Paper sizes up Canadian wood pellet heat sector

By Anna Simet | November 03, 2015

A new paper by FutureMetrics outlines reasons for the small size of the Canadian wood pellet industry, which include a small domestic heating market, low prices of electricity in some provinces and unfamiliarity with pellet heat technology.

The entire Canadian wood pellet heating market is about the size of the Northeast U.S. market, according to FutureMetrics, at about 360,000 metric tons per year. In contrast, the U.S. consumes about 3.3 million tons for heat each year, in pellet stoves and boilers, or about ten times more than Canada.

The paper points out that most homes in Canada, aside from Prince Edward Island and Nova Scotia, use electricity or natural gas for heat. Some provinces such as Quebec have low electricity prices, but others do not. FutureMetrics suggests that may be because electricity is traditional and “consumers are more or less unware of the value of using a pellet stove to offset costs or a pellet furnace/boiler to do their central heating.”

That won’t last for long, according to the paper, as the firm predicts wood pellet heat to expand rapidly in Newfoundland and Labrador, which currently pays the most per person for heating. There, a large-scale hydro project is expected to increase rates by at least 50 percent when it comes online, and 71 percent of NL homes and businesses will be impacted by the electricity rate hike, residents that could cut costs by one-third by using pellet heat.

“Even without in impending rate hike, dependence on costly electricity will drive the [pellet fuel] markets first in Newfoundland and Labrador, and soon after in New Brunswick,” the paper concludes. “When heating oil prices rise again, Prince Edward Island and Nova Scotia will follow.”