A look at the challenges and opportunities ahead for wood pellet markets in 2023.
The wood pellet sector is facing two critical challenges this year: the impact of inflation on the pellet fuel supply chain, and the impacts of the Russian invasion of Ukraine on global supply and demand.
While this article focuses on economic and geopolitical forces, it should be noted that policy matters too. As the frequency and severity of the consequences of climate change increase, the goal of decarbonizing the energy sector will drive policymaking. Pragmatic and rational policy will recognize the value of sustainably sourced renewable solid fuel for heat and power as a necessary support mechanism for the off-ramp to a decarbonized future.
And while this article focuses on near-term challenges, FutureMetrics strongly believes that the benefits derived from replacing some fossil fuels with renewing carbon beneficial pellet fuel will support continued robust demand at least for the next few decades.
Challenge: higher wood costs
High inflation is creating challenges in every sector. For pellet manufactures, there are obvious concerns about labour costs, consumables costs, and power costs. However, the largest cost to producing wood pellets is the cost of the delivered woody feedstock.
Author: William Strauss, Ph.D., is the president of FutureMetrics, www.futuremetrics.com.