The food versus fuel debate may also fuel a more rapid development of the cellulosic energy industry. Policies are pushing energy companies away from coal-based carbon footprints and toward biomass fuels that are more “green.” But what market opportunity does that mean for land owners and farm operators who can produce biomass?

Federal and state policies toward bioenergy and the impact that ethanol has had on the corn market may spur incentives toward biomass use as a feed stock at power plants. To help policy makers and farmers get ready for that occasion, Purdue economists Sarah Brechbill and Wally Tyner tried to identify the production costs of switchgrass and corn stover so farm operators could begin to determine if that was an opportunity for profitability. Their report looked at the cost of corn stover collection and transportation, and at the cost of switchgrass production, harvesting and transportation.

With corn stover, calculations were made for the nutrients that were removed from the soil and the cost of replacement fertilizer, which was determined to be $15.64 per ton of stover removed. Other negatives were determined to be more soil compaction, soil erosion, and water erosion. With switchgrass, the initial cost of establishing the stand was amortized with an 8% interest rate, with additional costs of mowing, spraying weeds, and a land rent charge.

Harvest can either be hired or accomplished with owned equipment, and for the latter, equipment costs were amortized at 8%, and fuel and labor was added. Bales stored at the edge of the field until called in by the power plant will lose dry matter, and that was calculated as well for both crops. Distance from the field to the plant is an expense, based on the need to transport bulk commodities with a lighter weight, and the Purdue economists say the average marginal transportation cost per mile was computed at 20¢.

Calculating the production costs per ton of product, and averaged over various sized farming operations, totaled $34.92 for corn stover and $55.34 for switchgrass. That would be the cost at the farmgate, and transportation is added to that. Combined, the cost for corn stover ranged from $38.22 five miles away from the plant to $45.54 for a 50 mile haul. For switchgrass, the cost of production and transportation is $58.05 if five miles from the plant to $65.37 if 50 miles from the plant.

The Purdue economists looked at biomass producing between 1% and 10% of the total heat production at the power plants to generate electricity where coal had been the only source to date. Corn stover is less expensive for a plant to acquire, but produces less heat. Switchgrass produces more heat, but is more expensive to acquire. On the emissions comparison scale, the biomass alternatives produce much less than coal, but switchgrass loses a bit more in carbon credit because it is taking carbon from the soil and releasing it during combustion.

The bottom line, according to Brechbill and Tyner, “In nearly all cases, although use of biomass offsets some coal costs and CO2 emissions, it is not enough to offset the costs incurred from purchasing the biomass.” Based on costs of CO2 at the Chicago Climate Exchange at $5.22 per ton, the breakeven costs of both corn stover and switchgrass are higher.

Brechbill and Tyner conclude that corn stover is less costly of a product than switchgrass, but produces less heat and has less value, but switchgrass has a higher value, but would require a larger carbon credit to be efficiently used. Uniformity of production across the Cornbelt is an issue that will have to be resolved if biomass powered energy plants are to depend on farmers for a crop, and the resource of an individual farmer will likely determine whether to engage in that activity.

Summary:
For power plants wanting to reduce their coal consumption, an opportunity exists for farmers to produce biomass products such as corn stover or switchgrass that would release less CO2 than coal. Corn stover is less costly to produce, but would demand a lower market price due to its lower heat generating capability, compared to switchgrass. However, farm operators will have to decide on investment in equipment, as well as opportunity costs with other crops, and even negative impacts on the soil in case of corn stover.

How much time and energy would you spend on penciling out the numbers to determine if this venture would be worthwhile?