The driving force behind growth in demand for industrial wood pellets in the U.K. is the Climate Change Act, which requires the U.K. government to set legally binding carbon budgets and reduce GHG emissions by at least 80% by 2050 (1990 baseline). In order to ensure progress towards this goal, the U.K. government has targeted a 57% reduction in GHG emissions by 2032 (1990 baseline). Achieving these targets will require utilities to produce a higher percentage of power from renewable sources, which management expects to be achieved in part by the replacement of coal capacity with industrial wood pellets.

To support growth in renewable technologies, the U.K. government has introduced a number of reforms, including the introduction of a carbon tax and changes to its incentive system to encourage operators of coal plants to switch to low-carbon alternatives, such as industrial wood pellets. On March 31, 2017, the U.K. introduced a "contracts for difference" framework to promote investment in low-carbon generation technologies, such as biomass, wind, and other renewables, by providing revenue certainty to low-carbon power generators.

In response to these changes, U.K. power generators have made significant investments in projects that utilize industrial wood pellets. Drax has converted three of its six 645MW plants from coal to industrial wood pellets and is investigating converting a fourth. Energeticky a prumyslovy holding is in the process of commissioning its 400MW coal-to-biomass conversion project in Lynemouth, U.K. (expected to consume 1.4 million MTPA and projected to come online in the fourth quarter of 2017) and MGT Power Ltd. is constructing a 299MW new-build biomass plant in Teesside, U.K. (expected to consume 1.1 million MTPA and projected to come online in the first quarter of 2020).

Hawkins Wright forecasts that the U.K. industrial wood pellet potential demand will increase from 6.4 million MT in 2016 to 9.6 million MT by 2021, supported by the ongoing coal-to-biomass conversion projects. In the U.K., the current subsidy regime for coal-to-biomass conversion projects comes to the end of its 25-year term in 2027. Hawkins Wright expects that, even in the absence of a renewed subsidy regime, key industrial wood pellet consuming power stations will continue to operate, as biomass power plants are expected to represent roughly 7% of the U.K.'s power generating capacity in 2027 and will be playing an important system balancing role for this region's power grid, with no readily identifiable dispatchable baseload power alternative that is renewable.

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  United Kingdom >>
The driving force behind growth in demand for industrial wood pellets in the U.K. is the Climate Change Act, which requires the U.K. government... More >>

  European Union (excluding the U.K.) >>
The primary policy that is driving the industrial wood pellet market in Europe is the Renewable Energy Directive, which sets binding targets on the... More >>

  Japan >>
Japan is currently the fastest growing industrial wood pellet market in Asia. The Japanese government has stated that it remains committed to... More >>

  South Korea >>
In January 2012, the South Korean government introduced the Renewable Portfolio Standard, which requires 14 energy companies to source an increasing... More >>

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