survey regarding the prices of wood fuels … · survey regarding the prices of wood fuels over the...

SURVEY REGARDING THE PRICES OF WOOD FUELS OVER THE 2014 - 2015 PERIOD

November 2015

Survey conducted by CODA Stratégies on behalf of ADEME

Contract number: 1501C0006

Technical coordination: Madame Alice Fautrad Direction Productions et Energies Durables

Service Bioressources

SYNTHESIS

janvier 16

Enquête sur les prix des combustibles bois en 2014 – 2015 sur 19

ACKNOWLEDGEMENTS

CODA Strategies would like to express its gratitude to Madame Alice Fautrad, of the Bioresources department of the ADEME, for her support and assistance throughout the different stages of the study.

CITATION OF THE SYNTHESIS

Author: CODA STRATEGIES

Publication Year: 2015

Title: SURVEY REGARDING THE PRICES OF WOOD FUELS OVER THE 2014 - 2015 PERIOD

Number of pages: 19 pages

Any representation or reproduction of the contents herein, in whole or in part, without the consent of the author(s) or their assignees or successors, is illicit under the French Intellectual Property Code (article L 122-4) and constitutes an infringement of copyright subject to penal sanctions. Authorised copying (article 122-5) is restricted to copies or reproductions for private use by the copier alone, excluding collective or group use, and to short citations and analyses integrated into works of a critical, pedagogical or informational nature, subject to compliance with the stipulations of articles L 122-10 – L 122-12 incl. of the Intellectual Property Code as regards reproduction by reprographic means.

janvier 16


1. The objectives, scope and methodology of the study

1.1. The objectives of the study

The government, as part of the policy to promote energy transition, has set ambitious goals for wood and biomass sector, especially in terms of thermal uses.

Thus, for domestic wood heating system, the objectives of the authorities anticipate an increase in the number of units from 5.8 million in 2006 to 7,300,000 in 2012 and 9,000,000 in 2020. This evolution should take place at a constant pace, that is to say, 7.4 Mtoe, due to the progress in terms of equipment performance and improved solutions for housing insulation. The energy transition law aims to increase renewable energy from 13.7% in 2012 to 32% in 2032. The wood currently represents 50% of renewable energy in France, well ahead the hydraulics (25%).

For domestic heating, a recent study by ADEME estimates that, in 2012, only 7.4 million households use wood heating, out of which 47% are individual houses. The corresponding wood consumption is estimated at 7.3 Mtoe, out of which 6.9 is wood log. The corresponding volume amounts to 31.9 Mm

3

for wood log and 33.8 Mm3

in total. While the auxiliary heating accounted for 70% of use in 1999, usage is now divided equally between the auxiliary and main heating.

For commercial, industrial and collective housing premises, the growth objectives are also very enthusiastic. ADEME believes that, in order to increase the share of renewable energy to 23% by 2020, according to the European Climate & Energy package, it is necessary to increase the annually renewable heat production capacity to 600 000 toe, compared to 250-300 000 toe during the previous period

1. To achieve this goal, the allocation for Renewable Heat Incentive have doubled over the

2015-2017 period and are expected to reach € 420 million in 2017.

In this context, ADEME raises several concerns. First, to ensure the price competitiveness of different wood and biomass fuels in the context of growing prices of fossil fuels and electricity. Monitoring prices is, from this point of view, a necessity, which ADEME has fulfilled over the last 10 years by publishing regular surveys on the price evolution of various wood and biomass fuels.

Meanwhile, the quality of the fuels used by companies and by individuals plays a crucial role in meeting environmental constraints associated with their usage. Distribution channels awareness, distribution of certified firewood and, generally, the quality of the delivered wood is, therefore, an important objective. It is then necessary to question the distribution of the most qualitative fuel, in order to observe associated price differences.

The market for wood and biomass fuels remains characterized by wide discrepancies in terms of price, packaging, delivery means and relative importance of the various distribution channels.

In this context, ADEME wanted a study which, on one hand, continues the publication of surveys and indexes since 2003 and, on the other hand, extends that work by analyzing in greater detail the various factors that influence the price (delivery and packaging, composition in terms of wood species, humidity level, regional diversity ...).

