1. Backdrop

The European Union has launched the European Union Emission Trading Scheme (EU ETS) to reduce carbon emissions in accordance with the Kyoto Protocol. This scheme regulates that the greenhouse gas emissions should be reduced by 20% by 2020 than that in 1990. In order to realize this goal, the EU has adopted a set of measures to decrease its dependence on fossil fuels in the last decades. Besides, EU countries have also agreed on several international environmental obligations such as the United Nations Framework Convention. In this context, nations around the world including EU countries tend to adopt more and more pellet fuel made from biomass residues for power generation and heat supply.


 As members of the EU, the Baltic states (i.e. Estonia, Latvia and Lithuania), which are located in northern Europe on the eastern cost of the Baltic Sea, are supposed to do their bit to reduce greenhouse gas emissions. So they process their biomass materials into pellet fuel. Now they have emerged as remarkable markets of wood pellet production and export among EU countries.

2. The Baltic States’ Wood Pellet Market

2.1 Pellet Production & Export Market 
The Baltic states enjoyed little share in wood pellet market, compared to larger wood pellets exporters like the U.S. or Canada. But in recent years, the three countries  have become significant in wood pellet production. In 2014, the production of pellet fuel in the Baltic states accounted for 35% of EU’s total, much of which was exported.
It was reported that the EU (as the biggest pellets consumer in the world) produced about half pellets in 2014. Even so, it still needed to import pellet fuel from other countries, especially from the U.S. and Canada. This means that the EU’s demand on pellet fuel needs large exports.
Since a vast majority of what is consumed in Europe is consumed locally, it is a good chance for such producers like Baltic states. It is easier to distribute their production to serve local European markets versus oversea producers. The wood pellets produced by them are mainly exported to Sweden, Denmark, Italy and the U.K.
Estonia had a limited pellet production a few years ago but has very quickly become a large pellet producer and the forth biggest EU pellet exporter in 2014. Pellet production in Latvia has boomed, making the country the biggest exporter in the EU. Lithuania produces mainly bagged pellets for the residential market and most of the production is exported. We can conclude that, the Baltic states, especially Latvia occupies important position in EU pellet fuel export market.
2.2 Domestic Consumption Market
Among the pellet fuel produced in the Baltic states, there are quite a large amount are exported. Meanwhile there are pellet fuel consumed domestically as well. For example, the pellet fuel is applied into industrial and residential sectors by power plant or home owners. However, the domestic wood pellet market in the Baltic states remains comparatively small. Most of the pellet fuel is used in household sector, and serviced by local small producers. 
There is still a potential for developing domestic consumption in Estonia, Latvia and Lithuania, since using timber for heating purposes remains as a tradition, and there is abundant wood residues that can be used for pelleting. Residents there should adopt wood pellets instead of firewood to do good to the environment.

3. Favorable Conditions of Making Pellets in the Baltic States

In the Baltic states, the conditions for utilization of biomass are particularly favorable. There are a lot of opportunities especially for production of heat and electricity through pellet firing. Against this backdrop, the pellet industry has experienced a significant boom in Estonia and the neighboring Lithuania and Latvia.
a. Abundant forest land
The main reason for the development is that the Baltic states are covered in large forest areas and pellet_fuels_from_forest_residues
there is a huge reservoir of solid biomass. The forests of the Baltic countries contain large amount of woods that support the wood processing industries. According to data, forests in Estonia total about 2 million hectares, which is about 50% of its land; in Latvia, forests cover about 42 percent of its total land area; in Lithuania, there are roughly 33% of its land covered by forests.
b. Relatively low costs of production
Due to the first factor, the Baltic states have abundant biomass residues for pellet fuel making, especially from forestry field. Then the price of raw materials for pellets production shall be lower, and the sustainability of raw material supply can be ensured.
Just with a set of equipment for pellet fuel making, producers can start their business into pellet fuel production. And for home owners who would like to make their own pellet fuel, a small pellet mill can help them with this (sometimes a hammer mill may be needed while processing materials with larger sizes).
c. Port accessibility
There are over 200 ports in the Baltic Sea, among which, many ports are international ports. To be specific, this region has the advantages on transporting cargo between Russia or Asian countries and European countries. It is convenient for pellet producers in Baltic states to delivery the pellets into EU market.

4. Raw Materials & Materials Processing

Raw material is one of the main factors of wood pellet production. In order to ensure that this business will last for a long time, it is especially important to insure the sustainability of raw material supply.
Luckily, in the Baltic states, there are abundant biomass residues like agricultural residues and wood wastes. The agricultural residues in the Baltic countries mainly comprise straw, leaves and stalks from grass species like wheat, maize, barley and rye. And the wood residues there come from two sources. One is from sawmill industry residues and another is from low-quality round-wood. The raw materials include tops & branches, logging residues, cuttings, bark, slabs, edgings, trimmings, veneer clippings & cores, sawdust, pulp screenings, scraps, shavings, sawdust, chips, etc.
If sawdust from sawmill is adopted as raw material, getting a small pellet maker is OK for farm owners or individual users to make their own wood pellets. But if the raw materials are of larger size, the materials need to be shredded, ground or chipped first. While for larger pellet producers, they need to adopt a set of pellet production equipment including hammer mill (shredder, chipper maybe also needed while processing materials of larger size), dryer, pellet mill or pellet press, cooler, and packing machine.

5. Pellet price

Pellet prices in the Baltic states fluctuate from producer to producer. For the residential market, the average price of EN plus A1 pellets in the Baltic states is about 150 euros per metric ton ex works, while industrial pellets average around 115 to 124 euros per metric ton free on board prices, depending on the producer and contract.Save


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