The Dutch pellet market is characterised by minor domestic production at only a few production sites (production capacity: 130,000 tons in 2008), a negligible market for domestic pellet heating and a large demand for wood pellets for co-firing in coal fired power plants.
Production is mainly hampered by the lack of raw material, because most sawmill residues have a dedicated use in Belgian particle industry or in the extensive Dutch dairy sector while the development of a residential pellet heating market is hindered by lacking policy support for residential pellet boilers and the nation-wide availability of cheap and domestically produced natural gas and advanced gas boilers.
Wood pellet consumption has increased from less than 200,000 tons in 2002 to over 900,000 tons in 2008. The use of wood pellets for co-firing started in the late 1990s, when the utilities started to use larger amounts of biomass for permanent co-firing. After 2000, all production companies intensified their co-firing activities, the main reason being a covenant between the power producers and the Dutch Ministry of the Environment (2002) and beneficial policy support schemes for the production of renewable electricity from biomass. The MEP (“Environmental quality of the electricity production”) feed-in premium, which was in place between 2003-2006 provided a subsidy of between 6 to 7 €ct per kWh electricity produced from clean woody biomass.
Co-firing capacity is still eligible for MEP support. The government, however, has limited its long term support to a maximum of 10 years. Because most contracts were made for the full period of ten years, it is likely that current wood imports and co-firing levels can be maintained up until 2012. After 2012, when first contracts from 2003 will be terminated, a starting decline in the consumption of wood pellets is expected, unless new subsidy schemes are put in place in the meantime.
Given the large contribution of wood pellet co-firing to the overall Dutch renewable electricity production, it is likely that a new instrument will be devised to continue the use of wood pellets. However, as wood pellet co-firing requires very little investment costs, and depends largely on the costs of wood pellets and the cost of coal (the fuel to be substituted), it is questionable whether the currently applied SDE support system (stimulering duurzame energie: feed-in premium for renewable electricity, currently not promoting pellets) will be used to stimulate future wood pellet use.
Alternatively, this could also be achieved by obliging power companies to produce a minimum share of renewable electricity from biomass. It is expected, that during 2009, more clarity on this issue will be provided by the Ministry of Economic Affairs. Until then, the main barrier for further increase in wood pellet consumption is the uncertain future policy support. Based on the current long term grants until the period 2012-2015 (inherited from 2003-2006 governmental obligations), it is expected that current wood pellet consumption may remain more or less stable until 2012.
Today, more than 95% of all wood pellets consumed in the Netherlands are co-fired in large coal power plants. While the maximum theoretical co-firing capacity is not yet reached, the market is quickly getting mature. In 5 to 6 power production units, wood pellets are co-fired (between 1% and 20% of total input). The substitution happens only at co-fired power plants. On average 2.8% of coal (in terms of electricity production) is substituted by wood pellets in 2008. The largest single consumer by far is the utility Essent, which has co-fired several hundred thousand tonnes of wood pellets annually at its Amer coal power plant. Furthermore, another large scale consumer has switched since the 1st quarter of 2008 from waste wood to wood pellets. In total, electricity consumption in the Netherlands in 2008 was about 119,000 GWh and the contribution of power production from wood pellets is about 1,700 GWh (CBS Statline 2009).
In order to satisfy this demand the Dutch utility sector started to import large amounts of pellets from e.g. Eastern Europe or North America. The wood pellets are handled almost exclusively in bulk. Typically, they are imported by large dry bulk carriers to harbors such as Rotterdam and Amsterdam, where they are transferred to smaller river barges, which transport the pellets to the final consumer, large coal power plants.
The Dutch ports of Rotterdam, Amsterdam, Flushing and Delfzijl/Eemshaven have a clear interest to become bioenergy-hubs, a scenario which is not unlikely. With increasing amounts of wood pellets being imported form North America (but possibly also from other continents), and raw material becoming scarce in North-West Europe, it is foreseen that e.g. the Rotterdam harbor could become a major hub where wood pellets are transferred from large ocean-going dry bulk carriers to smaller river vessels and coasters.
Please refer to the Publication section for a comprehensive report on the Dutch pellet market.