How to address a scattered market? The case of Italy konf...Pellet production in Canada and USA ons...

© Annalisa Paniz, AIEL

Annalisa Paniz

How to address a scattered market? The case of Italy Bruxelles, 13TH MAY 2014


• Who is AIEL?

• Is the ENplus certification supported by the Italian

companies?

• What is the Pellet market situation?

• What is the heating market in Italy?

• What are the current Pellet support schemes?

Contents


WHO IS AIEL? The main Italian association of Wood Energy Chain


Wood Energy Chain Association (300 members)

Representing the companies’ interests ‘from Forestry to chimney’

AIEL: Structure and organisation


• 150 companies (Plants Designers, Installers, Farms, Mechanic industries, banks, ESCo, etc)

• 100 companies involved into the Working Groups: Biomass Producers, Pellets Producers and Traders, Small scale heating appliances' producers, Biomass Boilers producers, mini CHP producers, Biogas plants producers, etc)

• 50 public and private bodies (Research Institutes, Universities, Municipalities, Provinces (Landers), Energy agencies, Embassies, Foundations, etc)

Who are our 300 members?


HOW IS THE SITUATION OF ENPLUS IN ITALY?


EN PLUS CERTIFIED PELLET AT GLOBAL LEVEL

2013: 10 Million tons of pellets were used in Europe for heating purposes

105 producers in Europa, Canada and

USA

Germany

2013

2013: ALMOST 4 MILLION TONS OF PELLET WERE ENPLUS CERTIFIED ALL OVER THE WORD


How will develop ENplus in Italy?

In less than 3 years the certification is becoming even more a point of reference

200.000 tons produced

600.000 tons traded

8.000 tons deliverided with autotank

After Germany and Austria, Italy was the third EU country where the ENplus certification was implemented.


Geminati Pierino IT011


For now we are the only Association who is doing so


For now we are the only Association who is doing so


THE ITALIAN PELLET MARKET The biggest European Market for domestic use


Development of global pellet production


Development of global pellet production

In 2013 for the first time in Europe the consumption for heating purposes has overtaken the consumption for the electricity power generation. 10 Million tons of pellets were consumed for heating purposes and 9 Million tons for power generation.

Rakos, ARGUS Conference


Italy: the biggest European pellet market

TOTAL CONSUMPTION 2013 3,2 MILLIONS TON

The domestic consumption

represents 96%

How big is the Italian consumption?


How many plants are installed?

Stoves and inserts: 1,9 Million

(21% second house)

≅15,2 GW

Boilers ≅200.000 (up to 35 kW) ≅5 GW

Big plants: At least 20 (> 1MW)

Boilers ≅2.500 (35 kW – 1 MW) ≅1-2 GW


Annual growth 200-300.000 tons

Over 3,5 Million tons in 2015


• Around 15% of the total biomass domestic installations (around 10,6 millions of heating systems) are fed with pellets

• Bagged pellet represents slightly less the total consumption. A significant high number of boilers are still fed with bagged pellets

• Bulk pellet transported with silo trucks is no more than 20.000 t

• The expected increase of this market sector is higher than the average growth of pellet market thanks to the increase of pellet boilers trade

•The market is fragmented: it is possible to buy pellets in every single shop, from mini market to Great dealers, from hardware store to hobby centres.

•According to the heating market growth expectations and the National Renewable Energy Action Plan statement, the use of pellets will reach 3,5 Mt in 2015 and 5 Mt in 2020

Some Market Considerations


Selling of biomass boilers

ASSEMBLEA GCMB – VERONA 5 dicembre 2013

2013: over 22.000 boilers were sold, more than double compared with 2009

Pellet boilers are the market driver. In 2013, 4 times compared to 2009

Number of boilers


Selling of pellet boilers

ASSEMBLEA GCMB – VERONA 5 dicembre 2013

2009-2013 Trend (∆) +268% Total number: 39.000 Total power: 1.160 MW

In 2013 were sold over 13.000 pellet boilers, mainly (95%) with a

nominal heating output of 35 kW (vs. 3.600 boilers of 2009)

+47%


Data source: REF-E . Elab. AIEL (2014)

What kind of boilers were substituted with new biomass boilers installed in 2012?

6.500 Biomass boilers were installed in substitution of existing boilers in single heating plants


1.900 Biomass boilers were installed in substitution of existing boilers in centralized heating prlants

What kind of boilers were substituted with new biomass boilers installed in 2012?


In 2012 were sold around 330.000 biomass stoves, inserts, roomheaters, cookers, etc

190.000 were pellets heating appliances

Selling of biomass stoves


THE HEATING SECTOR IN ITALY. A BIG POTENTIALITY FOR BIOMASS


Stock of Single Heating systems installed in 2011 Data source: Istat, elab REF-E 2013

560.000 heating oil boilers 13.900.000 natural gas boilers 1.562.000 LPG boilers


Stock of Centralized Heating systems installed in 2011 Data source: Istat, elab REF-E 2013

124.000 heating oil boilers 467.200 natural gas boilers 38.000 LPG boilers


Installation of single heating system in existing buildings for producing the 100% of the requested heat

Data source: REF-E (2014)

Heating oil and LPG are installed when there is no natural gas grid

Biomass stoves and boilers are installed also in case of natural gas grid


ITALY: AN IMPORT ORIENTED COUNTRY


kt

Elab. AIEL su dati GAD, GCMB; GPDPENplus

Eurostat production 2012

750.000 t

Production and Consumption: an opposite trend

IMP

OR

T

2014: + 200.000 t (?)

© Annalisa Paniz, AIEL Eurostat. Elab. L. Baù - AIEL

Pellets importation is growing every year. Italian suppliers are more than 40, but only 10-12 of them represent 90% of the total amount. The remaining countries can be considered “spot suppliers”; their relevance to the whole supply is very low and unstable.

