The growing scope for biomass in the public sector
Reduced energy costs and substantial payments from the Renewable Heat Incentive are two attractions of biomass boilers — especially in the public sector. Capital cost can be a deterrent, but there are ways of overcoming that issue. Paul Clark of Rural Energy explains all.
Designed to facilitate cleaner and more secure energy supplies, the Renewable Heat Incentive (RHI) has opened the door for public-sector organisations of all shapes and sizes to access renewable technologies. However, despite significant uptake in other industry sectors, many local authorities still face barriers when it comes to upgrading their heating systems.
The challenges that are most often cited by the public-sector officials I meet include the lack of resources — both human and financial — to dedicate to such a project, as well as the complexities of internal procurement processes. Public-sector organisations are rightly cautious when it comes to spending public funds, so it is important that purchasing decisions offer best value in the long term — particularly when investing in technology that may be unfamiliar to many stakeholders. When it comes to renewables, it is important that organisations think about the lifetime impacts and not just the short-term gains or costs; this is something I’m keen to communicate and help change over the coming years.
Despite these difficulties, the advantages of adopting a wood-based biomass heating system can be significant; unsurprisingly, an increasing number of schools, colleges, hospitals and other publicly owned buildings are making the switch. One of the key drivers is savings in energy costs, which can be substantial for this sort of building as the heating requirements are typically high. In a recent project Rural Energy completed at an NHS Dumfries & Galloway hospital site an annual saving of £30 225 was made on the heating costs alone.
So while capital-budget constraints may initially pose a challenge, the expenditure needs to be viewed in the context of long-term heating costs and the potential gains that can be made. The cost of heat generated by logs, wood chips or wood pellets is significantly lower than that from more traditional energy sources such as oil, electricity or LPG. It is expected that fossil-fuel prices will rise over the long term. With increasing worldwide demand, this pattern seems set to continue. Even accounting for a possible increase in the cost of wood fuel over time, the gulf between biomass and fossil fuel prices is only set to grow.
|Reduced fuel costs compared to fossil fuels and payments from the Renewable Heat Incentive combine to make biomass boilers a very attractive proposition.|
In addition, as most wood fuel is sourced locally or from Europe, energy supplies are shielded from the sort of price shocks caused by political instability in the Gulf States, Russian gas fields and elsewhere that can impact the gas and oil industries. This localised supply chain also minimises the financial and environmental costs of transporting fuel across the globe.
Sourcing fuel locally has other benefits too, particularly if local authorities can develop woodland within their own municipalities. Making use of sustainably managed woodlands can help stimulate economic growth, provide vitally needed rural employment and provide an additional revenue stream for councils — as well as ensuring a reliable, consistent and cost effective fuel supply. Recently, Rural Energy has been awarded contracts to vastly simplify and speed up the procurement process for West Midlands and Buckinghamshire councils’ central buying consortium via framework agreements.
What’s more, properly managed woodlands improve biodiversity and wildlife habitats, contributing towards healthier and more pleasant rural areas. This is in addition to the fact that biomass energy is considerably less harmful to the environment, producing a fraction of the carbon emissions released by burning fossil fuels — a key consideration for many public-sector organisations that face strict carbon-reduction targets.
Undeniably, however, the most significant development that has driven public-sector adoption of biomass heating has been the introduction of the RHI. Launched to the non-domestic sector in 2011, this Government-backed scheme provides a subsidy, payable for 20 years, to eligible renewable heat generators. This guarantees a fixed and index-linked income for every kWh of heat generated. At the previously mentioned NHS Dumfries and Galloway site the annual earnings from RHI payments were over £60 000 which, in addition to the reduced heating costs, resulted in total savings of over £90 000 in one year alone.
|The cost of fuel for a biomass installation could be doubled if the fuel delivery and storage solution is not well thought through.|
The combination of lower heating costs and the additional income stream offered by the RHI makes biomass heating a compelling proposition. Payback on initial investments can be achieved in as little as four years, and the return on investment can be as high as 25% or more.
With such clear benefits, it begs the question why more public-sector organisations are not signing up to the RHI. Part of the problem is that tender processes are often long and complex, which is not helped by the myriad of possible solutions to choose from. Also, for public-sector organisations, handing over large sums of capital expenditure is problematic — so it is beneficial to look for financing solutions that enable the investment to be paid for via the energy savings.
The Government-owned Green Investment Bank, for example, directs both public- and private-sector capital into sustainable development projects. The publicly funded company Salix Finance Ltd has been established with the sole purpose of offering interest-free capital to the public sector for energy-efficiency projects. There are many options for funding biomass projects, and Rural Energy is experienced in sourcing low-cost finance for clients.
Whatever the funding source, however, there are a few crucial elements that need to be considered during the specification process.
System design and installation is key to ensuring long-term cost effectiveness and efficiency of the installation and its integration with existing heating systems.
Another critical consideration is the fuel. From whom will it be sourced? How it will it physically be delivered into the storage room? The cost of the fuel could be doubled if the fuel delivery and storage solution is not well thought through.
One of the keys to long-term success is choosing a reliable biomass installer. Some installers can provide a full turnkey service — including system design, installation and maintenance.
Paul Clark is managing director of Rural Energy