Wood Pellets Market Size, Share & COVID-19 Impact Analysis, By Feedstock (Forest Waste, Agricultural Waste, and Others), By Application (Heating, Combined Heat & Power (CHP), and Power Generation), By End-user (Residential, Commercial, and Industrial), and Regional Forecasts, 2022-2029

The global wood pellets market size was valued at USD 15.08 billion in 2021. The market is projected to grow from USD 16.63 billion in 2022 to USD 27.52 billion by 2029, exhibiting a CAGR of 7.5% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with wood pellets experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a growth of 10.3% in 2020 as compared to 2019.

Pellets were originally produced as an alternative to oil, particularly for heating, due to their high fuel density and quality. Various factors, such as resource availability, geographical characteristics, climate, and other economic factors, influence the market growth. These market elements are intertwined with the intervention of various national and regional policies, weaving a complex trading web. The steady and rapid growth of the market is driven by various factors related to different market segments (industrial pellet for co‐firing, industrial pellet for CHP and district heating, and pellet for residential heating); however, the markets are still quite dependent on different extents on the availability of direct or indirect support measures.

COVID-19 IMPACT

Outbreak of Pandemic Impacted the Energy Industry Impacting Supply Chains

The COVID-19 spread rapidly everywhere in the world in 2020. Almost every country reported infected cases. From 2020 to 2021, every country was at different stages of the pandemic. The industrial participants witnessed challenges due to lockdowns. The outbreak of COVID-19 across the U.S. in 2020 hampered the market growth as it is a significant supplier of wood pellets.

The strategies are drafted to empower companies to continue operations effectively with fiscal benefits. Accordingly, the revival of industry verticals is set to unveil new possibilities for integrating reliable virtual power plant solutions to maximize efficiency and mitigate operational risks. The outbreak of the COVID-19 pandemic has impacted the sustainable energy industry significantly across the globe. As a result of the current scenario, various pellet manufacturers worldwide had to limit their operation and services in several locations, as countries were stringently implementing lockdown measures to deal with the pandemic.

LATEST TRENDS

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Rapid Demand for Electricity to Increase the Demand for the Product

Rapid population growth, the flourishing industrial sector, and the rapid expansion of infrastructure have led to a significant increase in the demand for electricity. As electricity demand increases, regions around the world are increasing their electricity generation capacity by expanding the capacity of existing plants or installing new plants. Due to stringent government policy regarding CO2 emissions, industry players are more prone to use renewable energy sources to generate electricity, especially bioenergy, solar energy, and wind power.

In the race to tackle climate change, minimize GHG emissions, and fulfill the Kyoto Protocol agreements, wood pellets draw significant attention worldwide as an innovative strategy. As per the U.K. Environment Agency, minimizing greenhouse gas emissions from biomass energy generation, pellets made from wood can reduce carbon emissions relative to coal between 74% and 90%.

According to the World Energy & Climate Statistics – Yearbook 2022, global power consumption will increase by 5.5% in 2021. China, the largest electricity consumer with 31% global consumption, triggered the COVID-19 recovery. European countries, including Germany, France, and Italy have shown a strong increase in consumption, and Asian countries, including South Korea, Indonesia, and India, rose by 5% during 2021. 

DRIVING FACTORS

Increasing Primary Fuel Prices to Drive the Market 

Wood pellets are made from by-products of forest such as agricultural waste and sawdust. It is becoming increasingly popular around the world due to rising primary fuel prices. There is high product demand as biomass fuel is increasing rapidly worldwide, which is due to the high demand for industrial and commercial purposes. In addition, the easy availability of pellets as a fuel raw material and the low production costs have led to higher consumption in the industrial sector.

Europe holds the largest market share and many European key players are converting their coal to biomass power plants. Furthermore, governments across Europe are choosing wood type of pellet and other renewable energy to meet their renewable energy commitments by using biomass to generate electricity. For instance, the Drax Group has started converting its units from coal to wood fuel as the U.K. government imposes tough limits on CO2 emissions to help fight climate change. The U.K. also announced its plan to completely phase out coal-fired power generation by 2025, and under the E.U., biomass is legally classified as a CO2-neutral energy source.

Engie's 731 MW Rotterdam plant started commercial co-firing and it is expected that the market size will continue to increase especially for the industrial segment.

Due to insufficient domestic production of pellets in Europe, several countries are largely dependent on imports. According to the Global Agricultural Information Network (GAIN), Europe imported around 5.4 million tons of market value worth USD 924 million in 2021.

