DELIVERABLE N.2 MARKET STRUCTURES ANALYSIS AND PROMOTIONAL ACTIVITIES IDENTIFICATION. With the support of:

Transcription

1 DELIVERABLE N.2 MARKET STRUCTURES ANALYSIS AND PROMOTIONAL ACTIVITIES IDENTIFICATION With the support of: 30 th November 2005

2 IMPLEMENTATION OF AN ACTION IN THE FRAMEWORK OF THE INTELLIGENT ENERGY EUROPE PROGRAMME (ALTENER) Project supported by the Intelligent Energy Europe Programme of the European Community Full title of the project: Project Acronym: Deliverable N.2: PROMOTING EUROPEAN PELLET HEATING SYSTEMS IN THE MARKET PROPELLETS Market structures analysis and promotional activities identification Period of reference: 01/04/05-30/09/05 Specific EIE Programme: ALTENER Grant Agreement Number: EIE/04/040/S Co-ordinator: ESCAN, S.A. (ESCAN) Partners: O.Ö. Energiesparverband ( ESV ) (Associated Beneficiaries) Jyväskylä Science Park (JSP ) Renewable Heat & Power Ltd. (RHPL) ETA Energia Transporti Agricoltura Srl. ( ETA ) Authors: Coordinator and partners Project commencement Date: 1/1/05 Project completion Date: 31/12/07 Prepared by partners: 30 th November 2005 Submitted to EC: 30 th December 2005 Ref.: EIE/04/040/S PROPELLETS Page 2

3 TABLE OF CONTENTS 1. FRAMEWORK SWOT ANALYSIS IN SPAIN Summary of results Analysis development SWOT ANALYSIS IN AUSTRIA Summary of results Analysis development SWOT ANALYSIS IN FINLAND Summary of results Analysis development SWOT ANALYSIS IN UNITED KINGDOM Summary of results Analysis development SWOT ANALYSIS IN ITALY Summary of results Analysis development...45 Ref.: EIE/04/040/S PROPELLETS Page 3

4 1. FRAMEWORK The objective of WP2 Market structure analysis and promotional activities identification is to identify barriers for pellets heating systems promotion and to select the necessary promotion actions to overcome those barriers, and also to make the most of the favourable aspects. A SWOT analysis is a method that permits in a very effective form to identify the Opportunities, Threats, Weaknesses and Strengths of an initiative. In this case it deals with the promotion of pellets heating systems in five European Scenarios. In order to carry out this analysis and to have the information regarding to the regional projects, factors that are external to the region will be considered, that is, factors of the macro setting that are going to affect the region positively or negatively. In addition to these, factors which are internal to the region and that can equally influence its functioning in a positive or negative way will be considered. The external factors are the Opportunities and Threats whereas the internal ones are named Strengths and Weaknesses. Opportunities are external factors of macro setting, which if suitably exploited by the regional initiative can provide a certain advantages or benefits. For the case of the promotion of pellets heating systems, the Opportunities can be related to different factors such as: Input cost factors, related to the feeding matter (pellets) that is going to enter the pellets heating systems. Aspects as the availability and quality of pellets should be considered, as positive points that the End-Users will exploit. Technological factors, related to the existence of technologies to be used and that contribute to the efficiency of the systems, as new technologies for heating and hot water production, improved automatisms or innovative technologies. Quality and service factors, are related to the use of pellets to obtain heat in a clean way, without emission of fossil gases in to the atmosphere and clearly contributing to the sustainable development of the region. Socio-economic factors, are related to the use of an autochthonous resource substituting an imported resource (gas, oil), leading to a reduction in external dependences, and improving the balance of the region. Good communications are needed among actors to promote pellets. Ref.: EIE/04/040/S PROPELLETS Page 4

5 Environmental factors, are related to the possibility of the substitution of old gas or oil heating systems by biomass systems, since they respect the environment Legal institutional factors, as the tax subsidies or funding for RES and the Administrative or legal measures that promote them. The Weaknesses are the internal limitations that prevent the regional initiative from facing up to a threat of making the most of an opportunity. They are factors that must be corrected, among which the following can be considered: Input cost factors, which are related to the high costs of pellets compared with other biomass (saw dust, wood chips) Technological factors, due to the innovative nature of these pellets heating systems (>150 kw) there is little experience in this sector, and there is need of information and dissemination. Quality and service factors, a weakness facing the pellets heating system in some regions in the lack of experience, that means a continuous learning process Socio-economic factors, one of the most important aspects is going to be the lack of guidance in the purchase these systems, as they are not so well known by the public or private end users. Environmental factors, can be the limitations due to the lack of regional environmental regulation related to biomass systems Legal-institutional factors, are the limitations the systems are going to come across related to delays in the granting of permits, long amortisation periods, lack of interest or knowledge from institutions, lack of legislation (or strict excessive legislation). The Strengths are internal aspects of the regional initiative that enables it to exploit an opportunity of face up a threat. One of the aims of this analysis is to reinforce these strengths. The following have to be considered: Input cost factors, such as the diversification of raw material, that could lead to the reduction of costs and improve availability, and storage matters. Technological factors, related to the possibility of communication among five European countries participating in the project thanks to the continuous knowledge interchange. Ref.: EIE/04/040/S PROPELLETS Page 5

6 Quality and service, the pellets heating systems and their logistics organisation are an example of a sustainable action on RES. In addition, the information given on it through the dissemination mechanisms, as well in the citizen information campaigns are going to have an important role Socio-economic factors, are related to the local economic development of the regions, since on the one hand their dependence on fossil fuels decrease, and on the other their own biomass resources are used. This will favour the economic saving and the employment. Environmental factors, entail an increase in the use of renewables in the regions (biomass), avoiding the emissions of fossil gases in the atmosphere Legal-institutional factors, the regional policies encourage the use of biomass resources in order to reach the European objectives. Threats are those external factors of the setting that can affect the region s ability to serve its markets. They are, therefore, factors that once they have been pointed out have to be offset. They are: Input cost factors, are related to the availability of pellets (from any origin) in the regions and the possible increase in the costs due to demand, or ever big fluctuations in prize. Considering pellets, boards can be a competence for their production. Technological factors, related to the availability of new heating technologies can be weak and due to the innovative nature of the project can exist lack of experience in the distribution, storage, operation/maintenance and installation. There can be only a few proven technology options available at the project demand scale (>150 kw), and availability of these boilers can be difficult. Quality and service, an important threat is going to be the location of the production or distribution companies of both pellets heating systems and pellets, in some regions. This can affect in a significant way the decision of the substitution of the boilers by end users Socio-economic factors, the lack of information and the unawareness of society, in general, may cause the low demand of pellets heating systems Environmental factors, as the necessity of high levels of performance for lowest environmental impact. Also can be the limitations due to the lack of national environmental regulation related to biomass systems Ref.: EIE/04/040/S PROPELLETS Page 6

