The relatively low energy density of biomass as combustion fuel means that it is generally not considered economical to move it over long distances. In spite of this, there is a growing trade in biomass combustion fuel in the form of pellets, particularly in Europe. The driving force for the trade is the push toward renew- able generation in Europe and the various subsidies available to support it. This includes support for biomass power generation in the form of feed-in-tariffs of tax relief that can make it cost effective to purchase wood pellet fuel for a bio- mass power plant.
The main sources for wood pellets in Europe are the United States and Canada with a growing supply from Russia. There is a nascent export industry in Australia and New Zealand, and South Africa also supplies pellet fuel to Europe. Meanwhile, Canada sends pellets to Japan, a country with few natural energy resources that must import all of its fossil fuel as well.
The size of the pellet industry remains small but it has the potential to grow if current incentives continue. There is also potential for a market similar to that in Europe opening in the United States. There are two primary sectors of the pellet market: the residential and the industrial. In the United States most pellets are consumed residentially, but in Europe the big market driver is industrial use by power utilities.