Summary
• The RHI incentivises use of wood-fuelled heating and combined heat and power plant.
• Biomass boilers involve a higher capital cost.
• There are biomass energy generation level “sweet spots” in terms of RHI returns.
• A company going from £18,000 of gas a year to wood fuel could get £20,000 annually under the RHI.

The Renewable Heat Incentive (RHI) is the first financial support scheme of its kind worldwide. Launched last November, it provides operators of non-domestic renewable heating systems with quarterly payments for 20 years, based on how much renewable heat they produce.

Gas, oil or electricity have always been more costly than biomass and, thanks to the introduction of the RHI, the financial case for using it is even stronger. This is particularly true for the timber industry. Companies producing wood dust or wood chip which use the material on site in a biomass boiler or a CHP plant can potentially take advantage of the scheme.

Capital costs

Anyone looking into heating their commercial properties with wood dust or wood chip, however, should be aware that the capital costs of installing biomass equipment are much higher than for fossil fuel boilers. There are also technical, logistical and legislative factors to consider. For example:

• The moisture content of your by-product. The wetter it is, the lower the net calorific value.
• The size of the particles. Wood dust is more difficult to cope with than chip and requires more specialist boiler equipment.
• Ash content. Bark has higher ash content and lower calorific value.
• How much material do you produce and when do you need the heat produced? Storage space can be a serious issue and if you have seasonal variation in heat demand, or produce heat for batch drying in a kiln, how much storage will be needed?

As wood is clearly not a smokeless fuel any biomass boiler installed in a local authority smoke control area would also need to be registered as an exempt appliance under the Clean Air Act.

The Act also requires those installing solid fuel appliances with a fuel feed rate of 45.4kg/hr or more to obtain chimney height approval from the local environmental health officer. This fuel feed rate varies with moisture content and fuel type but correlates to around a 100kW appliance using 50% moisture wood. Other considerations include planning, building control, Air Quality Management Areas, the Environmental Permitting Regulations and, if the fuel is not pure, untreated wood, the Waste Incineration Directive.

Lower fuel costs

On the initial outlay, a 2007 study showed installation costs of £300-900/kW for systems up to 1MW, with larger systems being less per kW than smaller ones. Even at the lower end of this spectrum, the cost is considerably higher than for fossil fuel systems as more robust engineering is needed, along with fuel stores, buffer tanks, ash bins, taller flues and more careful project design. In addition, operation and maintenance is more demanding.

On the flip side, biomass systems have historically benefited from lower fuel costs (particularly, of course, for timber processors). For this reason, organisations with high heat loads often experience a quick payback. With the introduction of the RHI, the return on investment can be more attractive.

With current tariff boundaries, the industry talks of 199kW and 999kW being the “sweet spots” for the best returns. In terms of fuel requirement, assuming 1,500 Full Load (Heating) Hours Equivalent (FLHE), the 199kW system would use around 130 tonnes of fresh timber or 70 tonnes of kiln-dried timber. If your business produces more or less wood than needed, you should be able to sell or buy the excess. A 199kW system could save around £10,000 per year on fossil fuel consumption and generate around £21,000 per year in RHI payments.

For further information: tom.vosper@climate-consulting.co.uk, tel: 020 8633 9801.