How and for what purpose was EPC created?
The European Pellet Council (EPC) is part of a larger organisation called Bioenergy Europe (formerly AEBIOM), a non-profit association that represents and advances the interests of the European bioenergy sector. The association was created in 1990, it has 130 member organisations and employs 17 persons. Our objective with Bioenergy Europe is to ensure fair and sustainable market conditions for our members and for the sector in general, which means not only for wood biofuel but for all bioenergy products.
The creation of EPC responded to a growing need within the Bioenergy Europe membership for a specific focus on wood pellets. Our goal is to protect the interests of the pellet sector and make sure that pellets remain a key player in the energy sector. EPC has 19 member associations representing 18 countries, including a Russian representative, ENBIO. Another essential duty of EPC is the management of the world-leading scheme for wood pellet quality, the ENplus® certification.
What is the internal structure of EPC and how is the organisation managed?
The structure and management of EPC is rather standard. We have a Board, which is made of 5 persons: a President, a Vice-President, and three Board members. The General Manager reports to the Board and the General Assembly.
What are your main duties?
My role within Bioenergy Europe is to supervise and coordinate all our activities related to wood pellets. I am also supervising the pellet component of our market intelligence efforts, and I am also the General Manager of the ENplus® certification scheme. I have been working for Bioenergy Europe for five years.
Is EPC a non-profit organization?
Yes, we are a non-profit organisation. Our work is financed through the membership fees and our various projects.
What tools does EPC use to promote pellets in Europe?
It is a mix of several things. First, we do a great deal of advocacy and policy work, with a team of three people dedicated to this within Bioenergy Europe. They meet and inform various policy-makers to relay concerns or questions from the sector. Besides this, we use promotion channels such as our website, social networks, we also organise conferences on key topics such as safety or innovation. But most importantly, we rely of course on our greatest strength: the membership. We also work on large-scale awareness campaigns such as the Bioenergy Days, that was distinguished last year at the European Associations Award ceremony. The campaign relies on a simple concept inspired by the well-known Earth Overshoot Day. But we chose to give it a positive twist by celebrating every year the day Europe starts relying on bioenergy only.
What major results has EPC achieved since its creation?
I would distinguish two major recent achievements. First, a very important piece of European legislation that was under negotiation for the last two years, called the ‘Clean Energy Energy Package’. It basically sets the legislative framework for the Energy transition for the period 2020-2030, and includes several directives of major importance for the bioenergy sector, such as the Renewable Energy Directive II and the Energy Performance of Building Directive. We followed these files very closely until the directives were finally voted last June. We believe we achieved very good results thanks to our strong presence and relations with EU policy-makers. For example, the new Renewable Energy Directive (RED II) is introducing sustainability criteria for solid and gaseous biomass. While the Commission proposed to impose these criteria to all installations above 1 MW (fuel capacity), we managed to explain the administrative and financial burden it would create to small operators. The final outcome sets an obligation for installations above 20 MW. Another very concrete example of our work is when the European Parliament wanted to introduce a ban on the use of roundwood and stumps for energy purposes. We managed to convince the members of the European Parliament that the proposal did not make sense on the ground. The Parliament finally voted against this proposal. We are confident this will create great market opportunities for bioenergy.
Another major achievement for EPC was the harmonisation and structuring that was brought to the wood pellet market through the creation of the ENplus® certification. With a set of standards discussed and approved collectively, ENplus® largely contributed to the sharp increase in wood pellet quality observed in recent years in Europe and beyond, and to maintaining constant levels of excellence. It created fairer trading conditions on the market and took its fair share in turning wood pellet into a domestic commodity.
How was the year 2017 and the first 6 months of 2018 for European pellet producers?
For pellet producers the situation has been good as the overall demand is high. Up until the heating season 2015-16, the demand was rather low for three years in a row due mostly to very mild winters. The industry was suffering from it on the residential and domestic markets. But since then, heating seasons have been better and the demand grew. In 2018, the sector was pleasantly surprised to see the heating season lasting longer than expected. All in all, I would say that the last two heating seasons were pretty good for the domestic or residential sectors.