7 Legal-institutional factors, are factors related to the possible decrease in the premium systems, as well as different administrative hurdles the biomass systems may come across. National legal frameworks low developed and with lack of encourage on these projects can exist. According to this framework, each regional initiative presents their market analysis, with their promotional activities selected to overcome the barriers found, and the way to make the most of favourable aspects. Ref.: EIE/04/040/S PROPELLETS Page 7

8 2. SWOT ANALYSIS IN SPAIN 2.1. Summary of results In Spain, both pellets market and pellets heating systems market are at the very first steps. There is still general lack of knowledge on these biomass technologies that will obtain the benefits of PROPELLETS project results in the following years. If we compare the Spanish situation with other EU25 countries, we can find that market (pellets and biomass boilers) presents interesting possibilities for development. As a first overview, it seems that Spain will start to grow fast in the following years due to the continuous increase in the profitability of pellets systems when compared to electricity energy, oil and natural gas facilities, and also due to the initial interest showed by private companies in developing the market. Concern on biomass uses in national, regional and local governments will also provide interesting tools (mainly through institutional support and funding) to favour pellets heating system market. It should be underlined that there are three energy pellet plants producing at present (2005) in Spain, one in the northern part and two in the centre of the country, that could provide pellets to a hundred of pellet boilers in the country. Therefore the bigger effort should be made in the boilers side that could consume those pellets, but also in the pellets production side to reduce pellets price at regional level. Some key information of the situation of Spanish market at present would be: - Pellets prize (to customers) is /t, lower than UE25 average, and much lower than UE15 - Heat produced by pellets will cost in 2006 half than oil or gas, and five times lower than electricity - National production will be close to t/year in 2005, that could (e.g.) supply fuel to 650 boilers with 200 kw installed power - National consumption lower than 5% of production -> Spain exports to Portugal, Ireland, United Kingdom, Italy, France, Central European countries... - National boilers available up to 350 kw, but not efficient yet. Bigger boilers are from Austria KWB up to 150 kw are the limit power for efficient pellets boilers at present Even when pellets heating systems investment could be higher than other traditional systems, it should be considered the duration of the system and the total figures considering system life. A heating system running for 20 years of production would have the following main costs (percentages): System cost:17% Energy: 77% Maintenance: 6% So, even whether system investment cost would be higher of another possibility, reduced energy price obtained with pellets would make the system profitable. Furthermore, initial investment could be favoured by public funding (Regional Government, National Energy Agency), by providing an interesting percentage even up to 30% for private investment. Ref.: EIE/04/040/S PROPELLETS Page 8

9 Also, there is a possibility of making an agreement with an Energy Services Company (ESCOs) which manages the installation, pellets supply, maintenance, and maybe financing. In this type of service, the ESCO assumes the risk for the whole facility and fuel supply, and the customer becomes an external observer of the heating system. Main actions to be developed found in the SWOT analysis: PROPELLETS will favour new companies to be boilers installers and distributors, and will have permanent contact with them to assure quality. Also ESCOs will be promoted. PROPELLETS will favour business contacts to obtain other boilers with main European manufacturers (at present contacts with Austria and Finland). There will be developed a business mission within the project, scheduled in 2006 In order to advice end users, PROPELLETS will favour contacts with pellets producers to have real information about pellets availability and expected prizes. PROPELLETS will favour technology and training transfer from other countries (by boilers manufacturers) PROPELLETS will favour contacts among key actors, in order to increase pellets production in Northern Spain. It is considered that this increase could reduce pellets prize to customer. A new pellet plant is under study (first steps) by PROPELLETS Cluster. Sustainability for the region must be analysed (remember boards) Incentives by Regional Government are necessary for the first units to be installed (pellets heating systems). This units should be showed (as new best practices) to other potential end-users. PROPELLETS dissemination is critical for pellet heating systems promotion, due to the low knowledge existing on this sector 2.2. Analysis development The following tables show the development of the SWOT analysis corresponding to Asturias, in the framework of the situation in Spain. Ref.: EIE/04/040/S PROPELLETS Page 9

10 TABLE 1 REGION OF ASTURIAS (SPAIN) - STATIC ANALYSIS OPPORTUNITIES THREATS A) INPUT COST FACTOR A) INPUT COST FACTOR Existence of pellets heating systems distributors to cover the initial demand Existence of pellets provided by the pellets heating systems distributors with a competitive prize. Pellets production costs is usually higher than other biomass (sawdust, chips ), so their cost in the market is also higher Biomass for pellets prize can increase if demand increases B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Modern technologies on automatic boilers are available, with high efficiency and well-developed control systems, though there is continuous innovation in pellets heating systems (searching for higher efficiency, and further improvements) At least one pellets producer has Spanish technology for pelletizer Some studies are being done on pellets production from different materials Lack of distribution of pellets boilers over 150 kw Lack of experience in installing and maintenance of pellets systems (of any size) need of training Technologies for wood-pellet combustion are developed, while not for agri-pellets Experiences on medium size pellets heating systems is lower than small systems, and there is low availability of technological options of medium size C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Fuels prices different than biomass are increasing and biomass is more competitive New economic relations are ready to happen. Increasing interest from market actors in developing pellets business Pellets heating systems are sometimes expensive when compared with traditional systems (particularly with oil) Competence among pellets producers and boilers distributors affects market development Communication among actors is needed, in order to widely promote, assess and favour the use of pellets heating systems Ref.: EIE/04/040/S PROPELLETS Page 10

11 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Low number of pellet heating systems providers favours lower dispersion of responsibilities. Quality of heat provided by pellets systems is good, and heat is instantaneous End users need advising due to their lack of experience Pellets heating systems should be installed in places with a certain number of heating hours per year E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Existence of promotion and funding for pellets heating systems installation from European and National Public Administrations (particularly National Plan for RES ) In some particular cases, special taxes apply for companies using biomass systems Some pellet plants produce in cogeneration regulation, and economic production is directly related to electric peak prize Lack of specific regulation for biomass heating systems in houses and buildings can delay acceptance of projects Strict legislation could lead to lack of interest from end-users and installers F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Increase on the use of pellets systems will reduce fossil fuel gases emissions Electric heating systems in rural areas can be substituted by pellets systems The only solid by-product (ashes) coming out from pellets systems are able to be used as fertilizer National environmental specifications for pellets heating systems are not clear Ref.: EIE/04/040/S PROPELLETS Page 11

