This new log cabin-style self-build in Derbyshire was off the mains gas network, so a 24kW biomass boiler was specified to provide the heating and hot water needs — it only burns two tonnes of woodchip per annum thanks to the home surpassing the Building Regulations insulation requirements. As a result, the home brings in approximately £1,400 a year in RHI payments

The Quick Read

  • High capital costs for renewable systems (such as biomass or heat pumps) are holding back mainstream take-up, although Government incentives can (more than) payback this initial cost over seven years
  • The best system to choose depends largely on the amount of heat energy your home will need and how your system is set up (e.g. with underfloor heating), and as such your assessment should start with a heating engineer’s report (or at the very least, an EPC)
  • You must take a view on long-term price volatility in the particular energy market you’re basing your system on. Even heat pumps depend on electricity prices, for instance

Around four million homes in the UK are not connected to the mains gas network. If you’re one of the 15% of homeowners who fall into this happy category, things have been getting quite complicated. For many years, the choice for heating your home was relatively straightforward — either heating oil, LPG or electricity. A few may also have used solid fuel: coal or logs. The cost of these different fuels continues to vary considerably but, with the possible exception of logs, all are more expensive than mains gas.

All self builders and the vast majority of homeowners in areas on the mains gas network would struggle to justify (in purely financial terms) moving away from gas. It is the cheapest fuel and likely to stay so. The rest of us, however, now have a significantly more complicated decision on our hands.

Over the past decade, previously niche heating options – heat pumps (air source and ground source) and biomass – have become a viable mainstream option (thanks in part to huge Government incentives such as RHI). Additionally, renewables such as solar panels and more left-field products offer a genuine alternative to the fossil fuel choices of electricity, LPG and oil.

If only it were that simple. Independent guidance is almost impossible to come by (hence this article) as many heating engineers have, at best, strong opinions and, at worst, allegiances to particular systems — albeit that these allegiances are the result of familiarity rather than any financial inducement. Every week, new reports and field trials data are published, revealing wildly different conclusions as to the efficacy of various renewables.

The capital cost of renewables is not coming down to any great degree (still somewhere between three to 12 times as expensive as an oil boiler). There is also, in corporate speak, a ‘lack of clear visibility’ as to where running costs for renewables may be heading (heat pumps run off electricity anyway so are hardly isolated from future price rises, while the biomass fuel market is still in its infancy — a few thousand biomass boilers are sold each year compared to hundreds of thousands of gas boilers).

Finally, of course, to make matters more complicated, the period to January 2015 saw a significant drop in the price of heating oil — to around 35–38p a litre from a peak of around 69p in April 2013 (although February 2015 saw oil prices start to rise again). This induced some rural property owners to invest in bigger oil tanks to fill up fast and fill up lots, rather than invest in renewables. So, there is some way to go before those of us off the gas mains are the large-scale adopters of renewables the Government would like (and needs) us to be.

All of which places the homeowner installing a new heating system in a tricky position. What to do? The main consideration for most people is the cost – both the initial cost of installing the kit and the annual running costs (which together gives a lifetime cost which is perhaps most important of all) – but it is worth considering the practical implications of living alongside these different systems too.

Off-Mains Heating Choices

Oil

  • Low capital cost
  • Wide choice of suppliers
  • Inconvenience of the tank and deliveries
  • Fuel price volatility
  • Easy operation
Home heating oil storage tank
LPG

  • Low capital cost
  • High running cost
  • High maintenance cost
  • Feels like natural gas
  • Cleaner than oil or biomass
blue tanks of LPG
Wood pellet

  • High capital cost
  • Stable fuel cost
  • Inconvenient fuel storage
  • Ash needs disposal (but not regularly)
  • Long life and high efficiency
a pile of wood pellets
Air-source Heat pump

  • Low capital cost
  • Higher running cost than ground source
  • Lower incentives
  • Shorter predicted life
  • Noise emissions potential
air source heat pump on an external brick wall
Ground-source Heat Pump

  • Higher capital cost
  • Lower running cost
  • Clean and convenient
  • Higher lifespan
  • Higher incentives
ground source heat pump trench
Thermal Solar

  • Low upfront capital cost
  • Supplementary heating only
  • Low maintenance and zero running costs
  • Good incentives
  • Very long life
thermal solar panels on a log cabin

Establish Your Heating Needs

The starting point for a wise choice is to establish your home’s heat requirement. This kWh figure will be on the EPC (Energy Performance Certificate) of your home if you bought it in the last eight years (usually quoted as kWh/m²/yr — simply multiply it by the total floor area of the house, which will also be on the EPC); it will have changed if you have altered the house since moving in (e.g. installing new windows, adding insulation, adding an extension).

