Biomass is one of the rising stars of renewable energy. As a carbon-neutral energy source, biomass technology is helping organizations generate electricity and heat while reducing their carbon footprint and greenhouse gas emissions. Bioenergy use for renewable heat generation overall in the U.K. increased by more than five times between 2005 and 2017.
In order to encourage biomass take-up, alongside the aim for 12 percent of heating to come from renewable sources by the year 2020, in November 2011 the U.K. government introduced the Renewable Heat Incentive (RHI). The RHI scheme, which supports large- and small-scale generation of biomass heat through financial incentives, has greatly encouraged the shift towards biomass energy sources — as evidenced by the 20,000 or so to join the scheme since its initiation as it can create a highly profitable additional income stream. (https://www.ofgem.gov.uk/environmental-programmes/non-domestic-rhi)
The majority of applications (95 percent) were made for small and medium biomass boilers, highlighting the important role every project plays in the U.K.’s efforts to reduce emissions.
For many organisations, access to energy-efficient technologies may seem unattainable given the initial capital investment required, despite a 6-year payback being common with the income over the remaining years of the scheme representing clear profit. To help with this, an increasing number of biomass technology suppliers, however, are helping to overcome this barrier by incorporating financing in their offerings with the help of specialist financing schemes in the market. These are usually known as ESCO (Energy Savings Contracts) Schemes whereby the end customer can have the system installed for free and maintained and serviced for free for the full 20 years.
The supplier then keeps the RHI themselves but this means the user benefits from immediate free new heating systems, no servicing or maintenance costs for the full period, savings on fuel from day one and no upfront investment. Given that the Boilers should have a life expectancy of 20+ years in line with the RHI Scheme, at least one round of plant replacement costs should also be avoided.
Equipment suppliers can apply to become a recognised supplier of the scheme, which allows them to integrate the financing offer into their overall sales proposition. In other words, their customers no longer have to seek external funding sources for equipment acquisition and can instead enjoy the convenience of an integrated solution, incorporating the finance. Since the scheme has the flexibility to customise payments to suit each client’s requirements and budgets, customers do not have to make do with what they can afford according to capital budgets — instead, suppliers and customers can explore the optimal technological solution suitable for their individual circumstances.
While businesses wishing to embark on green investments might lack the financial means required to implement an active energy management policy, forward-thinking suppliers can take policy changes in their stride and enhance their customer sales proposition with the help of specialist financing schemes. By offering innovative financing schemes at point-of-sale, suppliers can deliver value-added services to end customers and further differentiate themselves in an increasingly competitive market.
Some Examples of the Financial Benefits;
- For a residential charity client based in Herts, we had a single boiler installed that will heat the entire site. They’ll return a guaranteed profit of just under £1M – again that’s based on today’s RHI Rate but this rate will only increase with inflation.
- For a residential charity for adults with learning difficulties based in Gloucestershire, we also had a single boiler installed that will heat their entire site; they will see a guaranteed profit of just under £0.5M – again based on today’s RHI Rate which will increase with inflation.
- Avon & Somerset Police Constabulary HQ in Portishead have installed 4 Boilers to cover their entire site and will return an overall profit of around £3M.
As an example of a smaller scale user still creating a significant income stream – a day Hospice near Stroud Trust in N Wales is having a smaller system installed – they only have a demand of £3.5K for heat currently but will still return a guaranteed clear profit of £152K.