Cost-Effective Energy for Small Businesses: Is Wood Chip CHP the Right Choice?

One of the biggest challenges small businesses face in the 21st century is their energy. Where do you get it from? Is it from a sustainable source? Can you afford it? With so many questions swirling about it could be tempting to just stick with what you already know, but if you are still using fossil fuels, that will have to change in time.

One area in which you could make such a change is to switch to a small-scale biomass Combined Heat and Power system (a CHP) that can run on either wood pellets or wood chips. These systems use energy created from a sustainable source and could save your business a fortune on energy bills, so let’s take a deeper look. 

Cost of Biomass

This study from Glen Farrow from the end of 2023 shows the savings that can be made from switching to a wood chip CHP:

• Wood chip vs Gas = 7.8 pence in savings/kWh

• Wood chip vs Oil = 6.8 pence in savings/kWh

• Wood chip vs LPG = 11.8 pence in savings/kWh

• Wood chip vs Electricity = 31.8 pence in savings/kWh

This is the big selling point of this system. This savings does not take much time to grow into a substantial saving for our business, meaning that over time, any CHP system that you install should end up paying for itself and using energy from a sustainable source. 

CHP System Costs

Of course, it’s all very well to talk about the cost savings you’ll make once you have your CHP up and running, but that won’t count for much if it costs more than you save to get and maintain it in the first place. So, what are the costs associated with a CHP?

Cost of CHP System Itself

The cost of a CHP varies somewhat according to the specific system, but £5,000 or so is a reasonable estimate for a 1kw micro CHP boiler. If you’re looking to change from a gas boiler, it may be worth considering how close to the end of the normal lifespan of your existing boiler you already are if being cost-effective is your primary goal. 

Cost of CHP

Of course, the costs of something like this don’t end once you’ve got it installed. Ongoing operational costs for a wood chip CHP include fuel expenses, maintenance, and general upkeep. Maintenance is higher compared to gas-powered CHP systems due to the need for regular cleaning and servicing.

Biomass Wood Chip Prices in the UK

Biomass wood chip prices vary throughout the UK according to where your business is situated and the grade and quality of chip you need. Biomass CHP systems are usually designed to work with one particular type of wood chip. Prices can range from around £100 a ton to £150 a ton, and as with many other large items such as this, much of the cost will depend on how near you are to a source. 

Is Wood Cheaper than Gas?

The rising cost of electricity, oil and gas continue to make wood chip an attractive option for small businesses and choosing wood fuel to heat your premises this way is a sustainable choice, especially for those heat users who are already registered with the Renewable Heat Incentive (RHI), which has unfortunately now closed. Wood chip CHPs are more expensive than gas boilers and require more maintenance, but wood chip CHPs aren’t subject to the volatility of the fossil fuel markets. 

Benefits of Wood Chip CHP for Small Businesses

A wood chip CHP system offers significant benefits for businesses. These systems are highly efficient, utilising wood chips to generate both electricity and heat from a single fuel source. This dual output maximises energy use and reduces waste.

They can also save you money over time. Small businesses can significantly lower their energy bills by generating on-site electricity and heat. The cost of wood chips is often lower than fossil fuels, especially when sourced locally.

While these have reduced in recent years, the incentives available can offset costs further. Small businesses already on it can benefit from incentives like the Renewable Heat Incentive (RHI), which provides financial support for renewable heat generation. These incentives help offset the initial setup costs and ongoing operational expenses.

And then there’s the small matter of using wood chips as the right thing to do. They're a renewable resource, which reduces carbon emissions and supports sustainable practices. This can enhance a business's green credentials and appeal to eco-conscious customers while sourcing wood chips locally can boost the local economy and create a more sustainable supply chain.

As with all energy choices, there is much to consider when deciding to get a wood chip CHP for your small business, and whether it’s the right decision for you may come down to your specific circumstances. They require more maintenance, and the initial set-up costs will be higher, but with fossil fuel prices only likely to rise again, the stability of their costs and the savings that can be made make them an option that you should investigate further.