The industrial sector is also growing, especially in Denmark and in the UK. For producers the situation is good but the last winter was rather difficult in some areas in Europe, such as the Baltic states, Scandinavia, or Russia. This was due to the excessive wetness of the soils making work in the forests quite hard. Because of the difficulties faced to extract wood out of the forest, the whole wood industry registered a slowdown, which reduced the amount of available by-product (sawdust, shavings, chips). This ultimately generated a brief shortage of raw material for pellet production.
How do you assess consumption during this period?
Wood pellet consumption reached 24 million tonnes in Europe in 2017. For a better perspective, around 14 million tonnes of pellets were produced in Europe in 2016, and 15 million tonnes in 2017. While this number keeps growing, the European production levels are flattening, and there is no major investment in European production capacity scheduled at the moment.
What other trends in the European market would you highlight?
We see a growing demand in many countries, sustained and corroborated by a encouraging increase in sales of heating appliances. We are also seeing some interesting trends at a national level. As you know, Italy for example is the biggest user of domestic pellets in Europe with 3.2 million tonnes consumed in 2017, mainly in pellet stoves. But the most impressive progression in this sector was registered in France, where approximately 140 000 pellet stoves are being sold every year. The country is actually on its way to bridge the gap with Italy, where 170 000 to 200 000 units are sold annually. The sales of boilers in France, both domestic and mid-scale, followed a lower and more fluctuating trend, but the recent implementation of a carbon tax, that will gradually increase over time, created high expectations. Thanks to those results, wood pellet consumption sharply grew, reaching 1.25 million tonnes for the domestic and mid-scale sector in 2017, most of it locally produced.
Poland also experienced a dramatic increase in pellet boiler sales, reaching 10 000 appliances sold in 2017, bringing the country closer and closer to Germany and its 15 000 boilers sold annually. The consumption of pellets reached 230 000 tonnes in 2017 on the domestic market. Regarding longer term trends, we are confident in the development of the mid-scale sector. We firmly believe that this sector offers a bright future our industry, mostly because it is less weather and subsidy-dependent, and yet highly profitable for investors. In term of production, it is interesting to see the change over time. The leaders of yesterday in terms of production may not be the leaders of tomorrow. For example, Sweden and Germany remain the leaders in pellet production but some countries very quickly joined the biggest producing countries. Indeed, we could say that Latvia, Russia and France are new key players in a rapidly evolving pellet game.
What are the features of the European pellet stoves market?
The European stove and boiler markets must be apprehended differently. With stoves, customers are usually looking at the design of the appliance, placing a clear emphasis on how it will look like in the living room, for instance. In the case of boilers, it is not so.
The act of buying a pellet stove typically responds to a sense of spontaneity, which is not the case with boilers. Boilers require a significantly higher investment than stoves, and rarely do they bring any added value in terms of interior design. It is often seen as a sound investment with a quick payback more than anything else. Because of these essential differences, stove and boiler markets follow different trends. Indeed, the plasticity of the stove market is higher than for boilers, even with increasing prices for heating oil. Besides France and Italy, there is an increase in sales of heating appliances in some Balkan countries, such as Serbia. While data collection can be complex in other parts of Eastern Europe, our contacts on the ground attest of a growth in other countries such as Greece or Ukraine.
What other factors besides the weather affect the demand for pellets in Europe?
For the residential sector, sales of heating appliances play a huge role and dramatically affects wood pellet consumption. Other elements related to performance in energy efficiency for buildings also influence the demand, as well as the development of competing technologies. But the strongest correlation that we can establish is the one with the price of the heating oil. Basically, if prices are low for heating oil then people will not invest in pellet boilers, because the price difference between pellet and heating oil does not justify the investment costs. But on the other hand, if the prices for heating oil are high, then people will naturally do their calculations and come to the conclusion that is it better to invest in pellet boilers.