12 STRENGHTS WEAKNESSES A) INPUT COST FACTOR A) INPUT COST FACTOR Biomass availability for pellets production could lead to new pellets plants installation and pellets production, leading to pellets prices reduction Existence of pellets production in surrounding regions with similarities in wood exploitation. Theoretical and practical knowledge transfer. Board manufacturers are competence with pellets producers, as primary matter is common Use of biomass different than sawdust or shavings for producing pellets, as forest or agricultural residues, is still in R&D phase. B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Communication among five European regions (from five countries) will help knowledge interchange. Of particular interest is the information given from biomass technology high-developed countries to low-developed ones. There is low number of pellets heating systems manufacturers and installers close to the region, so technological knowledge is low Due to the innovative nature of the technology there is lack of expert staff, related to the installation and maintenance of the pellets heating system C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS The region has tradition on forest exploitations, and wood biomass uses for houses heating (not pellets) are known. New business on biomass, as installers or energy companies, are starting to happen. This could lead to a sustainable development in the region and favour employment The use of biomass can help clearly to the sustainable development of the region, as other biomass initiatives are being projected. Economic saving for the region and increase in employment related to pellets is expected Communication among key actors is low, and it is needed to promote the first units of pellets heating systems Public awareness and knowledge on automatic pellets systems is low leading to an initial lack of interest in these installations for heating and hot water production Some citizens are not keen on these systems due to their traditional thinking on biomass for heating = low development Ref.: EIE/04/040/S PROPELLETS Page 12

13 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Quality of service should be good due to the advising and supervision of the new facilities by PROPELLETS Cluster. It is possible to prepare a contract including the supply and installation of the heating system, the biomass providing, and system maintenance (all integrated) End users may need advising due to the lack of experience. Location of pellets producers and/or distributors, and location of heating systems distributors can affect end-users decisions. E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Regional Administration provides funding for pellets heating systems, and national Energy Agency provides soft credits Institutional support to favour reaching regional targets Lack of specific regulation for biomass heating systems in houses and buildings could delay acceptance of projects As a main, times for administrative documents are very slow, and can lead to changes in minds of end-users that wish to have funding before the beginning of the installation F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Substitution of fossil-fuel (oil and gas) heating systems by pellets systems will reduce fossil fuel gas emission in the region Electric heating systems in rural/protected areas can be substituted by pellets systems The only solid by-product (ashes) can be used as fertilizer Systems installed should have a high level of performance for the lowest environmental impact Environmental regulation for this systems is not developed at present at regional level, and is low at national level Ref.: EIE/04/040/S PROPELLETS Page 13

14 TABLE 2 REGION OF ASTURIAS (SPAIN) - DYNAMIC ANALYSIS OPPORTUNITIES THREATS ACTIONS A) INPUT COST FACTOR A) INPUT COST FACTOR Existence of pellets heating systems distributors to cover the initial demand Existence of pellets provided by the pellets heating systems distributors with a competitive prize. Pellets production costs is usually higher than other biomass (sawdust, chips ), so their cost in the market is also higher Biomass for pellets prize can increase if demand increases B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS To assure pellets availability by medium-term contracts with suppliers, at a fixed prize. Pellets heating systems distributors can act as energy sellers, so biomass availability and prize is managed by expert people. Pellets manufacturers should be encouraged to provide pellets to any end-user. Modern technologies on automatic boilers are available, with high efficiency and welldeveloped control systems, though there is continuous innovation in pellets heating systems (searching for higher efficiency, and further improvements) At least one pellets producer has Spanish technology for pelletizer Some studies are being done on pellets production from different materials Lack of distribution of pellets boilers over 150 kw Lack of experience in installing and mainteinance of pellets systems (of any size) need of training Technologies for wood-pellet combustion are developed, while not for agri-pellets Experiences on medium size pellets heating systems is lower than small systems, and there is low availability of technological options of medium size Favour new companies to be boilers installers and distributors. Also ESCOs will be promoted. Organise business contacts between Spanish companies and European boilers manufacturers When preparing a pilot project it is needed to study and define the boiler technology and pellet characteristics carefully. Include comparative study on existing technologies in the market. Pellets made with new matter should be tested C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Fuels prices different than biomass are increasing and biomass is more competitive New economic relations are ready to happen. Increasing interest from market actors in developing pellets business. Pellets heating systems are sometimes expensive when compared with traditional systems (particularly with oil) Competence among pellets producers and boilers distributors affects market development Communication among actors is needed, in order to widely promote, assess and favour the use of pellets heating systems Ref.: EIE/04/040/S PROPELLETS Page 14 When presenting pellets projects, demonstrate its economy in the medium term (e.g. since the 3rd-5th year) when compared to oil or gas Pellets heating systems installation have similar cost than electrical heating system, but electricity is much more expensive than pellets Maintain contacts with pellets producers to have a real prize of pellets (control measure) Make use of the national and international events to favour pellets use for heating

15 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Low number of pellet heating systems providers favours lower dispersion of responsibilities. Quality of heat provided by pellets systems is good, and heat is instantaneous End users need advising due to their lack of experience Pellets heating systems should be installed in places with a certain number of heating hours per year Consulting and engineer companies, and energy agencies provide advising on pellets heating systems Search for places with larger number of hours needed and stronger fuel consumption E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Existence of promotion and funding for pellets heating systems installation from European and National Public Administrations (particularly National Plan for RES ) In some particular cases, special taxes apply for companies using biomass systems Some pellet plants produce in cogeneration regulation, and economic production is directly related to electric peak prize Lack of specific regulation for biomass heating systems in houses and buildings can delay acceptance of projects Strict legislation could lead to lack of interest from end-users and installers To inform end-users on special taxes When preparing a project, consider carefully regulation and legislation to avoid delays in the execution F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Increase on the use of pellets systems will reduce fossil fuel gases emissions Electric heating systems in rural areas can be substituted by pellets systems The only solid by-product (ashes) coming out from pellets systems are able to be used as fertilizer National environmental specifications for pellets heating systems are not clear Promote the environmental benefits of using pellets heating systems Consider substitution or installation of pellets systems in rural/protected areas Ref.: EIE/04/040/S PROPELLETS Page 15

