Nordic Pellets 2019 shaping up to a perfect storm
With one week to go, this year's annual Nordic Pellet conference is shaping up to be the most topical and timely edition ever. EU's 2030 Renewable Energy Directive (RED II) is agreed, winter has come to Europe, the Netherlands has approved Sustainable Biomass Program (SBP) and Germany's coal exit commission has published its coal phase-out proposal. All these while Argus pellets price index has climbed steadily since July 2018, from around US$175 per tonne to almost US$210 per tonne CIF ARA.
Next week sees the start of the Nordic Pellets 2019 conference in Varberg, Sweden. Organised by the Swedish Bioenergy Association (Svebio) in partnership with the Swedish Pellet Association (PelletsFörbundet), this year’s edition sees the support from the world’s largest pellet producer Enviva Holdings Inc., Scandinavia’s largest pellet producer Scandbio AB and Sweden’s largest forest owners association, Södra.
As it happens, it is shaping up to be one of the most topical and timely wood pellet conferences on this year’s conference calendar. This is down to a convergence of circumstances and happenings.
Widely regarded as one of the pioneers in the wood pellet world, Sweden’s own domestic pellet production has, despite recent capacity build-outs during 2018, since been surpassed by single entities – companies such as Enviva (US), Pinnacle Renewable Energy (Canada) and Graanul Invest (Estonia), the world’s top three producers each have an annual production capacity in excess of Sweden’s own production or consumption.
The Baltic Sea Region is undergoing a major biomass heat and power build out in which woodchips and wood pellets play a dominant role. The Nordic power majors Fortum (Finland), Statkraft (Norway) and Vattenfall (Sweden) are pushing for European carbon neutrality by 2050 while others, such as Ørsted (Denmark) and Helen (Finland), are fast-tracking their own coal phase-out.
In its recently published Solid Biomass Barometer 2018, EurObserv’ER notes that gross solid biomass heat sold to heating networks in the EU rose 4.1 percent in 2017 compared to 2016. This was driven in part by proactive biomass cogeneration policies in Finland, Denmark and Sweden. Coal-fired power plant conversions, particularly in the UK, Finland and Denmark, has expanded by 2.9 percent.
Indeed, as countries, Denmark, Finland and Sweden are seemingly competing to become the world’s first carbon neutral welfare state – phasing out the use of coal in heat and power is one key aspect in this ambition. Together with Estonia, Latvia and Lithuania, they have already or are close to achieving EU’s 2020 renewable energy targets.
At the same time, with the exception of Denmark and inclusion of Norway, these countries are major producers of forest biomass including pellets. There is also cross-border ownership of energy utilities, forest resources and pellet production. Intra-regional biomass trade is supplemented by imports from Russia or North America.
So far so good in terms of market balance – biomass supply matching incremental demand. Looking ahead EU’s Renewable Energy Directive for 2030 (RED II) is agreed, winter has come to northern Europe, and the Netherlands has approved Sustainable Biomass Program (SBP) which is all good news for pellet producers.
However, the potentially biggest game-changer is Germany, already the EU’s largest solid biomass consumer. Germany’s coal exit commission has just published its coal phase-out proposal for the German power sector.
What might this mean for pellets going forward, now that the Argus pellets price index has climbed steadily since July 2018 from around US$175 per tonne to almost US$210 per tonne CIF (cost insurance freight) into ARA (Amsterdam, Rotterdam, Antwerp)? This is just one of many questions on pellet markets, logistics and safety to be discussed next week in Varberg.