Drying is widely used in a variety of thermal energy applications ranging from food drying to wood drying. Utilization of high amount of energy in the drying industry makes drying one of the most energy-intensive operations in pellet production. Thermodynamic analysis has appeared to be an essential tool for system design, analysis and optimization of thermal systems. The aim of current paper is to make an algorithm to evaluate wood chip drying process energy and exergy efficiency. Energy and exergy efficiency evaluation consist of the drying process energy and exergy balance analysis. On the basis of the results of the study it can be concluded that under the given assumptions drying process energy efficiency varies between 22.69 % and 10.25 % but the exergy efficiency varies between 16.47 % to 0.7 %. Decrease of drying air mass flow increases the energy and exergy efficiency. This is because less heat is required to heat drying smaller air mass flow. Decreasing drying air humidity ratio of air before dryer, increases energy and exergy efficiency. This is because the drying air with smaller humidity ratio content are able to attract more moisture from the drying product.