16 STRENGHTS WEAKNESSES ACTIONS A) INPUT COST FACTOR A) INPUT COST FACTOR Biomass availability for pellets production could lead to new pellets plants installation and pellets production, leading to pellets prices reduction Existence of pellets production in surrounding regions with similarities in wood exploitation. Theoretical and practical knowledge transfer.. Board manufacturers are competence with pellets producers, as primary matter is common Use of biomass different than sawdust or shavings for producing pellets, as forest or agricultural residues, is still in R&D phase B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Communication among five European regions (from five countries) will help knowledge interchange. Of particular interest is the information given from biomass technology highdeveloped countries to low-developed ones. There is low number of pellets heating systems manufacturers and installers close to the region, so technological knowledge is low Due to the innovative nature of the technology there is lack of expert staff, related to the installation and maintenance of the pellets heating system C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS The region has tradition on forest exploitations, and wood biomass uses for houses heating (not pellets) are known. New business on biomass, as installers or energy companies, are starting to happen. This could lead to a sustainable development in the region and favour employment The use of biomass can help clearly to the sustainable development of the region, as other biomass initiatives are being projected. Economic saving for the region and increase in employment related to pellets is expected Communication among key actors is low, and it is needed to promote the first units of pellets heating systems Public awareness and knowledge on automatic pellets systems is low leading to an initial lack of interest in these installations for heating and hot water production Some citizens are not keen on these systems due to their traditional thinking on biomass for heating = low development Favour the installation of new pellets plants in the Region, through providing assistance to promoters by Propellets Cluster, and using knowledge of regions with similarities Selection of places for pellets plant installation, considering biomass availability and surrounding factors Promote R&D projects to define new biomass as raw material for pellets production Make the most of the knowledge interchange from other European partners of PROPELLETS, particularly from highdeveloped countries Pellets heating systems distributors and maintainers should get training in experienced pellets companies Promote the use of pellets heating systems through dissemination mechanisms Provide technical assistance to interested endusers First facilities installed should be of high quality (they will be hopefully widely showed) by the supervision of Propellets cluster, in order to avoid worse experiences when starting this market Providing of clear information on the present advances of modern automatic pellets heating systems, to avoid thinking on biomass = low development Ref.: EIE/04/040/S PROPELLETS Page 16

17 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Quality and service should be good due to the advising and supervision of the new facilities by PROPELLETS Cluster. It is possible to prepare a contract including the supply and installation of the heating system, the biomass providing, and system maintenance (all integrated) End users may need advising due to the lack of experience. Location of pellets producers and/or distributors, and location of heating systems distributors can affect end-users decisions. PROPELLETS cluster should supervise quality and service issues, and provide assessment E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Regional Administration provides funding for pellets heating systems, and national energy agency provides soft credits Institutional support to favour reaching regional targets Lack of specific regulation for biomass heating systems in houses and buildings could delay acceptance of projects As a main, times for administrative documents are very slow, and can lead to changes in minds of end-users that wish to have funding before the beginning of the installation Make use of funding mechanisms, both regional and national, for promoting new installations End-users should have information on legal aspects related to pellets boilers F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Substitution of fossil-fuel (oil and gas) heating systems by pellets systems will reduce fossil fuel gas emission in the region Electric heating systems in rural/protected areas can be substituted by pellets systems The only solid by-product (ashes) can be used as fertilizer Systems installed should have a high level of performance for the lowest environmental impact Environmental regulation for this systems is not developed at present at regional level, and is low at national level To favour the installation of pellets heating systems reduces GHG and pollution Boilers with a high level of performance should be promoted Ref.: EIE/04/040/S PROPELLETS Page 17

18 3. SWOT ANALYSIS IN AUSTRIA 3.1. Summary of results Presently, the pellets market in Austria is characterised by small installations for one family homes (below 25 kw) only high quality pellets (pellets standardisation system ÖNORM) stringent emission standards for pellets an advanced boiler design an important boiler industry and an efficient pellet distribution network. In Upper Austria, the wood pellets market development experienced a rapid growth within the last years. Basis of this successful market development is the implementation of a comprehensive mix of measures, ranging from information & awareness raising activities and training & education measures to subsidies and R&D and quality control. Right from the beginning, the Upper Austrian market development was driven by consumer interest, supported by the regional government and the R&D efforts of the boiler producers to improve the technical performance of installations. The ambitious goal of doubling the share of modern biomass heating systems until 2010 was defined by the Upper Austrian government through an energy action plan for future market development. Additionally the Upper Austrian network of green energy companies "Ökoenergie- Cluster" (OEC), managed by the O.Ö. Energiesparverband, supports the market development by well targeted promotion measures to improve the quality of supply. Some figures characterising the Austrian and Upper Austrian pellet market situation are: - More than 7,500 wood pellets central heating systems are in operation in Upper Austria (more than 30,000 in Austria). - Pellet production capacity in Austria increased from 2,500 t (1995) to >500,000 t (2005). - The pellet price is about 150 Euro per ton the more quantity the cheaper. - There are 15 large-scale producers of wood pellets and a wide network of trading companies. Ref.: EIE/04/040/S PROPELLETS Page 18

19 - 15 companies of biomass boilers with 800 employees produce a turnover of 100 million in total, there are about 30 pellet boiler manufacturers in Austria (most of them active in the small-scale sector). They are European export leader - their export share is more than 50 %. - 4 Upper Austrian (out of 10 Austrian) pellet boiler companies produce installations above 90 kw. There are subsidies for pellets heating systems from the Austrian and regional government. Industrial biomass plants receive up to 44 % of their investment costs. The most important conclusions of the SWOT-analysis are the following: - Although pellets heating systems are very well established in the small-scale sector (for example, more than a third of new one family homes are equipped with a pellets heating system), there is low demand due to the lack of awareness and trust in the possibility of using pellet installations in the mid- to large-scale from the majority of potential users. - So far, mainly wood chips are used for larger biomass installations. - The competition with gas and district heating systems (especially in the cities) is a major barrier. - There is little experience in the planning and operation of larger pellet heating systems. In order to overcome this lack of awareness and practical experience, the following main actions were identified: - There is the need to find "pioneers" showing best practices. - The dissemination of information (brochures, seminars, site-visits etc.) is also an important activity Analysis development The following tables show the development of the SWOT analysis corresponding to the region of Upper Austria, in the framework of the situation in Austria. Ref.: EIE/04/040/S PROPELLETS Page 19

20 TABLE 1 REGION OF UPPER AUSTRIA (AUSTRIA) - STATIC ANALYSIS OPPORTUNITIES THREATS A) INPUT COST FACTOR (relating to the fuel) A) INPUT COST FACTOR Pellets are compact and have a higher energy density Local/regional availability of pellets (less import) Lower transport costs Pellet price gets more competitive with the rising oil, gas and electricity price Forest residues potential is better used Pellets production costs are higher than for wood chips, so, pellets are usually more expensive Competition with gas and district heating systems (especially in the cities) is still difficult B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Modern pellet heating systems above 100 kw are available (there are eight pellet boiler manufacturers in this performance range in Austria) Competitive and convenient heating possibility for new buildings Suitable for urban areas (less storage room, less transport) Increasing number of pellet producers in Austria Research studies are done on pellets production from straw / miscanthus / energy corn Less easy in existing buildings Mostly small installations for one family homes, lack of experience in the planning / operation of larger pellet heating systems Automatic wood pellet heating systems exist, boilers operating with agri-pellets are in research phase C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Oil, gas and electricity prices are increasing and pellets as a fuel are getting more competitive Multi-family homes and public buildings could be a future market Fostering local/regional economic development Possibility of installation and operation by ESCOs Image of biomass - renewable energy as "image factor" Low demand due to the lack of awareness and of trust in the possibility of using pellets in larger buildings from the majority of potential users Pellet boilers are more expensive than oil or gas boilers Ref.: EIE/04/040/S PROPELLETS Page 20

