There's no doubt that a guy mucking around to make wood pellets would have a hard time matching the quality of a large commercial operation. My understanding of the process is that one puts wood chips through a hammer mill to get the finer sawdust and from there to pellets. A bit of experimentation should eventually get you to a usable product. Once you have a product, price it right and buyers will come. Energy and equipment costs may be an issue, but if you can get your material input for free this might be a viable retirement project.
I also agree that pellets can't compete with cord wood on an economic basis. The people I've talked to that use them do it for the convenience. There's less mess and the stoves can be unattended for longer.
Around here, one of the advantages of selling firewood from your property is that if you reach a certain income threshold, your property taxes go from residential to a lower agricultural rate.
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