Wood pellet supply, demand and price prospects - some variables
Our page on the future prospects for supply, demand and prices for high-grade wood pellets necessarily speaks in averages, which disguise a great deal of variation around that average, from £170/tonne to £240/tonne (delivered, ex VAT) or more. The following are some of the factors that could make your actual cost differ from the theoretical average figures on that page.
Calorific Value (CV)
Prices for high-grade wood pellets should be converted to an energy cost on the basis of a CV of 4.8 MWh/tonne. This is a reasonably realistic but conservative figure - the typical energy content will normally be between 4.8 and 4.9 MWh/tonne.
You may encounter suppliers claiming that their pellets have an exceptionally high CV. Almost certainly, they will be playing games with the way that CV is measured. And if they aren't, it's bad news, not good - probably a sign of contamination.
CV can be expressed gross or net (i.e. whether the heat is recovered from the water vapour produced during combustion), and as-received or dry (i.e. in proportion to the weight of the pellets including the few percent moisture they contain, or as though the pellets contained 0% moisture when they were burnt). Claims of high CVs are most commonly the result of using a gross and/or dry figure, rather than the relevant figure, which is the Net CV, as-received.
Or they may be comparing the results from the analysis of an individual sample with a competitor's specification. This ignores the facts that (a) every honest supplier's specification is below their average CV, because a specification is a minimum guaranteed value, not the average actual value, and (b) an individual sample may be unrepresentative (deliberately or randomly).
The range of variation in the CV of virgin-fibre, softwood pellets without additives or contamination is actually quite small. Consistency is one of the key benefits of wood pellets. As most pellet boilers are not currently condensing, and the wood pellets are burnt as received, the figure you care about is the Net CV on an as-received basis. The A1 specs guarantee that this will not be less than 4.6 MWh/tonne and in practice the value will normally be around 4.8 MWh/tonne.
If you come across wood pellets that really do have a significantly higher CV, it's usually a sign that they are contaminated with things like plastic or oil. This is not a good sign. You are likely to have a whole host of problems, both from feeding energy to the boiler at too high a rate, and from the effect of the contaminants on your ash (e.g. clinkering and slagging) and emissions. Your boiler is designed for a particular specification of wood pellet, and you should aim to match that specification.
Delivery size and distance
The cost of supplying wood pellets varies widely depending how big a delivery is required and how far the pellets have to travel. Big deliveries are cheaper per tonne than small deliveries. That is common amongst most suppliers, although different companies do it in different ways.
In the case of Forever Fuels, we also vary our price depending on location, so the closer you are to one of our depots, and particularly to one of the factories, the lower the price is. This simply reflects reality. Big customers near Andover, Grangemouth, Ruthin or Girvan could pay less than £170/tonne (3.5 p/kWh). Small customers in remote areas may pay £240/tonne (5p/kWh) or more.
Spot or contract prices
The customer can also enter into different types of arrangement with the fuel supplier, which will result in different prices. They could buy spot (i.e. one-off) as required, or they could contract for one or more years. Generally, multi-year contracts are more expensive than one-year or spot prices.
Whether a one-year contract or a spot price is cheaper depends on the circumstance. We install DELOX level sensors in the fuel stores for our contract customers, so we can monitor their fuel levels remotely and schedule deliveries as required. Besides the convenience for the customer, this lets us plan ahead and try to combine deliveries for customers who take smaller deliveries, saving cost so that we can offer a better price.
Where a customer takes several deliveries a year, a contract can work out cheaper than spot pricing. It depends on circumstance, but a contract will typically be cheaper than spot pricing if a customer takes 7 or more deliveries a year. The convenience and certainty of a contract normally costs only a little more than spot pricing on 5 or 6 deliveries per year. Where a customer takes large or few deliveries and is happy to manage their fuel levels themselves, spot pricing may be better value.
Billing per unit ordered or delivered
Whatever the arrangement, Forever Fuels customers only pay for the wood pellets they take. Our tankers are equipped with Legal for Trade weigh loaders, which means we can bill for the exact quantity delivered. Trading Standards certify that they are accurate to 20 kg, correctly calibrated, and therefore suitable for billing.
If a customer takes less than they ordered, it costs them more per tonne because the delivery charge is not spread as thinly, but at least they only pay for the pellets they took.
Generally speaking, the weigh loaders on the animal-feed tipper-blowers that are sometimes used to deliver pellets are not Legal for Trade, and to avoid mis-charging, the supplier should bill for the amount ordered regardless of the amount delivered, or else weigh back over a weighbridge after delivery. This is one of many reasons why, on the continent, one finds almost all tankers and no tippers used for delivering wood pellets.
This can make a big difference to the real cost. There is (a) the risk of inaccuracy and (b) the cost of over-ordering.
With regard to (a), we have seen tippers adjusting the weight they were reading by a couple of tonnes, even while no pellets were being loaded or unloaded. But even as small a discrepancy as 0.1 tonne can raise the true cost from a nominal £170/tonne to an actual cost of nearly £176/tonne.
With regard to (b), you might easily mistake the amount you need by 15%. If you have ordered 3 tonnes and can only take 2.5, or 10 tonnes and can only take 8.5, and you have to pay for what you ordered, a nominal pellet cost of £170/tonne becomes an actual cost of £200/tonne.
A supplier who tries to insulate you from this reality by billing you according to the readings from their non-Legal for Trade weigh loaders is breaching Trading Standards and weights & measures regulations, and may not be available for future deliveries if caught. This is for your protection, to make sure you only pay for what you ought to pay for, and you should think carefully about helping a supplier to work round regulations designed for your protection.
Legal for Trade weigh loaders are clearly marked, and easy to spot once you know what you are looking for. See our page on Legal for Trade for a guide to what to look for.