The EU is the world’s largest wood pellet market, with consumption of about 22.7 MMT (million metric tonnes) of wood pellets in 2017. Based on the European Commission (EC) mandates and Member State (MS) incentives, the demand is expected to expand further to about 24 MMT in 2018. Future consumption will significantly depend on a range of market factors and EU Member State incentives and conditions.
While the EU produces about fifty percent of world production, EU demand represents about 75 percent of the market. In 2017, total EU consumption was about 22.7 MMT. In 2016, 43 percent was used residential heating, 35 percent for commercial power, 12 percent for commercial heating and 11 percent for combined heat and power (Source: AEBIOM). The major users of wood pellets in the EU are the United Kingdom, Italy, Denmark, Germany, Sweden, Belgium, France and Austria.
Residential Use of Pellets
Residential use for heating, about 45 percent of the total pellet market, fluctuates annually but is a relatively stable market compared to industrial heat and power generation. The demand depends on the winter temperatures and fossil fuel prices. The past two winters of 2016/2017 and 2017/2018 were relatively colder than the preceding four winters which is expected to have supported the use of wood pellets for residential heating. Medium-size use of pellets for energy generation by industries or public buildings such as hospitals and swimming pools is generally less dependent on weather conditions.
In Italy, Germany, France and Austria pellets are mainly used in small-scale private residential and medium-sized industrial boilers for heating. In some EU Member States, such as Sweden, Germany, Austria, France and Spain, household heating with biomass as input receives subsidies or tax deductions by the federal and local governments. In most countries, however, government funding is limited.
Italy is forecast to be the largest European market for the household use of pellets. According to the National Renewable Energy Action Plan statement, the use of pellets is expected to increase to 5 MMT in 2020. However, only 15 percent of the demand is met by domestic production, with the remaining 85 percent being covered by increasing imports.
Bagged pellets represents almost the total market. The pellets are mainly distributed through retail shops, hardware stores and fossil fuel suppliers. Currently, Italy sources pellets mainly from Austria, Germany, and Croatia. Imports from the United States fell from 180,000 MT in 2014 to 20,000 MT in 2016, due in part to a warm winter and the higher price of U.S. wood pellets over European competitors. In 2017, imports from the United States recovered to 40,000 MT. Market logistics and economics indicate that in the near future imports from North America will expand further.
The vast majority of wood pellets in Germany are used for heating, because the government does not financially support the use of wood for electricity generation. German law mandates that all buildings erected in or after 2009 have to use a certain share of renewable energy to satisfy their heating and cooling requirements. Wood pellets are one of the options. The replacement of heating systems with wood pellet ovens is subsidized.
Around 70 percent of total French consumption of wood pellets is used in individual residential heating systems. A minor use of wood pellets is collective residential heating.
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