Economics: Biomass

Capital costs

The cost to install the biomass CHP system is estimated at £8m.  This is based on the cost of a larger system installed at the Royal brewery in Manchester and represents a high end estimate for the installation costs.

The cost to install that district heating system has been estimated at £2200 per flat based on estimates from the Irish CHP Association for the cost of retrofitting buildings with a district heating system.  For the proposed district heating system for 384 council flats this gives a total installation cost of £840,000.

It is suggested that these costs are split between the brewery and the housing association, however the exact details of this have not been explored in detail in this investigation.

 

Cost (£m)

Install CHP system

8.00

Install district heating for 384 flats

0.84

Total

8.84

Table 1: Capital costs

Annual costs

The loan repayment calculations results in an annual repayment of £0.83m per year.  Annual running and maintenance costs are estimated at £350,000 per annum.  Wood chips with 30% moisture content are assumed to cost £80 per tonne.

 

Annual cost (£m)

Loan repayment

0.83

Annual running and maintenance costs

0.35

Fuel cost

0.27

Lost revenue from selling spent grain

1.01

Total

2.47

Table 2: Annual costs

Savings from the purchase of electricity and gas

The financial viability of the scheme is assessed by comparing the capital and running costs of the system against the value of the energy it replaces at current gas and electricity prices.  The accuracy of these calculations are dependent on the price of electricity and gas, however recent trends have been for large increases in these prices, which would increase the financial viability of the scheme.

Saving on industrial natural gas

£0.82m

Saving on industrial electricity

£1.61m

Saving on domestic electricity

£0.51m

Value of exported electricity

£0.01m

Total annual saving on energy

£2.96m

Table 3: Saving on energy purchase

Renewable Obligation Certificates

The biomass plant qualifies for Renewable Obligation Certificates (ROC) and earns 1 ROC per MWh of electricity generated.  The system therefore qualifies for 17520 ROCs, at their current average market price in March 2010 of £49.24 this would provide an additional income of £0.86m.  The calculations have been done both including and excluding the income from ROCs in order to demonstrate that the system would provide a saving compared to current energy use even without the additional support of ROCs.

Annual savings

 

Value (£m)

Annual cost

2.47

Saving on electricity and gas currently purchased

2.96

Income from ROCs

0.86

Annual saving without ROCs

0.49

Annual saving with ROCs

1.35

Table 4: Annual savings

References