Wood-Chip Heating Systems - Biomass Energy Resource Center

Current year oil price . . . . . . . . . . . . $1.00/gallon
Current year wood-chip price . . . . . . $28/ton
Annual wood-chip price
escalation rate . . . . . . . . . . . . . . . 2%
Annual oil price escalation rate . . . . 3%
IV. OPERATING, MAINTENANCE AND REPLACEMENT
(OM&R) COSTS
Operating costs for the existing heat system and
annually recurring costs for the wood-chip system
include routine servicing and parts, along with staff
time for operating and maintaining each system.
Non-recurring operation and maintenance costs for
larger repairs, such as system upgrades and parts
replacement, are taken into consideration at various
intervals.
For example, the existing oil heat system costs
include a substantial upgrade in year 15 and in year
20, when the two existing oil boilers will be 30 years
old respectively. The wood system includes replacing
the refractory in years 10 and 20, upgrades to the fuel
handling system in year 15, and periodic general repairs
and replacements to controls and other systems. These
non-recurring costs were then annualized and averaged
in over the analysis period.
V. SALVAGE VALUE
The analysis has been done on a 25-year basis. In
fact, some signifi cant components do not necessarily
decline in value over time. For example the wood fuel
storage bin and the additional space in the boiler room
for the wood boiler do not lose their value. A true lifecycle
cost analysis would take these values into account
by including a salvage value for these types of items at
the end of the analysis period.
However, these types of values have little monetary
impact on a school budget. The asset value of property
is not taken into consideration for most public sector
capital investments. For a private sector building,
salvage value may be an appropriate consideration
in the analysis. For purposes of this life cycle cost
example, assumptions about the salvage value of
equipment or building improvements at the end of the
25-year study period were not are included in either the
oil heat and wood-chip heat scenarios.
B. RESULTS OF LIFE-CYCLE COST ANALYSIS
NIST BLCC software is set up to compare the lifecycle
costs of each energy option. Each scenario is
analyzed individually, and the net present value of the
different options can then be compared. The option
with the lowest net present value is the one that should
be selected, based on economic considerations. This
analysis looks at two options: retaining the existing oil
heat system and installing a wood-chip system while
leaving the oil system as backup.
The results of the analysis are given below. For each
option, the present value of 25-year cash fl ows is given
in four line-item cost categories, and as the total lifecycle
cost.
The analysis shows clearly that the wood-chip
conversion had a life-cycle cost that was much less than
the keeping existing oil heat system. In 2003 dollars,
it is worth almost $350,000 to convert from oil heat to
wood heat.
Existing Energy
Consumption
Replaced by
Wood-Chip System:
First-Year Capital Costs
for Wood-Chip System
Wood-Chip System
Cost Range
gal/yr Oil
10,000 . . . . . . . . . . . . . . . . . . . . .$100,000 - 250,000
20,000 . . . . . . . . . . . . . . . . . . . . .$160,000 - 320,000
30,000 . . . . . . . . . . . . . . . . . . . . .$180,000 - 360,000
40,000 . . . . . . . . . . . . . . . . . . . . .$200,000 - 400,000
50,000 . . . . . . . . . . . . . . . . . . . . .$225,000 - 450,000
kWh/yr Electricity
340,000 . . . . . . . . . . . . . . . . . . . .$200,000 - 500,000
680,000 . . . . . . . . . . . . . . . . . . . .$320,000 - 640,000
1,020,000 . . . . . . . . . . . . . . . . . .$360,000 - 720,000
1,360,000 . . . . . . . . . . . . . . . . . .$400,000 - 800,000
1,700,000 . . . . . . . . . . . . . . . . . .$450,000 - 900,000
Cost Category Base Case Oil Heat Wood Chip Heat Alternative NPV Savings
Capital and Finance – Related Costs $0 $385,920 -$385,920
Energy Costs $1,563,725 $812,602 $751,123
Recurring and Non-recurring O&M Costs $99,832 $184,786 -$84,955
Replacement Costs $69,366 $0 $69,366
Total PV Life Cycle Cost $1,732,923 $1,383,308 $349,614
WOOD CHIP HEATING SYSTEMS
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