Buy a small-scale pellet mill and dryer to create your pellets. Since the pellets will be constructed for home use, most of the heavy machinery such as baggers, pelletizers and coolers can be skipped. If the wood particles being used are relatively large, a hammer mill may be needed to crush the material.
Collect raw materials to create pellets. Both hardwood and softwood will yield fantastic results. Inspect your materials and ensure they can be properly reduced to their granular form before beginning the process of pellet creation.
Gather the wood pieces. If any wood particle is more than 1/4 inches in length, you must reduce it to 1/3 inches or smaller, using the hammer mill. If your material is smaller than 1/4 inches to begin with, for instance if you are using sawdust, you will not need to use the hammer mill.
Dry the material with the dryer. Typically, the material will need to be dried to about 5 to 20 percent moisture content, with 10 to 15 percent being the sweet spot.
Place the material into the mill through the die, which is a hole with a tapered top like a funnel. Sending the material through the die will compress the material, as well as melt the lignin in it. This will act as a type of glue, which binds the pellets together after cooling.
Cool the pellets once they are formed. The best way to achieve this is to spread them out and let them cool at room temperature. Once the pellets are cooled, they will be ready to use.