Eastern Europe Exporters
Wood pellet production in the European Union grew 4.7 percent between 2014 and 2015, with 14.1 million metric tons produced in 2015, according to the European Biomass Association’s (AEBIOM) 2016 European Bioenergy Outlook. Production was spread throughout member states with the largest volumes coming from Germany (2 million metric tons) followed by Sweden, Latvia, Estonia and Austria. The EU consumed more pellets than it produced, reaching 20.3 million metric tons of pellet consumption in 2015. A majority was for heat production at 12.9 million metric tons, a 4.2 percent increase between 2014 and 2015, even despite consecutive mild winters and low oil prices. Pellets used for heat consumption can be divided into three markets—residential heating (42.2 percent), commercial heating (15.7 percent) and heat generated from combined heat and power (CHP) (6 percent). Italy, Germany and France were the highest pellet-consuming countries in 2015 for the residential heat market. Denmark and Sweden also made the list of top five countries consuming pellets for heat, but a majority of pellets in Denmark are used in CHP plants and in Sweden, commercial heating installations.
Although far from making the list of top five countries for pellet production or consumption, member states found in East Central Europe have increasingly supplied nearby, mostly residential, thermal markets. Insignificant domestic demand and small but growing pellet production largely characterizes pellet markets found in this territory. Increasing Eastern European pellet production comes from a few large-scale producers, a handful of medium- to small-scale producers and the rest is accounted for through varying levels of decentralized micro production in each country. A number of these countries export the bulk of their production to more developed pellet markets, but the demand side, at least in some countries—like Poland—could eventually approach levels found elsewhere for both residential and industrial use of pellets.
Poland’s pellet market beginnings date back to 2003 when almost all production was for export. Since then, production has increased, as has wood pellet consumption with the exception of slight fluctuations. By 2008, installed pellet production capacity already amounted to 674,000 tons and production to 340,000 tons. Around 20 pellet producing companies were operating in Poland at the time, most with capacities below 30,000 tons. During that time, total domestic consumption was estimated around 120,000 tons, making Poland an export dominant country, which it continues to be today.
Production capacity in 2015 climbed to approximately 1.2 million tons from an estimated 70 producers, only half of which produce more than 5,000 tons per year. Poland has six large pellet producers with production capacities greater than 50,000 tons per year, 25 to 30 producers above 5,000 tons per year, and more than 35 producers with capacities less than 5,000 tons per year (a majority below 2,000 tons), according to data collected by the Baltic Energy Conservation Agency, a regional energy agency situated in northern Poland’s Gdańsk Pomerania region.
The big pellet producing companies include Barlinek Inwestycje, IKEA, PPUH Fabich, Stelmet and Tartak Olczyk. Poland producers mainly utilize sawdust from coniferous species as their raw material to produce pellets almost exclusively for heating markets. Approximately 80 percent of pellet production is certified within Poland to either DINplus, ENplus or both standards. “Certification has become more important during the past three years,” says Ludmila Wach, director of development with the Baltic Conservation Agency. In 2013, nine certifications were held by five producers. Now, 39 producers are certified with 27 DINplus and 18 ENplus certificates. Poland’s pellet production is mainly distributed to Germany, Denmark and Italy. In 2015, Poland exported 36,012 tons of pellets to Italy for nearly $7 million, according to the UN Comtrade database. Poland imports around 90 percent of its pellets from the Ukraine, with a limited amount coming from Lithuania, Belarus and Russia.
Certification and production aren’t the only numbers on the rise. Since 2008, consumption has more than doubled to around 300,000 tons per year with a majority (250,000 tons) consumed residentially for heat. The remaining 50,000 tons were consumed in Polish CHP plants and power plants in 2015. Wach notes that there are no CHP installations dedicated to pellets only, but there are several small—200 to 300 kilowatt (kW)—district heating projects.
Poland’s domestic market is still relatively small, as coal remains the main source of heat. “The pellet market isn’t doing too well due to low coal prices,” Wach admits. “And Polish policy on lowering emissions has not been strong. Last year, a new anti-smog regulation came into force and is slowly kicking in.” She adds that there are green certificates for green electricity, but during recent years, certificate prices dropped drastically and this is no longer an incentive. EU funding for biomass heat sources is available, and, according to Wach, some municipalities try to financially support the exchange of boilers in order to reduce emissions. Consumers in Poland usually buy 15-kilogram (kg) bags of pellets, and the price of pellets is approximately €210 ($220) including value-added tax (VAT) per ton.
Bordering Poland to the southwest, the Czech Republic’s pellet market holds a number of similar attributes. The country began producing a small amount of pellets in 2004 (11,000 metric tons), ramping up to 60,000 metric tons in 2007. According to Vladimír Stupavský, chairman of the Czech Pellets Cluster, 2007 has been followed by rapid growth, and 2015 production of ENplus pellets reached 232,000 metric tons (98 percent ENplus A1, 2 percent ENplus A2) with an additional 30,000 to 40,000 metric tons of uncertified production. Although production data for 2016 hasn’t quite been released, Stupavský says, “I’m 100 percent sure we reached 300,000 metric tons of wood pellet production in 2016.”