Regarding fuels used on commercial, industrial and collective housing premises, ADEME uses, since 2013, data from official surveys carried out by CEEB, delegated by INSEE. However, since these surveys do not integrate the delivery costs for fuels, the data cannot be directly compared with the prices of other energy sources (natural gas, oil ...); under these conditions, it became necessary to have a reliable method to integrate delivery costs and thus to be able to make comparisons on a consistent basis.

1 ADEME ET VOUS, NO 79, OCTOBER 2014

janvier 16


The study conducted by CODA Strategies contains, therefore, in a first report, the results of a survey realized among distributors of wood fuels for domestic purposes. This report also presents data regarding wood pellets price, in order to place the French market in its international context. A second report presents the fuel prices for commercial, industrial and collective housing markets. This report is based on data published by the CEEB and proposes a method to estimate the cost of delivery.

1.2. The methodology Two major types of markets are taken into account by the study: The domestic wood heating market and the public and industrial market. The method of collecting and processing data is specific to

each of these markets.

A thorough investigation on prices in the domestic sector

For the domestic sector, a thorough investigation was conducted among more than 320 wood fuel suppliers, which represent different profiles on the wood market. This survey was used to determine the current prices for the fuels most frequently used by individuals (wood logs, pellets, reconstituted logs and sticks...) Moreover, the factors that determine the change in fuelwood prices were evaluated for the domestic market: the impact of marketing area, the marketing period, delivery options, labeling, quality and types of wood sold.

These data were supplemented with price quotes from the Internet, in order to have more information and, thus, to ensure a better representation of the sample at the regional level.

Specific for the domestic sector, a study recently published by ADEME on the wood heating market has shown that supply chains are not homogeneous

2 and that the professional channels remained a

minority. The annual industry survey conducted by AGRESTE3, estimated the household consumption

of wood pellets at 32.3 million m3, out of which 17.6% are delivered via professional channels. The prices presented in this report correspond to the sale of wood pellets under a formal business transaction giving rise to an invoice. These prices thus correspond to fewer than 20% of the consumption. In this study, the wood pellet PCI was 2000 kWh PCI / Stere. It corresponds to wood pellets (humidity below 20%, satisfactory diameter, hardwood) which meet the France® Bois Bûche standard and represents the majority of the products marketed via the professional channels, but does not reflect the average PCI in France, which is estimated at about 1500 kWh / Stere.

Analysis of the data collected by professional bodies for the collective and industrial sector, estimation of delivery costs.

The price of wood chips and hedgerows and all type of fuel used within the collective and industrial sector was taken from price surveys conducted by professional bodies, including the CEEB, with a delegation from INSEE. Additional data processing was carried out to introduce VAT rates and transportation costs.

Besides presenting prices and indexes published by these organizations, the report describes the methodology to collect and process data.

Finally, in order to establish a relevant basis for comparing the prices of different fuels available in the industrial and collective sectors, the delivery costs for wood fuel are estimated. This has been obtained by conducting a survey among 80 boilers and 15 interviews with service providers and industry experts. Based on this research, CODA presents the price including delivery cost.

2 ADEME « Study on the domestic heating wood market», June 2013

3 AGRESTE - Timber harvest and sawnwood production in 2012– AGRESTE PRIMEUR – The firewood harvest is estimated at

4.8 Mm3

according to AGRESTE compared to 4.3 Mm3

in 2012

janvier 16


2. Wood prices in the domestic market 2.1. The price competitiveness of wood energy

Individuals often use wood as a primary energy source for a few years now. Thus, the aforementioned study by ADEME, mentions that, nowadays, 50% of households have a wood heating system as a primary source versus 30% in 1999. This usage distribution is justified considering the price competitiveness of wood energy for this type of usage.

2.1.1. The usage for auxiliary heating

Wood is used in auxiliary heating, not necessarily as the main source, when it comes to satisfy a thermal need. Accordingly, the rates taken into account when comparing the price of wood fuel and other energies are chosen to be consistent with this type of use. For propane, the 13kg bottle packaging, for electricity a simple plan, with a subscription of 6 kVA and for natural gas, the BO tariff, with a consumption of 2326 kWh PCS / year (PEGASE database).

In terms of wood and biomass fuels, the 15 kg pellets bag is preferred because it is the most relevant for this type of use. Reconstituted logs are predominantly used in auxiliary heating, due to their high price. They can also be used, however, as a complement to the traditional wood log for main heating (for example to ensure a steady flame or to ignite the heating).

