In 2022, wood pellet consumption in the EU reached a new record of 24,8 million tonnes (MMT), mainly due to increased domestic use, according to a report prepared by the European Union.
The report further estimates that EU demand is expected to grow to 25,6 million tonnes this year, based on further expansion of housing markets, supported by stimulus measures from Member States, and the implementation of the Third Renewable Energy Directive (REDIII ).
EU demand for pellets has significantly exceeded domestic production over the past decade, resulting in increased imports from the United States, Russia, Belarus and Ukraine.
Since the EU introduced an import ban on wood pellets from Russia and Belarus last summer, an opportunity has opened up for the transatlantic trade in wood pellets, according to the EU.
Last year, wood pellet imports into the EU totaled 5,89 MMT worth $1,32 billion (€121,2 billion) – a new record.
Developments on the wood pellet market in the EU
With a consumption of 24,8 million tonnes (MMT) of pellets in 2022, the EU is the largest wood pellet market in the world.
Since autumn 2021, rising fossil fuel prices have increased residential demand for wood pellets, with Russia's invasion of Ukraine causing fossil fuel prices to rise even further.
Residential growth is expected to continue into 2023 and will be the main driver for further expansion of the EU pellet market.
The Third Renewable Energy Directive (REDIII) sets renewable energy targets for building heating, unlike the previous directive, which the EU expects will further support residential pellet demand in the longer term.
Although EU production has increased continuously since 2016, demand for pellets in the EU significantly exceeds domestic production, the EU said.
Of the total wood pellet imports of 5,89 MMT, 3,12 MMT came from the US, worth $682 million (€626,4 million). The Netherlands was the leading market.
Residential use (domestic stoves and special heating boilers with a capacity of less than 50 kW) and small to medium commercial use (with a capacity of more than 50 kW, which typically includes special heating boilers used in residential buildings and public buildings) of Pellets represent approximately 50% of pellet consumption in the EU.
The remaining 50% is filled by large-scale industrial use of pellets, with a capacity of usually more than 50 MW.
The main 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 impact on total pellet consumption in the EU in the period 2020-2022.
EU Member States' lockdown measures have mainly limited transport activities, leading to a reduction in the use of liquid biofuels.
Solid biomass used for heat and electricity is less affected, apart from a shift from office to residential use.
In 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
The markets in the Netherlands, Denmark and Belgium are dominated by large-scale power plants rather than residential use, as these countries have chosen to meet their renewable energy obligations by using biomass to generate electricity.
In terms of pellet demand, they lack sufficient domestic production and are therefore largely dependent on imports.
Potential major industrial pellet markets for foreign suppliers are Germany and Poland, but these countries do not currently support the use of wood or wood pellets for electricity generation.
The Netherlands is the EU's most important industrial market for wood pellets, importing a record 3,1 MMT of wood pellets worth €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).
This value also makes the Netherlands the second largest destination for US wood pellets, after the United Kingdom (UK), surpassing Japan, Denmark and Belgium.
The majority of wood pellets are used by Dutch power stations and co-fired with coal. All imported wood pellets used for the generation of sustainable energy, financed by the Dutch government, are subject to strict sustainability requirements.
The second largest industrial pellet market is Denmark. Most Danish large-scale heat and power (CHP) plants have now switched from fossil fuels to woody biomass.
Based on the approved financing, the consumption of woody biomass for heat and electricity is guaranteed and is 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 plants. The scheme runs until December 31, 2029.
Domestic production
The recent increase in demand for pellets has supported a further increase in domestic production in most EU Member States.
Since 2017, strong expansion has been reported in Germany, France, Austria and Poland.
Germany is the third largest producer of wood pellets, after the US and Canada. It currently has 50 wood pellet production facilities with a total annual production capacity of 3,9 MMT.
Wood pellet production has increased rapidly in the Baltic region (Latvia, Estonia and Lithuania) over the past decade.
The Baltic States produce for both the residential and industrial markets, mainly in Denmark, Great Britain and the Netherlands.
In 2021, combined Baltic exports reached a record 4,7 MMT, but plummeted back to 3,6 MMT in 2022 as a larger share remained in the Baltics due to increased domestic demand due to the ban on Russian gas .
A similar trend is reported in Poland, where pellet production is increasing, but an increasing share is consumed domestically, currently 60%.
Portugal and Spain are also net exporters of wood pellets.
In 2022, Portuguese exports stabilized at around 510.000 tonnes, down from the record figure of 709.000 tonnes in 2019.
Two medium-sized producers with growing capacity are the Czech Republic and Croatia. Five new pellet plants were established in 2020, adding 30.000 tons to the Czech Republic's total production capacity.
In 2022, 538.000 tons of wood pellets were produced by the Czech pellet sector.
Further production growth is forecast for 2023 based on the growing domestic market.
Croatia has the potential to utilize more of its biomass resources thanks to its large forests covering almost half of the country's land area.
According to the Croatian Organization of Biomass Producers (CROBIOM), the production of wood pellets in Croatia is approximately 400.000 tons, of which between 80 and 90% are typically intended for export.
The main export destinations in 2022 were Italy, Slovenia and Serbia.
Based on growing domestic and export demand, Croatian wood pellet production is expected to increase.
Local shortages of woody biomass supported the production of pellets made from other biomass sources. According to a 2019 EPC survey, secondary raw materials such as sawdust, wood industry residues and chips account for almost 85% of the raw materials used for pellet production in the EU. With increasing competition for sawdust resources, a broader sustainable feedstock is becoming necessary.
Source: https://www.bioenergy-news.com/
