Wood pellets (for fuel)
Click
here
for charts illustrating each EU member state's monthly imports and
exports of wood pellets. Click
here for a related commentary on EU member states' trade in wood
pellets. Click
here for a summary of the share
price performance of
Drax and
Enviva Biomass.
Drax' biomass feedstock
Source: based on
Drax plc Annual Reports (various years).
5.8 million tonnes of imported wood pellets burned at Drax
during 2023 Note
1: "low grade roundwood" may be a euphemism for logs from trees
of no commercial interest to sawmills, perhaps deriving from clear felling (self-evidently unsustainable).
This proportion supplied under this category is increasing. Note 2: "sawdust and saw mill residues" might include roundwood delivered to a sawmill which the mill does not transform.
Sawmilling and related clear felling and thinning would be less
commercially viable if pellet mills do not procure this category of
feedstock. The carbon emissions associated with this should be
attributed to the pellets, pro rata, based on weight of
sawmill output
(not commecial
value).
Wood pellets supplied by Drax companies
versus what is burned at Drax
Source: based on
Drax plc Annual Reports (various years). Time
lags aside, between 2013 and 2022, the weight burned at Drax has
matched the weight which Canada's export statistics indicate were
exported to the UK from British Columbia (the province from which
Drax' supplies to markets world-side are likely to derive). In 2023
those exports from British Columbia amount to roughly half the amount
from Canada burned at Drax. Drax
suggest
that the proportion of its pellet production for world-wide markets
burned at Drax is small enough to justify accounting
for those
burned at Drax at the market price - not cost. This would tend
to minimise taxable profit and help increase the CfDe strike price it
secures if, perhaps contary to publiuc interest and despite Drax
indicatingthat its business will continue "come
what may", government agrees to provide Drax with open-ended
subsidies beyond 31 March 2027.
CfD-subsidised power generation at times of
great national need
Source: based on
Low Carbon Conracts Company. Rather than address national
need, CfD contracts negotiated with large generators for burning wood
allowed and implicitly encouraged those generators to cease using
their CfD-subsidised units, maximise their returns instead. Is
their heart really in decarbonisation of the UK power grid and the
climate emergency? Does it jeopardise their proposals to capture
post-combustion CO2?
UK imports of pellets compared with UK
electricity prices
Source: [imports] based on Eurostat and
UK Trade Info
(to June 2024); Drax annual reports; [electricity prices]
Low Carbon Contracts Company (from
31 07 2016)
Electric Insights Q1 2024 (01 01 2010 to 31 03 2024)
Weak regulation of CfD subsidies? Pellet burners (and, if incentivised
by remuneration strategy, senior executives) profiting by
generating less when prices are high - thereby worsening price spikes for
electricity (and, in turn, methane), prompting reduced heat and power
use by the poor? Almost all burned at Drax and EPH Lynemouth to
generate subsidies & to pretend zero CO2 emissions?
Does this indicate that their owners are of insufficient character to
partner with the UK in Net Zero?
UK imports of pellets from USA, weight by port
and unit import value
Source: based on
UK Trade Info
(up to 31 05 2024)
Import value per unit of weight
will vary with the mix of long-term, contracted supplies and purchases
(some speculative) on the spot market (spot prices rose steeply during
autumn 2022). Does the decrease in imports through the Port of
Tyne imply problems at Lynemouth - and/or systemic failure of CfD
contracts implicitly designed to suit generators not the UK (the
owners of both Lynemouth and Drax appear to have curtailed generation
during a poplonged period of peak demand)? That port supplies up to
100% of the wood pellets which EPH Lynemouth burns - to generate
subsidies - perhaps
30,000 tonnes per week or
1.4 million tonnes per year (from 2018)
Unit
value of pellets exported from USA during spot market hiatus
Source: based on USITC Trade DataWeb
successive 12-monthy periods - 2021 to end August 2024
"Energy security" would tend
to have deteriorated due to the hiatus in spot market prices and
corresponding subsidy payments. The hiatus may have also
revealed the fragility of the market and corporate behaviour - as
Enviva admits in its Q3 2023 report, pellet trade contracts made at
that time might contribute to its bankruptcy. The trend shown in
the chart is upwards, jeopardising prospects for continuted subsidy. Cost cutting will tend to further erode the false veneer that regional
certification confirms sustainability and that, crucially,
burning woody biomass is
carbon neutral. UK Contracts for Difference
purportedly seek long-term decreases in price of energy delivered -
yet they seem to have risen 30% (reflecting the increase in unit
export value from $140 to $180 per tonne).
USA's exports - by customs district
(to 31 08 2024)
Source: based on USITC
Trade Dataweb (code 440131) and Drax plc publications.
Exports to all major markets - even
Japan - in decline? "Peak pellets?"