The Czech Republic supports approximately 20 stable producers, only five with production capacities over 20,000 metric tons—the top three ranging between 50,000 and 80,000 tons per year—and the rest falling between 5,000 and 10,000 metric tons annually. Stupavský shares that the big pellet players within the country include Mayr-Melnhof, Stora Enso, Pfeifer and Biomac. Pellets are mainly made from clean spruce sawdust without bark (80 percent) and the rest is a mix of hardwood, softwood with bark and microchips. “The biggest producers are pellet plants directly adjacent to sawmills,” Stupavský says. “We also have about 10 pellet plants with 5,000-ton capacity on greenfield—they are forced to buy sawdust on the open market and faced with the variable quality of sawdust.”
Fifteen pellet companies are ENplus certified. “Without ENplus, our producers cannot sell their pellets on western markets,” Stupavský says. “Only a few small pellet plants have not been certified. They only sell in their neighborhood.”
The Czech Republic has three times more production than consumption. In 2014, of the 199,000 metric tons of production, 138,000 tons were exported mainly to Italy, Denmark and Austria. In 2014, the Czech Republic exported 56,815 tons of pellets to Italy for a little over $15 million and, in 2015, doubled its exports to Italy to 116,776 tons for over $25 million, according to UN Comtrade. Also, the Czech Republic has several thousand metric tons exchanged with Germany every year. The country imported 25,000 tons in 2014. Imported pellets come mainly from the Ukraine and Belarus, usually uncertified and of poor quality, Stupavský notes. He says these pellets are bought by those who wish to save money and don’t mind a dirty boiler.
In 2015, pellet consumption reached around 95,000 metric tons, almost doubling in five years from approximately 50,000 metric tons consumed in 2010. During 2010, the country had around 10,000 pellet boiler installations. Almost all wood pellets consumed are for heating purposes. Wood chips and agropellets are used in larger installations like CHP and district heating units. There is some assistance for pellet installations. “We are the first country from Europe where the Ecodesign for small heating sources was integrated,” Stupavský says. “We also have reduced rate of VAT for pellets and briquettes.”
When asked about competing heating sources, Stupavský says, the biggest competitor is coal, as it’s about 30 percent cheaper than pellets currently. Prices vary from season to season; in the summer, pellets can cost €190 per ton with VAT and distribution and in the winter, up to €230 per ton with VAT and distribution.
Overall, the Czech Republic’s pellet market is strengthened by its independence on imports, but the market is weakened by cheap coal and natural gas.
Slovakia is situated in Central Europe bordered by Poland, Ukraine, Hungary, Austria and the Czech Republic. Much of the country is forested, making it an ideal market for developing biomass energy, however, environmental awareness in Slovakia is still fairly low, leaving little demand domestically. The Slovak pellet market was established toward the end of the ’90s and is still relatively small, according to a regional report put together by the information platform FOROPA Biomass to the Masses. The report finds that pellet production is unstable and dependent upon the state of the international market (demand prices). In 2012, pellet producers within Slovakia produced 80,000 metric tons and exported around 30,000 tons to Italy, the Netherlands and a few others. Like Poland and the Czech Republic, Slovakia uses dry sawdust from the wood processing industry as a base for much of its feedstock for pellet production. Based on a recent European Pellet Council survey, Slovakia’s 2015 pellet production falls between 100,000 and 300,000 metric tons.
Hans Comberg is the CEO of one of Slovakia’s largest pellet operations, myWood Pellets, with a production capacity around 15,000 metric tons. The majority of the pellet operation belongs to myWood Polomka Timber s.r.o., a manufacturer of EN13377-certified formwork materials and three-layer structural panels. The pure softwood shavings from its board production serve as the raw material to make pellets. “To produce our wooden formwork beams, we only use dry wood so we don’t have to waste any energy to dry our raw material for pellet production,” Comberg says. The use of this dry raw material coupled with on-site pellet production saves the company in transportation and energy, resulting in a low-carbon footprint, he adds.
According to Comberg, most pellet production is located adjacent to a wood manufacturing business. “Almost every big wood producing company in Slovakia by now has its own pellet production,” he says. “That’s why it’s very difficult to expand the business because all of the good spots are already taken by someone else.” He adds that only a few production sites don’t have an adjacent sawmill where they get their material from because transportation and logistics costs are very high.