21 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Easier to follow fire-protection regulation (TRVB) than for oil Stringent emission standards for pellet boilers Standardisation strengthens competitiveness Maintaining quality makes price calculation easier Lack of know-how from planners and installers Weak control system may cause inefficient heating systems Accidents happening because of wrong storage-design Bad handling of delivery causes dust E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Energy Action Plan of Upper Austria promotes biomass market development Subsidies for pellets heating systems from the Austrian and regional government Recent simplification of relevant legislation for biomass Subsidies can be an insufficient encouragement Administrative hurdles can delay the projects (for example: fire regulation) F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Pellets are a carbon neutral, low emission fuel The ash can be used as fertilizer Gas often has the image of "green energy" Discussions on "fine dust" of biomass heating systems can cause uncertainty Ref.: EIE/04/040/S PROPELLETS Page 21

22 STRENGHTS WEAKNESSES A) INPUT COST FACTOR (relating to the fuel) A) INPUT COST FACTOR Pellets are a standardised fuel Availability of raw material Disposal of wood waste (saw-mill residues can be used), thus lowering pellet prices Pellets producer are located in different parts of the country & Europe The production of quality pellets needs know-how In some areas, gas has a widespread availability Competition with wood chips for larger installations B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS High technological knowledge and expert staff for small-scale pellet heating systems Less storage room required than for wood chips More convenient than wood chips Knowledge interchange and communication between five European regions Little experience regarding installation and maintenance of larger pellet heating system Pellet boilers are more expensive than oil & gas boilers Other fuels need no storage room (gas, district heating) C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Pellets are a domestic fuel - national income, less dependency from imports The installation of pellet heating systems in one family homes is already good developed Installation / boiler costs could decrease due to increasing turnover Lack of awareness and specific information regarding larger pellet installations by installers, planners and architects as well as companies and institutions Lack of awareness about the possibility of third party financing Other heating systems are highly convenient (gas, district heating) Ref.: EIE/04/040/S PROPELLETS Page 22

23 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS High quality fuels - pellets standardisation system (ÖNORM M 7135) Convenient distribution system (pump tank car delivery system) Lack of practical experience Need for information of housing associations, companies, public bodies, planners etc. due to the lack of experience Housing companies prefer heating systems that do not require any work E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Energy Action Plan of Upper Austria promotes biomass use Subsidies for pellets heating systems from the Austrian and regional government Recent simplification of relevant legislation for biomass Lack of knowledge about subsidies Long pay-back periods F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Pellets are carbon neutral, low emissions The ash can be used as fertilizer Gas often has the image of "green energy" Discussions on "fine dust" of biomass heating systems can cause uncertainness Ref.: EIE/04/040/S PROPELLETS Page 23

24 TABLE 2 REGION OF UPPER AUSTRIA (AUSTRIA) - DYNAMIC ANALYSIS OPPORTUNITIES THREATS ACTIONS A) INPUT COST FACTOR (relating to the fuel) A) INPUT COST FACTOR Pellets are compact and have a higher energy density Local/regional availability of pellets (less import) Lower transport costs Pellet price gets more competitive with the rising oil, gas and electricity price Forest residues potential is better used Pellets production costs are higher than for wood chips, so, pellets are usually more expensive Competition with gas and district heating systems (especially in the cities) is still difficult Increasing production capacities B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Modern pellet heating systems above 100 kw are available (there are eight pellet boiler manufacturers in this performance range in Austria) Competitive and convenient heating possibility for new buildings Suitable for urban areas (less storage room, less transport) Increasing number of pellet producers in Austria Research studies are done on pellets production from straw / miscanthus / energy corn Less easy in existing buildings Mostly small installations for one family homes, lack of experience in the planning / operation of larger pellet heating systems Automatic wood pellet heating systems exist, boilers operating with agri-pellets are in research phase Information actions: seminars, leaflets and brochures Finding "pioneers" C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Oil, gas and electricity prices are increasing and pellets as a fuel are getting more competitive Multi-family homes and public buildings could be a future market Fostering local/regional economic development Possibility of installation and operation by ESCOs Image of biomass - renewable energy as "image factor" Low demand due to the lack of awareness and of trust in the possibility of using pellets in larger buildings from the majority of potential users Pellet boilers are more expensive than oil or gas boilers Information actions by the Ökoenergie- Cluster (network of green energy businesses in Upper Austria): seminars, leaflets and brochures, site-visits Information about the possibility of "Third Party Financing" Communicating the image effect of biomass Communicating the lower running costs Ref.: EIE/04/040/S PROPELLETS Page 24

25 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Easier to follow fire-protection regulation (TRVB) than for oil Stringent emission standards for pellet boilers Standardisation strengthens competitiveness Maintaining quality makes price calculation easier Lack of know-how from planners and installers Weak control system may cause inefficient heating systems Accidents happening because of wrong storage-design Bad handling of delivery causes dust The O.Ö. Energiesparverband, the regional energy agency, and energy advisors offer information regarding the planning, operation etc. of pellets heating systems E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Energy Action Plan of Upper Austria promotes biomass market development Subsidies for pellets heating systems from the Austrian and regional government Recent simplification of relevant legislation for biomass Subsidies can be an insufficient encouragement Administrative hurdles can delay the projects (for example: fire regulation) Promoting existing funding programmes and new legislation F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Pellets are a carbon neutral, low emission fuel The ash can be used as fertilizer Gas often has the image of "green energy" Discussions on "fine dust" of biomass heating systems can cause uncertainty Promoting the environmental benefits of pellet heating systems Ref.: EIE/04/040/S PROPELLETS Page 25

26 STRENGHTS WEAKNESSES ACTIONS A) INPUT COST FACTOR (relating to the fuel) A) INPUT COST FACTOR Pellets are a standardised fuel Availability of raw material Disposal of wood waste (saw-mill residues can be used), thus lowering pellet prices Pellets producer are located in different parts of the country & Europe The production of quality pellets needs know-how In some areas, gas has a widespread availability Competition with wood chips for larger installations Co-operation of market actors Increase the number of larger pellet heating plants by providing information, energy advice / assistance by partners of the Ökoenergie-Cluster B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS High technological knowledge and expert staff for small-scale pellet heating systems Less storage room required than for wood chips More convenient than wood chips Knowledge interchange and communication between five European regions Little experience regarding installation and maintenance of larger pellets heating system Pellet boilers are more expensive than oil & gas boilers Other fuels need no storage room (gas, district heating) Training activities: seminars for installers and energy advisors C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Pellets are a domestic fuel - national income, less dependency from imports The installation of pellet heating systems in one family homes is already good developed Installation / boiler costs could decrease due to increasing turnover Lack of awareness and specific information regarding larger pellet installations by installers, planners and architects as well as companies and institutions Lack of awareness about the possibility of third party financing Other heating systems are highly convenient (gas, district heating) Develop "demand & supply" at the same time Getting confidence in the available technology by showing best practices Information brochure (technology, financing etc.) Seminars Ref.: EIE/04/040/S PROPELLETS Page 26

