Italy Pellet Report

The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

November 2011

Author:

Annalisa Paniz

AIEL – Italian Agriforestry Energy

Assocaition

1

Table of content

Fact sheet ................................................................................................................................................. 2

1. Introduction ..................................................................................................................................... 3

2. The Pellet Market ............................................................................................................................ 6

3. Pellet Quality and Certification ..................................................................................................... 14

4. Sustainability ................................................................................................................................. 18

5. Conclusions and Perspectives ........................................................................................................ 19

6. Attachment: Survey Results .......................................................................................................... 20

2

Fact sheet

Pellet production in kt

Year Plants Capacity Production

2006 400

2007 750

2008 700

2009 550

2010 530

2011 23 520

Source of

information AIEL AIEL AIEL

Pellet consumption in kt

Year Heat Power Name of the power

plants (& consumption)

2006 830 0

2007 1,055 0

2008 1,225 0

2009 1,427 0

2010 1,628 0

2011 1,852 0

Source of

information AIEL AIEL

Heating Devices

Year Boilers <50 kW

(Residential)

Boilers >50 kW

(Commercial) Stoves

2006 2550 308.571

2007 1900 193.337

2008 1620 143.480

2009 1550 600 171.000

2010 1360 498 170.000

2011 1470 870 188.013

Source of

information AIEL AIEL CEDED Italia

3

1. Introduction

The biomass sector plays a strategic role in the Italian policy for renewable energy sources: according

to the National Energy Action Plan (NEAP), approved in June 2010 following EU Directive 28/2009,

biomass should become the primary renewable energy source by 2020, covering 44% of renewable

consumption (22.3 Mtoe) ― 20% in electric power generation, 58% in thermal power generation and

84% in the production of biofuels (Fig. 1). The final energy consumption in 2009 was approximately

132.7 Mtoe and by 2020 the estimate has been set at 145.6 Mtoe.

The use of solid biomass, represented mainly by wood, has been assigned a primary role as a

renewable energy source. According to the estimate reported in the National Forests and Carbon

Inventory (www.infc.it), the Italian forest area amounts to 8.8 million hectares (Mha), with a potential

availability of 874 Mt (dry basis) or 1,269 million cubic meters per year.

Figure 1: National Energy Action Plan (NEAP). Solid-biomass-generated energy contribution to total energy

consumption. Source: RES (2020). Elab. AIEL on NEAP

The development policies in favour of renewable energy have been up to now focused almost

exclusively on electric power generation, although, by 2020, 48% of total energy consumption in Italy

will be represented by thermal energy (Fig. 2). By the year 2020, among renewable sources, biomass

will have reached a record of 54% of the total thermal energy produced (10.5 Mtoe). Nevertheless, at

the moment, there are no specific incentives or subsidies in favour of thermal energy production.

Structural policies are urgently needed.

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Figure 2: Distribution of the three categories of renewable energy consumption in 2020. Data processed by

AIEL on NEAP source.

In 20055, the production of thermal energy based on renewable sources was estimated at 2.4 Mtoe

(Source: ENEA). The target set by NEAP (National Energy Action Plan) for 2020 is 5.2 - 5.4 Mtoe

(Fig. 3).

Figure 3: Consumption of thermal energy generated by renewable sources. Comparison between 2008 and 2020.

Source GSE.

Comparing data from different sources leads us to conclude that the forecasts reported in NEAP are

strongly underestimated. The total of solid-biomass generated energy production forecast by the year

2020 (5.2 Mtoe) has probably already been reached. A rough estimate of the total solid-biomass-

generated energy in 2010 reached about 6.7 Mtoe, of which about 6.4 Mtoe were consumed by small

scale domestic devices and small / medium district heating networks. (Table 1 and Fig. 4). NEAP

estimates to be revised (Fig. 5).

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Table 1: Wood-biomass-generated energy consumption estimates (Source: Pettenella D., 2011).

Mt M (%) NCV (MWh/t) TWh Mtoe*

Districts heating 0,41 40 2,81 1,2 0,1

Small districts heating 0,38 30 3,4 1,3 0,1

Domestic consumption (pellet included) 18,00 20 3,98 71,6 6,2

Power plants 1,8 50 2,23 4,0 0,3

Total 20,59 78,1 6,7

1 tep= 11,63 MWh

Figure 4: Consumption of different types of wood fuel in Italy

(Mt).

