Forecast biomass fuel prices

Forecast biomass fuel prices

There has been a growing interest in biomass boilers since the introduction of the Renewable Heat Incentive (RHI) subsidy that pays homeowners and commercial organisations for producing their own renewable heat. However, the industry has not taken off in quite the same way as the solar industry has for renewable electricity, after the Feed in Tariff was introduced. This probably comes down to uncertainty over fuel supply because, unlike solar PV, which benefits from a free and infinite supply of power, biomass is still often reliant on a purchased fuel supply (though certain organisations may be able to burn waste materials from their own site). When you consider that the returns from a biomass system can often double that of solar it is well worth considering though.

The first hesitation of those looking at a renewable heating system is fuel delivery and storage. Many of our clients are surprised to learn that taking a biomass fuel delivery is not much different to receiving oil or LPG because the biomass chips or pellets can be simply blown into the store from a distance of up to 20 metres away. If space is a constraint then clients often decide to use pellets, which offer a much greater calorific value than wood chips and take up far less volume. Once in the store the biomass boiler is self-fed through an automated system. This can be controlled remotely, much like a gas boiler.

The second concern for our clients is rising fuel prices. At present biomass fuel tends to cost around 50% less than heating oil or LPG but how do we know this won't suddenly change? Purchasing a biomass boiler is a long-term 20 year investment because of the length of the RHI contract, although most systems pay back in 5 years or less. You want to be sure that your investment produces the savings and revenue you expect. Biomass fuel prices don't fluctuate in the same way that oil and gas do; the price of wood pellets hasn't varied by much over the last 15 years.

Austria is one of the world's largest exporters of wood pellets and the below graph, produced by ProPellets in Austria, demonstrate the relative stability of pellet prices in comparison to heating oil and gas. Based on this information we can make an educated guess that whilst the prices of oil and gas will likely fluctuate and increase on the whole, the prices of biomass fuels should remain relatively stable, seeing a comparatively small increase and continuing to remain a much lower cost fuel.

Wood pellet prices