In 2022, EU wood pellet consumption hit a new record of 24.8 million metric tons (MMT) mainly due to increased residential use, according to a report compiled by the European Union.
It further estimated that EU demand is expected to grow to 25.6 MMT this year, based on a further expansion of the residential markets supported by Member State (MS) incentives, and the implementation of the third Renewable Energy Directive (REDIII).
EU demand for pellets has significantly outpaced domestic production for the past ten years, which has resulted in increased imports from the United States, Russia, Belarus and Ukraine.
Since the EU implemented an import ban for wood pellets from Russia and Belarus in summer last year, an opportunity has emerged for the transatlantic trade of wood pellets, the EU said.
Last year, EU wood pellet imports totaled 5.89 MMT with a value of $1.32 billion (€121.2 billion) – a new record.
EU Wood Pellet Market Developments
Consuming 24.8 million metric tons (MMT) of pellets in 2022, the EU is the world’s largest wood pellet market.
Since the autumn of 2021, rising prices of fossil fuels have boosted the residential demand for wood pellets, with Russia’s invasion of Ukraine causing fossil fuel prices to rise even higher.
In 2023, the growth in residential use is forecast to continue, and is anticipated to be the main driver for the further expansion of the EU market for pellets.
In the third Renewable Energy Directive (REDIII), renewable energy targets are set for the heating of buildings, in contrast to the preceding directive, which the EU anticipates will further support the demand for pellets for residential use on the longer term.
While EU production increased continuously since 2016, EU demand for pellets has significantly outpaced domestic production, added the EU.
Of the 5.89 MMT total wood pellet imports, 3.12 MMT came from the US, valued at $682 million (€626.4 million). The Netherlands was the leading market.
Residential use (domestic stoves and dedicated heat boilers with a capacity below 50 kW) and small-to-medium scale commercial use (with a capacity of more than 50 kW, which generally includes dedicated heat boilers used in residential buildings and public buildings) of pellets represents approximately 50% of EU pellet consumption.
The remaining 50% is fulfilled by large-scale industrial use of pellets, with a capacity of generally more than 50 MW.
The major users of wood pellets in the EU are Italy, Germany, the Netherlands, Denmark, France, Sweden, Austria and Belgium (in decreasing order of volume).
The COVID-19 crisis had a limited effect on total EU pellet consumption during 2020 – 2022.
The EU MS lockdown measures have predominantly restricted transport activities resulting in a reduction in liquid biofuel use.
Solid biomass applied for heat and power has been less affected, save for a shift from office to residential use.
During 2021 and 2022, consumption stagnated in Italy, the Netherlands, Denmark, Sweden, and Belgium. Strong growth was reported in Germany, France and Austria.
Industrial Use of Pellets
Markets in the Netherlands, Denmark and Belgium are dominated by large-scale power plants, rather than residential use, because these countries have opted to fulfil their renewable energy obligations by utilising biomass for electricity generation.
Regarding pellet demand, they lack sufficient domestic production, and so largely depend on imports.
Potential large industrial pellet markets for foreign suppliers are Germany and Poland, but the countries currently do not support the use of wood or wood pellets for electricity generation.
The Netherlands is the primary EU industrial market for wood pellets, importing a record 3.1 MMT of wood pellets with a (€534 million).
The US is the largest supplier to the Netherlands, with a volume of 1.87 MMT, and a value of $362 million (€332.5 million).
With this value, the Netherlands is also the second largest destination for US wood pellets, after the United Kingdom (UK), and surpassing Japan, Denmark and Belgium.
Most of the wood pellets are used by Dutch power plants and co-fired with coal. All the imported wood pellets which are used for renewable energy generation funded by the Dutch government are subject to stringent sustainability requirements.
The second largest industrial pellet market is Denmark. Most of the Danish large-scale combined heat and power (CHP) plants have now converted from fossil fuels to woody biomass.
Based on the approved funding, the consumption of woody biomass for heat and power is guaranteed and expected to remain unchanged by the Danish Energy Agency (DEA).
On May 19, 2020, the EC approved a €550 million state aid scheme to support the production of electricity by Danish biomass installations. The scheme will be in place until December 31, 2029.
Recent increases in demand for pellets has supported further increase in domestic production in most EU MS.
Since 2017, strong expansion has been reported in Germany, France, Austria and Poland.
Germany is the third largest wood pellet producer after the US and Canada. It currently has 50 production facilities for wood pellets with a total annual production capacity of 3.9 MMT.
Wood pellet production has expanded rapidly in the Baltic Region (Latvia, Estonia and Lithuania) over the past 10 years.
The Baltics are producing both for the residential and industrial markets, mainly in Denmark, the UK and the Netherlands.
In 2021, combined Baltic exports reached a record of 4.7 MMT, but plummeted back to 3.6 MMT in 2022 as a higher share remained in the Baltics due to an increased domestic demand as a result of the ban on Russian gas.
A similar trend is reported in Poland, where pellet production is rising but an increasing share is consumed domestically, currently 60%.
Portugal and Spain are also net exporters of wood pellets.
In 2022, Portuguese exports stabilised at around 510,000 MT, down from the record figure of 709,000 MT achieved in 2019.
Two medium-sized producers with an expanding capacity are the Czech Republic and Croatia. In 2020, five new pellet plants were established, adding 30,000 MT to the Czech Republic’s total production capacity.
In 2022, 538,000 MT of wood pellets were produced by the Czech pellet sector.
Further production growth is forecast in 2023 based on the expanding domestic market.
Croatia has the potential to employ more of its biomass resources due to large forests that occupy almost half of the land area of the country.
According to the Croatian biomass producer’s organisation (CROBIOM), wood pellet production in Croatia totals approximately 400,000 MT, from which between 80 to 90% is generally intended for export.
The main export destinations in 2022 were Italy, Slovenia, and Serbia.
Based on expanding domestic and export demand, Croatian wood pellet production is forecast to increase.
The local shortages of woody biomass supported the production of pellets made from other biomass sources. In the EU, secondary feedstocks, such as sawdust, wood industry residues, and shavings, comprise nearly 85% of the raw materials used for pellet production, according to an EPC survey in 2019.
With an increasing competition for sawdust resources, a broader sustainable raw material is becoming necessary.