Biomass Energy – What Is The Payback Period?
Each renewable heating technology included in the RHI scheme has had a tariff applied to it. For Biomass boilers, an amount of peak hours has been allocated per annum. These 1,314 hrs. apply to every registered MCS biomass boiler installation. If these hours are used up, the payments do not stop, they simply continue at a lower rate. The initial rate goes a long way to paying for the start up costs of purchasing the equipment and fuel, while the lower rate helps towards the fuel only.
The terminology that is used to describe this system of payment is “Tiered”. There are two tiers in total. Tier 1 pays 8.3p per kWh and Tier 2 pays 2.1p per kWh. Tier 1 (1,324) is multiplied by the boilers capacity. If a boiler has an output of 15kW, we can calculate annual rates like this, 1,314 x 15 = 19,710kW per annum at tier 1 and after the allotted hours tier 2 applies.
The larger the system the more you are likely to receive. A 30kW will receive twice as much as a 15kW system, mainly because it is more likely to burn twice as many pellets or logs.
At present we can only calculate the payback on Non-Domestic installations. So to give a customer an idea of what they could receive and save we need to understand their current setup. If we use an example of a farmer that has commercial premises, that required 80,000 kWhs in the previous 12 months to heat. We can start to work out the benefits and savings of introducing Biomass.
Firstly we have to do a heat loss calculation on the premises to decide the Biomass boiler capacity. For purposes of this example, we have calculated a 40kW Boiler.
Now with these two figures we can calculate the number of peak hours this boiler would have achieved based on the farmers previous energy use:-
80,000kWh ÷ 40kW = 2,000 peak hours
We can now estimate the payments based on the information provided. Of the 2,000 peak hours only 1,314 hours will be paid at Tier 1, whilst the remainder will be paid at Tier 2.
Tier 1: 1,314 peak hrs. x 40kW x 8.3p/kWh = £4,362.48
Tier 2: 2,000 hrs. -1,314 hrs. = (686 hrs.) x 40kW x 2.1p/kWh = £575.24
Total: £4,152.24 + £548.80 = £4,938.72 per annum
This farmer could expect to receive over a 20 year period based on the annual energy requirements £98,774.40
As with the current FiT scheme for PV Panel Installations these rates are indexed linked for 20 years so any system installed today will guarantee rates of Tier 1 and Tier 2.