Pellet producing factories are popping up across Florida, Alabama, and Arkansas to meet growing global demand for the renewable fuel, the Wall Street Journal reports.

While pellets may cost more than coal, burning them is currently cheaper than powering utility plants with wind or solar power.

A major driver behind the increased appetite for wood pellets are European Union (EU) regulations requiring that member states use renewable fuels to generate 20 percent of their electricity by the year 2020.

"You are looking at a totally artificial market," Christian Rakos, head of Propellets, a trade group of pellet producers based in Austria, told the newspaper.

"No power plant would consider using pellets for one minute if they didn't have to do it."

Nevertheless, in the first three months of 2009, Europe imported €66.2 million ($92.6 million) worth of pellets, an increase of 62 percent over the same period in 2008, according to EU statistics.

And US producers are finding they can help meet the demand, much to the joy of forest owners who were harbouring concerns about slumping paper and housing industries.

"We are irrationally exuberant," Lee Laechelt, executive vice president of the Alabama Forest Owners Association, told the Wall Street Journal.

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