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Assignment 1: Bioenergy markets and policy

Wood pellets in Spain


José González Santacruz (290753)

Edited by Jouni Tuukkanen (Bio-Erko)



  1. 1 Description of the product or technology


I would like to start from a brief description of wood pellets. They are biofuels made from compressed organic matter or biomass. They can be made from industrial and food waste, agricultural residues, energy crops and lumber.  Wood pellets are the most common type of pellet fuel and are generally made from sawdust which has been compacted. Wood pellets are related to industrial wastes from the milling of lumber, manufacture of wood products, furniture and construction.

Pellets are categorized by their heating value, moisture, ash content and dimensions. They can be used as fuels for power generation, commercial or residential heating, and cooking. Pellets are extremely dense and can be produced with a low moisture content (below 10%) that allows them to be burned with a very high combustion efficiency.

Further, their regular geometry and small size allow automatic feeding with very fine calibration. Their high density also permits compact storage and transport over long distance. They can be conveniently blown from a tanker to a storage bunker or silo on a customer's premises.


  1. 2 Description of the market.


In the following graphic, it can be seen the evolution of the pellets ‘market in Spain from 2012-2018 and the prevision until 2020.








In this figure it can be seen the capacity of production, the number of industries related to pellets, the production and the consumes per year in Spain. Since 2011, in Spain, the production of pellets has been multiplied by 2.71.






This second figure shows the evolution of the average price of the domestic use pellets in different formats. 

Given the great supply capacity and production potential available in our forests, the prices of wood pellets, have not increased, despite having grown so much the consumption. They have fallen for reasons like the reduction in consumption due to high temperatures during winter and their big availability. 

In 2015, Spain had 79 pellet production plants with a production capacity of 1,250,000 tonnes. By 2020, capacity is expected to increase to 1 646 000 tonnes.


  1. 3 Description of the policy measures


One of the most important factors that have influenced the pellet market is the rise in the price of fossil fuels in the country (natural gas, heating oil, etc.), highly motivated by taxation, for instance, gas oil price changed from 4.54 cts € / kWh in December 2015 to 6.41 cts € / kWh, in December 2017. Besides, the number of industries has been enlarged with the help of incentives. At the end of 2017, there were 244.197 heating installations, 46027 more than the previous year (+23%).

Basically, the policy measures are taken towards favouring renewable energies, the installation of new industries, establishing a stronger market for pellets, etc. In order to substitute the market for fossil fuels and improve the renewable heat generation. Besides, subsidies to promote the implementation of the installation of renewable heat appliances


  1. 4 Evaluation of the effect of these measures


It can be said that the evaluation of these measures is positive due to it can be seen an increment in the production of national pellets. It can be seen an increment in rural development strengthening the local industries too.  Spanish policies are enhancing bioenergy markets using different mechanisms like subsidies as well as obligations. On the other hand, it must be pointed out that the competitiveness among the energy sector is affected due to this subsidies and taxes not being honest sometimes to certain energies industries.

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.

In general policy measure can be evaluated as successful.