Wood Pellet Market

The global Wood Pellet Market is valued at USD 8.4 Billion in 2022 and is projected to reach a value of USD 12.4 Billion by 2030 at a CAGR (Compound Annual Growth Rate) of 5.8% between 2023 and 2030.

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The surge in global demand for renewable energy is fueling the demand for Wood Pellets to reduce the use of fossil fuels that contribute to global warming, as Wood Pellets are a clean, environmentally beneficial, sustainable, and renewable biomass. This is anticipated to contribute to the industry's growth over the forecast period. According to the U.K. Environment Agency, Wood Pellets can minimize carbon emissions by 74% to 90% compared to coal, thereby minimizing greenhouse gas emissions from biomass energy generation.

A new high of 23.1 million metric tonnes (MMT) of Wood Pellets was consumed in the EU in 2022, largely due to increased residential use in Germany and co-firing of Wood Pellets and coal in the Netherlands. The residential markets, primarily in Germany and France, expanded in 2022, driving up demand in the EU to 24.3 MMT. This growth was fueled by support programs for installing biomass boilers and the high cost of fossil fuels. Over the past ten years, the EU's need for pellets has vastly surpassed domestic supply, leading to increased imports, primarily from the United States and Belarus.

Rapid population growth, a thriving industrial sector, and rapid infrastructure expansion have led to a significant increase in electricity demand. As the demand for electricity increases, regions around the globe are expanding the capacity of existing plants or installing new plants to increase their electricity generation capacity. Due to stringent government policy regarding CO2 emissions, industry participants are more likely to generate electricity from renewable energy sources, particularly bioenergy, solar energy, and wind power. In the race to combat climate change, reduce greenhouse gas emissions, and meet the obligations of the Kyoto Protocol, Wood Pellets garner global attention as an innovative strategy.

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Key Takeaways

• Europe Accounted for more than 75% of the revenue share in 2022
• Asia Pacific is expected to expand at the fastest growth rate from 2023 to 2030
• By Application, the Power Generation segment contributed more than 35% of revenue share in 2022.
• By End Use, the Industrial segment recorded the major market share in 2022.

Economic Insights

The economic impact on the Wood Pellets market has been significant. The trade in pelletized wood fibers has increased dramatically since the Renewable Energy Directive of the European Union came into effect. In 2018, trade in Wood Pellets between EU member states reached over 18 million tonnes, with the U.S. accounting for a third of those imports. Also, the demand for renewable energy sources has increased, leading to a growing market for Wood Pellets. This has created numerous job opportunities in the production, distribution, and transportation sectors. Additionally, the Wood Pellets market has contributed to the growth of the forestry industry, as more trees are being harvested to meet the demand. Overall, the Wood Pellets market has positively impacted the economy by promoting sustainable energy sources and creating employment opportunities.

Top Market Trends

• Rising Demand for Generating Fuel: Wood Pellets are produced from forest byproducts like agricultural residue and sawdust. Due to the rising cost of primary fuels, it is gaining popularity globally. Due to the high demand for industrial and commercial purposes, there is a high demand for the product as the global consumption of biomass fuel increases significantly. Additionally, the easy availability of pellets as a raw material fuel and the low production costs have contributed to increased industrial sector consumption. As the U.K. government imposes strict limits on CO2 emissions to combat climate change, the Drax Group has begun converting its coal-powered units to biomass fuel. The United Kingdom has also announced its intention to eliminate coal-fired power generation by 2025, and biomass is legally classified as a CO2-neutral energy source within the European Union.
• Supportive Government Policies: Rapid industrialization has substantially increased CO2 emissions, resulting in climate change. Global population growth, a flourishing industrial sector, and infrastructure expansion have dramatically increased electricity demand. Governments across the globe are working to mitigate the effects of climate change by promoting the adoption of renewable technologies. Governments offer numerous global tax incentive programs, including exemption from state sales tax, state income tax credit, corporate income tax deduction, and local property tax, to encourage renewable adoption. Also eligible for numerous federal incentives are businesses, nonprofits, and community initiatives. Among these are a modified Accelerated Cost Recovery Scheme (MACRS), subsidy tax incentives, and business tax incentives. Government support and regulations, such as subsidy programs and business tax incentives that offer tax breaks and investment grants, play a crucial role in fostering the global market. Diverse government initiatives, such as the Renewable Heat Incentive (RHI), have sparked considerable interest in the U.K. pellet market. Long-term, these programs are anticipated to propel the market.

Market Segmentation

The global Wood Pellet market can be categorized into the following: Application, End-User, and Region. Based on Application, the market can be classified into Power Generation, Heating, and Combined Heat and Power (CHP). Additionally, by End-User, the market can be split between Industrial, Commercial, and Residential. Likewise, based on Region, the market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.