The following graph provides a price comparison for various fuel types used in auxiliary heating. It reflects the price evolution over the period 2006-2015. We can conclude that wood is the most competitive energy for auxiliary heating. This stands true for all types of wood fuels studied (logs, pellets), with an important gap of almost 1 to 5 between wood and electricity.

janvier 16


Comparison of wood fuel price for the domestic auxiliary heating use (c €. VAT / kWh PCI delivered)

Source: Fuelwood and biomass ADEME, a survey by Coda Strategies Propane: CFBP / PEGASE 13 kg recipient Electricity: Source EDF / PEGASE Simple price, 1700 kWh / year, 6 kVA, Natural Gas: Price B0, 2326 kWh PCS / year Source GDF / PEGASE. – Retained energy: wood pellets = 4600 kWh PCI / t, reconstituted log

4600 kWh PCI / t, log 2000 kWh PCI / stere

The bottled propane and the natural gas have decreased slightly in 2015 but their price remains significantly higher than that of the wood fuel. The increase of the electricity prices deteriorates further the competitiveness of this energy in the framework of the auxiliary heating use.

2.1.2. The usage for main heating Wood is a competetitive option when it comes to main heating also. After a sharp increase between 2009 and 2011, the price of domestic fuel has undergone irregular changes over the years. After reaching the peak of c€ 9.4 / kWh PCI in 2013, the price has experienced a sharp decrease and has returned to c€ 7.4 / kWh PCI in 2015.

Natural gas prices stagnated since 2013 and even registered a slight decrease, with a cost of c€ 7.3 per kWh PCI in 2015, which is very close to that of heating oil. Compared to bulk pellets, natural gas has now a 15% higher price. Its price is also slightly higher than the bag of pellets delivered per pallet (c€ 7.3 vs. c€ 7.1 per kWh PCI).

Electricity and LPG, with respective costs of 15.8 and 12.8 c€ per kWh PCI are much more expensive than wood fuel, regardless of its type.

janvier 16


As a consequence, the competitiveness of wood log remains very strong, with a cost more than two times lower than natural gas, for example (3.4 c€ vs. 7.3 c€ per kWh PCI). For this fuel, the usage constraints encountered in the main heating framework must be taken into account in order to put the discrepancy into perspective.

Comparison of wood fuel price for domestic main heating use (c €. VAT / kWh PCI delivered)

Source: Fuelwood and biomass ADEME, a survey by Coda Strategies Propane: CFBP / PEGASE tank Electricity: Source EDF / PEGASE Double price, 7 500 kWh/an, 9 kVA, Natural Gas: Price B1, 23260 kWh PCS / year Retained energy: wood pellets = 4600 kWh PCI / t, reconstituted log 4600 kWh PCI / t, log 2000 kWh PCI /

stere

2.2. Developments in the price of wood over the medium term

The most relevant indicator for the evolution of the price of wood is given by the cost based on the kWh PCI delivered including VAT. This indicator makes it possible to take into account the energy contribution of different fuels on a comparable basis. Taking into account the delivery makes it possible to determine the most common supply option chosen by individuals who use formal supply channels.

Considering this indicator, the average change in the price of wood for the 50cm log, currently the most common format used, was 2% over the period 2005 -2015; for all log formats, the average annual increase is 3%, which is a very positive development when compared to other energy sources.

janvier 16


Over the last decade, two sub-periods can be distinguished. Between 2003 and 2013, all fuels have been steadily increasing, much more pronounced for wood pellets sold in bulk. This trend seems to be reversed in 2013, being almost stagnant between 2013 and 2014, even though the VAT rate increased during this period from 7 to 10%. This moderation seems to reflect the fact, reported by a number of professionals interviewed, that the VAT rates variation was not fully reflected by the evolution, due to difficult market conditions. In 2015, prices are decreasing, due to climatic reasons but also due to the decrease in the price of the competing fuels (oil, natural gas). Moreover, the economic context negatively impacted, in general, the price of wood for all uses (timber, furniture ...).

