Verona, a city of just over 250,000 people tucked into northern Italy’s Veneto region, was immortalized when Shakespeare used the ancient city as the backdrop for his play featuring the star-crossed lovers Romeo and Juliet. The town is rich in history, boasting a first-century Roman amphitheater and many churches filled with frescoes by some of the most important Italian painters of the Renaissance, crowded along the Adige River. Just south of this historic downtown is the Verona Fiere, a vast fairground that serves as the venue every other year for one of the most important events in the wood heating industry. The Progetto Fuoco, which roughly translates into “fire project,” attracts players along the entire wood heating supply chain, and for producers hoping to capture a share of Italy’s nearly 3 million-ton wood pellet market, has earned its “can’t miss” status.

The Progetto Fuoco sprawls across over 100,000 square meters of exhibition space, and all but the furthest corners of each of the seven halls are filled with exhibitors selling fireplaces, stoves, stove components and pellet storage silos. Technical consultants and densified biomass producers of all types, including dozens of pellet producers, also take up exhibition space. A walk around halls 11 and 12 make it clear that any producer hoping to maintain and grow their market share in Italy has a well-staffed booth at the event and pellet volumes are being bought and sold with regularity. This is widely known amongst producers throughout Europe, and the official conference catalog identified 110 producers of wood chunks, pellets, logs, briquettes and wood chips as exhibitors.

 Every wood pellet-producing country in Europe is represented at the Progetto Fuoco including Austria, Germany, Poland, France, Germany, Slovenia, Slovakia, Lithuania, Latvia and many others. Certainly, the large, multifacility producers like Granuul Invest or global traders like Ekman have a large presence, but just as prevalent are producers with annual production volumes around 40,000 tons and a good handful of producers report annual volumes of less than 20,000 tons. At the Progetto Fuoco however, no one is interested in tonnage. Pellets are bought and sold in truckloads.


Success by the Truckload
“There are some customers that will take 100 trucks per year,” says Andrea Marchig, a sales representative for WoodPellet.lt, a Lithuanian company selling pellets produced in Russia. “For some buyers, maybe they’ll buy 40 trucks per year.” Describing his ideal customer, Marching says, “If they speak about 10 trucks per month, for us, this is the perfect size. This leads to a nice portfolio of customers. A portfolio built on lots of small customers is less risky for us.”

Katrina Kalva, sales project manager for the Latvian producer Stali, also sizes up potential clients on the number of trucks they are likely to take during a given heating season. “If they take 10 trucks per week, then just one client like that would be great from this exhibition,” she says.  “It would be good, of course, if I could find five clients that would take two trucks per week as well.”

Stali is a single-facility pellet producer operating on the waste streams produced during the manufacture of doors and windows, the company’s principle business. “We produce about 3,500 tons each month, or roughly 40,000 tons per year,” Kalva says. “About 40 percent of that volume is sold in our domestic market in Latvia and 50 percent we sell in Italy.” For Kalva, Stali’s presence at the Progetto Fuoco is necessary to maintain relationships with existing clients and find new ones. Kalva offers that the bulk of her customers are Italian resellers, but that they do sell directly to end users in certain situations.

For customers of all types, Kalva says, price is the No. 1 concern. “Buyers always ask about price of course. Everything is about price,” Kalva says. She continues by outlining the quality metrics Stali’s pellets have achieved. “In Italy, Latvian pellets are not really well known, but buyers appreciate our quality,” she says. “For traders, in my experience, the most important factor for them is mechanical durability. Our pellets have a durability index of 98.2 percent. This really helps in transportation. The higher the number, the better the pellets will do as they are shipped and won’t break as easily.” This is particularly important for Stali as their pellets must travel over 1,000 miles before they reach even the northernmost parts of the Italian market.

This year’s Progetto Fuoco was the first that Greek pellet producer Adamopoulos Vasilis’ company Alfa Wood ever attended. Alfa Wood is a 60,000-ton-per-year producer located in northern Greece hoping the event can help them grow their sales in Italy. “Our customers are importers,” Vasilis says. “The bulk of our business is in Greece and Bulgaria, but Italy is worth about 20 percent of our business.” The use of wood pellets within Greece is growing, despite difficult economic conditions inside the country. “The use of wood pellets to heat homes in Greece has really started to grow in the last three or four years,” Vasilis says. “It’s become very modern. Of course, pellets offer a compelling price for heat. It’s a much better price than fuel oil.” Current fuel oil prices in the United States have, for now at least, completely erased the heating discount that wood pellets have historically offered their customers.


Fuel Oil Economics
In Europe, fuel oil prices vary across the subcontinent and in many markets, because of taxes and tariffs, remain quite high. Analysis performed by Pellet Mill Magazine on fuel oil prices as reported by the European Commission on Feb. 29, 2016, shows that fuel oil in Italy costs $4.24 per gallon. Only homeowners in Denmark pay more ($4.50 per gallon) for fuel oil than Italian buyers. Alfa Wood is well-positioned when looking at fuel oil prices in neighboring countries.  In Romania, just north across the Greek border from Alfa Wood’s production facility, current fuel oil prices are hovering around $3.10 per gallon.  Just beyond Romania, in Bulgaria, prices are even higher with fuel oil selling at $3.15 per gallon. These prices have created an attractive opportunity for Alfa Wood. “Every year, as you can see, our turnover is going up and up and up,” Vasilis offers.

