryPellet Fuel IndustryCapacityCapacity

SHORTAGESRAW MATERIAL PRICE

INCREASESUNHAPPY CUSTOMERS

GOVERNMENT INTERVENTION

KATRINA - 2005

The Role of Renewable Energy Consumption in the Nation’s Energy Supply, 2007 , from DOE-EIA

6,830,000,000,000,000 btu’s or 6,830,000,000 MBTU’s

1,500,000 tons * 16 MBTU/ton = 24,000,000 MBTU’s

24,000,000/ 6,830,000,000 = 0.35% of Renewable Energy Market

Or 0.66 % of the Biomass Market or 0.02% of the Total Energy Market

BTU Per Unit Current Cost Cost In RelationFuel Unit Per Unit Cost Per MMBTU To Pellets

Electricity 293 kwh $0.12 $35.16 281%Oil 140,000 Gal. $4.60 $32.86 263%

Propane 91,000 Gal. $2.80 $30.77 246%Gas 100,000 Therm $1.40 $14.00 112%

Wood - Oak 19,200,000 Cord $250.00 $13.02 104%Pellets 16,000,000 Ton $200.00 $12.50 100%

North American Pellet Stove Shipments

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

If Shipments Exceed Katrina

THIS HEATING SEASONTHIS HEATING SEASON’’S S WILDCARDSWILDCARDSPellet Appliance Shipments

1st Q 2008 1st Q 2007 % Chg

Pacific 1,275 555 130%Mountain 841 628 34%Central 1,169 601 95%Great Lakes 1,080 840 29%Northeast 3,258 1,962 66%Southeast 545 312 75%INSERTS 2,595 1,613 61%USA 10,763 6,511 65%

CAD - West 145 -CAD - Central 61 -CAD - East 171 86 99%INSERTS - -

CANADA 377 86 338%North America 11,140 6,597 69%

Pellet Industry Is Going Through Its Largest Growth Period

Investment Capital “New Plants” Follows Growth

Most of the New Capacity, In Tonnage, is Being Exported From North America

Soon: Majority of Fuel Produced in North America will be Exported Than Used In North America

Excess Fuel Finds Homes

Sometimes For Extended Times, Contracted Elsewhere

Export Market Effecting Market Supply: Europe, Asia

JIT Inventory Gone

Order Early - Plan

INDUSTRY FACTS

Existing Manufacturers

Proposed Manufacturers

Existing Manufacturers

Proposed Manufacturers

July 2008

Fuel Shipments

PFI Fuel Shipment Trends

0200,000400,000600,000800,000

1,000,0001,200,0001,400,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Tons

Not Adjusted For Non-Reporting Mills

94-9595-96

96-9797-98

98-9999-00

00-0101-02

02-0303-04

04-0505-06

-30%

-20%

-10%

0%

10%

20%

30%

40%

0%

Pacific Mountain Northeast UNITED STATES

Bagged Residential Fuel ShipmentsUS Market Growth By Region

INDUSTRY CHALLENGEINDUSTRY CHALLENGE

The Institute's mission is to be a trade association which represents the fuel preparation and clean burning technology of renewable biomass energy resources and is dedicated to the advancement and promotion of the fiber and densified (pellets) fuel technology that will help solve global ecologicalproblems through the utilization of locally renewable energy sources. The organization exists to:

• Create and represent the ultimate expertise in the residential and commercial (fiber and pelletized) fuel industry and technology;

• Coordinate and integrate the needs of raw material sources, pellet equipment suppliers and consultants, fuel producers, appliance manufacturers and distribution entities;

• Educate, disseminate and promote the ecological, economical and environmental advantages and benefits of fiber fuel technology;

• Establish and maintain densified fuel standards; and

• Provide information and technical support to facilitate the safety, efficiency, emissions standards and test procedure specifically designed for densified fuel technology.

PFI MISSION STATEMENT

The 1988 Isuzu Trooper, above, owned by Robert “Chip”Beam of South Williamsport, at left, is modified to be environmentally friendly. Wood pellets are stored in the barrels in the rear of the vehicle so they can fall into a reactor to be burned. The resulting vapor is piped into the engine for power. The vapor doesn’t hurt the Earth’s atmosphere, Beam said. Another advantage is not needing gasoline.

CENTRAL HEATING

CENTRAL HEATING

FUEL BIN

RECEIVING

BIN RECLAIM

PFI Fuel Shipment TrendsCentral Heating

05,000,000

10,000,00015,000,00020,000,00025,000,00030,000,000

1 99 5 1 99 6 1 99 7 1 99 8 1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 2 00 9 2 01 0 2 01 1 2 01 2 2 01 3 2 01 4 2 01 5 2 01 6 2 01 7 2 01 8To

ns

Tonnage For Stoves 15% Annual Growth Rate

Tonnage For Residential Central Heating

Sell 20,000 units in 2009, 4 tons/unit

Double Each Year for 5 Years

50% Growth in Following 5 Years

What If ???????

WelcomeHilton Head Island , South Carolina

PELLET FUELS INSTITUTE

July 2008