Canadian Biomass Magazine

Green Growth

March 27, 2013
By Gerry Van Leeuwen

Global markets for wood pellets are projected to grow by 200 to 300% from 2012 to 2020 – from 16 million tonnes to 40-50 million tonnes.

Global markets for wood pellets are projected to grow by 200 to 300% from 2012 to 2020 – from 16 million tonnes to 40-50 million tonnes.

Forecasts indicate that Europe will remain the major market for wood pellets – at about 25-30 million tonnes in 2020 compared to 12 million tonnes in 2010. An important market change expected during the next eight years is the huge consumption growth forecast for the Asian market – from less than one million tonnes in 2010 to about 15 million tonnes in 2020.

As global wood pellet production increases, it is becoming clear that low-cost pellet production regions are becoming the major pellet exporters. The question of which low-cost production regions will evolve to supply the growing markets will depend to a great extent on the global competitiveness of the two major cost components of every pellet manufacturing plant: delivered raw material cost and transportation costs to market.

European Market Development
Growth of the European Union wood pellet market is the result of a number of government mandated energy targets, such as the EU’s “clean energy” policy adopted in 2005 that set a 20% reduction in greenhouse gas (GHG) emissions and a minimum of 20% renewable energy consumption by 2020. U.K. targets for 15% of total energy consumption to be produced from renewable energy forms by 2020 and a mandate that 35% of electricity supply must be renewable, have also helped spur exports.


U.S. Market Development
Until five or six years ago, U.S. pellet demand was limited to residential and institutional heating markets in mainly the U.S. North East. In the last few years, a rapidly expanding wood pellet industry has sprung up in the U.S. South to fill growing European industrial demand from a relatively cheap and abundant wood supply source combined with the advantage of low shipping costs.

Growing wood pellet production capacity in the U.S. South made the U.S. the largest wood pellet exporting country in the world in 2012, when U.S. exports exceeded Canadian exports for the first time. U.S. export volumes are forecast to nearly quadruple by 2015.

Canadian Market Development
In Canada, 65% of the country’s pellet production capacity is located in Western Canada (mainly British Columbia) and 35% is located in Eastern Canada (mainly Quebec and New Brunswick). The B.C. mills are mainly focused on overseas exports (about 85% of shipments).

Eastern Canadian pellet mills mainly sell their production in bags in Eastern Canadian and U.S. Northeast wholesale/distributor markets. Just three of 21 plants in Eastern Canada exported pellets overseas in 2010.

In 2011, Canadian offshore exports equaled about 60% of total pellet production. Offshore exports from both Western and Eastern Canada are forecast to continue to grow, though not at the explosive rate being witnessed in the U.S. South.

South Korea Market Development
Although South Korea is a small country, it is the world’s 10th largest energy consumer, fifth largest oil importer, and second largest coal importer. It currently produces about 65% of its electricity from fossil fuels. South Korea has become serious about reducing greenhouse gas emissions and has committed to a 30% reduction in CO2 emissions from 2010 levels by 2020. In addition, the Korean government has introduced renewable portfolio standards that require coal-fired power generators to begin producing a minimum of 2% renewable energy by 2012, increasing by 0.5%/year until 2020, at which time they will be required to produce a minimum of 10% renewable energy. It is expected that at least 60% of renewable energy will come from wood biomass, leaving about 40% for other sources.

Japan Market Development
Since the Fukushima nuclear accident in 2011, the Japanese government has been reviewing the country’s energy and resource development policies. The policy direction that the government is indicating it will follow during the next 10 to 20 years includes obligating utilities to use renewable energy; increasing non-fossil fuel energy utilization to 50% and increasing the zero GHG emission power supply from 34 to 70% by 2030.

China Market Development

Although very few specific renewable energy policies have been announced by the Chinese government so far, China’s 12th five-year plan allocates 4.75 billion RMB (US$750 million) in direct subsidies, incentives and tax exemptions to build 200 green energy demonstration projects by 2015. In addition, China has set a biomass energy production goal equivalent to 50 million tonnes of coal by 2012.

Although the five-year plan does not indicate specific types of green energy projects to be undertaken, it is assumed that China will move to include significant volumes of wood pellets in the production of biomass energy to replace coal. China has set the development of sophisticated, next-generation biomass energy plants as the key part of its renewable energy plan.

Gerry Van Leeuwen is vice-president at International Wood Markets Group.

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