station, which had previously co-fired under the old subsidy scheme, resumed co-firing significant amounts of wood pellets in the fourth quarter of 2018. The other plants will likely begin co-firing in 2019 and 2020, making the Netherlands a major market for industrial wood pellets again. The ramp up in co-firing demand in the Netherlands is expected to quickly approach 2.5 million tonnes. JAPAN North American producers, particularly with dedicated biomass plants (as opposed to major utilities co-firing at coal stations). South Korean demand is largely responsible for the rapid development of wood pellet production capacity in Southeast Asia. In 2018, South Korea’s wood pellet imports are projected to have reached 3.4 million tonnes, with more than 95 per cent of that volume coming from Southeast Asia. PELLET HEATING MARKETS While industrial pellet markets get the bulk of market analysts’ attention, heating markets make up a significant amount of total global demand and FutureMetrics forecasts continued strong growth over the next five years. Warm winters and low competing fuel prices, particularly for heating oil, slowed pellet heating demand growth in North America and Europe over the last few years. While a recent fall in oil prices raises some Japanese wood pellet imports are on pace to exceed one million tonnes for the first time in 2018, approximately double the amount of imports from 2017. Through the first three quarters of 2018, 63 per cent of Japan’s wood pellet imports came from Canada and 31 per cent from Vietnam. Due to the fixed price and long contract length of the Feed-in-Tariff subsidy that supports renewable energy in Japan, long-term contracts from strong counter-parties, like those in Canada and the U.S., are the preferred way most Japanese buyers procure wood pellets. We expect to see continued rapid expansion in Japanese wood pellet imports in the years to come with imports projected to exceed five million tonnes in 2023. Our full detailed analysis on Japan is available in FutureMetrics’ 2018 Japanese Biomass Outlook. SOUTH KOREA In South Korea, renewable energy is promoted by a renewable portfolio standard (RPS) that requires utilities to source an increasing amount of their energy from renewable sources. Tradable Renewable Energy Certificates (RECs) are used to demonstrate compliance. Utilities have three ways of meeting the RPS: produce RECs themselves, purchase RECs on an exchange, or pay a fine equal to 150 per cent of the average REC price during the year. Utilities have found that co-firing wood pellets is one of the most cost-effective ways of meeting the RPS. However, due to uncertainty regarding the value of RECs, the price of power and the price of pellets, South Korean buyers have a more difficult time entering into long-term contracts. Nevertheless, there have been instances of successful contract negotiations with Canadian BIOMASS CBM_Airoflex _JanFeb19_CSA.indd 1 21 2019-02-07 10:56 AM
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