During the Wood Pellet Association of Canada 2026 Conference in Victoria, B.C., the Emerging Competition & Market Dynamics panel discussion focused on the global wood pellet market and how it is entering a period of rapid change and intensifying competition.
Moderated by WPAC executive director Gordon Murray, the panel was comprised of Hannah Adler, deputy editor of Argus Media; William Strauss, president and founder of FutureMetrics; Manolis Karampinis, director for business development and membership for Bioenergy Europe; and Didzis Palejs, chairman of the Latvian Biomass Association.
One of the first major concerns addressed during the panel discussion was the potential for long-term oversupply in the wood pellet market caused by the expected reduction in demand from the Drax Group’s power station in the U.K.
“U.K. policy changes dramatically next year at the end of the first quarter, the current subsidy scheme expires, as many of you know, and the so-called bridge policy going to 2031 is going to restrict policy support for Drax from down to six terawatt hours,” Strauss told the crowd.
This past year, he said that Drax produced approximately 17 to 18 terawatt-hours of electricity, about one-third of what the expected output will be.
“There’s no way around the fact that demand for pellet fuel, at least in long-term contracts, is going to fall dramatically,” Strauss said. “By some estimates from Drax and some other experts in industries, four to five million tonnes a year drop in demand. That’s a huge potential oversupply.”
Strauss expects a major correction to take place in the industry starting next year and going into 2028, so many of the pellets currently being produced will need to find new markets. One of those markets is expected to be Poland.
“Poland may take 800,000 million tonnes, possibly a little more. That’s helpful but it doesn’t make up a complete loss of demand. It’s a serious demand shock just around the corner,” he said.
While the wood pellet sector is expected to go through a few rough years, Strauss believes the future for the sector remains bright. He views projects like NB Power’s Belledune Clean Fuel Project, which would replace coal with advanced (torrefied) wood pellets, and the sustainable aviation fuels market as being key areas that could start a transition within the wood pellet sector.
“I think the next big wave is carbon replacement in the liquid fuel space, and I think the pellet producers, and everybody associated with this industry, are uniquely positioned to play a key role in that transition,” he said. “The refiners don’t want to bother with all the forestry stuff that goes in the front end of bringing biomass to the refinery because they just want somebody to deliver the same thing every day, and [pellet] producers are really good at that.”
While the U.S. is currently the largest exporter of SAF – with most of it going to Europe – the majority of the fuel is produced from the byproducts or leftovers from the oil industries, which is a very limited feedstock supply, Strauss noted. He said that expected long-term growth in demand for SAF will be far more than the current feedstocks being utilized could supply. This is where Canadian pellet producers could benefit.
“I think Canada is uniquely qualified to become a producer and supplier to the EU, itself, and to Japan,” Strauss said.
Pellet producers are well-positioned in this market because they already have the infrastructure to convert biomass into the carbon that SAF producers require, Strauss noted.
“They’re making hydrocarbon, and they need carbon. They need that sustainable carbon. And you guys, I think, should be a huge player in that market,” he said. “I don’t think relations between the U.S. and the EU are all that good, but relations between Canada and the EU are getting better. And so, to become the supplier of SAF, I think that’s the future that’s really possible.”
While Japan remains a key customer of wood pellets for Canada, Adler said that demand has slowed down with the phasing out of the Feed-in-Tariff (FIT) and Feed-in-Premium (FIP) schemes.
“It’s a demand hub that has kind of slowed down a little bit to what people had expected in previous years. It’s still a huge demand hub, but potentially growth there is a bit less,” she said.
Adler added that all of the sustainability requirements and changing regulations taking place in the EU could be a huge opportunity for Canadian pellet producers.
“What Canada does really well is it’s low risk. There are established supply chains, and while the market moves into an era which is a lot more focus on sustainability, and where it’s a lot more important where your pellets come from, and if you know where they come from, rather than how many you can make, I think Canada is really well positioned to take advantage of that,” she said.
While industrial market developments are of great interest to Canadian pellet producers, Bioenergy Europe’s Karampinis noted that the heating market is also very relevant, noting that it accounted for more than half of the pellet consumption in Europe in 2025.
“I think everybody who has been exporting to Europe has been targeting primarily Italy as a market. But recently, we are seeing also investment of Poland as a relevant import hub,” he told the crowd.
Growing the domestic market
Palejs’ advice for the crowd was for Canada to follow a similar path to Latvia and find ways to increase domestic consumption of wood pellets.
“Export is good, but local consumption is far more important,” he said. “The difference between my country and your country is that obviously you have gas, we don’t have it locally, but biomass is far better than gas because if all energy is run on gas, then the money is still flowing to big gas companies.”
By diversifying the energy consumption and creating greater biomass consumption, more of the wealth would be spread to the rural communities where the biomass is harvested and converted into wood pellets and chips. It would also offer a more sustainable alternative, Palejs said.
“The wood in the forest comes from rural communities, and this is where that money for spent energy would go. This would increase the strength of your economy on a rural base,” he said. “Definitely my advice is grow your local consumption. Considering the size of Canada and amount of your population, even your current level of production of biomass is tiny comparing to your energy consumption, generally, in this country.”
This article was originally published in Canadian Biomass.