Supportive Government Policies and Initiatives to Propel the Growth of the Market

Recently, due to rapid industrialization, CO2 emissions have increased significantly, which led to climate change. The growing population globally, thriving industrial sector, and the expansion of infrastructure have led to an enormous increase in the demand for electricity. Governments around the world are striving to reduce the effect of climate change by increasing the uptake of renewable technologies. Governments are offering various global tax incentive programs such as State sales tax exemption, state income tax credit, corporate income tax deduction, and local property tax exemption to encourage renewable adoption. Many federal incentives are also available to corporations, nonprofits, and community projects. These include a modified Accelerated Cost Recovery Scheme (MACRS), tax incentives for subsidies, and business tax incentives. Government support and regulations, including subsidy programs and business tax incentives that provide tax benefits and investment grants, play a key role in promoting the global market. Various government programs such as the Renewable Heat Incentive (RHI) have generated significant interest in the U.K. pellet market. Such programs are expected to drive the market in the long term.

RESTRAINING FACTORS

Fulfilling Certification Criteria May Act as an Impeding Factor for the Market Growth

Government certification helps in assuring customers that the wood pellets come from sustainably achieved forests proving it to be a valuable tool.  Increasing the certification measures for export to European countries and other countries where numerous directives mandate the production of renewable energy is a key constraint on the wood pellets market growth.

Program for the Endorsement of Forest Certification (PEFC), The Sustainable Forestry Initiative (SFI), the Forest Stewardship Council (FSC), and the American Tree Farm System are some of the largest forest certification standards organizations and systems in the world. FSC and SFI are recognized in the U.S., while FSC and PEFC have excellent reputations in Europe. The latter requires protection of water, wildlife, visual quality, special sites, and other essential resources.

In the industry, pellet producers are worried about sustainability certification. This is to show their customers and governments that pellets used for electricity are sustainably produced. In the heating sector, the importance of third-party quality certifications is becoming increasingly important, to give consumers peace of mind that the pellets they buy are performing optimally in stoves and boilers.

For instance, norms laid down by the Forest Stewardship Council and Sustainable Forestry Initiative, a certification organization in North America, restrict the market growth in the U.S. Presently, the U.S. owns hectares of forest land which is more than 300 million. Though, major U.S. standards count only 19% of U.S. commercial forestland.

SEGMENTATION

By Feedstock Analysis

Forest Waste Segment Holds the Dominant Market Share Due to its Convenience

On the basis of feedstock, the market is split into agricultural waste, forest waste, and others. Forest waste holds the dominant market share as pellets are mainly made from the by-products of conventional forest operations which include finished wood products and sawmills. Several key players such as Drax Group and Eviva own private forests for pellet production. In the U.S., about 85% of forest land is owned by private family and small landowners. Majority of these landowners accomplish their land as a working forest or forest that is carefully managed to provide a sustainable supply of forest products to numerous industries.

The agricultural waste segment is anticipated to rise significantly in the market during the study period. According to Global Bioenergy Statistics, energy production from agricultural residues could account for about 3%-14% of the world's total energy supply.

By Application Analysis

Power Generation Segment Holds the Dominant Market Share Due to the Growing Shift toward Biomass Utilization

Based on application, the market is segmented into heating, Combined Heat & Power (CHP), and power generation.

The power generation segment holds the dominant market share globally as governments worldwide attempt to switch to biomass power generation. The demand is expected to increase due to urbanization, industrialization, and population growth. Furthermore, biomass gasifiers are in increasing demand as rural electrification enables decentralized power generation.

Releases from the chimney from the use of wood energy to generate electricity and heat are marked as carbon neutral by regulators and policymakers globally. This will have a positive impact on market growth in all regions. Wood pellets are considered to be better than coal or fossil fuels for the environment that old power plants use to generate electricity. According to the U.K. Environment Agency, substituting to biomass from coal has reduced CO2 emissions.

Combined heat and power generation is expected to grow significantly over the forecast period. Biomass CHP is currently qualified for both heat and electricity promotion. This makes them a potentially attractive investment option in areas with a continuous and sustained need for heat, provided the electricity generated can be used on-site or fed into the grid.

By End-user Analysis

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Industrial Segment to Hold the Dominant Market Share to Meet the Global Carbon Emission Goal

Based on end-user, the market is segmented into residential, commercial, and industrial.  

The industrial segment is likely to hold the dominant market share due to the international drive to minimize CO2 emissions, majorly from the industrial sector. Wood pellets are becoming an increasingly attractive fuel for power generation. According to new research from N.H. Agricultural Experiment Station at the University of New Hampshire, the use of pellets reduces GHG emissions by more than 50% compared to fossil fuels and natural gas. For instance, the Drax power station was originally envisioned as a large coal power station to add capacity to the national grid but currently it has become the largest power station in the U.K. and Western Europe, which has six boilers out of which four burn biomass to minimize carbon emission.

The residential segment is expected to grow at a stagnant rate during the forecast period as pellets are becoming popular among household users due to their characteristics such as eco-friendliness, cleaning, and sustainability. These are used not only for home cooking and heating but also as horse bedding and cat litter.

The commercial segment is expected to grow considerably during the forecast period as pellets are environment-friendly compared to gas, oil, and electricity alternatives. Currently, the most commonly used fuels for commercial greenhouses are fossil fuels, resulting in higher heating costs and a significant environmental impact. 