While North American producers likely find the fuel oil prices Vasilis and Alfa Wood are competing with enviable, the economic conditions within Greece are not. Eurostat data from November 2015 shows unemployment within Greece hovering near 25 percent. “This year is going to be more difficult for us,” Vasilis says. “A lot of people in Europe are facing economic difficulties and I think that means things will be more difficult.” Still, with the world’s largest pellet heating market just across the Adriatic Sea, Vasilis has high hopes for a return on the time invested at the Progetto Fuoco, learning the landscape of Italian traders and distributors. “We don’t really know who they are and they don’t know who we are, but after the event, we’ll connect with all of the people who we have met and find out who was really interested,” Vasilis says, who, like his competitors, sizes up his prospects by the number of truckloads they are likely to take on a monthly basis. “I need a buyer to take much more than 10 trucks per month,” he says. “Otherwise, it is nothing.”


Appliance Amore’
While the discount provided by wood pellets for homeowners in many European countries without a doubt has propelled the industry forward, the Progetto Fuoco’s other exhibition halls make it clear that wood heat and wood heating appliances have become a lifestyle choice across the subcontinent. The number and variety of wood pellet producers at the event is impressive, but appliance manufacturers steal the show. Over 150 exhibitors at the event identify themselves as manufacturers of pellet stoves, another 200 as manufacturers of wood-burning stoves. These numbers don’t include the manufacturers of inserts, fireplaces, wood-burning ovens and barbecues or pellet boilers. Well over half of the exhibition is dedicated to appliance exhibits and virtually every exhibit showcases operating appliances connected to vast ventilation systems. Stacks of bagged pellets dot the exhibit floor and appliance representatives regularly walk prospective customers through their product’s ease of use.

Kalva, Vasilis and their competitors remain busy throughout the Progetto Fuoco. Pellets take center stage, and potential buyers pick through sample bins rolling pellets through their fingers while reading data sheets that carry quality metrics. Often buyers and sellers disappear into small private offices built into the exhibit spaces to negotiate prices and sign supply contracts. In true European fashion, every visitor is offered espresso and cappuccino in the morning and Italian wines and beer in the afternoon.

As the event winds down, Kalva reflects on the heating season just now wrapping in Europe. “This winter was not very cold in Italy,” she says. “In Latvia, it was a good winter. We still have a lot of snow in Latvia. Business has been good this season, certainly better than previous winters. Still, the weather is not as cold as it should be.” Even though Kalva hoped for chillier conditions, she says sales are going well. “I certainly can’t complain.”

SIDE BAR----
The World Meets in Wels
The European Pellet Conference, hosted each year in Wels, Austria, made clear that thermal energy from biomass is leading Europe’s decarbonization efforts.

Every year in late February in the Upper Austrian city of Wels, the OÖ Energiesparverband hosts the World Sustainable Energy Days, a broad umbrella under which sit six different conferences and a massive trade show. One of the conferences is the European Pellet Conference which has become a vital annual meet-up for the broader European bioenergy community.

Upper Austria has firmly established itself as an important incubator of policies and technologies that are propelling the more widespread use of biomass-derived heating solutions.  Over 30 percent of homes in Upper Austria are heated by biomass, nearly double the next closest source, heating oil. This regional embrace of biomass heating has spawned innovation across the wood pellet appliance sector throughout the area, and now 25 percent of the biomass boilers installed in Europe were manufactured in the region.

Fanny-Pomme Langue, policy director at the European Biomass Association, opened the event by providing attendees an update on the progress that bioenergy is making in Europe’s overall energy picture. Langue’s presentation reported that consumed bioenergy doubled from 2000 to 2013, and today represents over 60 percent of renewable energy consumed in Europe. Biomass-derived heat is responsible for the lion’s share of bioenergy’s contribution representing nearly 75 percent of the biomass-derived energy consumed.

While the use of wood pellets for power generation continues to grow, the majority of wood pellets consumed in Europe are used to deliver a heat product. In 2014, 11 million of the 18.8 million tons consumed in pellets were burned in pellet boilers and stoves. Langue’s presentation identified Italy, Germany and Sweden as the clear leaders in pellet consumption for heat with Italy rising above the rest, consuming nearly 3 million tons per year, most of them burned in pellet stoves in homes.

Langue concluded her remarks by making it clear that the 2020 and 2030 renewable energy goals the European Union has established will not be met without continued growth in the bioenergy sector. Langue called for more ambitious renewable energy goals in the EU, however, and expressed confidence that bioenergy was capable of an even larger contribution. Her presentation made it clear that the policy makers in the region continue to express concern about biomass sustainability and that work toward harmonized sustainability criteria must continue.

The foundation for the EPC and the five other colocated events that make up the World Sustainable Energy Days is the massive Energiesparmesse, with nearly 1,600 exhibitors. Austria’s pellet appliance industry is on full display with seemingly every manufacturer having a large presence. Both individual homeowners and professional system installers attend, picking over the nearly endless variations of whole log, chip and pellet appliances. Over the course of the World Sustainable Energy Days, nearly 100,000 people visit the Energiesparmesse, making it one of the largest consumer energy trade shows in the world.

Next year’s EPC and World Sustainable Energy Days is scheduled for March 1-3, in Wels.

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Author: Tim Portz
Executive Editor, Pellet Mill Magazine
701-738-4969
tportz@bbiinternational.com