A wood pellet price is quoted in more than one way, and the two figures do not move together in any simple ratio. The price per tonne is what a supplier advertises, but the price per kilowatt-hour (kWh, the unit used to compare fuel costs against oil or electricity) is what actually determines your annual spend, because it accounts for how much heat a tonne of pellets delivers once burned at a given appliance efficiency. Converting from one to the other needs the pellet's stated calorific value, usually printed on the bag or the supplier's data sheet.

Bagged against bulk

Bagged pellets, typically sold in 10kg or 15kg sacks, carry a higher price per tonne than bulk deliveries blown or tipped directly into a hopper or store, because bagging, palletising and smaller-order handling add cost. A pellet boiler drawing several tonnes a year is normally set up for bulk delivery, while a stove used for occasional or secondary heating often runs on bagged fuel bought as needed. Comparing a bagged price against a bulk price without adjusting for this is comparing two different products.

Comparing against six months ago

A fair comparison needs the same grade, the same delivery format and the same region, since pellet pricing varies with all three. ENplus is the quality certification most UK suppliers quote (ENplus-A1 being the residential-grade standard), and a price change quoted for one certification tier does not necessarily apply to another. Where a supplier's current list shows both a per-tonne and a per-kWh figure, dated to the quarter it was published, that dating is what makes a six-month comparison meaningful.

For working out what a given price per kWh means for your own house, the arithmetic depends on your annual heat demand and appliance efficiency. That calculation, and what it does and does not account for, is set out on Running Costs and Maintenance, Honestly.

The price of a tonne of pellets is set by what it costs to produce them and by how many buyers are chasing the same tonne.

Supply: what pellets are made from and what making them costs

Wood pellets are usually pressed from sawdust and wood shavings, the by-product of sawmilling. That raw material supply tracks the construction and timber trade, so when sawmill output falls, the volume of sawdust available to pellet mills falls with it and the remaining supply becomes more expensive. Pelletising also uses a fair amount of electricity to dry and compress the material, so a rise in industrial electricity prices reaches the finished pellet before it ever gets near a UK yard.

A significant share of the pellets burned in UK stoves and boilers is imported, much of it from mills in continental Europe and the Baltic states, so the delivered price also carries a shipping and currency cost. A weaker pound against the euro raises the landed cost of an imported tonne even if the mill-gate price abroad has not moved at all.

Demand: who else is buying, and when

Pellet demand is more seasonal than oil or electricity demand for heating. Bulk orders placed for autumn restocking put pressure on both price and lorry availability in the months just before the heating season starts, while summer tends to be the quieter period for ordering. Beyond households, large-scale biomass power stations and industrial heat users compete for the same pellet supply, and a change in their offtake can move the price available to domestic buyers with little warning.

How that price sits against oil and electricity

None of this matters to a household unless it is set against the cost of the alternative fuel already available to them, since a pellet stove or boiler is usually competing with an oil boiler already on site, or with a heat pump instead. The only fair comparison is cost per kilowatt-hour delivered, because pellets, heating oil and electricity are sold in different units and burned at different appliance efficiencies. Read Running Costs and Maintenance, Honestly for the arithmetic behind that comparison, and see Biomass Against a Heat Pump: An Honest Comparison for how the same comparison plays out against an electric alternative.

Because pellets, oil and electricity are bought in different markets, they do not move in step with one another. A sharp rise in the wholesale gas price tends to lift electricity prices and oil demand together, but reaches pellet prices only indirectly, through the industrial electricity cost of production. A household weighing up fuels now is comparing figures shaped by three separate sets of pressures.