December 5, 2023

Fueling the Future: Exploring the Wood Pellets Market

Wood pellets Market generate small quantities of hydrocarbons such as methane and CO2 (Carbon Dioxide). Additionally, being carbon neutral, they can be relied upon to reduce GHG (Greenhouse Gas) emissions, due to which a shift from natural gas or coal to wood pellets is being witnessed, especially in thermal industries for clean energy generation. Moreover, government policies across various countries regarding coal fired power plants are likely to favour growth of the wood pellets market. For instance, in December 2018, Government of Canada laid down policies to phase out natural gas and coal fired electricity by end of 2030. This move was to ensure positive climate change by reducing GHG emissions, in turn completely committing to the Paris Climate Change Agreement. Likewise, in Netherlands, Rotterdam witnessed a 40% increase in electricity generation (around 5.5 TWh per annum), as compared to the electricity produced by wind farms, from a power plant that uses wood pellets. This reflects a higher efficiency quotient of wood pellets in producing electricity as compared to other renewable sources. Thus, rising demand for renewable sources of energy coupled with favourable government regulations regarding use of wood pellets in power plants is expected to boost the growth of the wood pellets market in the coming years.

Rising Demand in Heating Applications to Bolster Growth of Global Wood Pellets Market
Demand for wood pellets in heating applications has increased since the past few years. They are used in heating applications across commercial and residential sector for cooking and heat generation. Moreover, drop in prices of wood pellets due to oversupply in 2020 coupled with their cost effective nature as compared to other sources has further pushed their demand.  Additionally, governments are also offering incentives and subsidies apropos to use of wood pellets in heating applications. For example, in 2021, Wood and Pellet Heater Investment Tax Credit came into effect in the US in which consumers can claim an uncapped tax credit of 26% based on the total cost of the unit. This aspect is expected to fuel demand in heating applications, in turn contributing to the growth of the wood pellets market.

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Europe Touted as a Promising Growth Propeller for Wood Pellets Market
Countries in EU are poised to showcase high potential in terms of demand and supply of wood pellets in the coming years. According to Wood Resource Institute, nearly 85% of wood pellets production is from sawmill residues followed by roundwood and recovered wood. Wood Resources International (WRI) analysis shows that wood residues would remain a key feedstock and the demand of wood pellets in European countries is expected to rise by 40% in the next five years. According to WRI, about 75% of the global demand for wood pellets is from Europe, especially for applications such as residential heating, commercial heating and power plants. Bioenergy Europe in its recent publication states that production of wood pellets globally is witnessing a stable and constant growth, with a 5% increase from 2019 to 2020. EU touched 18.1 Mn tons of wood pellets production, making it the world’s major producer, with Germany accounting for a higher share. With regards to consumption, globally a 7% increased has been observed in 2020, with EU-27 being the largest consumer for wood pellets. Based on the current demand and supply scenario, European countries continue to be a lucrative go-to-market for manufacturers of wood pellets in the years to follow.

Global Wood Pellets Market: Competitive Landscape
Prominent players in the global wood pellets market are focusing on capacity expansions and mergers and acquisitions to maintain supremacy. For instance, in 2021, Pinnacle Renewable Energy Inc., a Canadian wood pellet producer, was acquired by Drax Group Plc. This acquisition will result in the inclusion of 11 wood pellets sites of Pinnacle to Drax’s current portfolio, taking the total count to 17. Likewise, same year, Enviva signed a MoU with Mitsui OSK Lines, to produce and deploy environment friendly bulk carrier. Enviva, in 2020, acquired a world class producer of wood pellets based in Georgia in a bid to enhance its production capacity and market position. In 2021, Enviva signed a MoU with J-Power for supply of wood pellets, wherein Enviva will deliver 5 million metric tons of wood pellets yearly to replace coal in the existing coal fired plants of J-Power.
Few of the key companies in the wood pellets market include Enviva, Drax Group Plc, Segezha Group JSC, AS Graanul Invest and Fram Renewable Fuels LLC.

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This press release first seen on Brilad