What’s the matter with the Wood Pellet Markets in Europe?

Abstract: Abstract Increasing the share of renewable energy for covering our energy demand is central to the energy policy of the European Union. Despite the acknowledged importance, renewable energy has not yet reached the favoured wide-spread utilisation throughout Europe. Wood pellets, cylindrical sticks of 10 to 30 mm length mainly made from wood processing residues, are a renewable, cost-competitive, local and convenient energy solution for heating and hot water supply in domestic buildings. Under the application of an innovation system approach, the European pellet market for small-scale pellet applications has been analysed concerning its barriers to diffusion. Despite the potential of the energy carrier pellets to contribute to a more sustainable energy supply, instabilities on the pellet market could be observed in the past. In order to identify the causes for the problems of the European pellet market, the institutional legislation around pellets, the market formation, the price development and consumer acceptance have been heart of the study. In the analysis, the three European pellet markets of Sweden, Austria and Germany have been considered. The aim of this thesis is to identify key barriers to the diffusion of the European pellet market from where measures can be derived to overcome these obstacles. Thereby, appropriate policy instruments are viewed as vital measures in order to remove the presented barriers. Finally, this knowledge is used to define how favourable conditions for a widely spread commercialization of wood pellet applications can be ensured. The generic conditions for an effective small-scale pellet market are grouped according to political (the legislation), economic (supply, demand, price) and social (consumer perception and local factors) aspects. The outcome of the thesis reveals that wood pellets for domestic use are part of the solution to move towards a more sustainable energy supply. However, appropriate policy measures need to be taken in order realise their potential.