Hungary Pellet Report

The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

December 2011

Authors:

Andrea Jakab

Agnes Gyurik

Hungarian Pellet Association

1

Table of content

Fact sheet ................................................................................................................................................. 2

1. Introduction ..................................................................................................................................... 3

2. Pellet markets .................................................................................................................................. 5

3. Pellet quality and certification ......................................................................................................... 9

4. Sustainability ................................................................................................................................. 11

5. Conclusions ................................................................................................................................... 13

6. Annex: result of enquiries ............................................................................................................. 13

2

Fact sheet

Pellet production in kt

year Plants Capacity Production

2006 1 3,6 0,48

2007 2 4,6 2

2008 8 30,9 2,7

2009 10 76,9 29,2

2010 11 96,5 32

Source of

information

Hungarian Pellet

Association

Hungarian Pellet

Association

Hungarian Pellet

Association

Pellet consumption in kt

year Heat Power

Name of the power

plants (&

consumption)

2009 9 0

2010 15,3 0

Source of

information Hungarian Pellet Association Hungarian Pellet Association

Heating Devices

year Boilers <50 kW

(Residential)

Boilers >50 kW

(Commercial) Stoves

2009 200 50 1200

2010 300 75 2150

Source of

information

Hungarian Pellet

Association

Hungarian Pellet

Association

Hungarian Pellet

Association

3

1. Introduction

Comparing to the countries in Western Europe, Hungary is behind in using renewable energy sources

such as biomass.

The percentage of total renewable energy was only 7.3 % in 2009 (while the target of Hungary is 14.6

% till 2020). The primary reason is the state of supply by natural gas in Hungary which currently

covers more than 70% of the national energy demand. Moreover, the gas price was significantly

cheaper in Hungary than in other parts of Europe until 2006, after that year the price closed in on the

world market price.

The price of natural gas had been held down for a long time and the support of fossil energy is a major

barrier for the off take of any renewable energy source today (government expenses were 600 billion

HUF for supporting of price of gas and wear-heat from 2003 to 2009, at the same time the government

spent only 10 billion HUF in National Energy Efficient Program).

The high cost of investment represents another barrier in the implementation of renewable energy

systems. The state support does not offer reasonable incentives for new renewable projects. The large

part of available biomass, (garbage, waste from agriculture, timber industry) is not used in Hungary,

thus underutilizing Hungary’s bioenergy potential.

Out of the all forestry biomass used for energy (3.6 million m3 of firewood in every year) 88.5 % is

being burned by large power-plant. This way of utilization of biomass is not efficient, and the

emergent heat is not (or only in parts) harnessed.

Production of heat made of biomass is only attractive, if the price of gas is increased. Most biomass

heating is used in family houses. Mostly typical form of biomass used is wood logs, but pellet and

briquettes start to gain ground.

The Hungarian pellet sector only formed in 2008, about a decade later than in Western Europe. In that

year six plants started their initial test runs. In the beginning, these plants produced only for export, but

in the second half of 2009 the number of installed pellet stoves and boilers increased, thus kick-

starting the domestic market.

Lack of knowledge was part of the problem before as potential consumers were not well informed

about the new fuel. The awareness of pellets has been gradually increased in the past three years due to

the information campaign of the Hungarian Pellet Association.

This favorable trend stopped in 2010, mainly due to the economic crisis. The pellet consumption and

the number of new pellet installations setting have decreased. Therewith the consumptions of fossil

4

energy carriers were continually being supported by the government. Later the (justified) price

increase of natural gas was delayed. An investment grant for pellet installations proved insufficient.

The pellet plants were faced with the problem of lack of raw material supply as sawmills saw fewer

orders thus reducing availability of saw dust.

At the end of 2010 Hungary Renewable Energy Action Plan was published. The energetic use of

biomass will be the main contribution to the Hungarian renewables target for 2010. Bioenergy should

reach 60.97 PJ annually by 2020 – equal to half of the total generation of renewable energy.

Figure 1.Division of applied renewable energy Source: Renewable Energy Action Plan (REAP)

Figure 2: division of applied renewable energy in the sector of electricity, heating and cooling, and traffic in

2020 Source: REAP

division of applied renewable energy in the sector of electricity, heating and cooling, and traffic 2020

biomass solar

energy

water

energy

geothermal traffic heat

pump

wind

energy

biogas

PJ 60,97 3,73 0,86 16,43 22,4 5,99 5,56 4,63

% 74 3 1 14 18 5 5 4

According to the REAP forecast bio-waste and by-product should provide about 50 % of the biomass

mix.

division of applied renewable energy in the sector of electricity, heating and cooling, and traffic 2020

water energy

solar energy

biomass

geothermal

traffic

heat pump

wind energy

biogas

5

2. Pellet markets

As mentioned before the pellet sector was really started in 2008 and most of the plants also

started that year.

