By KATE GALBRAITHMAY 1, 2012

AUSTIN, TEXAS — A century ago, rural homes in the United States and Europe commonly relied on wood for heating. Now wood is making a comeback, thanks largely to pellet technology.

The energy-dense pellets, which resemble dry dog kibble and are mostly made from mill residue like sawdust and wood shavings, can be used to generate heat or electricity — or both at the same time. Demand is strong in Europe, where high prices for heating oil and clean-energy requirements have fostered interest in alternatives, but analysts say that over the long term, markets in Asia and North America could grow rapidly, too.

Modern pellet furnaces for homes are a “very convenient way of heating,” said Christian Rakos, president of the European Pellet Council, an industry group. “The only thing you have to do is empty an ash box once a year.”

Europe accounted for close to 85 percent of the global pellet demand in 2010, according to a report issued in December by an international group called IEA Bioenergy Task 40.

Although many pellets used in Europe are manufactured on the Continent, the rising demand has caused an increase in new export-oriented pellet plants in Canada, Russia and especially the United States, whose mills already make more pellets than any other country. In the heavily wooded American South, nine huge industrial pellet plants are under development, according to Forisk Consulting, a timber research group in Georgia.

Pellet production worldwide more than doubled between 2006 and 2010, according to the IEA Bioenergy report. Because pellets are small and compact, they are easier to transport in bulk than other forms of biomass, like wood chips.

The price of pellets has been rising. Hakan Ekstrom, the president of Wood Resources International, a consulting firm in Seattle, said a delivery of industrial pellets from North America to Rotterdam, a major port, costs about €135, or $180, per ton, nearly 10 percent more than it cost a year ago.

“Some are buying pellets even if in some cases it would be cheaper to use coal or natural gas or oil, because they are going to switch over to renewables,” Mr. Ekstrom said.

European Union countries aim to get 20 percent of their energy from renewable sources by 2020, and analysts say a crucial source of demand is coal-fired power plants switching to “co-firing” with pellets — using them jointly with coal.

Britain is being particularly aggressive in its efforts to replace some coal power production with pellets; Mr. Rakos predicted that in a few years it would be the largest pellet market in Europe, overtaking Sweden.

Utilities are moving in this direction. E.ON, the German energy company, has sought to add pellet-burning capabilities to a coal-fired power plant in Shropshire, England. It received local approval last month to move ahead in its planning process.

Still, the markets remain tiny, relative to other energy sources like coal and natural gas. In the Netherlands, for example, less than 3 percent of electricity was generated using pellets in 2010, according to calculations by Martin Junginger, an assistant professor at the Copernicus Institute of Sustainable Development at Utrecht University. However, that figure “could easily double” by 2020, he said.

Mr. Rakos said that in Austria, pellets accounted for about 4 percent of the energy used for heating. Heating with pellets has also become “hugely popular” in Italy, he said. Companies in both countries have found an economic niche manufacturing pellet boilers and stoves.

But the growing use of pellets has alarmed environmentalists. They worry that pellet producers are no longer limiting themselves to making pellets from logging leftovers, like sawdust and wood shavings.

“Now what we see is entire forests being dedicated for pellet production,” said Nicolas Mainville, a forest campaigner for Greenpeace Canada and author of a critical report last year on the biomass industry. That makes the greenhouse gas effects problematic, he said.

Mr. Rakos said pellet producers were aware of the environmentalists’ concerns, which could pose a threat to their business, and were taking steps to ensure that the material was produced sustainably. In addition, he said, “if you do not burn coal but you burn biomass, that coal has not been used. So that carbon savings is a fact.”

Meanwhile, interest in pellets is growing around the world. Mr. Junginger of the Copernicus Institute predicts a strong increase in demand from Asia over the next several years. South Korea in particular has set ambitious renewable-energy goals, along with a target for greenhouse gas reductions, he said. Japan is showing interest, too, and China is a “big wildcard,” Mr. Junginger said — poised to become, potentially, either a large producer or a large consumer of pellets, or both.

In Canada, most of its pellets, especially from British Columbia, are exported to Europe, but its domestic market could grow.

Bryan Pelkey, an alternative energy specialist with the government of the Northwest Territories, said that some businesses in Yellowknife, the capital and the region’s biggest city, have begun using pellets manufactured in the neighboring province of Alberta.

“You can heat for half the cost of oil,” Mr. Pelkey said.