Evolution of wood fuel prices in the retail market (With shipping, c € TTC / kWh PCI)

Source ADEME - Survey conducted by CODA Strategies

(*) The weighted average price of logs is calculated by assigning to different log sizes a coefficient equal to their weight in household purchases, as estimated by the survey conducted by ADEME in 2013 : 25 cm: 4%, 33 (40) cm: 14%, 50 cm 52% 1M: 9%. (ADEME study, in May 2013, the domestic wood heating: markets and supplies)

The comparison between the evolution of energy prices in general and the price of wood and biomass fuels demonstrates a parallel evolution between 2006 and 2009. Since then, we can observe divergent developments, the growth of global energy prices accelerating sharply from 2009, while wood and biomass fuel prices remain more stable. In terms of annual average, energy prices grew by 3.7% between 2006 and 2015, while the price of wood fuels increased by only 2.4%. It should be noted that the decrease in prices recorded in 2015 obviously weighs heavily on the overall evolution of the wood fuel price.

janvier 16


Comparison between changes in the prices of wood and biomass fuels with all of the energy, natural gas and heating oil consumed by households

Source: Wood and Biomass: ADEME - Survey conducted by CODA Strategies, INSEE: consumer price index, position 04.5: Gas, electricity and other fuels. For 2015: January to April average. http://www.insee.fr/fr/bases-de-donnees/bsweb/serie.asp?idbank=000638574 a. For wood, the weighted index was constructed by integrating the following prices: Logs 94%, bulk pellets: 1.5%, bag of pellets 3.5% and logs and sticks: 1%. These weights were established on the basis of consumption distribution data evaluated by ADEME in 2013 (Study on domestic wood heating) It is likely that the weight of the pellets is set to increase over the medium term. The data on domestic oil

and natural gas are extracted from the PEGASE base.

2.3. Factors that influence the price of wood

The fuel market is experiencing significant price variations as evidenced, for example, in the graph below

Price dispersion per wood log stere (50 cm, delivered)

Source ADEME - Survey conducted by CODA Strategies. X-axis: No of observation, Y-axis: Price TTC per stere

janvier 16


The analysis shows that a significant number of factors are involved: the location, the quality of products sold, the delivery methods, the moisture content of the wood, and the composition in terms of the essence ... The study aims to identify the impact of these various factors.

2.3.1. Factors related to the location

Location influences the price of wood consumed by individuals

There are large variations in price depending to the administrative region.

For the 50cm wood log delivered in high season, the average price ranges from 50 € in Bourgogne to 94 € in Burgundy Brittany. These differences may come from a supply / demand balance at the regional level as the most wooded regions have seen lower price levels, but they are also the result of the supply chain organization. More informal channels are important, unless the price is high, due to competitive pressure. Regional differences are also n for the price of wood pellets. The most populated and urbanized areas know the highest prices.

2.3.2. Labeling and certification

For the wood log, the use of labeling and / or certification is not a widespread practice yet: 90% of the companies interviewed say they offer no certification or label to their customers. Even if the promoters of labels (eg France Bois Buche) report an increase in their number of members, the progress is still limited and successive surveys conducted in 2014 and 2015 cannot support this evolution with statistic data.

From the small number of observations available, the survey carried out revealed a difference of about 6-7% between the price of labeled and non-labeled products.

The very low number of companies using the NF standard for firewood makes the price difference observed statistically insignificant.

The price of wood log fuel by region (50 cm - High Season - delivered - € / stere)

50

55

57

62

59

61

62

63

64

64

65

65

66

66

68

69

70

72

76

81

94

- 10 20 30 40 50 60 70 80 90 100

Bourgogne

Franche-Comté

Auvergne

Lorraine

Champagne-Ardenne

Centre

Basse Normandie

Picardie

Limousin

Rhône-Alpes

Aquitaine

Midi-Pyrénées

Nord-Pas-De-Calais

Haute Normandie

Languedoc-Roussillon

Alsace

IDF

Poitou-Charentes

Pays de la Loire

Provence-Alpes-Côte d'Azur

Bretagne

janvier 16


The impact of labeling on the price (Labeling rates and prices in € per delivered stere - 50 cm log)

Source: ADEME, Survey by CODA Strategies.

On the pellets market, the situation is very different. 82% of interviewees said distributors sell labeled products. With 67% of distributors selling compliant products, the DIN PLUS

4 standard is currently the

most widespread, followed by EN PLUS (17%). Dealers offering certified DIN PLUS products practice higher prices, with approximately 3.6% compared to the average.

