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Increased biomass trade on Baltpool but Belarus uncertainty looms

According to data from the international biomass exchange Baltpool, the record-long heating season in the Baltics was the cheapest in Lithuania and the most expensive in Estonia. The turnover of bioenergy sold this season amounted to 4 TWh, compared to 3 TWh during the same period in 2019/2020. Experts say that biomass prices in the coming 2021/2022 heating season will depend on sanctions against Belarus, which is currently one of the largest biomass exporters supplying to the Baltic countries.

Woodchips

According to data from the international biomass exchange Baltpool, the recent record-long heating season in the Baltics was the cheapest in Lithuania and the most expensive in Estonia. The turnover of bioenergy sold this season amounted to 4 TWh, compared to 3 TWh during the same period in 2019/2020. Experts say that biomass prices in the coming 2021/2022 heating season will depend on sanctions against Belarus, which is currently one of the largest biomass exporters supplying to the Baltic countries.

According to Baltpool, the average biomass supply price for the 2020/2021 heating season in Lithuania was EUR 10.89/MWh, in Latvia, EUR 12.15/MWh, and in Estonia, EUR 12.90/MWh.

Looking at the average prices of the entire season in the Baltic region, we see that biomass prices were the lowest in Lithuania and the highest in Estonia. According to the latest data, biomass prices in Latvia are currently lower, so it seems that the next heating season in Lithuania may be more expensive, and Latvian biomass participants may be interested in selling more biomass to the Lithuanian market, said Andrius Smaliukas, CEO of the International Biomass Exchange Baltpool.

Belarus a woodchip wildcard

A few years ago woodchips made up about a quarter of the total amount of biomass sold on the exchange but have grown to become among the most popular biomass products during the last two heating seasons. Bordering Poland, Lithuania, and Latvia, Belarus has emerged as a notable supplier of woodchips with its geographical proximity.

We have noticed that this product has dominated the exchange for several years in a row, and buyers are demanding higher quality woodchips. This has led to a significant increase in imports of this product from Belarus, which is truly of good quality. However, if the recent events in Belarus will result in restricted imports, the ability to secure the required amount of higher quality woodchips for biomass will remain rather limited for Lithuania and somewhat for Latvia, said Vaidotas Jonutis, Head of the Trade Division at Baltpool.

Igors Krasavcevs, Head of the Forest Information Centre in Latvia, also cautions about possible changes in woodchip prices.

Since Lithuania imports a lot of its woodchips from Belarus, and in the second half of this year the supply chain of this product may change, its prices in the market may jump up, Krasavcevs said.

Thus far, Baltpool’s data suggests that biomass import volumes from Belarus have yet to decrease, exceeding 250 000 tonnes in the first quarter of 2021. However, the situation may change soon after the recent socio-political developments in Belarus.

How this will affect the coming 2021/2022 heating season in terms of an increased cost is too early to see.

At the moment, it would be difficult to make any accurate estimations. Only 8 percent of long-term biomass contracts have been concluded for the next season. This is a very small number compared to last year. It is obvious that the market is still watching and waiting, and the exchange participants are analysing the prices of last year’s summer and winter seasons. According to the current long-term and short-term contracts, the average price of biomass is EUR 13.13 per MWh, but it is possible that the average price will increase to EUR 15-16 per MWh in the next heating season, said Vaidotas Jonutis.

According to Jonutis, the price of woodchips is determined by two main factors: weather conditions and storage volumes.

At the moment, with such rainy weather, biomass warehouses should be full if we want to expect good prices. If suppliers have small warehouses and the weather is bad, the prices are high, Jonutis noted.

Growing biomass demand in the Baltic States

At the same time, the Baltic biomass market is growing year-on-year and, as Igors Krasavcevs notes, it is anticipated to continue growing even further in the coming years.

This (growth) will be influenced by the development of new cogeneration power plants in Lithuania and Latvia, and the changing situation in Estonia, which plans to switch from shale gas to more sustainable types of biomass – woodchips and biomass made from waste wood – in the next two-three years in order to meet the requirements of the (European) Green Deal. In recent years, the annual consumption of shale gas in Estonia has been around 12 million tonnes, Krasavcevs said.

According to Krasavcevs, the situation is different in Latvia, where around 2 million m3 of biomass is used in the industrial sector, and about 3 million m3 is used to meet central and district heating needs.

The situation in Latvia will change even more over the next few years, and the demand for biomass will increase with the construction and launch of a new 48 MW central heating power plant in Riga.

The demand for biomass in Lithuania will increase in 2022-2023 with the construction of a new cogeneration power plant in Vilnius, the capacity of which will reach 200 MW.

Tripling of exchange participants

This regional growth is also reflected in Baltpool. Last season, the number of contracts concluded by participants from outside of Lithuania on the international biomass exchange had tripled, particularly in terms of Latvia and Estonia.

There are currently 453 registered participants on the Baltpool Exchange, 117 of which are from foreign countries. Some of the largest buyers of biomass are well-known energy companies in the Baltic Sea Region (BSR), such as Ignitis, Stockholm Exergi, Enea, Enefit, Vilnius CHP Plant, Liepajas Energija, and Riga Bioenergija, to mention a few.

Participants from Latvia and Estonia have been trading on the exchange since 2018, and last year participants from Denmark and Sweden also joined the platform. And we have a partner in Sweden – Svebio. A Finnish exchange Finbex has been launched, where we now also operate via our Finnish partner. The growing number of exchange participants allows us to ensure more stable and favourable biomass prices, Andrius Smaliukas noted.

Focusing on trade in sustainable biomass

According to the CEO of Baltpool, the demand for sustainable biomass is continuously growing in Europe, thus a lot of efforts have been recently made by the platform to simplify trade processes and create even better conditions for market participants to trade in sustainable biomass.

Two new tools will be implemented on the biomass trading platform in the near future, which will make it easier for suppliers to provide data verifying compliance with the EU Renewable Energy Directive (RED II) sustainability requirements.

Furthermore, a carbon dioxide (CO2) footprint calculation tool will also be introduced shortly after in order to provide real-time data on CO2 emissions from the production and delivery of biomass.

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