Wood pellets have recently gained in popularity and are beginning to approach the mainstream.
The pellets themselves are made by milling sawdust or other ligneous ground material through a metal die under high pressure. The this generates heat which, combined with the pressure plasticises the lignin and glues the pellet together.
Most high quality pellets will have no binding material other than the lignin in the sawdust itself. They are manufactured to strict standards concerning moisture content (20%), size (6 - 10mm diameter) and strength so that they do not crumble. This makes them a very uniform and predictable fuel.
More recently however demand for fuel pellets has outstripped supply of waste (sawdust from sawmills etc... ) and the cost of fuel pellets has spiked significantly as a result. In recent years large supplies have been shipped to the UK from as far afield as China causing significant use of fossil fuels for transport.
In the near future brand new large scale wood pellet manufacturers will be coming on line in the UK and pellet prices should begin to drop down below that of oil again. To supply these plants it is likely that timber from managed forests, and other energy crops will be grown locally.
Overall pellet fuels are an appealing alternative to conventional fossil fuels, particularly in off-grid locations where delivered fuel oil is expensive. Unfortunately recent years have shown that the market for wood pellets is still developing and there is no guarantee that pellets will work out to be a economically viable heating solution in the short term.
If you are considering investing in a pellet boiler you would probably be wise to look at boilers that allow multiple fuels such as dual log/pellet furnaces to give alternatives in case of future pellet fuel price spikes.