Based on Application

Power Generation to Accommodate Largest Market Share

In 2022, power generation applications accounted for the largest market share. As demand increases due to urbanization, industrialization, and population growth, governments throughout the globe are attempting to convert to biomass power generation. Biomass gasifiers are gaining popularity as rural electrification enables decentralized electricity generation, projected to propel the market during the forecast period. The heating application will have the highest CAGR during the forecast period. Numerous nations have developed regulations and programs concerning Wood Pellets for thermal purposes. As a result, the rising demand for Wood Pellets in the commercial and residential heating sectors is compelling producers to produce them in enormous quantities, which is one of the primary determinants of the unavoidable increase in the growth rate.

Based on the End User

Industrial Segment to Dominate Market

Due to the international effort to reduce CO2 emissions, especially from the industrial sector, the industrial sector is anticipated to hold the largest market share. According to new research from the University of New Hampshire's N.H., Wood Pellet are becoming an increasingly desirable energy production source. Agricultural Experiment Station uses pellets to reduce greenhouse gas emissions by more than 50% compared to fossil fuels and natural gas. For instance, the Drax power station was initially intended to be a large coal power station to add capacity to the national grid. However, it is now the largest power station in the United Kingdom and Western Europe, with six boilers and four consuming biomass to reduce carbon emissions. The residential segment is anticipated to grow stagnant over the forecast period as pellets' eco-friendliness, cleanliness, and sustainability make them increasingly popular among household users. In addition to being used for cooking and heating, these are used as equine bedding and cat litter.

Based on Region

Europe is the Global Leader in the Wood Pellet Market and Accounts for More Than 75% of the Total Production

Europe has the largest market for Wood Pellets. More than 75% of the world's production of Wood Pellets is produced in Europe, which holds the top spot on the market. The strict laws and policies aimed at protecting the environment primarily fuel the expansion of the Wood Pellet Market in Europe. Additionally, the European Union (EU) and the governments of Europe have increased the demand for renewable and sustainable energy, which has increased the demand for Wood Pellets. The United Kingdom, Germany, Italy, Denmark, and Sweden are the European nations that consume the most Wood Pellets.

The two countries that produce the most Wood Pellets in Europe are Italy and Germany, followed by Austria, France, and the United Kingdom. Environmental concerns are not the only reason for the rising demand for Wood Pellets in Europe; additionally, the region's abundant supply of wood raw materials contributes to the low price of Wood Pellets. Additionally, it is now simpler to transport Wood Pellets from the production sites to the end users thanks to the expansion of logistics networks and transportation infrastructure. In the upcoming years, the market for Wood Pellets in Europe is anticipated to expand as more people switch to renewable energy sources and stricter environmental regulations are implemented.

The Asia Pacific Wood Pellets market is a rapidly growing global Wood Pellets market sector due to increasing demand for renewable energy sources and environmental concerns. Several countries in the region, such as China, Japan, South Korea, and Australia, have implemented policies and incentives to promote the use of biomass energy, which has fueled the demand for Wood Pellets. China is the largest consumer of Wood Pellets in Asia, driven by the government's emphasis on clean energy and efforts to reduce air pollution. The country has set ambitious renewable energy targets and has increased its imports of Wood Pellets to meet these targets.

Competitive Landscape

The prominent global Wood Pellet industry players have continuously engaged in mergers and acquisitions to ensure their competitiveness, profitability, and market dominance. Drax Biomass, Pinnacle Renewable Energy, Inc., and Georgia Biomass, LLC are the main companies operating in the global Wood Pellet market. The Wood Pellet industry leaders have amassed a vast customer base through high-quality packaging for brand recognition and expanding their brand portfolios. In addition, these actors are affiliated with industry OEMs and law enforcement agencies and have a more comprehensive network of retailers and distributors.

The key players in the global Wood Pellet market include - Energex Inc. (Australia), Enviva LP (U.S.), Graanul Invest (Estonia), Drax Biomass (U.S.), Pinnacle (Canada), Sinclar Group Forest Products (Canada), Lauzon (Canada), Wood Pellet Energy Ltd. (UK), United Company (U.S.), Highland Pellets LLC (U.S.), Groupe Savoie Inc. (Canada), I.C.S. (Lacroix) Lumber Inc. (Canada), Vermont Wood Pellet Company (U.S.), AVP Group (Germany), Farm Fuels (U.S.) among others.

Recent Market Developments

• August 2022: The Drax Group signed a contract with Princeton Standard Pellet Canada, which has been in business since 1995 and can produce 90,000 tonnes of Wood Pellet annually, primarily from sawmill residues. The plant is anticipated to contribute to the group's strategy to increase pellet production to 8 million tons annually by 2030 once the acquisition is finalized.
• September 2021: Drax announced the acquisition of Pinnacle Renewable Inc.'s entire issued share capital. Pinnacle would operate as a subsidiary of Drax and maintain its British Columbia headquarters. Over 480 Pinnacle employees, including its existing leadership, will join the Drax Group.

Segmentation of the Global Wood Pellet Market