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Separating the carbon and fibre from trees and forests at Nordic Pellets 2021

As the European Union, now the EU-27, heads into the 2021 – 2030 period, one may think that the thrashed out recast of the Renewable Energy Directive (RED II) along with its inclusion of woody biomass would herald a period of growth and stability for the pellet industry. The program and lineup for this year's Swedish Bioenergy Association's (Svebio) conference, Nordic Pellets 2021, taking place as an online event on January 27, highlights where the opportunities and demarcation lines lie.

The pellet bagging- and palletising line at Verdo’s facility in Randers, Denmark.

While the coronavirus (COVID-19) pandemic has an impact on pellet production, demand, and ENplus pricing, the European 2030 climate targets along with the European Green Deal and allied recovery strategies such as the Renovation Wave present an opportunity. Pellets could take a significantly larger share in the space heating of European homes and businesses where fossil fuels still dominate.

With both technical and sustainability criteria and schemes to verify compliance in place, one would expect that the pellet industry, which has been around for at least four decades, would be allowed to get on with replacing antiquated oil and coal-fired heating systems in European buildings or coal-fired power plants.

Yet despite EU sustainability criteria and third-party forestry and sustainability certification schemes, the “industrial use” of wood continues to draw considerable fire from environmental non-governmental organizations (ENGOs) on both sides of the Atlantic, not least over forest carbon stock concerns.

However, the results of a recently published first-of-its-kind joint study of systematic changes in timberland conditions of procurement areas of wood pellet mills in the Eastern US, are encouraging. The researchers found, overall, a net expansion in carbon pools that is compliant with current trade requirements for the preservation of carbon stocks.

German and Polish coal exits

There is much work to do. For instance, the two remaining coal bastions of Europe – Germany, and Poland. The former has agreed on a detailed coal exit plan and pathway to phase out coal-fired power generation and transition to clean energy by 2038 at the latest. Monies have been earmarked for early closures and conversions, such as Vattenfall’s Moorburg plant in Hamburg.

The latter has a draft proposal to reduce its heavy reliance on coal and invest billions of PLN into nuclear and renewable power capacity though details on biomass have remained sketchy.

Both countries have a fleet of Drax scale power stations, worrisome no doubt for the same said ENGOs. However, it is perhaps the numerous small- and mid-sized district heating and combined heat and power (CHP) plants dotted around the two countries rather than co-firing or full-scale conversions of large power plants, that present the best opportunities for the majority of pellet producers.

Commissioned in 2015, Vattenfall’s 100 percent hard coal-fired 1 558 MWe and 30 MWth Moorburg combined heat and power (CHP) plant in Hamburg, Germany plays a role for grid stability also with regard to the scope of the further development of renewable energies. The output of the power plant can be increased or reduced by more than 600 MW within 15 minutes. The German Federal Network Agency (Bundesnetzagentur) has decided to award compensation for a complete phase-out of Moorburg meaning that it can be phased out earlier than planned (photo courtesy Vattenfall).

Many of these plants could be serviced using local forest resources, not least spruce bark beetle ravaged wood, and capturing just low single-digit percentages of these coal conversions for pellets would result in significant volumes. Undoubtedly, pellet industry majors on both sides of the Atlantic are keeping a keen eye and ear on developments in these two re-emerging markets.

At the same time, a newish dark horse is entering the scene, Belarus. While the current (2020) annual production capacity is shy of 500 000 tonnes, the country sees itself becoming an exporter of pellets to Europe as part of an overall bid to modernize its forestry and forest industry sector. In 2020, there were 21 pellet plants operational of which six had ENplus certified production.

Sustainability and trade

Sustainable biomass such as woodchips and pellets is the largest contributor to Denmark’s renewable energy mix and is largely responsible for replacing the use of coal in the electricity and heating sector. Denmark’s pellet consumption in 2019 was 3.1 million tonnes, the same total as Italy.

A new Danish biomass sustainability law, in line with the EU’s mandatory sustainability criteria, is to replace a voluntary industry agreement that has regulated sustainable biomass use in Denmark since 2014.

Like Italy, Denmark has limited pellet and solid biomass production. Thus, unlike its Nordic-Baltic neighbours, Denmark is a major importer of pellets and biomass, sourcing it from a variety of geographies both from across the Atlantic as well as the Baltic Sea region.

A vessel unloading biomass at a Swedish combined heat and power (CHP) plant.

The latter biomass market is something that the Lithuanian state-owned digital timber and biomass trading platform Baltpool is keen to service. In operation since 2013, Baltpool has around 450 members and operates in all three Baltic States, Finland, Sweden, and Denmark.

Pellets in the post-Brexit UK

Then there is the UK, by far the single largest pellet consumer in Europe with around 9.2 million tonnes or so, the volume is driven by the power sector. Nonetheless, around 700 000 tonnes are used in the UK residential and commercial heating sectors, a figure that trade bodies behind the Biomass Heat Works! campaign is working hard to increase.

Incentive schemes such as the domestic and non-domestic Renewable Heat Incentive (RHI), and the more recent Heat Networks Investment Projects scheme open opportunities for the pellets value chain.

How will post-Brexit practicalities pan out for previous intra-EU trade for EU producers active in the UK market? How does this new Danish regulation and RED II compliance tie in with existing certification schemes such as the Sustainable Biomass Program (SBP) scheme or the recently launched SUSTAINABLE RESOURCES Verification Scheme (SURE)? Can digital trading platform operators like Baltpool help improve trading transparency while reducing transactional costs for users?

These are just some of the issues to be discussed during the upcoming virtual Nordic Pellets conference that will be held on January 27, 2021, starting at 13.00 CET – a good way to start off the 2021 pellet conference circuit.

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