The
decline in exports to the UK reflects a
loophole in CfD subsidies. Instead of dispatching
electricity to help overcome shortages of methane ("natural gas")
and thereby minimise acute hardship amongst people unable to pay a
surge in prices for gas and electricity, the two biomass burning
power stations did not operate their CfD-subsidised generating
units when market prices exceeded the strike price (obliging their
owners to pay government the excess revenue the owners received). One customer - Drax - (dependent on
subsidies) in one country - UK - has burned most of the USA's
exports of wood pellets. Exports to Netherlands are
rising (subsidies having become available) but are flat to Belgium and Denmark
(reflecting capacity and subsidy policy); Exports to Japan
are increasing rapidly - Japan copying ill-motivated UK and EU
subsidy policy. Drax' fourth & final unit
started operating in 2018; EPH Lynemouth operating since 2019 (like
Drax, power only & <40% efficient). The UK government's
adviser - the Climate Change Committee [page
14] - highlights that subsidies for unabated use of biomass as
fuel in large-scale power stations should not continue after they
expire (- 2027 for three of the four Drax units). During 2022,
roughly 40% of the pellets burned by those four units were
supplied by Drax Group enterprises. Most of the remainder
will have derived from Enviva (whose share price has, for
unfavourable reasons, greatly declined during the last year or
so).
Exports
of pellets from the USA - customs distrtict by destination
Source: based on USITC Trade DataWeb
successive 12-monthy periods - 2021 to end August 2024
Rate of clear-felling (/ loss of sequestered carbon)
rising fastest in Alabama & Georgia? Enviva (Southampton, VA) problems? Exports to leading markets in Europe
declining. Who is burning US pellets in "France"? "GMR"
refers to Guadeloupe, Martinique and Reunion (French territories).
Albioma burns wood pellets in those territories. Japan is
particularly vulnerable given the large share of its imports from the
customs district of Charlotte anf Norfolk.
Canada's exports
(to 30 09 2024)
Source: based on
Statistics
Canada (code 440131) (April and May 2024 exports to UK from BC
identical - an error?)
Continued decline in exports from BC - is
the end night (for Drax and Japan)?
The triumph of ambition (remuneration incentives
and the need to convey the appearance of momentum) over due diligence in Drax' acquisition
of Pinnacle and subsequent expansion in BC? The steep decline in
exports from BC to UK reflects greater profit available to Drax
under its contracts with markets in Japan, than supplying Drax
power station from BC. This suggests that Drax (which
dominates pellets supply in BC) has a substantial competitive
advantage over Enviva in supplying those markets. Drax
supplied - to countries other than the UK - almost 1.5 million
tonnes of pellets from Canada. Increasing costs due to
wildfire (in part a consequence of the unsustainability of
supposedly sustainable forest management practices) threaten
long-trerm exports frpm British Columbia.
Canada's exports of sawnwood
of coniferous species
(to 31 05 2024)
Source: based on
Statistics
Canada (code 4407.1x.xx)
This chart illustrates the decline in
availability of sawmilling residues - supposedly the predominate
raw material in the pellets which Drax exports from British
Columbia. The pellet industry helps sustain the commercial
viability of sawmilling industries (implicitly tending to compound
forest-degradation, carbon emissions and loss of sequestration).
Canada's exports of pellets
to the UK, by province
(to 31 06 2024)
Source: based on
Statistics
Canada (code 4401.31)
EU-27 imports of pellets (& other HS4401 customs
code products)
(to 30 04 2024)
Source (based on): Eurostat
Bans against imports from Russia and Belarus helped reduce
the impact of EU27 consumption outside the EU. EU27 pellet
imports are now largely dependent on contested imports from USA,
notably Enviva (at risk of bankruptcy and litigation).
Japan's imports
Source: based on
Trade Statistics of Japan
(code 44013100) [01 01 2016 to 31 08 2024]
At last, Japan has stopped increasing
its pellet imports. Risking energy
security, roughly half Japan's imports of pellets are supplied by
controversial entities in Canada (Drax) and USA (Enviva).
Republic
of Korea's imports
Source: based on
Korea
Customs Service (code 440131) -
to 30 09 2024 Note
step-change increase in imports from Russia and
flat current overall trend (which may significantly dampen enthusiasm
for pellet-fuelled energy in the global market).
Republic
of Korea's imports
(- import value per unit of weight)
Source: based on
Korea
Customs Service (code 440131) -
to 30 09 2024
Note large price premium for pellets from Canada.
Global production, imports and exports
Highly concentrated in
terms of countries, suppliers and (in Europe) buyers - an implicitly fragile
market
Leading global bilateral trade flows
Imports dominated by a
handful of countries which ignore CO2 emissions from burning woody
biomass but fail to compensate their suppying countries of origin for
this accounting loophole (especially for the decline in asset value
available to sequester local emissions).
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