Bioenergy

Compressed, but expanding fast: An update on pellets

Issue 3 and Volume 10.

With pellets production up 40% in the last two years, Jackie Jones reports on discussion at the European Pellets conference.

There have been a lot of changes in the pellets world since the last European pellets conference in 2005. The general level of interest has increased, and production has blossomed all over Europe. But with this growth have come new challenges.

The pellet-producing countries have increased their production by 40% over the past two years, according to figures presented by Chair of the recent European Pellets Conference, Christiane Egger. Likewise, consumption has increased by between 40% and 50%. Furthermore, the profile of the ‘big’ league is changing, with France now on the point of emerging as one of the largest players. Looking forward, many of the newer members of the European Union, from the Baltic States and Eastern Europe, have good forestry resources and therefore significant growth is expected in those regions.

One of the noticeable changes over the past year or two has been strong price fluctuation, which has threatened to destabilize the market. Various reasons underlie these price swings, says Christiane Egger. The winter of 2005-2006 was both long and cold, which increased demand from the heating market and slowed the supply, by making access to forests more difficult for the foresters. The pellet supply chain did not help, she adds, in having inadequate stocks to draw on. For although the previous, mild, winter had left producers with unsold stocks, many producers – fearing they may not be able to sell enough of their stocks into the homes market – had sold large quantities to the power generation sector. She also suspects that some of the price increases may have been engineered by some less scrupulous dealers more interested in making a quick profit than in creating a stable, long-term market.


The global trade in wood pellets has expanded by around 40% in the last two years. Indeed in some areas this has placed strains on the supply of sawdust, the most common feedstock for pellets

Pellets are not the only wood product to have experienced a price rise – increased activity in the building sector has increased the demand for wood and put up price of wood.

The price of pellets needs to be kept fair and stable, says Christiane Egger. Many others agree – particularly those from countries or regions where pellets are largely used in the home heating market. This sector knows that when householders are contemplating whether or not to install pellet-based heating, they want to know they can rely on a secure supply of heating fuel at a relatively stable price. If they perceive pellets as a risky option, they may opt for another, fossil-based, heating solution instead. This would have consequences for the pellet stove or boilers industries, the sector as a whole, and the environment. All the same, strong demand has stimulated production of pellets.

Pellets for all?

A typical pellets production plant produces 100,000 tonnes per year. Interestingly, this is more or less equal to the current demand for heating pellets from a country like France. However, the Les Awirs 80 MW pulverized coal power plant in Belgium, converted 100% to pellets in 2005, consumes 350,000-400,000 tonnes of pellets a year, according to Didier Marchal of ValBiom. Is there a moral dilemma here? Is it intrinsically better, or more valuable, to use pellets in one type of application rather than another? There certainly seem to be two ‘camps’ within the pellets sector, both with a firm footing in market realities.

The one group is focused largely on building a sound market for a pellets-based heating sector, with a strong emphasis on the local and green properties of pellets. In many countries and regions, pellets’ green image is a significant market driver, especially in these days of heightened awareness of carbon footprints. Many consumers switch to pellets because they like both the fact that the fuel is produced just down the road (rather than being imported from the Middle East or Russia), thereby supporting local employment and putting money into the regional economy, and that pellets are a low-carbon renewable source.


Bags of wood pellets ready to be transported to market

One bone of contention is imports of pellets, especially across continents (to Europe from North America). However, just as public awareness of ‘food miles’ has increased, so has awareness of ‘pellet miles’. Transcontinental sourcing of pellets can reduce the appeal of the fuel for this market, tarnishing – for some – that green image.

Another issue is about the most effective use of pellets. The group building the home heating market sometimes takes the moral high ground on pellets usage, explaining that efficiency of pellets use in heating is much higher than when pellets are burned in power plants in place of coal. Herbert Ortner of Oekofen explained that high-efficiency pellet-based heating devices could deliver efficiencies of up to 90%, compared with efficiencies as low as 35% when pellets are used in power generation. On the other hand, many of the wood pellets imported into Europe are used in CHP plants – in excess of 700,000 tonnes of Canadian pellets in 2007, according to John Swaan of the Wood Pellet Association of Canada – where they produce both power and heat, when needed. Per Ottosen of DONG Energi (check sp) in Denmark said that the high efficiency Avedøre plant uses pellets and straw. This gives 48% efficiency when generating electric power alone, but 92% when the heat is used for district heating. (Those pellets are made at their own pellets factory, where they hope soon to be able to produce 150,000 tonnes/year.)