2.3.3. Delivery methods and the additional cost associated with certain forms of

packaging

Almost all of the companies interviewed offer delivery of their products. 25% of enterprises systematically offer delivery or almost systematically and 70% in at least half of the cases.

Among the companies offering delivery to their customers, approximately 60% impose a minimum quantity, with very different practices: if the average is three cubic meters, the amounts imposed range from 1 to 8 steres.

4 The pellets are subject to a norm generally accepted throughout Europe: the European Committee for Standardization (CEN) established in 2010

a European standard: the EN14961-2 standard, which now regulates European standards on solid biofuels. The standard is public and certifications may be awarded by independent accredited laboratories Other standards and certifications, that existed before EN 14961-2 was established, continue to be used:

• The DIN PLUS certification is the best known. DIN PLUS is a trademark owned by the German body Din Certco. • The NF Pellets Biofuels certification. The brand is owned by AFNOR, which mandates the FCBA, the Technological Institute Forest

Cellulose Wood-built furniture, for the management of this certification. • The ENplus certification, the most recent one, is managed by the European Pellet Council, mandated by the DEPI, the German

organization for heating with pellets, who owns the trademark. • Registered by Inter Region Wood, the collective mark "France Bois Buche: French companies who get involved®" unites and validates

the quality procedures implemented by the French inter-regional authority for forest and wood. • The recognition program of forest certification or PEFC (Pan European Forest Certification became the Program for the Endorsement

of Forest Certification schemes) is an environmental label aimed to promote and certify sustainable forest management.

Total sample

No

certification

PEFC

certification

France Bois

Bûche

NF standard

for firewood Multi label

janvier 16


Pallets Stored

Average cost 13 18

Minimum 3 5

Maximum 40 50

Delivery methods practiced by wood log distributors

100 %

24 %

Systematic

19 %

Presque systématiquement

(80%)

28 % 9 % 17 % 4 %

Almost systematic(80%)

In at least half of casesIn less

than halfof cases

Rarely

Nev

er

Source ADEME – Study conducted by CODA Strategies

The packaging used remains very traditional and the bulk delivery is practiced by about 80% of respondents. Among the most advanced deliveries, storage pallet is the most widespread (12%), fairly widely, above storage at customer (3%)

Companies that offer more advanced packaging and storage solutions claim a surcharge - 50% of those offering logs storage and 38% of those packaging in palettes.

The amounts of the additional cost perceived by the supplier are extremely diverse, with significant deviations from the average. In fact, there is no "average" practice at this moment which would allow suppliers and customers to use it as a reference. It is also worth mentioning that some suppliers offer non-standard unit quantities (1.23 sqm) and delivery costs differ a lot depending on the distance to be covered; for example, these practices belong of a certain number of home improvement hypermarkets.

The extra costs associated to specific packaging (€ TTC / cubic meter)


2.3.4 The impact of the wood species and humidity

Some providers offer different species in their firewood offer. The majority only offers hardwood (90%), most often by mixing several species. 10% of companies interviewed also sell softwood, mainly pine, but in low volumes; these companies are mainly from Aquitaine, Midi-Pyrénées and PACA. Finally, an offer consisting solely of softwood is rarely encountered.

In a certain number of cases, a mix of species is proposed (the offers consisting mainly of hardwood are more costly, while the ones containing mainly softwood have lower prices ...), but such practices remain very marginal and it was not been possible to identify price changes that would be associated with them.

About 80% of respondents in the survey state they sell dry wood, where the drying time was over 12 months. The wood sold in green represents a small part of the offer, with approximately 5% of companies reported to offer this type of product; about 15% of the companies offer moderately dry wood.

