The effect of new raw materials on pellet prices

Abstract: As demand for renewable energy is increasing rapidly, the market for biomass pellets is expected to continue to grow in the near future. Most of the new raw materials that are discussed for pellet production have one thing in common; the production costs will increase compared to using traditional raw materials such as sawdust and planer shavings. The aim of this thesis is to investigate to what degree increased use of new raw materials for pellet production will affect the general pellet prices in Sweden and to survey what plans Swedish pellet producers have concerning new raw materials. To investigate the raw material situation of the Swedish pellet producers an industry survey was performed. Literature studies were also made on previous research in the subject field. Calculations of the production costs for pellets were done for the raw materials sawdust, wet sawmill chips and energy wood respectively.                 New raw materials are already used by the large-scale pellet producers in Sweden. It is mainly the large-scale producers that have started to use new raw materials such as energy wood, wet sawmill chips and dry chips. Around 65% of the respondents of the survey were planning for new raw materials. Most commonly planned for was energy wood. Most of the pellet producers in the survey were planning for raw materials that give high quality pellets. The minimum price for pellets is in the long run set by the production costs. The raw material costs are the most important part of the production costs and according to results from the survey they also affect the pellet prices most. For pellets made of sawdust the raw material costs were typically 2/3 of the total production costs in 2009. In calculations of production costs, wet sawmill chips resulted in a decreased cost by 4% compared to sawdust, mainly because of less expensive raw material. Energy wood also resulted in decreased production costs by 4% compared to sawdust, assuming that the thermal energy needed for drying could be entirely produced with the bark from the debarking process. Both energy wood and wet sawmill chips could hence decrease the production costs and thereby the price for pellets. Even though there is a much greater maximum pellet production potential for wet sawmill chips than for sawdust the amounts of available raw material will, among other factors, depend on the development in the pulp industry.