UK Pellet Council Statement: Russia/Ukraine crisis and changes to global supply chains

Mark Lebus, Chair of the UK Pellet Council (UKPC) said, “The UK Pellet Council, its members and the UK biomass (for heat) industry has, like many other sectors, actioned immediate and alternative measures to restructure its global supply chain, working with overseas partners to help ensure a continuous supply of biomass wood pellets for UK customers.

“Wood pellets will no longer be sourced from Russia or imported from Russian producers. Given the previous levels of Russian exports, this will of course have an impact on supply worldwide, not just to the UK but for other countries too who are all now competing for the same premium product from similar suppliers. With UK and international sanctions in place, we estimate that total European production may be reduced by some 12-15%, so there may be some short-term price rises due to the ongoing situation and heightened competitiveness between countries. UK customers may have experienced the price per tonne rising by approximately  25-40% (cost average £360-£385)[1], although most accept that this is still much lower than consumers using oil or gas-fuelled systems[2]. Current wood pellet costs are also in line with prices across Europe.

“However, it is important to say that we envisage any impact to be felt more so in the short-term while new supply chains and arrangements are put in place. This will mostly be over the next six weeks, and with heating demand from customers naturally falling as we head into the Spring and warmer months, new imports coming into the UK, for instance from the Iberian peninsula, should ensure most end users see minimal disruption.

“Whilst the UK biomass heat industry is a small, successful and very niche market, primarily servicing rural and off-grid, domestic and commercial users, we are indeed operating in a global wood pellets industry. The market going into winter gone was tight due to an increased roll-out of biomass boiler installations across Europe[3] and new renewable energy programmes being delivered across EU member states, and this was amplified further by a

big rise in shipping and container costs. These external factors also pushed other industries, such as the power stations and larger utility companies – totally separate to the biomass heat sector, to purchase and opt for bigger bulk shipments, buying a much greater quantity of and higher quality of premium wood pellets in addition to their usual lower, industrial grade stock requirement.

“The recent storms also disrupted global shipping schedules too but given we’re a much smaller sector, we were able to prioritise both domestic and commercial customers, and replenish stock across UK-wide suppliers.[4] All of those elements together therefore had a knock-on effect for everyone, especially end users.

“However, what we must seriously look at and the UK Government must seriously consider going forward is that we have a very real opportunity here and now to better support, strengthen and heavily invest in a ‘home-grown’ wood pellets production market which would not only see the UK becoming mostly self-sufficient for biomass wood fuel, and therefore less reliant on imports and energy price hikes, but also attract greater inward investment for new manufacturing plants, creating thousands of green jobs for rural areas.

“By growing and fortifying our own domestic production in line with sustainable forestry management and DEFRA’s own tree planting and new woodland creation ambitions, the UK Government could take huge strides forward in achieving net zero targets. Furthermore, if timber is to be further encouraged in future housing and construction, this whole process needs to be well managed as part of a circular economy, and with biomass being the waste product after the timber process, the biomass heat and wood pellets industry is the keystone that pulls all of this together.

“Long-term policy direction, signalled by government, could strongly encourage and deliver the kind of investment needed to develop strategic autonomy from world markets by quite literally, growing our own wood fuel supply. At present, the UK cannot provide the required volumes needed, and therefore we import on a considerable scale and become drawn into a growing energy crisis.

“Biomass for heating creates more jobs than any other renewable technology, especially for rural communities with hard-to-heat or off-grid homes[5], and with the boiler replacement scheme offering £5,000 grant for new biomass installations from 01 April, the opportunity is right there in front of us so these conversations must be had.”

ENDS – issued March 2022

EDITORS NOTES:

• The biomass for heat industry is a smaller, separate sector to that of the utilities companies (eg Drax) who use biomass wood pellets on a much greater, industrial scale for national power supply. Biomass for heat is used by both domestic and commercial users for home heating, especially in rural off-grid areas, and businesses (eg agricultural/food producers, hospitals, schools, care homes, leisure resorts etc).
• Publication of the Biomass Policy Statement, announced by the UK Government at COP26  included a strong commitment to biomass across the economy including heat generation, especially for rural and off-grid areas. It stated that the Government ‘recognises that not every home off the gas grid will be suitable for low temperature heat pumps’ and how in most of these cases, ‘solid biomass will be a suitable alternative’. This will provide a fit-for-purpose solution for a significant number of homes using fossil fuels such as oil, coal and LPG.
• Approximately 1.9m homes (7% of UK total housing @ 28.6m) and 200,000 non-domestic buildings (17% of UK total commercial @ 1.2m) cannot be decarbonised via the gas network. At least 422,000 of the 1.9m homes are only suited for bioenergy/biomass heating (or more expensive electric resistive solutions) due to property constraints.
• 57% of rural homes use fossil fuel (oil/LPG/coal) creating 20-40% higher CO2 emissions than natural gas in urban areas. 95,000 use coal (54,000 of those are classed as hard-to-heat).
• Rural areas cover approximately 80% of the UK’s landmass  

[1] Current heating oil costs are the equivalent of over £600/t of wood pellets

[2] Domestic Heating Oil Price Chart for England | BoilerJuice

[3] Germany has delivered more than 70,000 new biomass boiler installations in one year equating to 400k tonnes of wood pellets

[4] 100,000 users of biomass wood pellets across the UK versus 16m users of gas meaning the UK biomass heat industry is a much smaller, niche sector

[5] Over 57,000 rural homes still use coal as the primary heating source