Wood-Chip Heating Systems - Biomass Energy Resource Center

Cost-Effectiveness of Wood-Chip Systems
A school under consideration is characterized by
two numbers: (1) the amount of oil, gas or electricity
used for space heat (its heating consumption) and
(2) the unit price of the oil, gas, or electricity. (With
complex electric rates, it is important to select
an average rate, including demand charges, that
represents the cost of heating throughout the winter
season.) These two characterizing numbers can
be plotted to locate the school on the appropriate
graph.
Each graph has three zones. If the school falls
in the top zone (A) when plotted on the graph,
it is likely that a wood-chip system would be
cost-effective. If it falls in the bottom zone (C), a
wood-chip system is unlikely to be cost-effective.
The broad middle zone (B) defi nes the range of
uncertainty for which a detailed analysis is required
to get a sense of a wood-chip system’s cost-
produced, renewable fuel, wood chips can offer both
environmental and local economic benefi ts that other
fuels cannot match. Although generally left out of
fi nancial analyses and not discussed in great detail in
this chapter, consideration of these issues can be a very
important part in the fuel selection decision. These
non-economic issues are discussed in Chapter One and
Figure 7.1
Existing Electricity Cost
effectiveness. In this zone, systems that cost more
per MMBtu size will be less likely to be cost-effective,
while those that cost less to install will be more likely
to make economic sense.
These three graphs assume that there is no costsharing
of the project capital cost — in other words,
that the school district has to bear the full cost of the
project. If cost-share is available as a grant from state
aid or some other source, the economics (from the
school’s perspective) of installing a wood system can
be much better than indicated by the graphs.
The lines separating the three zones on each
graph are defi ned by the range of system costs for a
given size plant. The system costs assumptions can
be found in Appendix D. For an explanation of how
system costs are infl uenced by the owner’s decisions,
see “System Sophistication and System Cost” on
page 61.
elsewhere in this guide.
The principal disadvantage of wood-chip systems
is that the up-front costs to install and house the
necessary equipment are usually signifi cantly greater
than the initial costs of oil, gas, or electric systems.
However, the magnitude of this greater fi rst cost is
extremely site-specifi c: it depends on the use for which
Wood Chip System Cost Effectiveness Potential
$0.20
$0.18
$0.16
$0.14
$0.12
$0.10
$0.08
Likely Cost Effective
$0.06
$0.04
Possibly Cost Effective
$0.02
Unlikely Cost Effective
$0.00
340,000 680,000 1,020,000 1,360,000
Annual kWh Heating Consumption
WOOD CHIP HEATING SYSTEMS
1,700,000
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