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July 24, 2019

Overview of the current trends in Europe’s industrial wood pellet market

Overview of the current trends in Europe’s industrial wood pellet market

In markets such as the United Kingdom, Belgium, and the Netherlands residential use is negligible and the demand for wood pellets is dominated by large scale power plants. The governments of these countries opted to fulfill their obligations for renewable energy use in 2020 mainly by the use of biomass for the generation of electricity. As these countries lack a sufficient domestic production of pellets they are largely dependent on imports.

The conversion of large electricity plants to fire biomass instead of coal is a key factor in the UK Government’s plans to reach renewable energy targets. The main support mechanism within the UK’s energy policy that has enabled the conversions is under the Levy Control Framework and called ‘Contracts for Difference’. This involves the government paying a premium above the market price of the electricity generated by the biomass power plant. The largest user of pellets in the United Kingdom recently converted a fourth unit of their plant from coal to biomass combustion. Each of these four units combusts 2.3 mmt of wood pellets per year. The second largest user was scheduled to start their operations in May 2018, but this plant is not operational yet. At full capacity the power generation of this plant will utilize about 1.4 mmt of pellets.

Another company is schedule to start using pellets early 2020. The expected maximum use of this plant is about 1.0 mmt. It should be noted that for power generation, these three plants use wood pellets as their main feedstock but other biomass such as elephant grass and willow also may be used. For 2019, the total use of pellets in the United Kingdom is forecast at 8.5 mmt.

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