A Lifecycle Cost Analysis of Wood Pellet and Natural Gas


July 20, 2018 - Bill Knudson


This analysis compares the cost of two different heating technologies wood pellet, and natural gas over the lifetime of a wood pellet heating unit that provides central heating. Two different sized buildings are considered: a 2,000 square foot detached residence and a 30,000 square foot institution (church, school, etc.). Two scenarios will be considered, one with a 30 percent subsidy to offset the cost of the wood pellet heating unit and the second without this incentive. These units only generate heat, and as a result are not likely to be used for public/commercial buildings in most locations. The best locations are likely to be in the Upper Peninsula, parts of the Northern Lower Peninsula and perhaps select locations along Lake Michigan and Lake Huron. These parts of the state tend to have cooler summers and therefore are in less need of a combined heating and cooling system.

Lowest Life Cycle Cost (LCC) will be used to compare the different technologies. It has the advantage of being relatively straightforward and easy to understand (Fuller). It allows comparisons between competing technologies that provide the same service, in this case heating. It should be noted that each project is different and that this analysis is designed to give a general idea of the relative cost of heating with wood pellets compared to natural gas. Actual costs will be different and in some cases could be considerably different depending on the actual building and vendors used.


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