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Figure 5: Source: NEAP forecast and new estimates. Data processed by AIEL. Sources: NEAP and FIRE.

2. The Pellet Market

The pellet sector in Italy is steadily growing and becoming of increasing importance to the national

economy. Present data shows its major role in the renewable energy market. Our estimates on the

Italian market confirm the following:

• Over 3,500 companies entirely dedicated to this sector;

• More than 1.8 million Mt of pellet consumed in 2011;

• More than 470 million euro worth of pellet consumed in Italy per year;

• The sector currently employs over 19,000 persons. The annual turnover of the sole pellet stove

segment exceeds 10 million Euro (Source: CECED, 2007).

Production

Wood pellet is the second most commonly used wood fuel in Italy, covering approximately 9% of

total wood fuels consumption. Specific statistics on pellet production and distribution of heating

devices are not available at the moment. The following data has been elaborated by AIEL on the basis

of its own surveys as well as various other sources.

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Pellet production in Italy began in the late '90s. In particular, the wood pellet market began in

Northern Italy, especially in border regions. About 86% of pellet producers are located in Northern

Italy where almost 95% of the total domestic production is carried out.

Production has suffered a sharp decline in the past three years, following a 59% yearly growth rate

between 2003 and 2007 and a peak production in 2007 of 750,000 tons. Over the past four years

(2008-2011), the production has decreased at a rate of 8,5% per year. Domestic production will not

exceed 520,000 tons in the current year (Fig. 6).

Figure 6: Pellet production in Italy in tons (2003-2011). Source: AIEL.

The decrease in domestic production is mainly due to the decline of the entire wood processing

industry, which has led to scarce availability of raw materials for pellet production (sawdust, shavings

and other non-chemically treated wood scrap). The lack of raw material and the consequent increase in

prices have resulted in a decrease of production as well as the closing of a number of pellet producers.

The first pellet market survey carried out in 2003 showed that 40 producers, which eventually

increased to nearly 90 in 2007, covered by far the largest share of the Italian market. Only 23

producers were surveyed in 2011, with an average production per company of 20,000 tons per year.

In addition to the decrease of domestic production we have experienced an increasingly widespread

relocation of Italian-owned production plants to Eastern European countries. Several Italian

entrepreneurs have started pellet production companies abroad aimed at the exclusive supply of the

Italian market. At present it is difficult to accurately estimate the quantities of pellet produced and

exported to Italy by these companies.

Consumption

From 1999 to 2011 pellet consumption increased by an average rate of 56% per year. Our estimates

show that pellet consumption amounted to 1,852,700 tons (732.80 ktoe) in 2011, of which 89%

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(1,652,300 tons) consumed by single household stoves and inserts; only the remaining 11% (200,400

tons) was consumed by small-scale heating networks (Fig. 7).

Figure 7: Annual consumption of pellet in single household stoves and small-scale heating networks (1999-

2011). Data processed by AIEL. Source: CECED and AIEL.

Pellet stove and boiler markets are different in size and characteristics. Nearly 5,900,000 household

heating devices (including fireplaces and stoves) were installed by 2010, 24% of which fueled with

pellets (Fig. 8).

Figure 8: wood household heating appliances (2010). Data processed by AIEL. Source CECED.

From 1999 to 2005, the sales of pellet stoves (8-12 kW) on the domestic market witnessed an average

annual growth rate of 49% with a sudden rise in 2006 (+137%). 2007 and 2008 saw a sharp drop in

sales (-37%) followed by a recovery in the following years (Fig. 9). The sales of pellet stoves in 2011

are estimated at 188,000 units. So far, over 1,561,000 stoves have been installed in Italy, of which

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48% in Northern Italy (Fig. 10), corresponding to an annual consumption of about 1,650,000 tons of

pellet.

If the sales rates were to follow those of the last four years, it would be safe to assume that by 2020 the

number of installed pellet stoves will reach 3,600,000 units, corresponding to a total consumption of

over 3,828,900 tons (1,514 ktoe) (please note that our calculations do not consider the replacement of

old heating devices).

