When New England Wood Pellet retrofitted an old grain delivery truck seven years ago so it could be used for bulk delivery of wood pellets, Charlie Niebling, the Jaffrey-based company’s marketing manager, says the company was going out on a limb.

“I think we were the first company in the U.S. doing bulk delivery,” he said. “For years, we were the only company doing it in New England. We were trucking fuel for customers as far as Bar Harbor, Maine.”

Niebling said that has changed in the last three or four years, and now across the Northeast there are probably a dozen companies that provide bulk delivery. With at least five distributors offering the service in New Hampshire, NEWP may soon retire the old grain truck.

Bulk delivery is essential if wood pellets are going to gain widespread use as a heating fuel, according to Niebling and others in the wood pellet industry. Consumers have been reluctant to convert to wood pellet heating systems that require handling bags of pellets stacked on palettes and stored in sheds or garages.

But pellet fuel providers were reluctant to make the investment in trucks and delivery systems without a customer base. Niebling says the pellet industry blinked first.

“You have to build it first; there’s no way around that,” he said. “We recognized that the egg had to come before the chicken, and we laid an egg. We didn’t make any money on it, and I suspect no one is making any money delivering pellet fuel yet because of the enormous investment in building a fleet of trucks with this technology, but you have to show the consumer you have the system to deliver the fuel.”

With bulk delivery, a truck pulls up to the customer’s house and pumps pellets into a silo in a way that looks much like the delivery of home heating fuel to a holding tank. Europe has been converting to wood pellet heating with bulk delivery at a rapid pace.

“More than 50 percent of the new construction in Germany incorporates some kind of central wood pellet heating system with bulk storage,” said Brian Hernon, manager of the alternative energy division at HB Energy Solutions, a Vermont-based company that serves several New Hampshire communities.

“The majority of systems in this area currently don’t have bulk storage, whether an indoor hopper or exterior silo,” Hernon said. “The trend we see is that people start out with a working hopper that holds about a week of fuel. Then over three or four heating seasons people take the savings and upgrade to incorporate bulk storage.”

Explosive growth

The past decade has seen explosive growth in the use of pellet stoves, which burn biomass or pellets in the form of compressed sawdust from lumber mills or managed forests. Popular Mechanics reports that sales jumped from 18,360 to 141,211 units between 1999 and 2008, a 650-percent increase.

Stoves, however, only provide supplemental heat. The next wave in the growth of wood as a heating source will be the transition to pellet-fueled boilers, with bulk delivery and storage, as the source of central heating. It’s already happening in Europe, and conditions are right for the transition in the United States.

The transition starts with larger commercial or government users, said Niebling, since they are able to recoup the up-front costs much faster due to their greater energy use.

Froling Energy in Peterborough has installed bulk systems in municipal buildings, businesses and schools throughout the state, including the Peterborough Town House, Hopkinton Elementary School and Franklin Pierce University.

“At this point, our biggest volume is totally commercial,” said Jim Van Valkenburgh, vice president of business development and sales at Froling.

In order for the pellet heating to take off with residential consumers, two things have to happen, according to several executives in the biomass business — the price of home heating fuel has to approach $4 per gallon, and the economy has to improve so people feel comfortable making the significant up-front investment, which can run as high as $30,000 for a bulk delivery system.

“If we hadn’t had the recession, and high energy prices had persisted, this thing would be going great guns,” said Niebling. “We’re crawling out of that now. We have energy prices that are as high as they were in the fall of 2008. It’s amazing what a panic we had that spring. Here we are in the fall of 2012 with heating oil approaching $4 again.”

Rebate program is key

Pellet fuel providers in New Hampshire on average reported sales increases of about 20 percent over the same period last year, and are anticipating a busy season, especially if the state decides to fund a tax rebate program for bulk systems that had been paid for with stimulus funds.

The program is set to expire on Sept. 15, after distributing $550,000 in rebates since 2010. It refunded 30 percent of the cost of boiler installation, up to a maximum of $6,000 per applicant, for bulk-fed systems that provided at least 75 percent of a home’s heating needs.

New Hampshire lawmakers created a Renewable Energy Fund in 2007 that could be used to replace the federal stimulus-funded rebate program. Electricity providers who have not met state requirements for use of alternative energy sources must contribute to the fund through what is called “alternative compliance payments.” The trust fund is now at $19 million, some of which is likely to be used to re-start the pellet furnace rebate program, given its popularity.

“We are reviewing all our program budgets and are in the process of determining new budgets for that program as well as other technologies,” said Jack Ruderman, director of the Sustainable Energy Division at the PUC. “It’s just too early to say. It’s something that I hope we’ll know in the next two to four weeks.”

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Dave Solomon may be reached at dsolomon@unionleader.com.