Welcome Hilton Head Island , South Carolina July 2008

PELLET FUELS INSTITUTE Thank You To Our 2008 PFI Annual Conference Sponsors PLATINUMPLATINUM

GOLD

SILVER

BRONZE Thank You To our 2008 PFI Annual Conference Exhibitors Thank You To our 2008 PFI Annual Conference Exhibitors And Thank You to our 2008 Promotions Program Sponsors MEMBERS PFI Organization Board of Directors

Executive Committee President Professional Staff Vice President HPBA Employees Secretary-Treasurer Don Kaiser Immediate Past President Executive Director STANDING COMMITTEES Jennifer Hedrick ‰ Conference Association Manager ‰ Membership Jason Berthiaume ‰ Promotion & Membership Coord. Communications ‰ Standards Various Support Staff ‰ Government Affairs Companies Attending the PFI Annual Conference

2008 Preliminary

2007

2006

2005

0 20 40 60 80 100 120 140 160 180 200

2005 2006 2007 2008

Companies 50 75 143 137 PFI Annual Conference

350 NOT FINAL

300

250

200

150

100

50

0 2001 2002 2003 2004 2005 2006 2007 2008 Exhibitors 6 8 7 1515223142 Attendees 55 66 73 104 95 169 275 285 MembershipMembership PFI Membership

160

140

120

100

80

60

40

20

0 2003 2004 2005 2006 2007 2008 YTD Manufacturers 38 36 38 70 90 57 Suppliers 18 19 20 35 47 53 Associates 975654 New PFI Members

40 35 30

25 Fuel Manufacturers 20 Suppliers 15 Associates 10 5 0 2003 2004 2005 2006 2007 2008 Financials PFI Revenue & Expenses

$600,000 BUDGET Projected 2008 Revenues In This $500,000 Range

$400,000

Year $300,000 Revenue GOVERNMENT AFFAIRS Expenses

$200,000

ADDITIONAL STAFFING

$100,000

$0 123456 Year 2003 2004 2005 2006 2007 2008 Revenue $133,554 $162,391 $170,919 $200,429 $275,734 $517,200 Expenses $105,080 $142,690 $118,781 $125,311 $297,414 $411,500 PFI Net Revenues - 2007

$275,734 11.9%

2.3% Fuel Mfgrs Dues Suppliers & Other Dues 15.4% Promotions Contributions Meetings, Net

70.4%

PFI Budgeted Net Revenues - 2008

$517,200 6.3% 2.5%

14.5% Fuel Mfgrs Dues Suppliers & Other Dues Promotions Contributions Meetings, Net

76.7% PFI Expenditures - 2007

$290,059

Government Relations 44.6% 47.8% Promotions Overhead

7.6%

PFI Budgeted Expenditures - 2008

$411,500

36.5% Government Relations Promotions 57.4% Overhead

6.2% Thousands $100 $200 $300 $400 $500 $600 $0

Fuel Mfgrs Dues PFI -SixMonths VsBudget

Other Dues

Promotions Contr

Meetings, Net June 2008 REVENUES

Govt Relations

Promotions

Overhead, net int

Special Projects

EXPENSES

NET Annual Budget June 2008 PFI Fund Balance

$250,000 2008 $200,000 Projected

$150,000

$100,000

$50,000

$0 2004 2005 2006 2007 2008 Amount $86,000 $140,000 $217,000 $202,000 $115,000 Government Relations ƒƒContinuingContinuing toto workwork withwith FleishmanFleishman--HillardHillard GovernmentGovernment RelationsRelations GroupGroup ƒƒPFIPFI membermember andand staffstaff efforteffort toto securesecure $300$300 taxtax creditcredit forfor stovestove ownersowners ƒƒInvolvementInvolvement inin multiplemultiple piecespieces ofof legislationlegislation ƒƒMeetingMeeting regularlyregularly withwith federalfederal lawmakerslawmakers andand staffstaff asas wellwell asas membersmembers ofof thethe ExecutiveExecutive BranchBranch ƒƒIncreasingIncreasing awarenessawareness ofof thethe pelletspellets ƒƒParticipatingParticipating inin thethe firstfirst annualannual WashingtonWashington InternationalInternational RenewableRenewable EnergyEnergy ConferenceConference BiomassBiomass HeatHeat UsesUses ALLALL thethe FuelFuel EnergyEnergy

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

3 From Biomass From Coal and Natural Gas Fuel-to-Petroleum Ratio = 10 2.5 From Petroleum 45% Efficiency

2 57% Efficiency Fuel-to-Petroleum Ratio = 0.9 1.5 81% Efficiency 82% Efficiency Energy 1 in the Fuel

Btus Required per Btu ofBtus Required per Btu Fuel 0.5

0 Gasoline Corn Ethanol Cellulosic Ethanol Wood Pellets

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.) RESA Appropriation May Level Playing Field Subsidy Per Million BTU’s of Fuel Displaced This was RESA in the 2005 $9.00 Energy Act which was a 25%

