Look across the horizon for the industrial-grade wood pellet market, and you will see many positive developments for the industry. Not only is the industry achieving policy certainty and government support for biomass across the European Union, but also new markets are beginning to emerge in Asia. There are also opportunities opening up here at home in the U.S., and within the robust residential heat market in Europe.
The southeastern U.S. has spent the past decade developing the necessary infrastructure and supply chain to bring wood pellets to the world. Over the past several years, the U.S. has become the No. 1 exporter of wood pellets to Europe, exporting over 2.7 million tons of wood pellets in 2013 alone.
Industrial-grade wood pellets in the U.S. are harvested from forest products residues, such as sawdust, tree tops and limbs, and other fiber unusable for saw logs. Providing a market for this low-value fiber keeps the forest healthy by removing debris that would otherwise be left to rot or burn, and by allowing more space for replanting.
This industry also gives a small financial boost to the forest products market overall, which encourages private landowners to keep their land well-managed and forested, rather than converting to other uses such as agriculture or commercial development.
All this results in a product that is good for the forest, good for the economy and good for the environment. Biomass is currently the only renewable energy than can provide low-carbon, low-cost power that can balance the energy grid.
The European Union is leading the world in reducing carbon emissions and mitigating climate change, and the wood pellet industry is poised and ready to play a large role in these efforts. As EU member states analyze their current energy portfolios, many are seeing the benefits of using woody biomass to reach their renewable energy goals.
The demand for industrial wood pellets for biomass conversions has been growing steadily in the U.K., Netherlands, Belgium and Denmark. There are dozens of projects in the supply chain, each of which will require a continuous and ever-increasing wood pellet supply.
The market in Asia is also promising. South Korea will need to rely heavily on imports for wood pellet supply because of the lack of domestic forest resources. It is estimated that 75 to 80 percent of its supply will need to be imported by 2020. Japan also has made commitments to reducing the use of fossil fuels and has ramped up both importation and domestic production of wood pellets.
The residential heat market in Western Europe will also offer some trading opportunities for producers, as Europe has predicted that its domestic supply will not be able to meet demand in the coming years.
Additionally, with the recent commitment from President Obama to reduce carbon emissions 30 percent by 2030, we expect to see growth in the biomass market domestically as well.
As we look out across the market place, we see industrial wood pellets playing a large role in mitigating climate change both here at home and around the world, and the U.S. stands ready to continue to provide a steady, sustainable supply to meet this growing demand.
Seth Ginther | Executive Director
U.S. Industrial Pellet Association