In 2022, in particular, there were big pellet price ranges in Austria © proPellets Austria
In 2021, around 1.6 million tons of wood pellets were produced in 40 Austrian mills. Around 1.2 million tons were used for domestic consumption, while around 800,000 tons were mainly exported to Italy. Imports totaled around 400,000 tons and came from Germany, the Czech Republic and Romania. “For trading companies in Upper and Lower Austria, the cost of importing pellets from Germany and the Czech Republic is lower than that of deliveries from western and southern Austria. That’s why a considerable quantity of pellets produced in mills in Tyrol or Carinthia go to Italy and not to Vienna,” Dr. Christian Rakos, Managing Director of proPellets Austria, says, explaining why Austria imports wood pellets despite a domestic overproduction.
As of the end of 2022, 184,000 pellet boilers have been in operation in Austria. In 2021, 12,000 new pellet heating systems were installed, i.e. 50% more than in 2020, and according to estimates, 22,000 new installations were recorded last year. “This strong upward trend will continue in the coming years,” Rakos is convinced.
Repercussions of the war in Ukraine on the pellet market
“Pellets, the ‘comfort fuel’”: In December 2022, heating oil, natural gas and electricity were much more expensive than wood pellets © proPellets Austria
The war in Ukraine led to bottlenecks in supply throughout Europe. Before, 3.5 million tons of pellets a year were imported from Russia, Belarus and Ukraine. Earlier purchases exacerbated the situation and led to long delivery times and massive price increases in Europe. “The supply situation has calmed down since autumn. Compared to heating oil and natural gas, pellets are cheaper and have become a ‘comfort fuel’ again. Nevertheless, the bottlenecks of the summer of 2022 showed that adequate stockpiling would be the best measure against unforeseeable bottlenecks and extreme price fluctuations,” the industry representative analyzes.
Security of supply and mandatory stockpiling in accordance
The proposal put forward by proPellets wants to make stockpiling mandatory for all companies that put wood pellets on the market in Austria, that is both pellet producers and importers. The proposal is comparable to the Oil and Gas Storage Act. The industry association proposes both mandatory seasonal and strategic stockpiling, which should amount to a total of 10% (5% for each type of stockpiling) of the volume put on the Austrian market in the respective previous year. Seasonal stockpiles are to reach the required level by December 1 and can be used gradually from December 15 to supply the market. In order to avoid upheavals on the market, proPellets Austria believes that it should be admissible to stock up on wood pellets until December 1, 2024. Half of the compulsory quantities should be reached by December 1, 2023. The industry association expects Austrian consumption to amount to 1.3 million tons this year, which would result in a total storage volume of 130,000 tons of pellets. The release of the strategic stockpiles could be possible through a regulation by the Ministry responsible for energy, based on a recommendation of the Energy Management Committee.
The cost of stockpiling should be borne by industry and trade. Government subsidies are not necessary, as the association emphasizes. The overall cost includes the costs of tied-up capital, transport to storage silos, their filling and emptying, storage interest as well as losses resulting from the screening of pellets prior to delivery, and should not account for more than 1 to 2% of the end customer price. “Most production sites already have storage capacities, and it is important to make full use of them. However, it is probably necessary to expand storage capacities,” Rakos says. The inventory levels can be checked electronically in the silos. Using laser measurement, the quantities in stock can even be determined on a daily basis. In contrast, quantities of bagged wood pellets would have to be reported.
The ball is in the government’s court
The association, which represents most of the domestic pellet manufacturers, trading companies and boiler manufacturers, had called for mandatory stockpiling already in early 2019, which is also included in the federal government’s coalition agreement. After such a turbulent time, it is important to bring some calm to the pellets market. Customers have to be able to rely on stable supply and that is exactly what mandatory stockpiling can ensure,” the Managing Director of proPellets Austria emphasizes. The association has submitted proposals on the legally mandatory stockpiling of wood pellets to the responsible Ministry and hopes that they will become law over the course of this year.