When it comes to industrial use, things are a bit different. Wood pellet consumption on this segment depends on the global energy demand, as for the domestic market, but the biggest driver is the policy framework. If the framework for building and operating a pellet combustion plant is unfavourable in a given area, or if it is seen as unreliable because of a changing political landscape, the industrial pellet sector in this area will be strongly impacted.
Do European pellet producers have issues with wood raw materials?
Europe is in a classic market situation, where there is a race for raw material between different industries, but there are no major issues for pellet producers with the current levels of production. We also have the privilege of a rather stable situation from one year to the next in terms of raw material availability. Besides some specific situations such as that of last winter, there are no serious problems in this department.
What is the situation with the production and consumption of pellets in other markets, for example, on the Chinese and American markets?
Those markets are completely different. North America is predominantly an exporting market, and in these markets pellets are produced in huge volumes. North Americans export most of their production, mainly to Europe, and use only a few million tonnes domestically. The US pellet production was recently around 6.5 million tonnes, and around 2.5 million for Canada. The domestic use amounts to approximately 2.5 million tonnes in the residential sector, while Canada consumes only about 150 000 tonnes. In both cases, pellets are mainly used in the residential sector, where people are not connected to the natural gas grid.
The Chinese market is a complete different story. The Chinese authorities decided to switch from coal to bioenergy for their mid-scale operations because of their massive air pollution problem. In all likelihood, all the pellets required for the operation of these plants are and will be remain locally producing. The Chinese market will remain quite an isolated one, and this should not impact the sector at a global level.
What is the trend for European imports from North America for the first half of 2018?
It is too early to provide any consolidated data, but we notice an upward trend, confirmed year after year as considerable investments are made in pellet production in North America.
On the export to Europe, we have witnessed a shift over the last two years whereby by Canadian pellets are being exported more and more to Japan, and less to Europe.
How has the import of pellets from Russia changed?
Levels of imports from Russia to Europe are progressing fast, matching the upward production trend in the country. Unlike with the Baltic states or North America, we do not anticipate a boom in Russia. At the moment we can identify two obstacles. The first one is logistic, which is not easy in Russia because of the uneven condition of the road network, especially in and around forested areas. Another issue is the means of transport for pellets. In Russia, pellets are transported mainly in big bags, which slows down the logistic. On top of the increased time and equipment required to handle each load, once the production has reached a port every single bag has to be opened in order to load the ship. The second obstacle might lead in the possible difficulties to enter in long-term business relation with Russian partners.
What are the advantages for Russian pellet exporters entering the European market?
Russia has a lot of wood resources. The penalties applied to the wood industry for not using residues is an important incentive for pellet production. Pellet manufacturers in Russia are very serious about what they are doing and produce high quality products. More and more Russian companies joining the ENplus® certification, making Russia the third country in the world in terms of number of certified companies. This has had a strong influence on quality levels, which has raised quite rapidly.
What projects is EPC currently involved in?
As I mentioned before, the issue of pellet quality is of paramount importance to us and to keep turning pellet as a 100% reliable fuel commodity, which is why we invested so much in the ENplus® certification. These investments will certainly not wane, and we will keep on improving our scheme based on a feedback we constantly collect and analyse. Of course, these improvements must come together with an even greater awareness about the ENplus® scheme, which is why we are actively engaged in better promoting the certification.
On a related note, while excellent fuel quality is essential, so is the quality of the appliances and their installation. This is why we currently consider taking actions to cover these two aspects.
Besides all this, we will continue working hard on our advocacy and policy efforts, to ensure the best legislative framework for the development of our industry. We will also continue our efforts around market intelligence, to keep monitoring of what is happening on the pellet market.
Lastly, we will place a special emphasis on the mid-scale sector, an essential one for all our industry. We need to know this specific segment better, and to promote it even further to the industry. We are currently organising meetings with various sector representatives that could benefit from switching to wood pellets. For example, the Church could be interested in going towards more renewables and its estate would greatly benefit from bio-based solutions in general, and wood pellets in particular.