Investigating the future supply distribution of industrial grade wood pellets in the global bioenergy market

ABSTRACT

Many factors may globally affect the trade pattern for industrial-grade wood pellets, with one such factor being the decision strategies by potential buyers and suppliers to optimize feedstock price and volume. This study investigated the industrial-grade wood pellet market assuming potential buyers and suppliers optimize their decision independently. A non-cooperative, bi-level, Stackelberg, leader-follower game model was developed to predict potential resource distribution in global competitive feedstock markets for industrial-grade wood pellets. Based on historic trade patterns and expected future production and demand structures, a set of potential buyers and suppliers of industrial-grade wood pellets were identified for 2022, 2030, and 2040. Projected trade volume and patterns among buyers and suppliers were identified in different scenarios. Potential buyers for US-sourced industrial grade-wood pellet were identified. Results shows that the expected demand growth from the European Union, South Korea, and Japan until the year 2030 limits the resources available to the USA. Competitive prices offered by international buyers cause the US industry to primarily sell overseas. International trade could contribute to 83.4% of the total volume in 2022 and 90.2% of the total trade value in 2022. High-demand markets with a respective high willingness-to-pay dominate international trade.

KEYWORDS:

• Stackelberg game
• bi-level programming
• international trade
• wood pellets
• feedstock

Acknowledgments

We are grateful to the following people/institutions that provided helpful comments, data, and other forms of support for this analysis: US Department of Energy: Sam Tagore, Steven Thomas, and Mark Elless; Idaho National Laboratory: Erin M. Searcy and J. Richard Hess; EEG TU-Wien: Gustave Resch.

Disclosure statement

The authors declare no conflict of interest

Notes

1. High-quality animal feed (such as hay) is exported in a baled format; however, no known case exists where baled material is exported for energy purposes.

2. NP-hard is a common metric to express the level of computational complexity of a problem. It is widely used in computer science and operations research, among others. NP-hard is the highest level of complexity. NP stands for non-deterministic polynomial time.

3. Cost years are 2011 if not indicated otherwise.

4. Oversea shipping prices vary but are typically between 20 and 40 US$ Mg⁻¹. Only shortly before the economic crisis in 2008/2009 did they peak at around 70 US$ Mg⁻¹. Today, most pellet shipments are made between 25 and 35 US$ Mg⁻¹.

5. Cost insurance freight to Amsterdam, Rotterdam, or Antwerp harbors.

Additional information

Funding

This work is supported by the US Department of Energy under the US Department of Energy Idaho Operations Office Contract [Biomass Program grant number DE-AC07-05ID14517].