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Development of wood pellet use in Germany – Role of policy

Description of the product or technology: Wood pellets consist of wood particles compressed into small cylinders for use as burning fuel. Due to their density (which is about 2 to 3 times that of softwood), pellets burn cleaner and more uniformly per unit volume. Today, wood pellets have a range of uses, from home heating to large-scale industrial power generation. While wood pellets have been used for decades, some of the recent increase in demand can be attributed to bioenergy targets under the European Union’s “Renewable Energy Directive”, which requires the EU to fulfil at least 20% of its total energy requirements with renewables by 2020. The source of biomass for wood pellets can come from timber (trees harvested specifically for the purpose of manufacturing wood pellets), logging residues (portions of harvested trees that are not utilized for saw-timber, such as tops, branches, and leaves), or mill residues (such as sawdust, wood chips or wood shavings that are a by-product of wood processing in sawmills). (Global Forest Atlas 2019)

 

Description of the market: Market development with regard to consumption and production patterns are shown in the following graphic.  

 

The figure above illustrates that large scale pellet consumption is insignificant at the moment.  In  2008, the installed production capacities were more than sufficient to satisfy the domestic demand so that large amounts of mainly industrial pellets have to be exported in order to better utilize the capacities.

Germany is one of the largest pellet markets worldwide in terms of produced and consumed volumes and installed production capacities. The pellet production in Germany is concentrated in the South and in the South-West (as shown in the image below), around the well-wooded low mountain ranges with high wood industry activity. The distribution of installed pellet appliances follows a similar pattern.

 


Source:  Global Forest Atlas 2019

 

Source: https://www.tzb-info.cz/

The price index in Germany, Austria and the Czech Republic may be considered stable and the prices have barely experienced dramatic fluctuations and staggering (see above-plotted graphic). In general, small fluctuations in prices took place only in accordance with seasonal needs increases. (Biomassa 2016)

  

Policy measure to trigger an increase in wood pellet usage and production in German:

The targets of the Federal Government for 2020 include the increase of the share of renewable heat generation from 7 % today to 14 %. An important share of this target will have to be achieved in the residential heating sector mainly by increased use of biomass and solar thermal technologies. In order to reach this target, a renewable heat law is in force since 2009.  It obliges owners of new houses to provide a certain share of their heat demand from renewable sources.  Heating with wood pellets is one option.  The law also includes the continuation of the established and successful Market  Incentive  Program (MAP). This program provides subsidies for the installation of renewable heat appliances in new and old buildings which were one of the main drivers for the growth of renewable heating markets in the past. Other support measures included reduced VAT rates on wood fuels (7 % instead of 19 %) and several information portals on renewables in general. The legal framework for wood heating is provided by the  German Law for the protection against harmful effects on the environment.  According to this law, small-scale heating installations do not need special approval. (Deutsches Biomasse Forschungszentrum 2017)

Furthermore, the German government actively promotes and conducts various types of research and development work on issues involving sustainable biomass use. These include crop- growing methods for energy crop production, broadening the scope for energy crop use, establishing sustainability standards and certification schemes, and biomass conversion. (National Biomass Action Plan for Germany 2009). These instruments target at the residential heating market which produces the demand for pellets in Germany.

  

Evaluation of policy measures:

Generally, there is a broad range of reasons which justify the need for political support regarding bioenergy production like the development of rural areas or strengthening of local industries. German policies affecting the development of bioenergy makes use of different mechanisms like subsidies for local households (MAP) as well as confronting them with obligations like provision of a certain share of energy produced by renewable resources in houses recently built. However, one must keep in mind, that political measures affecting economy lead to market falsification e.g. by affecting the competitiveness of certain sectors. In addition, tax revenues invested in bioenergy market may lead to lacking investment opportunities in other sectors like education and therefore discontent among populations groups may arise. Nevertheless, as the use of wood pellets for energetic purposes in Germany has increased in the last decade, policy measures can be evaluated as successful but policy-makers must keep in mind, that high production capacities are not used at all, whereas there is much more potential.

 

References:

  • Biomassa (2016)

          http://biomassa.de/news-pellet-price-index-in-austria-and-germany-33.html

          (Visited on 21.01.2019)

  • Deutsches Biomasse Forschungszentrum (DBFZ) (2017)

          Nagano, Japan; author: Volker Lenz

          https://www.renewableei.org/en/activities/events/img/20170524/nagano_VolkerLenz.pdf (visited on 21.01.2019)

  • Global Forest Atlas – Yale School of forestry and environmental sciences (2019)

          https://globalforestatlas.yale.edu/forest-use-logging/forests-bioenergy

          (Website visited on 21.01.2019)

  • National Biomass Action Plan for Germany (2009)

          https://www.bmel.de/SharedDocs/Downloads/EN/Publications/BiomassActionPlan.pdf?__blob=publicationFile (Visited on 21.01.2019)

          https://www.tzb-info.cz/ (visited on 21.01.2019)

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