Wood energy plays a significant role in the UNECE region as the leading source of renewable energy. According to official reports, wood fuel production and consumption decreased slightly (by about 3 million m³) in the region in 2019, to 260 million m³. Wood fuel is often traded in informal markets, however, and officially reported volumes are often significant underestimates.
The consumption of wood pellets is increasing steadily for both industrial (electricity and heat) and private (household heating) uses. The UNECE region is the global centre for the production and consumption of wood pellets: 80% of world production is in the region, and 90% of global exports originate in UNECE countries.
A total of 33 million tonnes of wood pellets was produced in the UNECE region in 2019, an increase of 7.6% compared with 2018. Of the subregions, Europe consumed the most by far, and North America confirmed its position as the number-one exporter of wood pellets worldwide.
EECCA countries showed the most dynamic growth in wood pellet production in 2019, albeit from a relatively low base. Of the big producers, production increased in the Russian Federation by 14% and in Belarus by 48%.
Renewable-energy policies aimed at reducing the share of fossil fuels in national energy mixes are a main driver of increased demand for and international trade of wood pellets.
Outside the UNECE region, Viet Nam is the third most important exporter of wood pellets worldwide behind the US and Canada.
Recent data show that 25.3% of European roundwood removals was directed to energy generation in 2019. Wood fuel accounts for about half the wood removed from forests in one in every four countries in the subregion; in Albania, Italy and North Macedonia, 80% or more of the wood removed from forests is used for wood fuel. European wood fuel* consumption increased slightly in 2019 (graph 6.1).
* Wood fuel is defined in the Joint Eurostat/FAO/ITTO/UNECE Forest Sector Questionnaire as, “roundwood that will be used as fuel for purposes such as cooking, heating or power production. It includes wood harvested from main stems, branches and other parts of trees (where these are harvested for fuel), round or split, and wood that will be used for the production of charcoal, wood pellets and other agglomerates. It also includes wood chips to be used for fuel that are made directly (i.e. in the forest) from roundwood. It excludes wood charcoal, pellets and other agglomerates. It is reported in cubic metres solid volume underbark (i.e. excluding bark)”. This definition corresponds with code 313 of the Central Product Classification Version 2.1 of the United Nations Statistics Division and the sum of codes 4401.11 and 4401.12 of the Harmonized System of the World Customs Organization.
The European market for wood pellets is forecast to be only lightly affected by the COVID-19 pandemic (Flach et al., 2020). However, some 75% of respondents to a recent survey of ENplus-certified companies indicated that COVID-19 has negatively affected their businesses. Among reported impacts, about 8 in every 10 survey respondents reported reduced demand in the first half of 2020, and half of respondents expect to be severely affected. Only about 5% of respondents indicated positive effects. To date, there have been no major issues with the procurement of wood fibre for pellet production (ENplus, 2020). Comparatively, the crisis is expected to cut European demand for transport biofuels such as renewable diesel by 6-10% (Flach et al., 2020).
European wood-pellet production was about 18.8 million m³ in 2019, an increase of 8%. European wood-pellet imports continue to grow, exceeding 19 million tonnes in 2019 (up by 5.3% compared with 2018) (graph 6.2); the Netherlands doubled its annual wood-pellet imports, to 1.22 million tonnes. The wood-pellet supply was sourced primarily from the Baltic states, followed by the Russian Federation, Belgium and the US (Flach, 2020). Flach (2020) identified a lack of certification at the forest level as a major obstacle to the growth of US-based wood-pellet exports to the Netherlands because such certification is required to receive Sustainable Energy Production stimulus funds.
Unit values for traded wood fuel, including pellets, declined slightly in 2019 (graph 6.3). Adequate supplies and milder-than-average winter temperatures in 2019 contributed to this trend.
Wood fuel production in the Western Balkans* increased sharply (by 11%) in 2019. Wood-pellet production jumped by 22%, to 1.5 million tonnes, of which more than half (781,000 tonnes) was exported. The production of wood pellets dropped by about 20% in the first quarter of 2020 compared with the first quarter of 2019, however, and even optimistic scenarios indicate a drop of 5-8% overall in 2020 (assuming no increase in COVID-19-related lockdowns). The wood fuel and charcoal component of production shrank slightly in the first quarter of 2020 in the Western Balkans. Wood fuel production is expected to drop by about 10% in 2020 (B. Glavonjić, personal communication, 2020)**. The consumption of wood pellets and wood chips in the Western Balkans jumped by 21.3% and 18.5%, respectively, in 2019, likely the result of national policies in Serbia and Bosnia and Herzegovina to replace obsolete coal- and heating-oil-fired heaters in public buildings with wood-based systems.
* The Western Balkans comprise: Albania, Bosnia and Herzegovina, Croatia, North Macedonia, Montenegro, Serbia and Slovenia.
** Data from the University of Belgrade Faculty of Forestry, Timber Trade Centre database. Belgrade, June 2020.
Wood fuel production and consumption in EECCA regressed to pre-2018 levels in 2019, dropping by 9.9% and 8.2%, respectively, after record highs in 2018. Most of the production was used domestically or traded among EECCA countries; thus, subregional production and consumption were similar in 2019, at about 42 million m³ (graph 6.4).
