|Title||Exploring the drivers of demand for non-industrial wood pellets for heating|
|Author(s)||Flinkman, Matti; Sikkema, Richard; Spelter, Henry; Jonsson, Ragnar|
|Source||Baltic Forestry 24 (2018)1. - ISSN 1392-1355 - p. 86 - 98.|
|Department(s)||Forest Ecology and Forest Management|
|Publication type||Refereed Article in a scientific journal|
|Keyword(s)||Carbon tax - Demand elasticity - Econometric analysis - Heating - Heating oil - Natural gas - Renewable energy policy - Wood pellets|
The targets for renewable energy in the European Union (EU) have resulted in a surge in the use of wood pellets. The EU-28 consumption has outgrown domestic production, resulting in increasing net imports. This study analyses the drivers of the use of pellets for heating (non-industrial pellets). An inquiry directed to pellet organizations indicates that country specific subsidies could be a driver for the purchase of pellet stoves and boilers, resulting in a base level of consumption of non-industrial pellets. Further, light heating oil and natural gas are considered the main heating sources substituted by wood pellets. Econometric analysis indicates that GDP is less important, while the price of wood pellets as well as the price of alternative energy carriers seem to be significant drivers. Models using different combinations of these variables account for 63% to 76% of the variation in non-industrial pellet demand. The results indicate the importance of considering competing fossil-based fuels when modelling wood pellet demand. This aspect is also relevant when new policy measures for a low carbon economy are applied, such as the levying of carbon taxes on fossil fuels.