27 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS High quality fuels - pellets standardisation system (ÖNORM M 7135) Convenient distribution system (pump tank car delivery system) Lack of practical experience Need for information of housing associations, companies, public bodies, planners etc. due to the lack of experience Housing companies prefer heating systems that do not require any work Continuous learning process Cooperation with partners of the Ökoenergie-Cluster E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Energy Action Plan of Upper Austria promotes biomass use Subsidies for pellets heating systems from the Austrian and regional government Recent simplification of relevant legislation for biomass Lack of knowledge about subsidies Long pay-back periods Information on support programmes (nationally / regionally) F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Pellets are carbon neutral, low emissions The ash can be used as fertilizer Gas often has the image of "green energy" Discussions on "fine dust" of biomass heating systems can cause uncertainness Communicate that pellets are a carbon neutral fuel Ref.: EIE/04/040/S PROPELLETS Page 27

28 4. SWOT ANALYSIS IN FINLAND 4.1. Summary of results Pellet market is developing well at the moment. It is special feature for Finland that pellet production has developed well. Pellet production exceeds local consumption by 4 5 times. Major part of pellets manufactured in Finland are exported to other countries like Sweden, Denmark, Holland and UK. Pellets have found its niche in certain market segments. It is common to use pellets in building heating and in small heating networks where the boiler capacity is in the range of kw. In bigger units the wood chips become more common. Pellets are more common if heat is supplied by outside heat supplier/entrepreneur. Pellet fired plants require little maintenance and supervision work, can be easily automated and is reliable stand alone plant. Pellets have not become very popular among private household owners although now the number of pellet heating units is increasing rapidly. One reason for slow development has been relatively low prices of competing fuels like fuel oil or electricity and there has been no public support for pellet heating for private households. Commercial heating companies or industries may get some investment grants when installing pellet heating unit. The increasing oil price recently has increased the demand of pellet heating units. Pellet logistics is already organised, pellets are available delivered to your home in all parts of the country, minimum delivery by truck (pneumatic unloading) is 3 tons. Smaller quantities are available at higher price in hardware stores. Pellet combustion equipment are manufactured in Finland. There are mainly separate burners and boilers, the integrated burner/boiler combinations have not gained much popularity yet. The future challenge is to increase the pellet systems in private households. There is need to develop the boiler system supply in order to make the purchase of pellet system easier. At the moment you have to purchase, in most cases, the storage and boiler separately, order mechanical and electric installation separately etc. The aim is to develop the system towards one stop purchase keeping in mind the economic limitations. There is no public support so the equipment has tight cost limits in order to be competitive. Emission trading caused sudden demand of pellets in large units. It is viable to cocombust pellets together with fossil fuels in coal fired units and it is also viable to replace oil fired peak boilers with pellet fired ones if annual peak utilisation is more than 2000 hours. These segments will increase the pellet utilisation rapidly. The aim is to double the pellet utilisation each year for next few years. Ref.: EIE/04/040/S PROPELLETS Page 28

29 4.2. Analysis development The following tables show the development of the SWOT analysis corresponding to the region of Central Finland, in the framework of the situation in Finland. Ref.: EIE/04/040/S PROPELLETS Page 29

30 TABLE 1 REGION OF CENTRAL FINLAND - STATIC ANALYSIS OPPORTUNITIES THREATS A) INPUT COST FACTOR A) INPUT COST FACTOR Domestic pellet production exceeds domestic consumption by factor 4-5 Pellet systems are available, good service for larger units Pellets more expensive than other biomass Price is dictated by export market, increasing demand may increase price One dominating pellet producer B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Modern technologies on automatic boilers are available, with high efficiency and well-developed control systems, though there is continuous innovation in pellets heating systems (searching for higher efficiency, and further improvements) Several local manufactures plus import Wood pellets dominating, available also peat and bark pellets Technologies for wood-pellet combustion are developed Medium size pellet boiler market is developing well Small size market is growing but it is still too complicated process to purchase pellet heating system C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Fuels prices different than biomass are increasing and biomass is very competitive Pellets heating systems are sometimes expensive when compared with traditional systems in single house units Nice systems are available for small size also but not very competitive Ref.: EIE/04/040/S PROPELLETS Page 30

31 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Service for mid size is in order Improvements for small users are needed End users need advising due to their lack of experience Now those with special technical interest are installing pellet systems Greater public will require better service E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Companies and farmers may get financial aid for installation of biomass systems No support system for private houses so far, some political discussion has started F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Increase on the use of pellets systems will reduce fossil fuel gases emissions Oil heating systems in rural areas can be substituted by pellets systems The only solid by-product (ashes) coming out from pellets systems are able to be used as fertilizer Discussion of solid fuel combustion emissions is becoming stronger, so far no cleaning systems for small units are required Ref.: EIE/04/040/S PROPELLETS Page 31

32 STRENGHTS WEAKNESSES A) INPUT COST FACTOR A) INPUT COST FACTOR So far the pellet domestic use is in order of t/a when export is about t/a Increase in domestic consumption will not affect rapidly on price, more important factor is price of competing fuels Dry raw material for pellet production are almost fully utilised, new capacity will require raw material drying which is extra expense B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Communication among five European regions (from five countries) will help knowledge interchange. Finland is looking forward to ideas to develop the small household use, the market for larger units is developing better already Domestic pellet equipment producers are under cost pressure because no subsidy systems are available for households and oil and electricity prices are among the lowest in Europe The general public is requiring more sophisticated systems but not ready to pay enough for them Number of new installations has been about 3000 per year, now due to high oil price demand is higher C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Pellet systems provide more economical heating when the change is technically easy, direct electricity heated houses require more changes and not very common yet Economic saving for the region and increase in employment related to pellets is expected, expecting that pellet unit installation and maintenance creates new businesses Public awareness and knowledge on automatic pellets systems is improving but still fear of extra work and unreliability compared to electric and oil heating Pellet systems are regarded as modern development Ref.: EIE/04/040/S PROPELLETS Page 32

33 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Quality of service is good enough for bigger installations operated by experienced persons Higher level of service is required for small units market End users may need advising due to the lack of experience. End users expect as carefree use of heating systems as is it is possible with oil or electricity. E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Financial support available for farmers and industrial users. No financial support for private Varying requirements for fire protection among municipalities has been F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Substitution of fossil-fuel (oil and electricity) heating systems by pellets systems will reduce fossil fuel gas emission in the region Electric heating systems in rural/protected areas can be substituted by pellets systems (often requires installation of water circuit heat distribution system) The only solid by-product (ashes) can be used as fertilizer Systems installed should have a high level of performance for the lowest environmental impact Ref.: EIE/04/040/S PROPELLETS Page 33

