Wood pellets are a renewable, sustainable energy source that helps countries and regions meet decarbonisation targets, while still providing baseload dispatchable power. Unlike intermittent renewable energy sources such as solar and wind, biomass energy can be turned on or off to meet demand and can operate as baseload generation as it is not generally affected by weather or resource conditions. As a result, biomass energy is an important component of the energy market that provides renewable baseload power to complement intermittent renewable energy sources. Industrial wood pellets are used to stabilize the electrical grid.

The wood pellet market is comprised of two segments: industrial wood pellets that are generally used as a substitute for coal in power plants; and commercial and residential wood pellets that are used in wood pellet stoves and wood pellet boilers to generate heat (also called the "heat" market). Demand for wood pellets is split roughly equally between industrial and commercial/residential heating markets, though industrial wood pellet demand is forecasted to grow more rapidly.

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  Global Demand for Industrial Wood Pellets >>
The industrial wood pellet industry is experiencing an extended period of rapid demand growth. According to Hawkins Wright, annual industrial wood pellet demand increased from 9.4 million MT in 2013 to... More >>

  Potential New Markets for Industrial Wood Pellets >>
Beyond the traditional markets for industrial wood pellets, there are a number of new markets that represent significant growth opportunities... More >>

  Global Supply of Industrial Wood Pellets >>
Worldwide nameplate capacity to produce industrial wood pellets was estimated by Hawkins Wright to be 20.9 million MTPA as of September, 2017... More >>

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Industrial wood pellets are used in dedicated biomass power generation plants or co-fired with coal. Since the process for converting industrial wood pellets into electricity and the process for converting coal into electricity is similar, the capital costs for converting a coal plant into a plant that burns biomass are typically lower than the capital costs associated with developing other renewable energy sources. As a consequence, coal plant conversions and co-generation investments are highly attractive investment opportunities for coal plant operators/owners whose generation assets are no longer economical or viable due to the introduction of a regulatory framework intended to reduce GHG emissions. In addition, certain utilities in Europe and Japan have embarked on projects to build new, greenfield biomass fueled power stations to provide renewable baseload power. Power plants that are equipped to process industrial wood pellets, whether alone or in conjunction with coal, provide a stable source of long-term demand supported by long-term supply contracts between large producers and utilities or trading houses that purchase industrial wood pellets.

Hawkins Wright, an independent market consultant with expertise in the bioenergy sector, forecasts that existing industrial wood pellet capacity will not be sufficient to meet global potential demand beyond 2017. To measure the industrial wood pellet supply to potential demand market balance, Hawkins Wright compares global potential demand with the total available volume to supply the market. Total available volume is typically less than nameplate capacity, as there are a number of factors that affect industrial wood pellet suppliers' productivity, such as feedstock availability, economic viability, operational process constraints such as maintenance programs and unscheduled downtime, and working capital constraints. For the industrial wood pellet market, Hawkins Wright assumes capacity utilization of approximately 90% of nameplate capacity.

According to Hawkins Wright's projections, global potential demand for industrial wood pellets is expected to exceed current total available volume by approximately 5.6 million MT in 2019 (requiring a 27% increase in supply from current capacity of 20.9 million MTPA). Taking into account the 2.5 million MT of capacity under construction or financed for completion by 2019, approximately 3.1 million MT of incremental capacity is required to meet expected potential demand in 2019. By 2026, Hawkins Wright believes that global production capacity of industrial wood pellets will need to more than double to meet expected potential demand, requiring 18.6 million MTPA of additional production capacity. However, there are a number of factors that make it difficult for all but the largest industrial wood pellet producers to construct significant new production capacity, including the ability to secure long-term off-take agreements, the experience required to manage complex industrial wood pellet operations, the need for regional density to optimize logistics through vertical integration, and the capital requirements and management expertise to build new production capacity.