The kWh figure shows how much heat energy your home consumes for space heating (i.e. your radiators or underfloor system if you have them) and hot water (showers, hot water taps, baths and so on). One of the key lessons to learn early is that the two types of heating requirements need different temperatures. Space heating can be as low as 35°C for underfloor systems; hot water needs to be in excess of 64°C at least once each week, and often ends up at 70–90°C (one great way to save energy is to ensure that hot water is not too hot). The point being that the two elements of your heating system can be separated out, if you plan it that way.

Figures for gas consumption from ECUK (Energy Consumption in the United Kingdom) 2014 suggest that the average UK home uses around 15,000kWh each year for heating. This may be a bit misleading as the average includes flats and small new builds, as well as large brick piles.

  • The ‘average’ 200m² new build is likely to use nearer to 11,000kWh for space heating.
  • Renovators of larger homes can enjoy consumption figures well above 50,000kWh per year.
  • Self builders constructing relatively modest-sized homes to Passivhaus standards could achieve annual consumptions of just 2,250kWh (150m² at 15kWh/m²) for space heating with perhaps the same again for hot water heating.

Whatever the figure is, it will form the basis for your planning and calculations. Of course, the best thing you can do is to reduce this figure — meaning how you generate the heat will be less important. But that’s another story.

The Annual Running Cost Comparison (based on March 2015 prices)

Target efficiency Three-bed Passivhaus needing 5,000kWh Four-bed new build needing 15,000kWh Six-bed renovating needing 50,000kWh
Mains gas 85% £318 £953 £3,176
Heating oil 85% £206 £618 £2,059
LPG (1) 80% £337 £1,012 £3,375
Wood pellet (2) 90% £311 £933 £3,111
E7 Electric (3) 100% £598 £1,368 £4,630
Ground-source heat pump 400% £203 £609 £2,030
Air-source heat pump 250% £325 £974 £3,248

(1) The cost does not include rental or maintenance cost incurred for the storage tank, pumps, etc.
(2) Assumes bagged price for three and four-bed property and bulk for six-bed property.
(3) Space heating is at E7 tariff and hot water at standard tariff.
(4) At standard electricity tariff.

The cost comparison above is based on current prices:

  • Mains gas: 5.4p/kWh (including standing charges);
  • Oil: 3.8p/kWh (41p/litre);
  • LPG: 5.4p/kWh (40p/litre);
  • Electricity: standard tariff 16.24p/kWh;
  • E7 tariff: 7.7p/kWh (including standing charges);
  • Wood pellet: 5.6p/kWh bagged, 4.7p/kWh bulk 

The Capital Cost Comparison

First things first, you need to work out what output you need from your new system. Biomass boilers, solar panels, heat pumps and so on are all sized in kW and although there are online calculators available to help the amateur size up a boiler, it is best to get a bespoke calculation from a heating engineer.

Certainly if you are installing a renewable energy system, getting the right size is key — undersize it and it may be working too hard to be efficient; oversize it and excessive cycling (switching on and off) will occur. And big systems cost more than smaller systems.

Calculations done for a recent renovation project indicated that a 28kW boiler was needed. A couple of the big energy suppliers wanted between £2,200 and £2,800 to supply and install that boiler. Shopping around with small, local plumbers got the price (for the same make and model of gas boiler) down to £1,300.

It would be possible to carry out the same exercise for an oil boiler because, as with gas boilers, they are well understood and there are a plethora of potential suppliers and installers. The same is not true for heat pumps or biomass boilers. The list of potential installers will be extremely limited in any given locality – more than two would be exceptional – which obviously limits the opportunity for shopping around.

In addition, the price of comparable gas and oil boilers will be broadly the same across manufacturers, as will the price of comparable heat pumps. But the price of biomass boilers can vary hugely. Quality, country of origin and level of sophistication will all influence the price of a biomass boiler.

It is difficult and potentially misleading to give direct price comparisons for heat pumps as, typically, a 28kW heat demand would be considered unsuitable for heat pumps. A more likely scenario is that investment would first be made in insulation and airtightness to reduce the heat load to something within the reasonable scope of a heat pump.