Figure 3 : Number of pellet plans in Hungary Source : HPA

By the end of 2011, 11 plants with small and medium capacity and two larger ones (exceeding 30,000

t/year capacity) are operating with total capacity of 126,500 t/year. (Fig. 4)

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011

6

Figure 4: Capacity of Hungarian pellet producing Source: HPA

The actual production is lower than this figure. About 32,000 t pellets were produced by Hungarian

plants in 2010, and approximately 40,000 t in 2011.

The main reasons for the rather low degree of capacity utilization are the following:

technological issues due to the young age of the business

economic crisis, the wood mills supplied less raw material for the pellet production – it

endangered continuous pellet production.

economic crisis, lack of capital postponed the urgently needed technological improvements;

credit practice of the banks were also unfavorable

two plants with high capacity at first could not produce continuously due to technological

issues

Hungarian pellet producing capacity

capacity: 0-5000 ton/a

capacity: 5000-10000ton/a

capacity: 10000-50000ton/a

7

Export, import

Hungarian wood pellet plants mostly produce for export (approx. 70-75%), main target countries are

Italy, Austria, Slovakia and Poland.

Figure 5: Rate of exported pellet Source: HPA

The Hungarian domestic demand is mostly covered by local production of the Hungarian plants with

30% of the total consumption coming from imports, which was approximately 5,000 t in 2010 (see

Fig.6.). Pellet mostly is imported from Ukraine and Romania to Hungary.

Figure 6: The rate of import in Hungarian consumption Source: HPA

0

20

40

60

Export (%)

export

import

8

Pellet Prices

The history of the Hungarian pellet market is rather short. Pellet prices have been recorded only for the

past three years. The Hungarian pellet prices in the Hungarian trade and market were affected by

export prices - mostly Italian and Austrian markets, and increasing production costs.

Figure 7 Average pellet price Source: HPA

Hungarian pellet consumption

The main motivation to switch to pellets from gas is the possibility of saving running costs. The

heating cost of a pellet system was about 30% lower in 2010 and 20-25% in 2011 because the

Hungarian government locked the natural gas price. At the same time, the switch to pellet heating is

directly related to the liquidity of real estate owners.

Pellet heating systems are mostly chosen by the wealthier middle class, who in general deem the use

of renewable energy important.

Beside private consumers, public institutions with (heating range of 50-200 kw) and entrepreneurs

with smaller floor spaces changed to pellet heating and their number will probably increase due to

tenders co-financed by EU. Most of the winners of these tenders have not yet carried out the

investment, so decision-making is still going on.

85% of installed appliances are pellet stoves, so pellets are typically sold in bags in Hungary.

0

10

20

30

40

50

2009 2010 2011

40 44

48

average price of wood pellets in Hungary (net/kg HUF)

9

Figure 8: Rate of installed pellet stoves and boilers Source: HPA

3. Pellet quality and certification

The survey represents the opinion and experience of pellet stakeholders, and reflects the rate of market

players - 2 fire place builders, 8 equipment installers, 4 pellet producers and 4 pellet traders were

interviewed.

It should be mentioned that most stakeholders are active in several fields - e.g. equipment installers

sell pellets as well.

All stakeholders have the same opinion concerning pellets quality which is seen as an extremely or

very relevant factor.

According to the Hungarian experiences, consumers frequently get poor pellet quality; the source of

80% of pellets is unknown. These poor quality pellets are packed in unmarked bags are and sold in

wholesale trade. These pellets frequently cause damages that can set back the improving of young,

Hungarian market.

Therefore fire place and stove builders, distributers and installers recommend the parameters of pellet

using in appliances. The most frequently problem regarding to quality is slagging.

Rate of installed pellet stoves and pellet boilers in Hungary

pellet stoves

pellet boiler<50

pellet boiler>50

10

Most of domestic producer have the quality of pellet tested. In Hungary there are several accredited

laboratories to test the quality of pellet, and products get a certification from congruence according to

the CEN/TS 14961 standard. DIN certification has become known in public awareness and in the

consumer’s. Foreign traders and some of informed consumers examine DIN certification of domestic

producers. The new EN standard has started to appear in public awareness. Productions get Hungarian

Pellet Association’s trade-mark by using the EN standard.