Figure 9: Sales of wood pellet stoves and corresponding fuel consumption (Mt). Data proceed by AIEL. Source:

CECED.

Figure 10: Regional distribution of installed pellet stoves. Data proceed by AIEL. Source: CECED and APAT

Lombardia.

The pellet-boiler market is a niche market when compared to the pellet stove one. From 1999 to 2006,

sales registered an average annual growth rate of 122%, even if overall sales remained very modest.

Sales decreased by -13% from 2007 to 2010 and began to pick up again (+9.7%) only in 2011. Sales

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of pellet boilers have been estimated at 1,549 units in 2011, totalling just over 15,600 units installed so

far, corresponding to a consumption of about 200,000 tons of pellet (Fig. 11). Almost all boilers are

used for residential heating purposes and have an output lower than 150 kW. Slightly less than 5% of

pellet consumption in 2011 was related to pellet boilers with power output exceeding 1 MW.

Figure 11: Sales of wood pellet boilers and corresponding fuel consumption (tons). Data processed by AIEL.

Source: AIEL and BG of AIEL.

If sales rates remain at the level of the last four years, it is safe to assume that by 2020 the number of

installed boilers will rise to 29,800 units, corresponding to a consumption of 345,000 tons of pellet.

Pellet in Italy is used only for small scale heating networks. Immediate future trend changes are not

predictable and it is unlikely that pellet will be used for the production of electric power in CHP or co-

firing. Since 89% of pellets are used in stoves, the most common packaging is 15kg-bags, also used

for fueling low power boilers (<35 kW). Nevertheless, in the case of this type of heating unit,

consumers mostly use pellets in large bags to be returned empty to the supplier or, as an alternative,

buy bulk, delivered by truck. Companies that provide this type of service have doubled in the last two

years (2010-2011). Currently, at least 16 pellet silotrucks operate in northern Italy. They are mostly

owned by trading companies which buy pellet from abroad, mainly from Austria, Germany, France

and Slovenia. It is estimated that pellet delivered loose by silotruck amounts to at least 91,000 tons per

year.

Pellet Consumption and Supply

When comparing supply with consumption data, it is clear that domestic production does not cover the

total domestic demand for pellet. Only 28% of the demand is met by domestic production (Fig. 12). A

large part of pellet used in our country comes from abroad, both from European and non-European

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countries. Since 2009, official import / export data is published by Eurostat for all European countries.

Previously, the survey of national import data was very tricky.

According to Eurostat, Italy imported more than 471,600 tons in 2009 and over 827,200 tons in 2010

(Table 2 - Fig. 13). Although updated data is not yet available for 2011 it is safe to assume that the

share of imports will exceed 1.2 million tons. It should be noted that large shares of imports are not

subject to official statistics, partly because they are based on national statistics, often partial or

unreliable.

Figure 12: Comparision between domestic demand and production. Source: AIEL.

Table 2: Pellet import (2009-2010). Data processed

by AIEL Source: Eurostat and USA/Canada

statistics.

Figure 13: Geographical spread of pellet imports (2010)

2009 2010

Canada - 9.810,10

USA 39,60 3.533,10

Austria 143.646,20 268.179,10

Bulgaria 10.968,40 7.444,60

Czech Republic 8.265,20 22.213,50

France 12.045,60 26.300,50

Germany 74.449,70 106.774,80

Hungary 3.025,00 8.371,00

Latvia 1.718,50 3.540,70

Lithuania 5.982,80 32.252,50

Poland 9.462,80 25.286,60

Portugal 313,90 3.458,10

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Romania 12.778,10 48.393,20

Slovenia 67.397,30 78.533,30

Slovak 14.160,40 23.056,30

Spain 210,90 7.226,20

EU extra 27 107.205,00 152.876,20

TOTAL 471.669,40 827.249,80

Austria represented the largest pellet supplier of the Italian market and traditionally a substantial share

of its production is meant for the Italian market. According to an estimate by proPellets Austria, in

2011 exports to Italy will exceed 400,000 tons. A strategic supplier for Italy is also Canada, whose

exports to Europe are forecasted to be 1.7 million Mt.