Capital Cost Comparison

Comparison for a 28kW heat source Target/typical price Cost of installation Total Cost Longevity
Gas boiler* £800 £600–1,000 £1,400–1,800 10 years
Oil boiler* £1,400 £3,000+ (incl tank) £4,400+ 10 years
LPG boiler* £800 £4,000+ (incl tank) £4,800+ 10 years
Wood pellet boiler* (1) £9,000 £2,000 £11,000 20–25 years
Electric storage heaters (2) £4,200 £2,200 £6,600 20 years
Comparison for a 15kW heat source Target/typical price Cost of installation Extra build cost Total cost Longevity
Ground-source heat pump* £7,500 £3,000 £7,000 £17,500 20–25 years
Air-source heat pump* £4,000 £2,500 £7,000 £13,500 15–20 years

*Excluding distribution system such as radiators or underfloor heating.

Future Running Cost Predictions

It is worth first noting that the prices of heating oil and LPG have dropped dramatically in the past 12 months. It has to be accepted that the possibility exists that these fossil fuel prices will return to their previous highs, and may even exceed them. It is, after all, a finite resource.

Expert opinion seems to be divided between “the oil companies will have to live with lower prices,” to “oil and gas production is controlled by a small number of very large companies. Of course the price will rise.” The owner of one delivery company with over 30 years experience, who we interviewed, confidently predicted a year ago that the price of heating oil would top £1 per litre by Christmas 2014. He was wrong — and he has not stopped predicting. Essentially, no one knows. And bear in mind that whatever happens to the price of oil and gas, the consumer paid price of electricity continues its steady rise.

Biomass is a different matter. It is largely unaffected by geopolitics and tends to be produced by smaller companies. In addition, supply is growing rapidly while demand (in the UK, at least) is growing slowly. The average cost of bulk wood pellets has remained relatively stable since 2004. At that time it was between £180 and £190 per tonne and has risen to around £225 in 2014.

ProPellets, the Austrian wood pellet association, have monitored prices since 2000. The average price in 2000 was 24 cents/kg, which fell to 19 cents/kg in 2005 and has since risen to 25 cents/kg. Data from Germany and Sweden show very similar trends and these are all far more mature markets than the UK.

There is a long, complicated argument as to why UK prices will remain low, based on the ability of countries like Canada, USA, Russia and Brazil to produce high-grade wood pellets at around £110 per tonne. Obviously there will be shipping and handling costs but it would still be possible to get pellets to a UK customer’s door for under £200 per tonne. The UK is currently a tiny market in world terms however – using around 50,000 tonnes of pellets for domestic heating per year – so the foreign manufacturers are not really interested. But if UK manufacturers start to push prices too high, it leaves a gap for UK traders to import cheaper products.

So the perceived wisdom is that wood pellet will fluctuate by around the 4% mark for the foreseeable future, as it has in the past.

Government Incentives

Tariff p/kWh Annual payment at 5,000kWh Annual payment at 15,000kWh Annual payment at 50,000kWh
Biomass 10.98p £549 £1,647 £5,490
Solar (1) 19.20p £345 £345 £345
GSHP 18.80p £940 £2,820 £9,400
ASHP 7.30p £365 £1,095 £3,650

(1) Solar tariff relates to domestic hot water only, not space heating, hence the cap on payments at £345

Renewable Heating Incentive (RHI) tariffs are subject to degression in January, April, July and October each year. The degression applies to new applicants and is generally around 5%, although the degression for biomass in April 2015 is over 18%. So a homeowner applying for biomass RHI in February 2015 will receive 10.98p/kWh for the seven-year period of the RHI scheme. A person applying in August 2015 is likely to receive 8.92p/kWh for seven years.

Payments can be assessed on either ‘deemed’ consumption, or metered.

To apply for the domestic RHI scheme the property must have an Energy Performance Certificate (EPC). The EPC will calculate the amount of heat the house will consume in a year and that figure will be the ‘deemed’ consumption — irrespective of what is actually consumed. Installing a meter is only necessary if there is more than one heat source or if the house is occupied for less than half the year, or for non-domestic situations.

Overall Costs

A table comparing the total of the running and capital costs, including RHI payments, over five, 10 and 20 years (assuming today’s fuel prices and no inflation). The interesting one to point out are the figures for GSHP — note that, with the large RHI tariff, it is cheaper to run the system for 10 years than it is for five. The difference between the figures for 10 and 20 year overall costs is exacerbated because the RHI payments stop after year seven.

