When investors look for renewable energy plays they usually dream of wind farms and solar panels.
Seen from that prism there may not appear to be much happening. Wind and solar are still pretty small industries. All non-hydroelectric renewable energy, taken together, still represents just 5% of the energy market, according to the Energy Information Administration.
But that's not true in the industrial sector. Industrial energy consumption has been declining for a decade and is now even with transportation and trending downward. Industrial consumers have been getting more efficient, cutting the amount of energy they lose in production. In fact, use of all industrial energy sources is trending downward, save one – biomass.
Yes, biomass – often the waste material from the plant being powered – now delivers more industrial energy than coal. We're talking about 2 quadrillion BTUs, more every year.
And who are they turning to for this sea change? Usually, they turn to the same suppliers they have always used, like Finland's Metso (OTCQX:MXCYY).
Metso works in mining, construction, even oil and gas. But they also work in the pulp and paper business, which is where many of their major orders have been coming the last few years. A tissue paper plant in Morocco, a pulp mill in Brazil, about one-quarter of the major orders listed by the company for 2011, it turns out, involve the construction of new biomass or energy recycling facilities.
Industrial companies aren't buying these units to be green. They know that energy is a big cost of doing business. If they can save energy, or create new energy from existing operations, the savings go straight to their bottom lines making them more competitive.
The Metso news peg is its latest sale in this area, a 100 Megawatt biomass plant worth about $125 million, to be fed by both waste wood from forests and urban wood waste, even tree trimmings, around Gainesville, Florida. That's enough electricity to supply 70,000 homes – the city had about 125,000 people in the 2010 census.
The Metso biomass plants use a bubbling fluidized bed (BFB), which can burn high-moisture and high-ash stock efficiently, replacing older stoker and recovery boilers with something that delivers less pollution and more useful energy.
Metso is not the only big industrial supplier after this opportunity. Babcock & Wilcox (BWC), best-known perhaps for building small nuclear power plants used in submarines, is also in this business. Mitsubishi offers a unit that uses waste tires for fuel.
Metso stands out for me, both because of how big a business this is for it, relative to the entire company and for their global connections. Biomass electricity is a global opportunity and markets where oil or coal are more expensive represent the best prospects.
The lesson here is you don't have to be green to make green from green energy. And that industrial markets are prospering from this changing technology, transforming them from energy wasters to energy producers.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.