On October 5, 2021, Lithuania-headed International Biomass Exchange Baltpool recorded the highest ever spot price for woodchip trade in Lithuania on its weekly auction site. The average spot price of woodchips for delivery to a heating and/or cogeneration plant in Lithuania on the most recent auction reached EUR 20.14 per megawatt-hour (MWh), a 2.6 percent increase from the previous week's spot price average of EUR 19.63/MWh.
The Baltpool biomass auctions are held on a Tuesday, and this week’s auction recorded the highest ever spot price average of EUR 20.14/MWh for woodchips delivered to biomass plants in Lithuania. The energy turnover of this week’s woodchip contracts for Lithuania is 69.86 GWh, which puts the value of Tuesday’s trade at EUR 1.406 million.
The increase in electricity prices and higher costs for emission rights increase the demand for biofuels, commented Gustav Melin, CEO of the Swedish Bioenergy Association (Svebio) which is also a Baltpool partner.
From heat to heat and power
Melin points out that while the rise in woodchip prices in Lithuania cannot be transposed directly to the rest of the Nordic-Baltic region, the markets are interconnected and the overall demand for woodchips is increasing.
In Sweden, district energy companies that have turbines in their asset fleet are switching from heat-only operations to combined heat and power (CHP) mode to take advantage of the currently high electricity prices.
In doing so woodchip consumption increases by almost 50 percent. In addition, contracts relating to longer periods are signed at a higher price.
It is gratifying to see that European climate policy is finally starting to work, and that it will be more expensive to emit carbon dioxide. The price of emission rights has doubled since last year and increased tenfold in the last four years. This after almost 15 years of an emissions trade that barely played a role. That explains why the companies were unprepared for the price increase that started this spring, said Gustav Melin.
Significant demand increase forecasted this heating season
In Europe, emission costs are now rising from a low level, which is why Svebio says that it will be “unnecessarily expensive” for companies in the coming heating season.
Svebio forecasts that there will be a significant increase in demand for biofuels throughout Europe for the coming season as companies try to switch fuel in existing boilers.
How big the demand will depend on factors such as wind conditions, day degree temperatures, and emission prices – cold, calm weather is likely to push demand up while mild, windy weather is likely to dampen demand.
The Swedish model with carbon dioxide tax, which is gradually raised over a long period of time, is a better method for energy conversion, as is the Lithuanian method which over the last decade has switched fuel in cogeneration plants. In both countries, heating costs have been reduced while switching to renewable bioenergy in almost the entire heating sector, Gustav Melin said.
Biomass fuels are available but time is needed to scale up
However, Svebio believes that there are plenty of biomass fuels available and that they can cover energy needs for the next 15-20 years, perhaps even for an even longer period. But fuel suppliers need to have time to prepare to scale up production.
The Swedish biomass fuel situation is particularly good as forest industry by-products such as shavings and bark are plentiful. In addition, the current spruce bark beetle infestation has also increased the volumes of beetle-kill logs that have no alternative but to be used for energy purposes.