Italy is a candidate to become the leading European importer of pellets for domestic use and the only

country where consumption is almost four times higher than production. Importer profiles are very

different and include:

• Pellet producers who buy wood pellet from abroad in order to integrate their production;

• Large traders who wholesale pellet to medium / small retailers;

• Domestic large retailers;

• Medium / large retailers of heating fuel (both fossil and wood);

• Loose pellet distributors.

Merging production, import and consumption figures for the last three years (2009 -2011) highlights

some inconsistencies (Fig. 14). As can be seen from the graph, the demand is always higher than the

sum of production and import. Assuming that data concerning sales of heating devices is based on

reliable information, we can assume that the inconsistency is based on erroneous data concerning

imports and domestic production whose figures have not been accurately gathered.

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Figure 14: Merging of production, import and consumption figures (2009-2011). Source: AIEL.

Pellets prices

Following the strong fluctuation of the price of pellet when the market was not yet fully mature (2003-

2008), from 2009 on, the market has shown a higher level of stability. The gap between pre-seasonal

and seasonal prices (based on Austrian trends) has been reduced, as well as the difference between

minimum and maximum market price (Fig. 15). The result is a greater market stability, as well as

greater balance between supply and demand.

The significant increase in the price of pellet on major European markets occurred between 2006 and

2007 and was caused by a hysterical increase in demand, not matched by an increase in pellet supply.

The consequence has been a sharp rise in prices (+40%) due to the limited supply.

The unbalance between supply and demand had negative repercussions. Comparing the trends of

prices and sales of pellet stoves and boilers (see Figures 9 and 11), it is clear that the peak in the price

of pellet corresponds to a sharp decline in sales of heating devices, as occurred in 2007 and 2008.

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Figure 15: Trend of pellet wholesale price (2003-2011). Source: AIEL.

The comparison of costs of thermal energy generated by pellet and other fuels, both fossil and wood,

is particulary interesting (Fig. 16).

Figure 16: Comparison of primary energy costs (€/MWh) produced by fossil and wood fuels (November 2011).

3. Pellet Quality and Certification

Pellet Quality

The monitoring of pellet quality in Italy started in 2006 with the pellet quality certification labelled

Pellet Gold©. Surveys covering the Italian production over the same period of time clearly show that

the quality of pellets produced by Italian companies has improved significantly.

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Figure 17 compares, over the years, the main quality parameters of Class A1 pellet introduced by EN

14961-2. Hereafter we selected only the most significant parameters: water content, ash content,

content of N, Cl and S, net calorific value (NCV) and durability. 100 has been set as the limit value for

A1 class pellet in order to verify the percentage changes in the average values from 2006 to 2011.

Particular attention must be paid to ash content which over the years has been gradually reduced. In

2006, the average content was slightly less than 1%, almost 40% higher than the limit set for class A1.

In 2011, the testing of samples shows an average content of ash close to the limit. The content of

nitrogen, chlorine and sulfur has gradually declined over the years, as well as the water content. The

net calorific value (NCV) has witnessed a slight increase.

Figure 17: Comparison of average quality of pellet produced in Italy from 2006 to 2011. Processed by AIEL.

Data source: AIEL/Pellet Gold.

Problems

In 2011, only 28% of domestic demand was covered by domestic production. High demand for pellet,

as opposed to limited domestic supply, results in considerable uncertainty in terms of quality of

supply. In fact, only imported pellet from consolidated partners such as Austria, Germany, Canada and

a few other countries, is duly certified. At the same time we should underline the fact that Italy still

lacks a consolidated quality philosophy in pellet production. It is not yet mandatory for pellet

producers/traders/importers to indicate clear information concerning product characterisitcs, quality

certification and the full address of the manufacturer/trader/importer.

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It is therefore impossible to prevent the entry and circulation of lower quality pellet on the national

market. The problem could be solved by imposing a standard European certification. In terms of

quality, the main problems to be tackled are: high ash content, which in cases exceeds 2% and makes

the product inappropriate for domestic consumption, as well as low mechanical durability which is

also often found in the product, resulting in an excess of fines.

Existing Quality Certification Systems

The first and only quality certification system in Italy, before

the introduction of ENplus, was Pellet Gold©, a voluntary

certification introduced by AIEL and based on the main

European pellet standards. As of 2011, Pellet Gold© has

conformed with EN 14961-2 standards.