34 TABLE 2 REGION OF CENTRAL FINLAND - DYNAMIC ANALYSIS OPPORTUNITIES THREATS ACTIONS A) INPUT COST FACTOR A) INPUT COST FACTOR Existence of pellets heating systems distributors to cover the initial demand Existence of pellets provided by the pellets heating systems distributors that assure the availability of biomass. Pellets production costs is usually higher but installations are cheaper than for other biomass fuels Biomass for pellets prize can increase if demand increases, international pricing Pellets are available throughout the country, one dominating supplier and several small ones B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS To assure the efficiency of fuel distribution, full truckload to few customers near each other, well planned delivery Modern technologies on automatic boilers are available, with high efficiency and welldeveloped control systems, though there is continuous Imported and domestic technology available Technologies for wood-pellet combustion are developed Struggle between sophistication and equipment price Pellet for low quality biomass fuel priming and replacing oil as peak fuel are developing. When planning attention must be paid on the easy maintenance and reliability of the systems, bad experiences would slower the development C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS Fuels prices different than biomass are increasing and biomass is more competitive. Increasing interest from market actors in developing pellets business. Pellets heating systems are sometimes expensive when compared with traditional systems (particularly with oil). Communication among actors is needed, in order to widely promote, assess and favour the use of pellets heating systems. When presenting pellets projects, demonstrate its economy in the medium term (e.g. since the 3rd-5th year) when compared to oil Ref.: EIE/04/040/S PROPELLETS Page 34

35 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS More attention is still paid on the bigger instalments Quality of heat provided by pellets systems is good End users need advising due to their lack of experience, convincing the reliability and easiness Private household owners still feel, that purchase of pellet system is complicated process E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Consulting, engineer companies, and energy agencies provide advising on pellets heating systems, wood energy advisers assist specially farmers Turnkey suppliers are needed, cost issue is difficult Existence of promotion and funding for pellets heating systems installation from European and National Public Administrations Industries and farmers may get investment subsidy No support system for private households Interpretation of fire protection legislation varies among municipalities Dissemination work to municipal authorities and private household is needed F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Increase on the use of pellets systems will reduce fossil fuel gases emissions Heating systems in rural areas can be substituted by pellets systems, small district heating networks can be operated by pellets Replacement of oil as peak boiler fuel is very competitive for those who are in emission trading (more than 20 MW) The only solid by-product (ashes) coming out from pellets systems are able to be used as fertilizer Emission control systems possibly coming for small units as well Promote the environmental benefits of using pellets heating systems Peak boiler fuel and households need special attention, mid size units market is developing Ref.: EIE/04/040/S PROPELLETS Page 35

36 STRENGHTS WEAKNESSES ACTIONS A) INPUT COST FACTOR A) INPUT COST FACTOR New plants with drying facility can use new rawmaterial base High domestic production capacity will ensure pellet supply High demand in Europe and high competing fuel prices may lead to increasing pellet price One dominating supplier Favouring the investments on new capacity B) TECHNOLOGICAL FACTORS B) TECHNOLOGICAL FACTORS Communication among five European regions (from five countries) will help knowledge interchange. Particularly new service concepts for household market are interesting. Tough competitive situation is pressing pellet system prices, most advanced units are not commercially competitive Service sector shall be developed to install and maintain pellet systems, specially for household markets C) SOCIO-ECONOMIC FACTORS C) SOCIO-ECONOMIC FACTORS The use of biomass can help clearly to the sustainable development of the region, as other biomass initiatives are being projected. Service sector for pellet market may create new businesses Economic saving for the region and increase in employment related to pellets is expected Public awareness and knowledge on automatic pellets systems is low leading to an initial lack of interest in these installations for heating and hot water production Wider pellet heating concentrations are needed in order to get the supporting services developing First facilities installed should be of high quality (they will be hopefully widely showed) by the supervision of Propellets cluster, in order to avoid worse experiences when starting this market Ref.: EIE/04/040/S PROPELLETS Page 36

37 D) QUALITY AND SERVICE FACTORS D) QUALITY AND SERVICE FACTORS Quality and service should be good due to the advising and supervision of the new facilities by PROPELLETS Cluster. It is possible to prepare a contract including the supply and installation of the heating system, the biomass providing, and system maintenance (all integrated) e.g. HEAT Entrepreneurial service End users may need advising due to the lack of experience. Heating services are not yet commercially available for small instalments PROPELLETS cluster should supervise quality and service issues, and provide assessment E) LEGAL-INSTITUTIONAL FACTORS E) LEGAL-INSTITUTIONAL FACTORS Regional Administration provides funding for pellets heating systems industries and farmers Lack of financial support on household sector is slowing the development Promotion activities and new services for housing sector F) ENVIRONMENTAL FACTORS F) ENVIRONMENTAL FACTORS Substitution of fossil-fuel (oil and electricity) heating systems by pellets systems will reduce fossil fuel gas emission in the region Electric heating systems in rural areas can be substituted by pellets systems The only solid by-product (ashes) can be used as fertilizer Systems installed should have a high level of performance for the lowest environmental impact To favour the installation of pellets heating systems reduces GHG and pollution Ref.: EIE/04/040/S PROPELLETS Page 37

38 5. SWOT ANALYSIS IN UNITED KINGDOM 5.1. Summary of results The SWOT analysis for the South West of England comes at an important time in growth of the wood pellet industry. The first pellet boilers and pellet stoves have now been installed with some buildings having 2-3 years of experience with the heating systems. In addition, there are two pellet mills in the region which are likely to come on stream early in The existence of local pellet production is likely to have a major impact on wood pellet industry in the region as it gives more consumer confidence to security of supply and price stability as well as achieving political goals of bringing local production to the region with the economics benefits and jobs that this brings. This emergence of the wood pellet industry in the South West also coincides with substantial and sustained increases in fossil fuel prices. Whilst this is a European wide increase, it could be argued that this price increase has been more significant in the UK where there have been traditionally low fossil fuel prices due to North sea reserves of oil and gas. The fossil fuel price increases have recently taken fossil fuel prices to levels where they are now generally higher than wood pellet fuel. Therefore, we are now in a situation where all the various elements required for a wood pellet market to grow exist. The question is how that growth is facilitated and the pitfalls of a new industry are avoided such as poor quality pellets or poor quality installations due to lack of experience. The following analysis looks at the strengths and opportunities in this emerging market, but also some of the factors that could limit this growth Analysis development The following tables show the development of the SWOT analysis corresponding to the region of South West, in the framework of the situation in the United Kingdom. Ref.: EIE/04/040/S PROPELLETS Page 38

