Thomas Meth, executive vice president of sales at Enviva, spoke with Fastmarkets senior editor, William Perritt, about the shift to biomass and the appetite for wood pellets in North America and beyond.

Watch the full session or read the summary below, with additional data from Hema Kalathingal, associate economist at Fastmarkets. 



What is wood biomass?

Fastmarkets defines wood biomass as any timber-derived product (both softwood and hardwood) that is capable of being converted to energy through direct combustion or gasification.

While biomass may include any part of the tree, typically biomass used in energy and fuel production comes from:
• Manufacturing residues (wood chips, shavings, saw dust)
• Non-merchantable timber harvest residuals (tops and limbs of trees)
• Post-consumer wood waste (construction scraps, demolitions)
• Urban and agricultural wood waste (smaller tree discards)

Find out more about wood biomass >>

Enviva’s journey to biomass and wood pellets as a fuel source (01:22 in video)

Enviva has been operating biomass manufacturing facilities in the US since 2004; they expanded to Europe in 2007 on the back of heightened interest in alternative fuel sources. One of their well-known European clients is the Drax power station, situated in the UK, which has a 2.6 GW capacity for biomass and uses around 7.5 million tonnes of wood pellets a year.

The wood pellets Enviva manufacture contain a wide range of wood materials and can be sourced from thousands of different private landowners. The most difficult part of the operation and financing of the biomass plant is to source the material, make sure they are from creditable counterparties, and process them in a way that makes sense.

North American demand is driven by the consumer wood pellet market – for now (08:37 in video)

There are a couple of elements that are similar in the countries that Enviva currently serves and where biomass makes sense, and it largely boils down to policy.

In the UK and Denmark, there are strong pushes from the government to reduce their dependency on fossil fuels; they have swapped out their coal plants for renewable installations such as wind and biomass. However, the US has a very different energy strategy. Coal is taken out of the system not because of governmental regulations, but the fact that natural gas is very cheap in comparison.

While there may not be a market for large scale conversions of coal plants to biomass plants in the US right now, there seems to be a market for smaller industrial or domestic applications. 

Wood pellet continues to be the largest sector on the North American bioenergy market

North America bioenergy market chart
The demand for wood pellets in the US is primarily driven by domestic households. According to the United States Energy Information Administration, there are currently 1.7 million households that use cord wood or wood pellets for heating. This means that both the weather and energy prices can greatly influence wood pellet prices.

However, demand can also be influenced by policies, such as the US tax credit scheme passed in 2020 that benefits those using wood and pellet stoves. We expect faster growth in 2022-2023 based on growing interest, rising traditional fuel prices and shifting policies.

Reducing carbon footprint as a fuel supplier (14:30 in video)

Not all biomass is equal in its carbon footprint. It’s important to maximize the long-term carbon storage of wood by maximizing its use.

Wood pellets can be made from byproducts of the industry, such as residues from sawmills, which maximizes the use of the trees from the timberland harvest. Enviva has also invested in wood chipping to utilize more lower grade wood. In addition, Enviva sources their wood from areas with stable or increasing carbon stocks, so landowners must be committed to keep the forest land where wood is taken from to ensure of the carbon benefits.

Looking at the supply chain, the biggest carbon emissions are from electricity used in production and fuel used for transportation. Both are generated mostly using fossil fuels. Enviva is looking to transition to solar and biogas at their plants, but the greater challenge is to change the fuels used for transportation. While ships are becoming larger and more efficient, Enviva is hoping to work alongside the shipping industry to find solutions.

There is still more room for biomass demand and growth on a global scale (21:09 in video)

There is certainly a lot of interest within the US, and there are plans to create more sites. The speed of which they come into play will depend on the market demand. 

Demand for industrial wood pellets in Asia and Europe

Demand in Asia wood pellet chart
Demand from Asia has been growing substantially over the past few years. European countries, while not expected to grow as fast as Asia in the future, remain the strong hold for the wood pellet market, with the UK leading the way. One important factor to watch for is the change in policies surrounding subsidies for biomass instillations.

Looking further ahead, new markets continue to open up, including Japan, Taiwan, Germany and Poland. Increased policy pressure in Europe also has the potential to speed up decarbonization efforts and displace fossil fuels with various forms of biomass, which should provide more opportunities for this industry. 

Learn more about our Global Pellet Demand Outlook 2021 – it’s a comprehensive look at how high energy prices and renewable energy policies are going to affect global wood pellet demand through to 2031.

The energy transition is one of the biggest forces of change in commodity markets today. Stay on top of this rapidly advancing market with the latest developments and insights from Fastmarkets’ experts. Visit our energy transition insights hub to learn more