Comberg says there are maybe five or six big producers within the country, but the rest consists of very decentralized micro production. Even so, Slovakia’s pellet industry is developing at a very fast scale, he says. “We started with our production at the end of 2012,” Comberg notes. “We were the first producers certified with ENplus certification and now we already have nine ENplus-certified producers in Slovakia. Comparative to the size of the country and its inhabitants, that’s quite a lot.” Comberg estimates that in addition to the nine certified, there are 20 to 30 small producers who produce for their own purposes.
Certification is particularly important for export, and larger producers are mainly producing for those markets, as there are few customers in Slovakia. “Eighty percent of producers in Slovakia are mainly exporting pellets to Italy,” Comberg estimates. “We also have some customers in Austria, Germany and Slovenia.” The UN Comtrade database shows that Slovakia exported 61,947 tons of wood pellets to Italy in 2015 for about $12.3 million.
European-wide certification helps overcome customer prejudices, which Comberg notes are getting better. “Pellets from Eastern Europe have a bad reputation because, in the past, many producers put in things that they should not have, like plastics and other things, especially those from Russia, Ukraine and far East,” Comberg says. “These pellets came to the European market and people started not wanting to buy pellets that came from east of Austria, I’d say, they just didn’t trust it.”
Slovakia’s annual domestic consumption in 2012 was approximately 50,000 tons, according to FOROPA’s report. EPC’s 2015 survey indicates that pellet consumption for heating is still below 100,000 metric tons. The slow development of the market is attributed to the relatively high installation cost of boilers and the low prices of competitive heating fuels. What pellet consumption the country does have is confined to the residential (1,000 households) or about 100 small- to mid-scale installations with annual consumption up to 3,000 tons, according to FOROPA’s 2012 and 2013 data. In spring 2013, pellets in Slovakia ranged from €170 to €210 per ton, based on seasonality and regional conditions.
Heating oil and gas are the largest sources of heat in Slovakia, and Comberg says this has strained the other heating markets they serve with their pellet production. “This is a huge problem, but more a problem for say Germany or Italy, and also Austria because many people who wanted to change their oil heating system are now waiting to see where prices go. Even if these systems are 30 years or older they are still waiting,” he says.
Croatia and Hungary
Further south, Hungary and Croatia pellet markets mirror other East Central markets in that they predominantly export pellets for heat within the EU. Croatia has a long coastline along the Adriatic Sea, making trade with Italy optimal. Croatia exported 176,890 tons of wood pellets to Italy in 2015 for nearly $30 million, according to the UN Comtrade.
In 2007, Croatia’s market was just beginning to develop with 150,000 metric tons of pellet capacity in the country, but only 40,000 metric tons actually produced, 95 percent of which was exported, according to Inteligentna Energija, a business network that promotes domestic renewable energy sources and efficiency. AEBIOM’s 2016 statistical report ranked Croatia in the 100,000-to-300,000-ton pellet production range. Currently, the country has 14 ENplus-certified producers. Some of the country’s main producers include Drvenjača, Energy Pellets, Mundus Viridis, Spačva and Šišarka.
Hungary is behind other Eastern European countries in using renewable energy sources such as biomass, according to a pellet report issued by the Hungarian Biomass Association. Natural gas meets much of the national energy demand. Still, Hungary’s pellet market has gradually grown since it first got legs in 2008. In that year, six plants started initial test runs, and began producing only for export. In the second half of 2009, the number of installed pellet stoves and boilers increased, which led to the beginning of the domestic market. By the end of 2011, 11 plants with small and medium capacity and two larger plants (exceeding 30,000-ton-per-year capacity) were operating with total capacity of 126,500 tons per year. However, only about 40,000 metric tons of pellets were produced that year. Today, according to AEBIOM’s 2016 statistical report, Hungary’s pellet production still falls below 100,000 metric tons per year. Hungary currently has three ENplus-certified pellet producers: Hungarian Biomass Recycling Ltd., R.E. HEATING ZRT and Pellet International Kft.
Plants are often located near available raw materials, near forests, but some producers in southeast Hungary use agricultural byproducts as raw material for their production. Wood pellets are mainly for export and agripellets are for local, domestic use. Hungarian wood pellet plants main target countries for export are Italy, Austria, Slovakia and Poland. In 2015, UN Comtrade data suggests Hungary exported 6,189 tons of wood pellets to Italy for around $1.3 million.
In 2010, about 15,300 tons of pellets were consumed, with about 5,000 tons coming from imports, according to the HBA report. Pellets are mostly imported from Ukraine and Romania. Also in 2010, the country had 300 residential boilers (less than 50 kW), 75 commercial boilers (more than 50 kW) and 2,150 pellet stoves. Eighty-five percent of installed appliances were pellet stoves in 2010, so pellets are typically sold in bags.
Unlike the power market, which remains fairly concentrated in a few member states, wood pellet use for energy has penetrated all heat markets across Europe. While not large, export-driven pellet industries in East Central Europe are increasingly fueling these demands as their own markets develop.
Author: Katie Fletcher
Associate Editor, Pellet Mill Magazine