Capital cost Annual running cost (1) Incentive payment Five-year cost 10-year cost (2) 20-year cost (3)
Mains gas £1,400–1,800 £953 £0 £6,165 £12,330 £23,260
Heating oil £4,400+ £618 £0 £7,490 £11,980 £19,560
LPG £4,800+ £1,012 £0 £9,860 £16,320 £27,840
Wood Pellet £11,000 £933 £1,647 £7,370* £8,801 £18,131
E7 Electric £6,600 £1,368 £0 £13,440 £20,280 £33,960
GSHP £17,500 £609 £2,820 £6,445 £3,850 £9,940
ASHP £13,500 £974 £1,095 £12,895 £15,575 £23,315

*How we came to these figures: Capital cost of £11,000 + 5 x £933 running cost = £15,665.
RHI payments of 5 x £1,647 = £8,235.
£15,665 – £8,235 = £7,430.
(1) Running costs for a four-bed, three-bath new build of 200m² floor area.
(2) & (3) Adding capital cost for a replacement gas or oil boiler.

Heating System: Other Costs

A heating system comprises three elements: the heat source, the distribution system and the control system. So far we have only looked at the heat source.

Heating distribution is a choice of either underfloor heating (UFH) or radiators.

The only limiting factor is that heat pumps, ground source or air source, need low temperature distribution and this is best done with UFH. The other heat sources are content with either option and it is a matter of personal choice and budget — UFH is a little more expensive than radiators but usually not so much as to be a dealbreaker.

The control system needs to be able to control when heat is delivered, where to and at what temperature. A good-quality digital system will add £1,200 to £1,500 to the total, to include room thermostats and a programmable control panel.

Biomass is a bit different in that the control system also has to control how and when the boiler operates. While a control system that gives a comparable level of convenience to a heat pump can run to £4,000 or £5,000. What is needed will be dictated by the manufacturer and is not optional. The issue is that asking a supplier for the price of a wood pellet boiler gets you so far, but the need is for the installed cost to include the control system.

Living With the Different Systems

In terms of convenience there really is little to choose between the options. Log boilers are difficult but wood pellet boilers impose little operational burden on the user — load pellets at worst once each week and then empty the ash every three to six months. Heat pumps ask no more than a gas or oil boiler.

It’s worth noting that log boilers need a very large hot water storage tank — no less than 50 litres per kW output, so our 28kW boiler would need a 1,400 litre cylinder. Solar panels also need a bigger than average hot water cylinder, but typically this is 250 to 350 litres. This size of cylinder would be more than adequate for a heat pump or wood pellet boiler.

There may be other concerns that affect your decision:

Controls: The control systems are also fairly similar: a digital, touch-sensitive pad to set timing and temperature for each heated zone (or room). Remote control is now becoming increasingly prevalent enabling control from a PC or smart phone.

Storing Fuel: Storing wood pellets (or logs) will always be an issue but, for wood pellets at least, no more of an issue than oil. Waterproof stores are now easily available and even underground storage is becoming more common.

Noise: Noise emissions from air-source heat pumps can also be an issue. But again the industry has been working on it and today’s models are quieter than once was the case, with noise deflector boxes now available.

In short, the renewable energy heating industry (if we can call it a single industry) have been working hard over the past 10 years to get heat pumps and biomass boilers to be as easy to live with as gas and oil boilers.

Conclusions: Horses for Courses?

Once we move away from mains gas we are in a world of decision making. A plumber installing a gas boiler will need to do no more than stick his or her nose through the front door to know what size and type of boiler is needed — principally because gas boilers (and to an extent, oil boilers) have a lot of latitude. A 28kW gas boiler can work equally comfortably at 4kW or 5kW, with very little loss of efficiency. So the plumber does not need to be accurate. It is more like an order of magnitude than an actual sizing.

This is not the case with renewable energy. The biomass boiler will have some latitude – in some cases as much as a gas boiler – but bigger machines cost more. A heat pump needs to be the right size to work efficiently, and bigger machines also cost more.

The type of renewable heating system specified will differ with the type of house. Renewable energy fits in directly with the ‘fabric-first’ method of building in that the house is designed to be as energy efficient as possible first and then this dictates which heating system is most appropriate. The disaster stories around heat pumps that we have all heard are generally where the heat pump has been shoe-horned into a situation where it should not be. Which brings us to the following conclusions:

  1. Designing the house to be as energy efficient as possible is a good long-term strategy;
  2. Getting an accurate heat load calculation done leads to the right heating system;
  3. Heat pumps suit smaller, highly insulated houses;
  4. Biomass suits larger or less well-insulated houses;
  5. Betting on oil and LPG remaining at low prices is brave;
  6. Electric storage heaters are never a good idea.

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