Not only pellets, but the wood fuel industry in general is also expanding

Swaan maintains it doesn’t matter who uses pellets. What matters is getting all possible players on board to create mass and market stability. That can help open up new markets as environmental awareness, and policies, evolve.

In the end, when it comes to carbon benefits, arithmetic should reveal which uses have the greatest effect. As for transport, Talloil’s Tomas Kåberger, a member of the Swedish Bioenergy Association Board for 16 years, said that on average (and the cost reflects the amount of fossil fuel used) €20 will transport 1 tonne 200 km by road 600 km by rail, or 10,000 km by sea. Thus long-distance seafreight can make sense in terms of carbon footprint.

The main point is that all uses can bring benefits, and that a more mature market and supply chain should be able to meet growing demand from all corners, at relatively stable prices.

In fact, Kåberger thinks it is dangerous for the biomass industry to think of itself as ‘special’ – it’s important to look at the bigger picture, he says. The sector should not be afraid of international competition – it’s not about competing against one another, but together against the fossil fuel market. ‘And that’s a huge market to take on’, says Kåberger.


A typical pellet plant can produce around 100,000 tonnes per year

In a speech he told the European Pellets Conference that, in the past, some Swedish suppliers had concerns that cheaper, imported fuels would damage their business. However, in the end the industry decided that imports would help stabilize prices and reassure investors that the market would be ongoing, regardless of what happened to Swedish biomass. About 5% of the biomass now used in Sweden is imported, and confidence in the market has been established and maintained.

North America

North America (especially Canada) remains a much larger producer than user of pellets, but use is growing, especially in the US. North American pellets consumption (about 1.5 million tonnes in 2006) could rise to over 3 million by 2010. The home heating market is dominated by the ‘small bag’ supply model. ‘We don’t have storage or automatic delivery’, says John Swaan (Wood Pellet Association of Canada) ‘and we need to deliver this. Canada needs the convenience factor’. It’s much the same with the US, which is currently taking between 300,000 and 350,000 tonnes per year from Canada. The remainder of the Canadian output is being exported to Europe.

In some ways, there is a built-in limit to the growth of pellets heating in North America, to do with established heating practice. Whereas traditional heating practice – or culture – in much of northern Europe, especially, is to have a heating system based on hot water distributed to radiators throughout the house, this is rarely the case in the US or Canada. Thus these countries (and the same is true in much of southern Europe, such as Italy) are more likely to use stoves that heat specific rooms. Countries such as Denmark or Sweden tend to use pellets in district heating schemes.


Modern pellet stoves are highly efficient and automated devices calimax

Swaan estimates that by 2010, North America will be exporting 8.5 million tonnes of pellets a year, 5 million of these from Canada. Currently, he reports, Canada’s 23 pellet plants produce just over 1,400,000 tonnes per year. With Canada trying to harvest as much of its vast quantity of pine-beetle damaged wood as possible, Swaan expects Canada’s output to hit 5 million tonnes/year by 2010.

While Canada has a strong supply and a small market, the opposite is true for Norway’s Statoil. Though its parent company is the world’s third largest seller of crude oil, Statoil Pellets is involved in the supply of pellets into the home heating market – essentially, one assumes, to retain its existing customers who wish to switch to non-fossil heating fuel. Statoil Pellets reports that its sales into this market have recently risen by over 70%. One challenge is securing raw materials, and Business Development Manager Lars Romney, who represented the company at the European Pellets Conference, said that alternative materials are needed to meet the needs of the growing market. The next step will be to convert city dwellers to pellets.

In some cases, city dwellers benefit from district heating fired by pellets, but on the whole pellets heating tends not to be widespread in cities. One aspect that the industry continues to improve is that of emissions, though existing boilers and stoves already reach very high standards.