REGIONAL INSIGHTS

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On the basis of geography, the global market is analyzed across North America, Asia Pacific, Europe, and the rest of the world. Europe led with the highest share in the global market. As per European Pellet Council, Europe remained the world's largest consumer of industrial pellets.

Great Britain was the largest user of pellet-based energy, using more than 8 million tons. Belgium, U.K., and Netherlands domestic use of pellets is small and large power plants dominate the market. The governments of these countries have chosen to meet their renewable energy commitments by using sustainable biomass to generate electricity. Since these countries do not have adequate domestic production of pellets, they are largely dependent on imports.

The Asia Pacific market is projected to grow the most during the forecast period. South Korea, China, and Japan are the largest consumers of pellets. South Korea imports its pellets mainly from Malaysia and Vietnam, while Japan mainly sources them from Canada.

Moreover, the North America region holds a significant market share as the U.S. contains over 24 million acres of lowland hardwood forests, accounting for 65% of the North America region. Additionally, the U.S. Southeast has emerged as a major supplier and net exporter of pellets. The industry continues to thrive off abundant timber resources in the Southeast.

KEY INDUSTRY PLAYERS

Key Participants are Concentrating on Enhancing their Product Capacities

The market is highly fragmented, with numerous players. Each of the present companies in the market has a strong foothold in their base country and region. Drax Group plc, Enviva, LP, and Rentech Inc. are the leading major players with a strong presence across different countries. Their operational plants' success will help them to acquire contracts and have a considerable market share in the coming years.

In 2021, Enviva LP held the largest market share. The company owns and operates plants with a combined production capacity of about 6.2 million metric tons of wood pellets per year in Florida, North Carolina, Virginia, South Carolina, Mississippi, and Georgia. The company is the major supplier of industrial pellets to European countries. Wood Pellet Energy U.K. (LTD), German Pellets Trading GmbH, Snow Timber Pellets, LLC, Lignetics, and the Westervelt Company are the other key players operating in the market.

The competition among top players in the market is very high as they are targeting to expand across regions. The one with unique offerings in technology, portfolio, design, efficiency, and more will capture the maximum end-user attention.

Again, the market is not stagnant; if a company comes up with extra benefits and advancements, other companies will target more innovation. So, there is always hardcore competition among top-notch players. 

List of Key Companies Profiled:

• Drax Group PLC (U.K.)


• Enviva, LP (U.S.)


• The Westervelt Company (U.S.)


• Fram Renewable Fuels LLC (U.S.)


• Rentech Inc. (U.S.)


• Wood Pellet Energy U.K. (LTD) (U.K.)


• German Pellets Trading GmbH (Germany)


• Snow Timber Pellets, LLC (U.S.)


• ENERGEX AMERICAN, INC. (U.S.)


• LIGNETICS (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• August 2022 - The Drax Group signed an agreement with Princeton Standard Pellet Corporation (PSPC) to acquire their pellet plant in Princeton, British Columbia, and Canada, which has been in operation since 1995 and can produce 90,000 tonnes of wood pellets per year, mainly from sawmill residues. Once the acquisition is complete, the plant is expected to contribute to the group's strategy to increase pellet production to 8 million tons per year by 2030.


• April 2021 - Drax announced the acquisition of the whole issued share capital of Pinnacle Renewable Inc. Pinnacle would operate as a subsidiary of Drax and remain headquartered in British Columbia. Over 480 Pinnacle employees will be welcomed into the Drax Group, including its existing leadership.


• July 2020 - Enviva acquired all limited liability interests in Georgia Biomass Holding LLC, a Georgia limited company and indirect owner of a wood pellet manufacturing facility in Waycross, Georgia, for an aggregate consideration of USD 164.0 million in cash, after taking into account certain collateral adjustments. The acquisition of Georgia Biomass was accounted for as a business combination and accounted for using the purchase method.


• June 2020 - Drax Group plc. and Mitsubishi Heavy Industries Group signed an agreement to build new bioenergy with a pilot carbon capture and storage (BECCS) plant. This newly constructed pilot plant will allow Mitsubishi Heavy Industries (MHI) to demonstrate that its BECCS technology can be deployed at scale and help achieve the U.K.'s zero-carbon targets.


• October 2019 - Enviva Partners L.P. constructed a new manufacturing plant in Lucedale, Mississippi, U.S. The company will invest nearly USD 140 million in these new plants. The company has 8 manufacturing plants located in the southeastern U.S., which produce more than 3 million metric tons of pellets annually. Construction of these new plants will be completed in 15 to 18 months.

REPORT COVERAGE

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The research report provides a detailed regional analysis of the market and focuses on key aspects such as the system's competitive landscape, types, and applications. Besides this, the report offers insights into wood pellets market analysis and highlights key industry developments. In addition to the factors mentioned above, the report encompasses several factors that have contributed to the market growth opportunities in recent years.

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