Wood pellet production trends in Canada
August 21, 2013
Driven almost exclusively by foreign demand, the Canadian wood pellet manufacturing sector is bringing significant value to the domestic forest sector. As of the beginning of 2013, Canada has 41 pellet plants with over 3 million tonnes of annual production capacity. Although exports to the United States (US) have fallen in recent years, it has been more than offset by an expansion of exports overseas. In 2012, Canada exported CAD$ 208 million in wood pellets; 94% of which was shipped overseas.
Wood pellet production in Canada
Notes: (1) Production, capacity and export data for years 2001-2009 from Lamers et al. (2012).
(2) Production, capacity, and export data for 2010 from IEA Bioenergy Global Wood Pellet Industry Market and Trade Study (2011).
(3) Capacity data for years 2011-2012 from Canadian Biomass.
(4) 2011 production from the Wood Pellet Association of Canada (accessed July 31, 2013).
(5) 2012 export data collected from Statistics Canada (accessed August 8, 2013).
Since 2007, the capacity utilization rate has declined as the gap between manufacturing capacity and production has grown. Many issues are reasponsible for this trend, however, one reason is linked to lumber production. Wood pellets rely primarily on sawmilling residuals, and sawnwood production has declined significantly since 2007.
Canadian sawnwood production and wood pellet capacity utilization
Notes: (1) Sawnwood Production from FAO
(Accessed August 8, 2013)
In 2012, 97% of foreign demand for Canadian wood pellets was primarily located within five countries: the United Kingdom (UK); the Netherlands; Japan; the United States; and Italy. In fact, the UK purchased 58% of all wood pellets sold outside of Canada in 2012. So far, in 2013, the UK is on pace to import an estimated 1.1 million tonnes of Canadian wood pellets, an increase of almost 300,000 tonnes from the previous year.
Note: Data obtained from Statistics Canada (Accessed August 8, 2013)
*As of January–June
Two market shifts are noteworthy. First, exports to the Netherlands have dropped from 253,481 tonnes in 2012, to virtually nothing in 2013. Pre-August 2006, generators of electricity from biomass in the Netherlands were eligible for MEP subsidy (Milieukwaliteit Elektriciteitsproductie subsidie). Although this subsidy was cancelled in 2006, installations co-firing with biomass continued to received the MEP until the end of the subsidy period (10 years from grant). 2013 marked 10 years from the initial grant for many installations relying on biomass energy production, including the Dutch power plants of GDF Suez, EON and RWE.
Second, The UK has emerged as a dominant market for Canadian wood pellets, representing 75% of foreign demand in 2013. The UK Electricity sector is encouraged through a Renewable Obligation Certificate (ROC) of 1.5 ROC/MWh of renewable electricity generated. As a result of obligations to generate a certain portion of energy as renewable, the market value for these certificates were £40.71/MWh (2012-13).