Good quality pellet (and also appliances) can use MPE trade-mark for one year, after that they need to

apply again.

All of respondents know about ENplus system, but have no detailed information yet, and they would

like to be better informed about it.

The introduction of a quality insurance system is considered a good thing, if it can guarantee

continuous good quality. It is feared that it could be an excessive burden in this market circumstances

and it may affect the market price. The quality insurance system could only reach its goal, if it is

adapted to the practice of Hungarian plants.

Domestic agro pellets also need to be included in a quality insurance method – at least in the medium

term.

11

4. Sustainability

The improvement of the Hungarian pellet sector is supported by the government, according to the

medium and long term development of the RES sector due to the EU directive. The tow decisive

documents are the Renewable Energy Action Plan and Hungary’s Energy Strategy to 2030

Priorities are the following:

Reduction of dependence on imports

Hungarian energy consumption declined between 1990 and 2004 by 10%, the rate of imported fossil

energy carrier reached 67.3% due to a 30% increase in gas consumption. Along with imported nuclear

fuel, the country’s dependence on imports exceeds 78.5%, putting Hungary in an exposed situation

from an energetic point of view.

Raising rate of renewable energy

According to 2009/28/EC guideline Hungary has to reach 14.6% renewables in final energy

consumption by 2020. Fossil energy sources will be displaced at highest rate in heating and cooling by

renewables.

Figure 9: Expected share of RES by sector, Source: REAP

0

5

10

15

20

20

05

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

heating andcooling

electricity

traffic

% of RES in final energy

12

Improving green economy

The creation of new jobs in the sector will persuade politicians to support pellets. According to the

estimation of the Hungarian Pellet Association, 100 new workplaces have been created in 2011. This

number may multiply due to improvement of this sector and may be expected multiplicative effects as

well.

Internal sustainability considerations

At this time, the quantity of wood by-products in Hungary (approximately 250.000 t/a) exceeds the

applied quantity of the pellet plants. At the same time it's needed to forecast a lack of raw material and

its transport in the medium term. One of the ambitions in Hungary is widening the basic material base

and forming a suitable agro pellet system. The available quantity of agricultural by-products is very

important in Hungary.

Figure 10: Biomass potential in Hungary in million t/a, Source: Hungarian Academy of Sciences

Quality assurance

In the young Hungarian market the biggest challenge for manufacturers is the production of good

quality pellets from raw material which is usually not homogenous. In 2011 several Hungarian plants

used their own innovative developments, hereby resulting in significant quality improvements in the

end-product. At the same time, it is needed to step forward in quality assurance.

0 2 4 6 8 10 12

straw

corn, con-cob

sunflower

loppings

wood wasteBiomass potential in Hungary million t/a

13

5. Conclusions and outlook

The development of the three years old Hungarian pellet sector is slowed down by circumstances

mentioned in point 1. The big improvements expected by market stakeholders have been delayed, but

the growth of pellet production and installed appliances continues. The experience with pellet

production and appliances is growing and so is the number of consumers.

The Hungarian market is still very young and therefore vulnerable, so not all quality problems could

be solved. Important issues for the future market developments are: innovation and quality assurance.

All market stakeholders have to professionalize their business to ensure satisfied consumers.

According to the members of the sector, especially the challenges crated by expanding the raw

material base have to be anticipated in order to be tackled.

6. Annex: result of enquiries

Questionnaires were sent to companies, with 18 answers (until December 2011). Among the

respondents are 2 fireplace builder, 8 installers, 4 pellet producers and 4 pellet traders.

Result of survey

Figure 11: Division of respondents

pellet stoves and boilers producers

pellet producers

pellet traders

pellet stove and boiler installers

14

Respondents’ answers regarding pellet quality

The pellet quality is extremely important according to the respondents. Installers have different view

regarding to pellet boiler failure caused due to poor pellet quality. (Fig. 12)

Figure 12: Pellet boiler failure caused due to poor pellet quality

If there is a pellet boiler failure – in how many % of cases is this due to poor pellet quality? /%/

99 50 50 85 98 95 50 98

Every pellet traders and boilers installers pointed out that the most frequent quality problem is

slagging. Other problems are too much fines and too much ash.

Figure 13: Problems in pellet quality

Three respondent pellet producers produce pellets with certified quality – by using Hungarian Pellet

Association’s trade-mark, and one does not. (CEN/TS 14961)

All of respondents have already heard about the EN standard and ENplus quality insurance system, but

they have not got enough information about it.

020406080

100

slaggingtoo much

finestoo mush

ashother

problem(not

pellet)