The situation is much more dynamic in the wood pellet market, with production increasing by 12% in EECCA in 2019, to 2.5 million tonnes. The production of wood pellets has almost doubled in the subregion in the last five years, driven mostly by demand elsewhere (graph 6.5); about two-thirds of the production is exported to Asia and Europe. The Russian Federation remains the main wood pellet producer and consumer in the EECCA subregion, although Belarus saw the biggest increases in production and consumption in 2019, up by 48.2% (to 412,000 tonnes) and 102.3% (to 46,000 tonnes), respectively.
The construction of several new wood pellet plants has been announced in the subregion: two with capacities of 100,000+ tonnes in Belarus (Vitebsk and Polotsk, which may come online in early 2021) (PRODESA, 2020) and one in the Russian Federation (in Boguchany, Siberia) (WhatWood, 2020d).
The average export declared unit value for wood fuel was $74 per m³ in 2019 (graph 6.6). The export unit value for pellets was unchanged at $125 per tonne, due mainly to a relatively stable exchange rate between the Russian rouble and the euro in 2019.
North American wood fuel production was 73 million m³ in 2019, and wood pellet production reached 11.8 million tonnes (graphs 6.7 and 6.8). Additional growth in pellet production has come from new and restarting operations.
The US House Select Committee on the Climate Crisis has identified biomass as one of the pillars for achieving zero carbon emissions by 2050, and it has recommended investment in research on the implications of wood use and wood products for the climate (US House of Representatives, 2020).
The US has a total annual production capacity of 10.9 million tonnes in the manufacture of densified biomass (i.e. wood pellets) in 84 operating facilities (as of April 2020) (EIA, 2020). Three-quarters of this installed capacity is in the country’s southeast, 18% is in the northeast and the remainder is in the west. Industrial wood pellets comprised 79% of total US wood pellet production in 2019, and the average domestic price was $183 per tonne. Flach et al. (2020) estimated that the US has the potential to supply 65% of EU import demand (about $1.6 billion at 2020 prices) if EU trade flows continue their current upward trajectory. So far, demand for US wood pellets has been unaffected by the COVID-19 pandemic.
In Canada, the majority of wood energy in 2019 was derived from the use of solid-wood processing residues (12.4 million tonnes) and spent pulping liquor (18.2 million tonnes) (Statistics Canada, 2020a). The domestic consumption and production of wood energy may increase in Canada as the country’s Clean Fuel Standard is implemented. Concerns have been raised recently about this policy, however, because it does not recognize the use of wood pellets in coal-fired generators (Clean Fuel Steering Committee, 2019). Recommendations have been made for policy changes, which, if acted on, could spur an increase in the domestic use of solid biomass fuels including wood pellets.
Canadian wholesale prices for wood pellets held close to $140 per tonne in 2019 (Statistics Canada, 2020b); the average US retail prices for wood pellets was $183 per tonne in 2019. Prices were lower in the US south, at $149 per tonne in 2017 and 2018, and higher in both the north and west. This reflects the concentration of utility pellet production in the south and domestic (premium bagged) pellet production in the north and west (EIA, 2020).
Graph 6.9 shows a gap between declared unit values for imported and exported pellets. This gap is due to the continued export of utility-grade pellets and the import of premium bagged product.
The UNECE region dominates the global trade in wood energy, in both volume and value terms. Viet Nam is the only significant producer outside the region; its production was almost zero in 2012, but the country is now the third most important exporter of wood pellets worldwide behind the US and Canada. (table 6.1).
Viet Nam’s pellet industry is fuelled by demand from countries in the Asia-Pacific region, especially Japan and the Republic of Korea, which have low-carbon-fuel policies for the generation of heat and power. Almost all Vietnamese production is destined for those two countries, accounting for about two-thirds of the Republic of Korea’s imports and one-third of Japan’s imports (FutureMetrics, 2019). Vietnamese wood pellet exports reached 2.46 million tonnes in 2019 (FAOSTAT 2020).
Japan and the Republic of Korea are the only two countries outside the UNECE region with established and growing wood pellet markets (table 6.2). South Africa, which imports large quantities of traditional fuelwood, ranks a very distant third, by value, among wood-energy importers outside the UNECE region.
Table 6.3 summarizes data on the production, consumption, trade and declared value of cross-border trade of wood fuel and pellets in the UNECE subregions. Additional information and the complete forest products database is available at: www.unece.org/forests/fpamr2020-annex.
Initial data supplied by UNECE member States (all figures are year over year) indicate the production of wood pellets will decrease in the UNECE region by 1.0% in 2020 and increase by 2.6% in 2021. Subregionally, the forecast is for wood pellets production to grow in Europe by 2.4% in 2020 and by 5.2% in 2021; increase in the EECCA by 23% in 2020 and 7.7% in 2021; and North America to shrink by 9.2% in 2020 and 1.5% in 2021.