France, a growing market

The French pellet market is undergoing a notable growth spurt, as Frédéric Douard of ITEBE explained at the conference. Pellet production started back in 1980, but moved slowly, with a dozen producers active in the 1980s. By 2000 this number had dropped to three, mostly producing wood pellets for the pellet boilers market. The rising price of oil in 2004 gave the sector a boost, with seven producers active, a number that then increased to 27 by 2006.

Pellets make up only part of France’s burgeoning wood fuel market, which currently consumes 10 million toe of wood fuel per year – 88% of which goes into domestic heating. Sales of pellets boilers and stoves are increasing (accounting for 5% of all boilers bought, and 6% of all stoves bought, in 2005). Consumption and production of pellets in France is increasing dramatically from a steady figure of around 10,000 tonnes pear year since the 1980s, to an expected production of 300,000 tonnes per year and consumption of 250,000 tonnes per year in 2007. Pellet production is already constrained by the supply of sawdust (and its price, up to €50 per wet tonne), with one producer already driven to making pellets from wood chips. See www.itebe.org

So despite price fluctuations and some availability scares in the recent past, it appears that the pellets market is indeed maturing. As it gains in scale and establishes steadier growth, it should be able to leave behind its erratic adolescence. And while it makes sense for the supply of pellets to be as local as possible, it appears that, in terms of pellets’ transport carbon footprint, long sea transport may be a preferable option to shorter distances by land transport. As ever, it makes sense to keep on doing the calculations.

Jackie Jones is Editor of Renewable Energy World
e-mail: [email protected]


PelletBase: a free resource for pellet manufacturers and users

David Smith of Rye Energy had a problem: his company needed a small-scale pellet mill, and he didn’t know where to go to find a list of manufacturers who could give him a quote. He also needed advice about pellet standards, and which was most appropriate for the biomass he had in mind.

After spending several days browsing the web without success, he thought there had to be a better way. So he decided to make his own website.

The idea behind the site would be that manufacturers and users of pellets and associated products and services would be able to register themselves on the site, and enter details of the product they have to offer. Likewise, customers looking for these products could register themselves and tell the suppliers what they needed.

Having had some experience of IT, David spent evenings and weekends working on what would become www.PelletBase.com, a site specifically for the pellet industry and its customers.

‘The site is completely free. Users who don’t want to register on the site can browse the products on offer: these are mainly pellets, boilers and stoves, and companies involved in the design and construction of pellet mills…and of course companies that need them!’

If someone wants to list their company and its products, they need to register: this is also free of charge.

David Smith: ‘Included in the site is a utility which enables users to mail each other directly regarding listings: in order to do this, the user’s email address must be added, and this is why it is necessary to register if you want to add listings.’

Companies can decide how much of their data is viewable by others, including e-mail address and website. PelletBase does not force people to communicate with each other from inside the system … all the contact details which a company decides to share are visible to everyone who visits the site.

The site also includes an RSS news feed of new listings, so companies don’t even need to visit the site to see new listings – they can have them sent directly to their desktop news reader.

‘The idea behind PelletBase is not to make money, which is why there will never be any charge to use it – the idea is to help small companies (like mine) to find the things that they need to make their business grow.’

In the first 3 weeks following its launch, more than 200 companies from more than 30 countries had registered on PelletBase.

And has David found the small pellet mill he was looking for?

‘Not yet … but I have learned a lot about this wonderful business and the people that work in it, which has made the late nights working on PelletBase all worthwhile. And I watch PelletBase for new listings….’.
website: www.PelletBase.com


Pellets in Upper Austria

Upper Austria, home to the European Pellets Conference, has been a pioneer in the pellet market with the first boilers offered 10 years ago at Energiesparmesse (a public event for energy in the home). The region is home to a number of leading boiler producers, and has helped established the supply chain for pellets. Early on, Upper Austria took a decision to build up the market slowly and surely, by taking a ‘quality’ approach. Within the region the pellets sector now employs 3600 people, and has a turnover of €1.6 billion. In 2006, six pellets boiler companies invested €100 million in new manufacturing capacity, creating no fewer than 500 new jobs. And pellets are one of the renewable heating technologies that are helping displace oil-based heating in the region. In new homes, back in 1999, oil accounted for 36% of the heating systems in new homes – in 2006 the figure was less than 1%. Renewable heating, including pellets, accounted for 32% of heating systems in new homes in 1999. Now it is 76%.