A very small number of companies offer differentiated prices depending on the wood drying rate: approximately 5% of the sampled companies offer such formulas. The small number of companies adopting this type of practice makes it difficult to identify price differences.

janvier 16


100 %

Single humidity rate Moist wood Dry wood

95% 2% 3%

Averageprice 60 € 79 €

Humidity rate 45% 20%

Offers containing various wood drying rates and their impact on the prices

2.3.5 The low season practice

For now, the practice to differentiate prices according to the season is not widespread and accounts, for the 50 cm wood logs, about 8% of the companies surveyed. Where this practice is encountered, the difference in average price is 9% between the low and high season, which corresponds to a majority of companies offering a 10% discount during low season. It is observed that companies utilizing this type of offer practice "high season" prices higher than the market average (€ 72.9 in the high season compared to € 68 for the whole market). The interviews conducted with industry players show that the development of low season offers is considered a factor of market progress. For wood logs, such offers would lead to a tariff differentiation, by offering lower prices to individuals who can self – store firewood during the spring and winter. This would allow professionals to better position their offerings in relation to informal channels: wood sold offseason would be more competitive in terms of price while the quality of very dry wood would make a differentiation in quality.

The stakes seem even more significant for the pellets, because, in this market, the development of low season deals allows a better match between the production that takes place throughout the year and demand, which is currently highly concentrated during the heating period.

2.4. The French pellets market in the European context

The discount for low-season prices (Wood log - 50 cm - Supplied)


janvier 16


A price comparison at international, and particularly European, level is difficult to be realized due to the lack of common indicators between the different countries. The most homogeneous basis for comparison is the price of the bulk pellets. It is important to mention that this form of marketing is rarely used in France for individuals, reducing the scope of such an exercise. Having said that, the truth remains that the comparison between the French and international prices shows that national prices, long time among the lowest in Europe, are now above those of the main consumer countries for this fuel type. Thus, in the first quarter of 2015, the average delivered price of bulk pellets raised to € 285 per tonne during the investigation conducted (€ 279.5 according to data released by the CEEB), while, in the same period, the price was € 261 in Germany (but falling to € 239 in May) and € 248 in Austria (€ 228 in May). Among the factors that can explain this finding, we can cite the orientation of the French market towards the pellet bag, which may limit the bulk supply and thus competition, but also the absence of regulatory mechanisms on the market, including the poor development of "low season" offers that allows better matching of supply and demand.

3 Price analysis on the of wood and biomass fuels markets for industrial and collective use

3.1 . The data sources

In this study, CODA Strategies has not conducted a specific survey on fuel prices for public and industrial uses (wood chips, shredded OIW, sawdust chips). To present data on these markets, the data identified by the CEEB was used.

The CEEB has not included in its price surveys, the cost of delivery, both because of the great variability of these costs and secondly because the CEEB indexes are largely the basis for revisions of boiler supply contracts while the delivery costs are subject to specific indices (index CNR, INSEE ...). Moreover, the CEEB presents prices before tax.

To make them comparable with data collected by ADEME since 2003 and provide a basis for consistent comparison with the prices of other energy sources, an estimation of the average cost of delivery was made by CODA Strategies on the basis of a survey among 80 boilers to determine the current delivery practices. Moreover, fifteen interviews were conducted with professionals (carriers, distributors, producers) to better understand the factors influencing the shipping costs and assess the value. Moreover, the VAT was introduced at different rates for delivery (20%) and fuel supply (10%).

3.2 . Analysis of delivery prices The survey and interviews conducted showed that the cost of delivering wood fuel were likely to vary greatly, depending on various factors:

The delivery means used: for large boilers, push floor vehicles with a 27 tons capacity are used, while small boilers are delivered with dump trucks of 6 tons. There are significant economies of scale for the benefit of the first case;

The distance: if the average distance is 50-60 km, the observed distances can range from a few kilometers to 120-150 km. There is, however, with the development of the market, a tendency towards rapprochement between of production and consumption areas

The location and ease of access to the boiler room, and the existence or not of underground silos for quick unloading.

The quality of the delivered fuel, for the driest chips with superior energy power, the delivery cost reported to MWh will be lower (even if it appears higher per ton, due to the lower weight of the fuels performance)

The level of logistics optimization, some carriers can optimize the costs by reloading products after delivering a boiler, to avoid coming back empty

All these factors led to the conclusion that each case is unique and that the average does not reflect the wide variety of situations encountered. However, there are trends to harmonize costs, via the

janvier 16


market development that brings closer the production and consumption areas, and the carriers’ efforts to optimize their logistics offering.

3.3 The competitiveness of wood and biomass fuels for collective and industrial use

Applying the estimated shipping costs and incorporating the VAT costs of different energy sources, makes it possible to compare the prices for the different types of energy on a consistent basis.