39 The objective of WP2 Market structure analysis and promotional activities identification is to identify barriers for pellets heating systems promotion and to select the necessary promotion actions to overcome those barriers. The UK pellet market is now starting to be established with the first pellet boilers and pellet stoves being installed and new pellet production capacity under construction. New players are starting to enter the emerging market. A SWOT analysis has been employed for South West England that identifies the Opportunities, Threats, Weaknesses and Strengths of the emerging pellet market. In order to carry out this analysis and to have the information regarding to the regional projects, factors that are external to the region will be considered, that is, factors of the macro setting that are going to affect the region positively or negatively. In addition to these, factors which are internal to the region and that can equally influence its functioning in a positive or negative way will be considered. The external factors are the Opportunities and Threats whereas the internal ones are named Strengths and Weaknesses. Strengths The Strengths are internal aspects of the regional initiative that enables it to exploit an opportunity of face up a threat. One of the aims of this analysis is to reinforce these strengths. 1. Wood pellets have the potential to become a major industry across South West England and play an important role in reducing the CO 2 emissions from within the region 2. The South West has a number of urban centres but is largely a rural economy. Large parts of the South West have no access to the natural gas network and rely on oil and LPG for heating and hot water. Due to the recent rise in the cost of fossil fuels wood pellets are now competitive against oil and LPG. The typical delivered price of pellets in bulk in the region (based on imported pellets) is approximately 220/tonne delivered, equivalent to 4.4 ct/kwh, compared with oil at approximately 4.8 ct/kwh and LPG at approximately 6.8 ct/kwh, 3. The South West has an indigenous sawmilling industry who are in need to find outlets for the wood residues from the milling activities. Therefore, there exists the possibility of local production of wood pellets. 4. The South West has a large farming sector and hence the potential exists for the pelletisation of agricultural residues. Ref.: EIE/04/040/S PROPELLETS Page 39

40 5. There already exist a number of pellet boilers (see appendix 1) and pellet stoves (estimated to be about 35 to date) that people can see in operation to enable potential users to become familiar with the technology. 6. A network of heating engineers has been established who are able to install and service domestic pellet stoves and boilers. These heating engineers have undergone hands-on training on technology specific appliances. 7. High quality technology is now available (primarily from Austria) which has technical support e.g. trained engineers, spare parts available etc. 8. Local pellet production is due to start in 2006 which will have a major impact on the expansion of the wood pellet market in the region. 9. Promotional campaigns and renewable energy events have started to increase awareness of the technology to both the private and public sector. Weaknesses The Weaknesses are the internal limitations that prevent the regional initiative from making the most of an opportunity. They are factors that must be corrected, among which the following can be considered: 1. Although the region has a number of sawmills and joineries and has a large agricultural sector, the amount of indigenous raw materials for pellet production will be ultimately limited and hence this could limit the expansion of the sector. 2. Due to the innovative nature of these pellets heating systems (>150 kw) there is still little experience in this sector, and there is need of information and dissemination. There needs to be increased trust and understanding particularly within the public sector 3. Socio-economic factors, one of the most important aspects is going to be the lack of guidance in the purchase these systems, as they are not so well known by the public or private end users. 4. Legal-institutional factors, are the limitations the systems are going to come across related to delays in the granting of permits, long amortisation periods, lack of interest or knowledge from institutions, lack of legislation. 5. The nature of wood pellet fuel means that storage is required. This may not be possible due to space restrictions, particularly in the urban areas 6. The emerging local pellet production needs to be monitored for quality. Substandard pellets would damage the emerging industry. Ref.: EIE/04/040/S PROPELLETS Page 40

41 7. Building regulations within the UK do not accommodate high efficiency pellet stoves, but class them in the same category as log stoves. This means that the flue systems, for example, that are required to meet UK building regulations are larger diameter (and hence more expensive) that is necessary from a technical point of view. Opportunities Opportunities are external factors of macro setting, which if suitably exploited by the regional initiative can provide a certain advantages or benefits. For the case of the promotion of pellets heating systems, the Opportunities can be related to different factors such as: 1. The nature of the region means that the wood pellet heating has the potential to become a major heating technology. The sawmills and farming industry have an opportunity to generate local pellet production to drive the industry. 2. There is now national government programmes to support the technology of pellet appliances in the form of capital grants and interest free loans. Also companies can benefit from Enhanced capital allowance (ECA) whereby the costs associated with the pellet installation can be written down within 1 year. 3. The pellet market represents new opportunities for heating engineers to add a new technology to their expertise. Training in wood pellet heating gives a competitive advantage to the company. 4. Socio-economic factors, are related to the use of an indigenous resource substituting an imported resource (gas, oil), leading to a reduction in external dependences, and improving the balance of the region. All fossil fuels are imported into the region. 5. The idea that there should be an obligation for all new public sector building projects to achieve 10% of the buildings energy needs from renewable sources. If implemented, this would result in a major opportunity for the wood pellet fuel to rapidly expand. Threats Threats are those external factors of the setting that can affect the region s ability to serve its markets. They are, therefore, factors that once they have been pointed out have to be offset. They are: 1. The wood pellet industry must compete with both fossil fuels (natural gas, oil and LPG) and other renewable technologies such as wood chip and ground Ref.: EIE/04/040/S PROPELLETS Page 41

42 source heat pumps. The region has a number of companies promoting and installing ground source heat pumps. 2. Poor pellet quality will have an adverse effect of the emerging market. 3. Technological factors, related to the availability of new heating technologies can be weak and due to the innovative nature of the project can exist lack of experience in the distribution, storage, operation/maintenance and installation. There can be only a few proven technology options available at the project demand scale (>150 kw), and availability of these boilers can be difficult. 4. Quality and service, an important threat is going to be the location of the production or distribution companies of both pellets heating systems and pellets, in some regions. This can affect in a significant way the decision of the substitution of the boilers by end users. 5. Socio-economic factors, the lack of information and the unawareness of society, in general, may cause the low demand of pellets heating systems Ref.: EIE/04/040/S PROPELLETS Page 42

43 Appendix 1 Pellet Installations in the South West 01 December 2004 Locations Output Building Estimated pellet Project kw Type usage (tonnes) Otterhampton Somerset 50 school 12 South Dean Devon 25 private 4 Rose Cottage Cornwall 25 private 4 Ilminster Somerset 75 school 12 Total December 2005 Locations Output Building Estimated pellet Project kw Type usage (tonnes) Pinkworthy Bar Devon 15 Private 3 Stockland Village Hall Devon 40 Community 10 Bath and West Somerset 500 Community 100 Wilderness Centre Glocs 100 Community 20 Westonbirt Glocs 25 Community 3 SCAT Somerset 40 School 6 Jubilee Wharf Cornwall 75 Community 20 Pitts Cleave Devon 25 Business Units 10 Total Ref.: EIE/04/040/S PROPELLETS Page 43