International Forest Products Transport Association

Transport, Handling, Warehousing and Distribution of Forest Products

Market Analysis

EU faces biomass shortage without new sources

Due to renewable energy policy, European demand for biomass is expected to grow as much as 50% in the next decade

June 30, 2011

Renewable energy policy is rapidly changing the European biomass market. In response to the much-publicized EU Energy 2020 strategy, targeting 20% of energy requirements to come from renewable sources, biomass demand is expected to grow as much as 50% within the next decade. Without new biomass sources, Europe faces a critical shortage.

This potential chain of events is forcing biomass suppliers and consumers to reevaluate their renewable energy strategies. For transport and logistics companies, the challenges are two-fold: the need to include biomass to meet their own energy requirements and how the demand for biomass could affect the entire forest products cargo mix for the European market.

Forecast of biomass demand for Europe West region

According to the upcoming European Biomass Review, the key to future biomass development of the European biomass markets resides in the region’s ability to effectively supply biomass sources now and in the near future. To meet this demand, forest, agricultural residues and energy crops appear to be the best options for mobilizing the biomass supply.

Covering lignocelluosic biomass (wood, energy crops and agricultural residues), the review has compiled three scenarios for finding new sources of biomass to meets Europe’s demand. The study covers the 27 countries of the European Union, plus Norway and Sweden. Breakdowns of the forecasts and analysis are compiled into five regions; the North, West, East, South of Europe, the UK and Ireland.

An independent study, the European Biomass Review considers energy targets, National Renewable Energy Action Plans (NREAPs), announced investments, carbon costs, and the economics of biomass versus other renewable energy sources (RES). Using this forecast and analysis, biomass producers, consumers and suppliers should be able to begin to strategically plan and budget for expected biomass demand and supply implications based on each scenario. The review is produced by RISI and will be released in early July 2011.

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While technologies such as wind, solar and geothermal are developing rapidly, lignocellulosic biomass is currently the largest renewable energy source (RES) and remains attractive due to its relative abundance and reliable supply. The economics of biomass versus other RES is analyzed in the studyusing macro demand drivers and the NREAPs to forecast biomass demand by sector until 2020.

Financial services providers and equity investors could be at risk without a solid roadmap, say analysts. Being able to understand the end-user sectors and the political environment appear to be critical factors in understanding the market outlook for biomass until 2020.

The potential implications of the increased demand should be a point of concern for the traditional forest industries, concludes the review. To meet the demand forecasts, these sectors should be aware of where new biomass sources might be found, including how imported biomass is likely to become a substantial part of any biomass strategy.

Various other factors could also collaterally affect biomass demand and supply in Europe. Announced biomass heat and power installations in the EU will almost certainly affect supply and prices. Complicating the picture are economic incentives promoting energy investments and future energy installations by key EU countries.