For communities and industries, the prices of wood chips, shredded OIW, sawmill chips appear very competitive in comparison with natural gas and oil, which are both directly competing energies. There has been observed, however, a significant price change during recent years, with a catch-up of the price of sawmill by-products and industrial waste. Thus, between January 2012 and the first quarter of 2015 the softwood shredded bark and DIB experienced an average annual growth of over 15%; the shredded DIB has thus increased from 100 in January 2012 to 147.5 in the first quarter of 2015 (CEEB index). For some fuels, the trend was even more pronounced, as the price of hardwood shredded bark experienced an average annual growth of 43% during the period 2012-2015. On these fuels, the short-term price differences can be very large, reflecting a lack of market structure for these specific products. Generally, there has been a catching up for the less expensive fuel (shredded DIB, bark and sawdust), which probably can be explained by the strength of demand and which leads to diversification of the supply channels. Under these conditions, the demand for these fuels increases and a tendency towards convergence for the price set at MWh PCI can be observed. For wood chips, the market is very structured and framed by medium-term supply contracts, hence the price developments are less significant (3.4% per year over 2003-2015), starting from a higher initial level.

For the wood pellets, it is more difficult to make a comparison because the data collection mode has changed. In the studies conducted by ADEME from 2009 to 2012, prices were estimated based on the surveys among users, which most probably incorporated negotiated discounts. For 2014, prices are derived from the data obtained from wood pellets vendors and do not include specific business conditions. As a consequence, a price comparison, both in terms of time and with competing energies, is difficult to realize.

janvier 16


Comparison of wood fuel price for collective and industrial use (c €. VAT / kWh PCI delivered)

Heating oil, delivery of 27,000 liters or more, source DIREM. Natural Gas: B2S and STS price (base PEGASE). TBTS Oil (Very Low sulfur content <1%), source DIREM. For pellets, from 2009, the price was calculated based on the declaration of communities and reflected the actual conditions of sale (including the impact of any discounts on the list price). From 2014, the data is taken from price quotes from pellets vendors and do not include discounts. For sawdust, as of 2014, prices are those communicated by the CEEB and conversion factors used are now PCI 2550 kWh / ton. From 2014, the data is taken from CEEB surveys and averages between hardwood and softwood sawdust are determined. For barks, 2014 and 2015 data are taken from CEEB and averages between hardwood and softwood bark are determined. For chips, the data is provided by the CEEB and different weights 0.12 / 0.27 / 0.61 are applied according to different moisture classes (<30%, 30-40%, > 40%), weights that express the relative weight of each of the qualities in the total consumption of the boiler. For wood fuels, the prices are without tax and include delivery. Delivery costs are presented in the full report (see "Delivery cost estimation" from page 52 onwards).

Source ADEME - from 2003 to 2012 for wood and biomass fuels survey conducted by the Cabinet BASIC 2000.

For 2014 CEEB data for the price before tax and without delivery costs. Estimated delivery costs and incorporation of VAT was realized by CODA Strategies.

janvier 16


3.4 The evolution of price for fuel used in public and industrial areas on the medium term

The following graph shows the evolution in the medium term of the price of fuels for professional boilers. If the prices of wood chips and hedgerows are relative stable since 2013, other fuels for professional boilers experienced significant growth in their prices over the medium term. This reflects, for most of these fuels, a catch-up effect, from a very low initial level. It is now observed that the prices reported by kWh PCI delivered tend to be closer to that of wood chips. Overall, it appears that the data series, incorporating the change in collection method (between 2012 and 2013), then an estimation for the delivery cost from 2013, remain consistent. By establishing a weighted index, the average annual growth rate of all wood fuels for industrial boilers has been 5.9% during 2005-2015. After a period of sustained growth between 2009 and 2013, prices have stabilized over the last three years.

Evolution of delivered price without VAT for professional boilers fuels on the medium term (€ c per kWh PCI without VAT)

Source ADEME - Survey by BASIC 2000 for the period 2005-2012, Estimation by CODA Strategies starting from CEEB data from 2013. AAGR: average annual growth rate for the years 2013 and 2014, the method to estimate delivery costs for 2015 was used to avoid bias due to the change in the method Weighted Index: calculated on the basis of the contribution of different fuels in generating heat (Background heating projects): Chips

71.5%, bark: 5.8% Sawdust 11.3%, Shreds: 11.4%.

