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.
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| Bulk shipment of wood pellet |
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.
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| Wood Pellet Loading in Sea Port |
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.