Pellet Gold aims at insuring that pellet production meets the

standards outlined in the certification requirments. It is the

only European certification system that also provides for

formaldehyde content testing (HCHO), essential in order to

detect the presence of materials (glues and paints) dangerous

to the health of consumers, as well as the presence of

radioactivity.

The certification procedure requires an initial inspection visit which checks:

• Production process control;

• Pellet quality control system.

During the inspection visit, the auditor collects samples on which laboratory analysis will be

performed in order to check their compliance with the certification standards handbook. Certified

pellet is labelled with the Pellet Gold seal.

The Importance of Quality Certification

A quality certification system is the only valid instrument aimed at guaranteeing consumer protection.

Quality cannot be based on self-certification and must be guaranteed by an impartial certification

organisation. In order to insure the level of quality required by the market as well as by consumers,

specific rules must be put in place.

The awareness of the importance of pellet certification has grown in the last years among Italian

consumers who have realized that for a slightly higher cost, they can obtain heating fuel which ensures

excellent performance of the heating appliance and highly efficient combustion.

More and more consumers have turned their attention to certified pellet. The introduction of an EU-

wide certification will surely benefit the Italian consumer, forcing pellet coming from Eastern

European countries to meet required quality standards.

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Share of Certified Pellets

In view of the various origins of pellet consumed in Italy, at present it is very difficult to estimate the

share of certified pellet sold on the market.

With regards to pellet produced in Italy (520,000 t/year), 47% of the production is not certified, while

the remaining 53% is partly certified as Pellet Gold and a smaller portion as ENplus (Fig. 18).

Figure 18: Share of certified domestic production pellet.

Regarding imported pellet, we can assume that pellet produced in Austria and Germany is ENplus /

DINplus certified, while pellet from Slovenia is Pellet Gold certified.

On the basis of import forecasts for 2011, we can assume that about 51% of pellet consumed in Italy is

certified either ENplus, DINplus or Pellet Gold (Table 3).

Table 3: Certified pellets consumed in Italy in 2011 (Data processed by AIEL)

Domestic production Pellet Gold 212.000 t

Domestic production ENplus 60.000 t

Pellet produced in Austria* 400.000 t

Pellet produced in Germany* 210.000 t

Pellet produced in Slovenia* 70.000 t

Total of certified pellets 952.000 t 51%

Total consumed pellets 1.852.679 t * import forecast (2011)

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4. Sustainability

The issue of wood fuel sustainability is not yet popular with Italian consumers. There are no specific

initiatives aimed at introducing guidelines and a certification system for transportation and pellet

sustainability.

Sustainability of raw materials used in pellet production is dealt with by two main forest certification

schemes developed by:

The Forest Stewardship Council (FSC), providing for 10 criteria for sustainable forest

management and rules for the accreditation of certification on a legal basis;

The Pan-European Forest Certification Council (PEFCC). For the implementation of regional

forest certification in Europe, PEFCC refers to 6 criteria and indicators for sustainable forest

management developed by the pan-European process (Table 4).

Table 4: differencies between FSC and PEFC.

Characteristics FSC

FSC Trademark © 1996 Forest

Stewardship Council A.C.

www.fsc-info.org

www.fsc-italia.it

PEFC

PEFC Trademark ©

PEFC/01-00-01

www.pefc.org

www.pefc.it

From 1993 1998-2000

Object of certification Forest management (including timber and

non timber products) and chain of custody.

Wood arboriculture is included.

Forest management (including timber and non

timber products) and chain of custody. Wood

arboriculture is not included.

Type of representatives With three chambers, one for each sector:

economic, environmental and social.

Representatives of environmental ONGs,

group and association of consumers.

From 1 to 3 votes per delegate depending on

the woody production level per country.

Representation for industry, private forest

owners' associations, public administrations.

Accreditation of certification bodies Directely by FSC At national level and indipendent form PEFC

Tipo di certificato rilasciato Single company and group Single company, and regional.

CoC Based on the inventory and the separation

of certified products.

Three typs Tre tipi riconoscibili da due loghi e

diciture diverse.