$8.00 Rebate that never got appropriated. $7.00 All currently subsidized

$6.00

$5.00 Proposed $4.00 Subsidy With RESA $3.00

$2.00

$1.00

$- BioDiesel Biomass Electric Ethanol Geothermal Hydropower Photovoltaics Wind RESA Propsed Pellet Appliance Subsidy NOW ZERO Fuel Standards New RESIDENTIAL DENSIFIED Fuel Standards Being Voted by PFI Membership

ƒƒSuperSuper PremiumPremium 00 << .5%.5% AshAsh ƒƒPremiumPremium 00 << 1%1% AshAsh ƒƒStandardStandard 00 << 2%2% AshAsh ƒƒUtilityUtility 00 << 6%6% New INDUSTRYINDUSTRY WIDEWIDE QUALITY CONTROL & ASSURANCE PROGRAM

Now Being Voted by PFI Membership ¾STANDARDIZED TESTING PROCEDURES ¾STANDARDIZED TESTING INTEGRALS ¾STANDARDIZED PRODUCT QUALITY LABELING ¾PRODUCT REGISTRATION ¾INDEPENDENT PRODUCT REVIEW & COMPLIANCE ¾WARRANTY CONSIDERATION FOR STOVE MFR’S ProposedProposed NewNew LabelingLabeling IdenticalIdentical SlidingSliding ScaleScale StandardsStandards onon BothBoth PelletPellet FuelFuel andand AppliancesAppliances

Purpose:Purpose: MakeMake itit EasyEasy forfor ConsumersConsumers PelletPellet FuelFuel IndustryIndustry CapacityCapacity SHORTAG RAWES MATERIAL PRICE INCREASES UNHAPPY 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 THISTHIS HEATINGHEATING SEASONSEASON’’SS WILDCARDSWILDCARDS Pellet Appliance Shipments 1st Q 2008 1st Q 2007 % Chg North American Pellet Stove Shipments Pacific 1,275 555 130%

160,000 Mountain 841 628 34% If Shipments Exceed Katrina Central 1,169 601 95% 140,000 Great Lakes 1,080 840 29% 120,000 Northeast 3,258 1,962 66% 100,000 Southeast 545 312 75% 80,000 INSERTS 2,595 1,613 61% 60,000 USA 10,763 6,511 65%

40,000 CAD - West 145 - 20,000 CAD - Central 61 - 0 CAD - East 171 86 99% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 INSERTS - -

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

BTU Per Unit Current Cost Cost In Relation Fuel 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% INDUSTRY FACTS ¾ Pellet Industry Is Going Through Its Largest Growth Period ¾Investment Capital “New Plants” Follows Growth ¾Most of the New Capacity, In Tonnage, is Being Exported From North America ¾ Soon: Majority of Fuel Produced in North America will be Exported Than Used In North America ¾Excess Fuel Finds Homes ¾ Sometimes For Extended Times, Contracted Elsewhere ¾ Export Market Effecting Market Supply: Europe, Asia ¾ JIT Inventory Gone ¾ Order Early - Plan Existing Manufacturers Proposed Manufacturers Existing Manufacturers Proposed Manufacturers July 2008 Fuel Shipments PFI Fuel Shipment Trends

1,400,000 Not Adjusted For

1,200,000Tons Non-Reporting Mills 1,000,000 800,000 600,000 400,000 200,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Bagged Residential Fuel Shipments US Market Growth By Region

40% 30% 20% 10% 0% -10% -20% -30% 94-95 96-97 98-99 00-01 02-03 04-05 95-96 97-98 99-00 01-02 03-04 05-06

Pacific Mountain Northeast UNITED STATES INDUSTRYINDUSTRY CHALLENGECHALLENGE PFI MISSION STATEMENT 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 ecological problems through the utilization of locally renewable energy sources. The organization exists to: ¾• Create and represent the ultimate expertise in the residential and commercial (fiber and pelletized) fuel industry and technology; ¾• Coordinate and integrate the needs of raw material sources, pellet equipment suppliers and consultants, fuel producers, appliance manufacturers and distribution entities; ¾• Educate, disseminate and promote the ecological, economical and environmental advantages and benefits of fiber fuel technology; ¾• Establish and maintain densified fuel standards; and ¾• Provide information and technical support to facilitate the safety, efficiency, emissions standards and test procedure specifically designed for densified fuel technology.

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 RECEIVIN G FUEL BIN

BIN RECLAIM What If ???????

PFI Fuel Shipment Trends Central Heating

Sell 20,000 units in 2009, 4 tons/unit Tonnage For Double Each Year for Residential Central 5 Years Heating 30,000,000

Tons 50% Growth in 25,000,000 20,000,000 Following 5 Years 15,000,000 10,000,000 5,000,000 0

5 7 8 0 1 3 6 8 0 1 3 6 99 9699 99 9900 0 0200 040500 070 00 0910 10 1210 141510 17180 1 191 1 192 20202 20202 2 2 202 2 202 20202 202 Tonnage For Stoves 15% Annual Growth Rate Welcome Hilton Head Island , South Carolina July 2008

PELLET FUELS INSTITUTE