Biomass boilers – an efficient, green alternative heating system

 

In recent months we have seen a number of examples of clients considering biomass heating systems as a way of cutting the ongoing costs of heating their hotel. Due to the initial cost of the boiler and related installation works these schemes are generally more attractive to businesses with larger properties or those with high energy needs, such as a hotel with a pool, but any business with significant energy costs could benefit.

 

Biomass boilers burn wood pellets, chips or logs to power a building’s central heating and hot water system. Recent advances in technology have led to the development of new types of boiler that use biomass both cleanly and efficiently.

 

To encourage the uptake of renewable heating systems such as Biomass the Government have introduced the Renewable Heat Incentive (RHI), a scheme worth £860 million which was rolled out in July 2011 to provide businesses and the public sector with a financial reward for the generation of heat, allowing renewable energy to be financially attractive as well as green.

 

Due to the efficiency of the new biomass boilers the price of generating your own electricity will be lower than traditional power sources and, as you are able to sell any excess energy to the national grid through the RHI, you can also generate an income to cover the cost of the initial capital outlay.

 

We recently assisted a client who had a 199kW biomass boiler installed.  This size of boiler can serve the heating and hot water needs of a hotel with up to 100 rooms.  It cost £145,000 to install and commission. It will generate RHI income of £25,650 per annum (£623,228 over the 20 year term assuming inflation at 2%) and save £16,975 each year on fuel costs (around 40 per cent of the current oil bill). Assuming corporation tax at 20% the payback period for the capital costs of this biomass project will be 4.25 years.

 

There are a number of tailored financing packages on the market which aim to offer a flexible approach to funding the costs of a biomass boiler installation. Typically funders will lend 90% of the cost of the system and require repayments to be made over a term of up to five years.

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