There is, in fact, a high variability in the prices of these fuels over time, especially due to the intensity of the demand (thus, for example, for recycled shredded wood, a 20% increase in prices has been ascertained by the CEEB investigation between Q1 and Q4 2013).

janvier 16


Conclusion

Wood energy remains the least expensive on the market, regardless of the alternatives considered. 2015 marks a break in the trend compared to previous years. Indeed, while the price of wood fuel followed a moderate upward trend, this movement is interrupted and prices are now on a downward trend on all markets.

This trend is partly the result of mild weather conditions that have prevailed in the winter of 2014-2015. The observation data over the medium term suggests that the climate factor continues to play an important role in explaining the annual changes in prices.

Markets that experienced in recent years significant price developments, such as pellets, saw their prices fall over the last year, reinforcing their usage attractiveness compared to other energy sources (natural gas, fuel oil) which also experienced a decrease in price.

Beyond the short-term phenomena, it must be noted that the professionalization and structuring of the market are slow, pulling back the national market when compared to some neighboring countries. This is evidenced for example by the fact that the practices related to the seasonal offering are not wide-spread, as opposed to some neighboring countries. There are few suppliers offering "low season", which bear no significant impact on individuals’ preferences (buying in the spring and storing during summer). Moreover, the qualitative differentiation of offers is not significant.

On the domestic market, the price pressure remains constant, especially due to the weight of the informal market. Consequently, the situation of the professionals is fragile today, and the recent price trend is not likely to improve.

The wood and biomass fuel market remains strongly marked by regional differences. These differences are expressed on the one side by the ease of access to the resource, and on the other by different competitive situations: in scarce regions, the less traditional offers are obviously not so present and their impact on the level of price is less significant.

On the wood log market, a price that would support an economic balance for the producers would be around € 80 per stere, which is about 10-15% higher than the prices currently observed. It is clear that the evolution of prices recorded in 2015 is a weakening factor for the suppliers which are targeting individuals.

On the pellets market, this year's study took into account the packaging of a tonne, which allows individuals to access cheaper rates. The comparison of prices with those of major European countries demonstrates, at least for bulk pellets (the only packaging for which this comparison is possible), that domestic prices are now higher than those charged in the main neighboring countries (Germany, Austria, Italy ...). The French market knows only limited seasonality, reflecting weak stock regulatory mechanisms ("low season" offers).

On the fuel market for professional boilers, even if the 2014-2015 seasons were characterized by a decline in the price over the medium term, the momentum remains favorable to suppliers. The chips market will increase from 1.6 MT to 5 MT in 2017-2018. The pressure on price would then increase. It should be noted that the markets for biomass fuels in the professional sector should evolve significantly in the upcoming years. If today the production of the heat represents two-thirds of consumption, by 2018, half of the biomass fuel should be used as part of cogeneration units.

End user prices remain highly differentiated, depending on the amount consumed, the quality of fuel used and the ease of delivery. Comparing the price of wood and biomass fuels with other fuels implies integrating the shipping cost in the price paid.

The study on the costs of delivery has demonstrated that they are highly variable and, on average, represent about 20% of the total cost (€ 12 / € 56 / t for high humidity chips; € 21.9 / € 102.1 / t for low humidity chips). Relative to the average delivery price, variations of up to 25% or 30% are possible. The data estimated in this study should be used with precaution when assessing the competitiveness of a service delivery in a particular case, especially a specific one.

janvier 16


ABOUT ADEME

The French Environment and Energy

Management Agency (ADEME) is a public

agency under the joint authority of the

Ministry of Ecology, Sustainable

Development and Energy, and the Ministry

for Higher Education and Research. The

agency is active in the implementation of

public policy in the areas of the environment,

energy and sustainable development.

ADEME provides expertise and advisory

services to businesses, local authorities and

communities, government bodies and the

public at large, to enable them to establish

and consolidate their environmental action.

As part of this work the agency helps finance

projects, from research to implementation, in

the areas of waste management, soil

conservation, energy efficiency and

renewable energy, air quality and noise

abatement.

www.ademe.fr.

http://www.ademe.fr/

survey regarding the prices of wood fuels … · survey regarding the prices of wood fuels over the...

Documents