Green heat entrepreneurship – selling renewable BTUs

Green heat entrepreneurship consists in producing green energy from biomass and sell the BTUs to his customers instead of the fuel itself.

Evolution of heat entrepreneurship and woodchip consumption in Finland

Green heat entrepreneurship started in Northern Europe. The graph above shows the evolution of the number of biomass heat plants operated by heat entrepreneurs in Finland (source: Lämpöyrittäjät RY). First heat entrepreneurs in Finland begun in 1992. At the end of 2013, no less than 520 heating plants were operated by 310 companies classified as heat entrepreneurs.

In most cases, the biomass fuel used by green heat entrepreneurs is wood-energy chips. In 2013, heat entrepreneurs in Finland consumed a total of 1.5 million cubic meters of woodchips. This represents between 7 and 8% of the total available woodchips. About 1/3 of district heating networks and 2/3 of private heat networks were operated by heat entrepreneurs. Total potential in Finland is estimated to be more than 5,000 municipal, commercial and industrial sites.

Green heat entrepreneurs are mostly farmers, forest owners or peat producers. The concept of heat entrepreneurship started as an additional income, but tends more and more to become an industry of its own. In Finland, this industry provides currently between 600 and 700 full-time jobs.

The video above, made by HECSO, shows the basic principles of heat entrepreneurship in Finland.

How does green heat entrepreneurship work ?

School heated by a heat entrepreneur

The heat entrepreneur is in charge of the fuel delivery and all the maintenance of the biomass heating plants that supply the customers with heat. The heating plant is equipped with an energy meter that will monitor the energy used by the customer (BTUs or kWh). Energy meters can be installed for each customer if the heating plant provides heat to more than one building. The customers are billed depending of their consumption, just like with electricity.

The heat plant can heat water, steam or air. The heating plant can be owned by the entrepreneur or the customer.

The heat entrepreneur can be a private company (usually a farm or forestry cooperative) or a public company (usually a municipality) or a mix of both.

Most of the heat contracts include a clause for obligation to provide heat. For example district heat contracts in Finland stipulate that the entrepreneur is allowed maximum one hour of service cuts during the heating season. That’s why it is important to build redundancy in the heating system. For example the yellow heating plant on the picture above is fitted with double pumps for all the heat networks and has two chimneys: one for the biomass boiler and one for the oil-fired backup boiler.

Heating equipment for BTU sellers

The containerised biomass heating plants are ideal for heat entrepreneurs. The heating plant is easy to install at the customer’s premises. It is also easy to move to another location at the end of the heating contract or if the customer is unable to pay his bills.

Economical principles of entrepreneurship in green energy

Heating contracts are usually made for 10 or 15 years. This gives the entrepreneur enough financial security to invest in the heating equipment.

Best practice is to index the selling price of the BTU (or kWh) with at least 3 variables to dilute the risk. The advantage of biomass fuels is that their price is usually stable.

Most of the heat entrepreneurs will divide their expenses that way:
– 1/3 for investment
– 1/3 for fuel and transportation
– 1/3 for other expenses (salaries, electricity, maintenance…)

In Finland, the MWh is usually priced between 40 and 75 euros. Production cost with biomass varies between 5 and 20 euros per MWh. This results in a profit between 10 and 30% of the turnover.

With its network of private and institutional partners, Säätötuli Canada can help you on all aspects of setting up and running your heat entrepreneurship company, from the forest up to the energy meter. Säätötuli has worked with over 300 heat entrepreneurs in Finland. Do not hesitate to contact us to discuss your project.