Economics of biomass
Before going ahead with a project, it is essential to carry out a full economic appraisal as part of the planning process.
Fuel costs are fundamental because, when considering total lifetime costs, ongoing running costs far outweigh capital investment. Also, as biomass systems can cost three to five times more than the equivalent fossil-fuelled system, a good differential in fuel costs (biomass vs. fossil fuel) is necessary in order to achieve acceptable paybacks.
The Renewable Heat Incentive (RHI) will help to enhance the viability of biomass heating projects — in this sector in particular. Carefully study the RHI rates to ensure that your system is eligible and that you are getting the best deal from the support that is available.
Also, make sure that your project meets all of the RHI eligibility requirements. Two calculators are available to help with the economic appraisal:
- The Carbon Trust’s Biomass Assessment Tool (available under the Biomass heating tools heading on the Biomass Heating Tools and Guidance page of the Carbon Trust's website)
- A simple Biomass Economics Calculator from the HDC through the GrowSave Project. This requires two simple inputs — your total energy consumption and fuel cost.
Ensure you include all of the possible elements in order to achieve a realistic projection.
Capital expenditure items – cost influencers
- Type and size of biomass boiler
- Heat distribution systems (such as pipe work, heat store size)
- Fuel store and feed system
- Level of automation
- Buildings to house the system
- Works to improve or enable access for fuel delivery vehicles
- Emissions abatement requirements
- Biomass fuel costs
- Electricity – running costs of associated pumps, fans, and motors will be higher than for traditional boilers
- Labour for daily operation such as fuel loading, daily checks, ash emptying
- Maintenance cover, for example, feed system problems, clinker build up, burn outs
- Annual service, depending on boiler size. Note that because biomass systems are still fairly new in the market, there can be significant variations between different manufacturers for annual service costs for same capacity boilers
- Displaced fossil fuel costs
- RHI revenues
- Avoidance of environmental legislation such as the Climate Change Levy (not applied to biomass fuel) and the Carbon Reduction Commitment
- Payable on eligible installations completed after July 2009
- Payable on metered output of heat generated from a range of technologies including biomass
- Tariffs scaled for technology size
- Payments will be made quarterly for a period of 20 years, index-linked to the Retail Price Index (RPI)
Helpline: 0845 200 2122 or visit www.ofgem.gov.uk/rhi