Approach Based on performance Based on performance

Inspections Provided Provided

Duration of certification 5 years 5 years

Norms and standards Defined by FSC at internationa level Defined by pan-european process of Helsinki

and Lisbona.

Indicators Indicaors of GFS defined at local scale. Indicators approved by PEFCC, additional

indicators defined at local scale.

Logo / Seal For forest management and CoC. Final

products can be sealed only in case of CoC.

For forest management and CoC. Final

products can be sealed only in case of CoC.

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Costs Group certification is allowd to permit the

riduction of costs.

Certification costs divided inside the group or

at regional level.

Consensus among stakeholders Support of environmental NGOs and social

parties. Criticism from smallholders and

industries.

Strongly challenged by environmental NGOs,

supported by small owners, industry and public

administration.

Minimum standards

Existing for all indicators. Available for the mandatory indicators. Only

non-binding indicators monitor some social and

cultural indicators.

The interest in sustainability for pellet production is widespread among market actors, in particular

among those who are already involved in forest certification processes and environmental

associations. No Italian company has a CoC of FSC or PEFC applied to pellet production. Interviews

carried out with pellet producers confirm that the share of certified FSC or PEFC raw materials

exceeds 50%.

5. Conclusions and Perspectives

Over one and a half million families are presently using pellet-fueled domestic heating systems. The

remarkable success of pellet stoves in Italy, as opposed to other European countries, was not due to

specific subsidies but to the high price of traditional fossil fuels.

At present, there are twenty-three pellet producers in Italy, fewer than in previous years. The past and

present difficulties of the wood processing industry has a negative impact on pellet production and

resulted in the decrease of production as well as the closing of several pellet producers. The domestic

production in 2011 will not exceed 520,000 tones compared with a consumption of over 1.8 million

tones. In order to meet the high demand, Italy must import at least 1.2 million tones of pellet. Italy is

certainly the most important European pellet consumer and a major net importer.

Almost all pellet traded in our country is packaged in 15 kg bags even if the share of pellet sold loose

is rapidly growing. We estimate that the amount of loose pellet delivered by silotruck amounts to

91,000 tons.

According to our estimates, should sales of pellet stoves and boilers settle at the levels of the last four

years, the number of heating appliances installed by 2020 will exceed 3,670,000 units, resulting in a

consumption of over 4 million tons of pellet per year (Fig. 19).

Figure 19: Sale forecasts of pellet heating appliances and pellet consumption by 2020 (Data processed by AIEL).

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In this growth scenario in which the Italian pellet market will become increasingly international, it is

clear that the ENplus certification will be an important tool to guarantee the stability of the market.

Pellet manufacturers and retailers are increasingly interested in certification and in the near future a

large part of the Italian production will be certified. Pellet stove and boiler manufacturers also believe

that this certification is the only tool able to guarantee consumer protection and the proper operation of

heating equipment..

6. Attachment: Survey Results

The consolidated questionnaire created by AEBIOM with the support of the project consortium was

translated into Italian at the end of October 2011. The translation was carried out in order to guarantee

a most easy comprehension from Italian market actors.

At the beginning of November 2011 the questionnaire was sent to the most important Italian pellets

market stakeholders:

• Pellet producers

• Traders of loose pellets

• Traders of small bags pellet

• Pellet stoves and boilers producers and traders.

We received 37 answers, mostly from pellet stoves producers, the most stronger actors in the Italian

market (fig. 20).

Figure 20: result of survey

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The results of specific survey carried out through each category of market actors are afterwards

summarized.

Pellet stoves and boilers producers and traders

22

Pellet producers

23

The reason is the high cost of certification

Interviews carried out with pellet producers confirm

that the share of certified FSC or PEFC raw

materials exceeds 50%.

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Small bags pellet traders

All pellets traded is imported from abroad.

If you consider the market in your country, how

large is the share of pellets that do not achieve

EN 14961-2?

Almost 75%

All pellet traders require quality certification for

pellets they sell.

25

Traders of loose pellets

Share of bagged pellets compred with total

deliveries

Average value: 58%

26

All pellet delivered in bulk is imported form

other counties. Austria, Germany, Slovenia and

France.

If you consider your competitors, how large is

the share of distributers that do not offer

adequate pellet quality or poor delivery

quality (%)?

The average value id 27%