Italy is an Import oriented country


Importation flows are very relevant in the Italian pellet market, representing over 80% of total supply. They compensate the reduction of production and allow the national supply to satisfy the increasing national demand.

Italy is an Import oriented country

Security of supply will become the main challenge in the close future. How are

importation flows developing?


A NEW ORGANISATION OF THE ITALIAN PELLET MARKET

In 2013 starts


What are the main changes?

Commercial partners (importation flows)

Logistic of supply (harbours)

Pellet prices

Bulk pellets imported oversea by vessel is increased and the number of international companies operating in our country is growing as well. More than a few Italian harbours (e.g. Napoli, Gaeta, Livorno, Civitavecchia, Savona, Ravenna) are currently

equipped with fines’ removers and bagging facilities

At least 600.000 tons are expected to arrive by vessel in 2014

The distribution chain (too fragmentised), stronger role of Department stores (+150% compared to 2012)


Import in 2013: some considerations

ITALY DEPENDS STRONGLY FROM THE IMPORTATIONS

The export availability of the consolidated suppliers is lower

compared with the previous years, due to the increase of internal

consumption

AUSTRIA

2012 2013

Production

Internal Consumption

893.000 t 935.000 t

785.000 t 900.000 t

Difference

108.000 t 35.000 t

Fonte: EPC 2013

AUSTRIA, CROAZIA, SLOVENIA,


Pellet production in Canada and USA M

illio

n o

f to

ns

Seth Walker – RISI - June 2012

The USA pellet production for export will increase in the coming years

Wood pellet exports from North America to Europe have doubled in two years to reach 4.7 million tons in 2013 with the US South accounting for 63% of the volume Wood Resources International LLC


USA

2012 2013

Production

Internal consumption

4.100.000 t 4.800.000 t

2.200.000 t 2.300.000 t

Difference

1.900.000 t 2.500.000 t

Some USA pellet production sites are

entirely destined to the Italian market / to the

export to Italy

Source: EPC 2013

The production capacity of USA

But PFI estimates that the real domestic

consumption of pellet for heating purposes in 2013

has reached 3 Million tons


WOOD PELLET COMPETITIVE POSITION


Heating represents an important cost element for Italian families. In order to maintain a competitive position in the heating market, pellets has to be both a cheap and effective choice. It means that the market expectations are: • Pellets’ price advantage compared to fossil-based fuel (in particular the ones that are mainly used for the residential heating)

• Optimizing heating devices performance by using high quality wood pellets

The importance of the heating costs


January, 2014

VAT and taxes included, delivery included

Primary Energy Cost Pellets vs other heating fuels

The cost advantage is decreasing

April 2014: the price of certified pellets in bulk is higher than the pellet in small bags. How the Ukraine crisis will act on natural gas price?

�€/MWh


Pellet price comparison. Italy vs. other EU countries

Bulk pellets by trucks (€/t, delivery included, VAT excluded)

Source: EPC 2013

How is the pellet price developing?

December, 2013


15 kg pellet bags (€/t, wholesale, VAT excluded)

Source: EPC 2013

What is the maximum level of price that can attract the end consumers?

Pellet price comparison. Italy vs. other EU countries


THE CURRENT PELLET SUPPORT SCHEMES


Some Preliminary information

There is no specific support scheme specifically for pellets. The support of using pellet is included in other general systems

Pellet is supported trough two different schemes

Tax deduction. The deduction is allowed in 10 years for the 50% of expenses incurred for buying and installing a pellet stove. This support is included into the “Ristrutturazione edilizia”

Feed-in-tariffs for heating and cooling, known as ‘Conto termico’ is a scheme of support for small-scale projects of energy efficiency improvement and production of thermal energy from Renewables.

1.

2.

The decree allocates every year € 700 million for projects implemented by private parties


Feed-in-tariffs ‘Conto termico’: short overview

Replacement of heating systems fed with heating oil, coke or biomass (NO NATURAL GAS) with new renewable-energy systems biomass boilers or local space heaters.

In some cases is possible replacing also LPG heating systems

Eligible projects concern

This Feed-in-Tariffs, came into force on 3 January 2013 and implemented the Legislative Decree no. 28 /2011 which is the Italian application of the EU Directive RED 28/2009

What kind of biomass is allowed?

• Wood pellets certified in accordance with EN 14961-2 • Wood chips (in accordance with EN 14961-4) • Wood logs (in accordance with EN 14961-5) • Other not chemically treated biomass (in accordance with Dlgs

152/06)



Minimum requirements for heating systems

Eligible parties are

• public administrations

• private parties: individuals, apartment block owners and parties with business or agricultural income

Certified in accordance with

PPBT mg/Nm3 (13%

O2)

CO g/Nm3 (13%

O2)

Performance %

Pellet stoves

EN 14785

40

0,25 > 85

Pellet boilers

EN 303-5 – Class 5

30 0,25 > 87 + logPn



The incentive will be paid yearly in 2 years for stoves and 5 years for boilers.

The incentive is based on

• Nominal power (kW)

• Supposed using hours (based on Climatic zones)

• Coefficient of incentives (Ci)

• Level of emissions (Different coefficients of performance Ce 1 – 1,2 – 1,5)


Examples for pellet stoves (< 35 kW)


Examples for pellet boilers (< 35 kW)


CONCLUSIONS


• Italy is the biggest European Market for the

domestic use of pellets

• Italy is depending strongly from the importation

• The market logistics and organisation are changing

and in the close future North America will become

the major supplier

• Security of supply and stability of prices are the

main challenges for the future

Conclusions


THANKS! [email protected] www.aiel.cia.it

mailto:[email protected]

http://www.aiel.cia.it/

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