UK, Danish pellet burn down in 1H22
Wood pellet burn for power dropped significantly in the UK and Denmark in the first half of 2022 compared with a year earlier, as tight supply availability, increased pellet costs and utility outages combined to pare generation.
The UK's pellet-fired output saw the largest decrease having dropped to the lowest since at least 2018. Average hourly output fell to 1.8GW in 1 January–23 June, from 2.3GW during all of the first half of 2021, national grid data show. This is equivalent to a combined 1.2mn t of wood pellets, assuming an average 40pc efficiency at UK plants and that generation on 24-30 June holds in line with its average earlier in the year.
The drop was mostly because of a decrease in generation by around 370MW and 160MW on the year at the 2.6GW Drax and 405GW Lynemouth power plants, respectively.
Danish pellet-fired generation dropped to 533MW from 644MW over the same period. Belgian pellet burn also fell on the year, although only slightly. While French output rose by around 100MW to 440MW, although it could not offset the overall decrease in northwest Europe.
Pellet-fired generation fell despite spark spreads offering a strong incentive for utilities and as pellets maintained a strong competitive edge over coal-fired output after counting for emission costs, mostly because of supply shortages.
Supply availability has held tight so far this year, owing to Covid-19-related disruptions in the global supply chain as well as shortages and rising costs of raw materials in key European producing regions, which were exacerbated by the start of the conflict in Ukraine.
Utilities in the UK and elsewhere in northwest Europe faced delivery delays for most of the first half of 2022, which became more acute in March-May, increasing to four to six weeks. Delays were experienced from all producing regions, with Covid-19 infections heavily affecting US production in the first quarter of 2022, while European producers fought with raw material shortages and rising production costs.
Raw material costs in the Baltic states have more than doubled from a year earlier, with firewood prices currently heard around €70-75/m³ in recent weeks. The industry has taken a dent from the conflict in Ukraine, as disruptions to trade — including transport and insurance barriers, certification suspensions, and subsequent sanctions after the conflict started in late February – have significantly pared raw material supplies from Russia and Belarus into the Baltic region.
Issues with raw materials were also experienced in southern European producing regions, primarily in Portugal, although industrial pellet prices here have increased by a lesser extent on a fob basis so far this year compared with other regions.
Many European utilities sought alternative ways to tackle supply bottlenecks, by bringing planned maintenance forward, extending outages or switching to coal burn.
Forward power, pellet, coal and emission price indications suggest that there is still strong incentive for utilities to burn biomass for power for the remainder of 2022 and throughout 2023. Pellets may however face more competition from coal at co-fired Dutch units in the second half of 2022, following the suspension of a ceiling for coal-fired generation in the Netherlands, in a bid by the government to accelerate the filling of gas storage sites ahead of winter.
| UK, Danish pellet burn down in 1H22 | |||||||
| MW | mn t | ||||||
| 1H21 | 1H22 | YOY | 1H21 | 1H22 | YOY | ||
| UK, Drax | 1,868 | 1,498 | -369 | 4.3 | 3.4 | -0.8 | |
| UK, Lynemouth | 367 | 208 | -159 | 0.8 | 0.5 | -0.4 | |
| UK, Markinch | 53 | 48 | -4 | 0.1 | 0.1 | -0.0 | |
| Denmark | 644 | 533 | -111 | 1.5 | 1.2 | -0.3 | |
| Belgium | 193 | 180 | -13 | 0.4 | 0.4 | -0.0 | |
| France | 342 | 440 | 98 | 0.8 | 1.0 | 0.2 | |
| NWE | 3,467 | 2,908 | -559 | 8.0 | 6.7 | -1.3 | |
| Finland | 744 | 606 | -139 | 1.7 | 1.4 | -0.3 | |
| Czech Republic | 301 | 285 | -17 | 0.7 | 0.7 | -0.0 | |
| Poland | 216 | 218 | 3 | 0.5 | 0.5 | 0.0 | |
| Italy | 688 | 602 | -86 | 1.6 | 1.4 | -0.2 | |
| Portugal | 380 | 382 | 3 | 0.9 | 0.9 | 0.0 | |
| Rest of Europe | 2,329 | 2,093 | -236 | 5.4 | 4.8 | -0.5 | |
| Total | 5,796 | 5,001 | -794 | 13.3 | 11.5 | -1.8 | |
| Notes: Conversion in equivalent wood pellet mn t are Argus calculations, assuming efficiency at 40pc, and pellet burn for 24-30 Jun in line with average earlier in the year. The Netherlands and Spain excluded because of data unavailability | |||||||
| —Argus, BMRS, Entsoe | |||||||
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