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Fuel Price Comparisons

No matter how strongly you feel regarding the environmental benefits of switching into wood pellets, it is important that the fuel also represents good value for money both in the short and long term.  This page explains why wood pellet heating is significantly cheaper than alternatives such as oil, LPG or electricity.

How much does it cost to heat your Building?

A typical large office building might require 600,000 kWh of energy for heating and hot water per year. If we compare the cost of using wood pellets against other fuels, we can see that wood pellets are significantly cheaper than all other fuels with the exception of natural gas (based on equivalent boiler efficiencies).

Wood Pellet Fuel Cost Comparison
Product Amount Required  Unit Cost  Annual Cost Incl. VAT  Cost per kWh 
Wood Pellets  137 Tonnes £180 £24,660 4.11p
Heating Oil 60,000 Litres 65p £39,000 6.50p
LPG 84600 Litres 49p £41,454 6.91p
Natural Gas 600,000kWh 3.711 £22,226 3.91p
Electricity 600,000kWh 10.112 £60,672 10.62p

Why not check your own energy usage via your existing gas, electricity or oil bills and work out your annual energy costs, using the cost per kWh number from the table above. It doesn't matter whether you are looking at a single bedroom flat, a large factory, office block or public building - the cost per kWh will be the same.

 

Renewable Heat Incentive

In addition to lower fuel costs, switching into wood pellets means that you are entitled to receive payments under the Renewable Heat Incentive, which will provide an annual grant for Non-Domestic users of renewable fuels such as wood pellets.

Householders will receive a grant of £2000 towards the upfront cost of a new wood pellet boiler, between now and March 2014, and from Summer 2014 (estimated) they will be able to receive annual payments under the RHI.

For all other installations, including commercial and public sector users, the RHI will pay a tariff of between 1.0 and 8.3 pence per kWh of heat produced depending on the size of the installation. With payments continuing for 20 years the return on the initial up-front costs is generous.

More details of the RHI are available on this site or at www.decc.gov.uk.

 

Do I require a new boiler?

Yes, wood pellets burn in specially designed wood pellet boilers which burn a few pellets at a time in a small combustion chamber or crucible. This controlled method of burning means that wood pellet boilers are highly efficient and very versatile, being able to operate from a thermostatic controller in the same way as conventional boiler systems.

Wood pellet boilers are comparatively more expensive than conventional boilers and this difference is intended to be refunded (and more) over the life of the boiler through the RHI.

The example below based on purchasing a 200,000kWh boiler, shows how lower fuel costs and the RHI makes switching into wood pellets when your conventional boiler needs replacing a great financial decision for everyone, particularly for those businesses or households currently using heating oil.

  Oil Fired Boiler Gas Fired Boiler Wood Pellet Boiler
Cost of Boiler £15,000 £12,000 £100,000
Cost of Fuel (Over 20 year, based on today’s price) £780,000 £445,320 £493,200
RHI Payment £0.00 £0.00 -£520,000
Total Cost (Over 20 years) £795,000 £457,320 £73,200

What about price stability?

Energy costs for most users have increased recently with heating oil and gas prices increasing significantly (over 50% in some cases) in the last few months. It has been particularly noticeable for those using heating oil where costs have increased from 44.5 pence per litre (ppl) to over 75ppl.

It is difficult to predict future cost fluctuations but we do expect to see a similar picture in the years ahead with the cost of heating oil and gas showing much greater volatility than wood pellets.

As it stands today wood pellets represent excellent value, even before the launch of the Renewable Heat Incentive which will support customers switching to renewable fuels.

Comparing the cost of wood pellets against other fuels we see that the current wood pellet prices of c £255 per tonne for bagged products is equivalent to a heating oil price of 54p per litre. Because heating oil is currently at 77p per litre, the cost of heating oil could fall circa 30% before becoming equivalent to the cost of pellets.