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EU Market for Pellets to Explode

While the 2012 AGM of the Wood Pellet Association of Canada in Quebec City started off with a tour of a domestic pellet heating facility, the key focus of the meeting was on trends in export energy markets, and what they mean for Canadian pellet producers.

Claude Routhier, president of Poly-Energie, has been a driving force behind Quebec’s Cité Verte wood pellet heating project.

The meeting started with a tour of the Cité Verte urban district heating project (See our cover story in Canadian Biomass Sept/Oct 2012 for the full report.) The tour was led by Claude Routhier, president of Poly-Energie and a driving force behind this project. The 800-unit apartment block and commercial centre is heated 100% by four Viessmann biomass boilers in a pilot project partly funded by Hydro Quebec and Natural Resources Canada. The goal is to create an example and working database for others to emulate. The company’s next project involves individual pellet heating systems in semi-detached ski lodge housing near Quebec City.

The conference kicked off with overviews of the Canadian and international wood pellet scene from WPAC executive director Gordon Murray. The European Union still represents 84% of global pellet consumption, with the United States responsible for another 12%. Canada, despite our climate, accounts for just 1%. More importantly, the U.K. is now responsible for some 50% of North American exports, a number that both Murray and other experts at the AGM expect to see grow at a significant pace.

On the domestic market, Murray expects great things from new federal coal-powered generating emission regulations. By capping emissions at 420 tonnes of CO2 per GHh starting in 2015 versus the current 1050 average, Murray expects a market of 5.5 million tonnes to develop by 2019. “We currently produce less than two million tonnes, so we are looking at almost tripling our production level just for the domestic market.”

Picking up where Murray left off, Arnold Dale of the Ekman Group returned to trends in the international pellet market. Ekman represents forest products producers worldwide, and has moved strongly into pellet markets in the past few years, including a 900,000-ton plant in Russia with plans to add another million tonnes.

While stressing the uncertainties of politically driven global power generating markets, Dale’s message was essentially one of significant growth opportunities, especially in the U.K. He expects some hiccups as coal power generators there move increasingly to biomass. Still, even with one or two plants converting at a time, he forecasts a switch involving roughly 2 GW.

“With each plant you are talking 2.3 million tonnes, and I can see a need for some 7.3 million tonnes by 2017 in the U.K. alone. The question is where will it come from?” Dale expects much to come from the U.S. south, South America and Russia. Yet there will be opportunities wherever logistics allow.

“With the demand we are expecting, and the pace at which it will happen, there will even be a market for the smaller players, the 50,000- to 200,000-tonne plants – the need will be that great.”
Dale also sees massive opportunity in the residential heat market across Europe, a market he feels more comfortable forecasting. Europeans currently consume some seven million tonnes of pellets to stay warm (a similar amount to industrial power consumers).

“The math is a little easier: You know how many pellet boilers were sold this year in Italy and Austria, for example. If 160,000 boilers were added in Italy this year, they will need 320,000 tonnes of bagged pellets next year to run them, and for the next decade as well.”

With the torrid pace of pellet stove sales in countries like Italy, Austria and Spain, Dale predicts the current seven million tonnes of pellets to become 14 million by 2015, and a staggering 20 million by 2020. The consuming nations simply no longer have the forest industries to support that volume, a fact that should make hardcore industrial suppliers look at diversification.

“Even if you are currently in the industrial market, I suggest you start looking at the European domestic bagged market for a portion of your production.”