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Why have wood pellet prices for biomass boilers risen so much?

Posted by Cathy Debenham on 11 December 2014 at 9:44 am

Q: I installed a Grant wood pellet boiler in May 2013. Prior to installation, I monitored Enplus A1 pellet prices for about a year. They seemed to hover around the £230 a tonne for 10kg bags. Since installing the price has crept up to £262 (Liverpool fuels balcas brites). I have been reassured that supplies are plentiful so why the price rise? Are these companies just cashing in like the other big energy firms are accused? Any ideas?

A: There are three major wood pellet manufacturers in the UK, and over the past few years they have been investing heavily in developing their businesses. Until the RHI took off they were working in a UK market where supply outstripped demand and were exporting surpluses to Germany.

As demand for biomass boilers has grown, so has the demand for wood pellet in the UK. Also as the economy has started growing again there is increasing demand in the market for timber (housebuilding, construction, we export some as well as wood fuel). This combination has allowed manufacturers to increase prices in the way you have seen. Once one manufacturer made a significant price increase, the others followed suit.

However, the good news is that future prices are likely to be more in line with the retail price index. "There is more demand in the market generally," says David Newman, head of sales and business development at Forest Fuels. "UK manufacturers have upped production, but costs have increased too. I expect the market to steady off next year. 

"Having said that, there is too much emphasis on price in this market," he adds. "You also need to consider quality and how the pellet is delivered, and whether your supplier is meeting all the relevant quality standards."

He illustrated the point, saying that it's no good getting a cheap price if you end up with a pile of sawdust, or the delivery company leaves you a week without heating.

So, in answer to your question, I don't think that it's comparable with the energy companies. The timber market is a complex one, and the pellet sector is in the process of establishing itself. Hopefully, the prices will be less volatile in 2015.

Photo: Andrew-Writer

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