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The global wood pellet market is estimated to be USD 10.52 billion in 2020, and it is expected to reach USD 15.63 billion by 2026, at a CAGR of 7.28% during 2021-2026

·4-min read

Due to the COVID-19 pandemic, the market witnessed reduced demand and shortages of raw materials. However, Asia significantly had a low impact due to the already existing oversupply and suppressed consumption.

New York, July 01, 2021 (GLOBE NEWSWIRE) -- Reportlinker.com announces the release of the report "Wood Pellet Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)" - https://www.reportlinker.com/p06101234/?utm_source=GNW
The primary drivers for the market include increasing demand for wood pellets in clean energy generation, especially in the European region. However, the adoption and increasing deployment of alternative renewable energy sources such as solar photovoltaic, wind energy, and geothermal in various parts of the world is likely to hinder the market growth during the forecast period.

- The heating application held a significant market share in 2020, and it is likely to dominate the market during the forecast period.
- As per the World Bioenergy Association, wood pellets have the potential for replacing coal in power generation facilities. With technology development in recent years, wood pellets have undergone some thermal upgrading through various processes like torrefaction, hydrothermal carbonization, and steam explosion. The thermal upgrading enables wood pellets to act as a fuel with coal properties. The Asia-Pacific region with the highest number of coal power plants in the world is expected to be an opportunity for the market to grow in the near future.
- With a significant production of wood pellets during 2020, Europe is expected to dominate the market during the forecast period.

Key Market Trends
Wood Pellets for Heating Application to Dominate the Market

- Pellets are a solid biomass fuel, primarily produce from wood residues and agricultural by-products like straw. Specific advantages of pellets as compared to unprocessed biomass include standardized properties, high energy content, and high density.
- Wood pellets for heating applications are primarily used in residential and commercial sectors for food, cooking and grilling, and supplying heat to homes. Since the cost of pellets remained cheaper than that of other fuels for a long time, it becomes a more economic option, addressing the primary concern of the residential and commercial sectors. In addition to this, in 2020, the wood pellets due to oversupply experienced a sharp decline in their prices.
- In 2019, wood pellet consumption for heating application was majorly observed in Europe, followed by North America and Asia.
- As a renewable energy source, wood pellets have received subsidies and incentives from the governments in many countries, and many countries either launched or updated their policies and schemes related to wood pellets for heating applications in recent years.
- For instance, in January 2021, a new Wood and Pellet Heater Investment Tax Credit (ITC) came into effect in the United States, under which consumers buying highly efficient wood, or pellet stoves or larger residential biomass heating systems can claim a 26% tax credit that is uncapped and based on the full cost (purchase and installation) of the unit.

Europe to Dominate the Market

- In Europe, EU countries are a significant producer as well as consumer of wood pellets. The EU currently has approximately 25 million metric tons of wood pellet production in place, with capacity use at 74 %. As of 2019, the EU has registered a modest 5% increase in production.
- Europe’s demand for wood pellet is expected to increase by 30-40% between 2021 to 2026. Europe represents more than 50% of global pellet demand. As of 2020, European nations’ use of pellets includes residential heating (40%), power plants (36%), commercial heating (14%), and combined heat and power plants (10%). Moreover, pellets have also made their way into coal conversion projects in local authority or public administration buildings such as schools and offices.
- As of 2020, most of the co-firing power stations have either closed or converted since these early projects, with several making a move to 100% wood pellets for fuel. The largest of these is Drax Power Station in North Yorkshire, which has converted four of its six 65 MWe generating units to run exclusively on biomass and is currently evaluating options for its remaining two coal-fired units.
- As of 2020, sawmill residues make up 85% of the mix for wood pellet production, followed by roundwood (13%) and recovered wood (2%). Although the wood residues are likely to remain an important feedstock, especially in northern and western Europe, they will not be sufficient to meet the future fiber demand from the growing wood pellet sector.
- As a result, Europe will likely draw upon the experience of North American producers, who have shown it is possible to use more forest residues as fiber furnish. Additionally, the countries in the region are likely to increase their wood pellet imports as well.

Competitive Landscape
The wood pellet market is moderately consolidated. Some of the key players in the market include Enviva Partners LP, AS Graanul Invest, Drax Group Plc, Fram Renewable Fuels LLC, Segezha Group JSC, Lignetics Inc., among others.

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