Industry expert blames warm winters for slow wood pellet market

EXCLUSIVE: Unseasonably warm weather is affecting global demand for wood pellets, according to an industry expert.

Speaking at the Argus Biomass 2016 conference held in London, Joao Rocha Paris, CEO of Portugal-based wood pellet firm Enerpar, said Europe was the main consumer of wood pellets in the world. However, he said due to three consecutive warm winters "we are facing a dramatic situation right now in terms of consumption".

Wood pellets are a type of biomass fuel. They are used as a low-carbon alternative to coal to fuel boilers to produce heat. Warmer winters can reduce the need for bio-based heating, both for industrial use and domestic use.

Pessimistic outlook

Paris said 2015 was a "bad" year for the wood pellet market, "2016 is turning out to be worse" and "2017 will be very bad". Paris said he expected the market to pick up by 2018.

Separately, Paris said that the low oil price was making bioenergy a less attractive option and contributing to weak demand for wood pellets.

With oil prices lingering near their lowest levels in five years, greener, cleaner alternative fuels, including biofuels, are taking a hit.

Political leadership

Elsewhere, panel members at the Argus conference were in consensus that two main energy firms are the two biggest consumers of wood pellets – UK-based Drax and Denmark-headquarted Dong Energy.
Drax operates the UK's largest power station, at Selby, North Yorkshire, which supplies about 8% of the country's electricity. It has already converted two of its six generating units to burn biomass in place of coal.

The plant runs on wood pellets, mainly imported from North America.

Speaking about Drax's dominance of the market, Vaughn Bassett, senior vice president sales and logistics of Pinnacle Renewable Energy, said the UK government should be supporting more bioenergy start-ups to make the playing field more level and competitive.

He said the UK government needed to show more leadership and reinstate subsidies for renewable energy plants.
Portuguese market

Separately, speaking about the Portuguese market, Paris said favourable exchange rates for the Russian and Polish markets were putting pressure on Portuguese wood pellet producers.

He also said that pellets produced in the Baltics, Poland and Russia which were traditionally sold to Sweden and Germany were now being sold to the UK – a traditional market for Portuguese pellets.

He also said high electricity costs and high costs of feedstock were affecting the balance sheets of Portuguese wood pellet producers.

Paris added: "I predict that a lot of plants in Portugal will struggle and some of them will shut down in the next 12-18 months. The scenario in Portugal is very difficult."

This article was written by Liz Gyekye, editor of Bioenergy Insight