Title: Bioenergy Crops in Illinois : Competitiveness and NonMarket Benefits
1Bioenergy Crops in Illinois Competitiveness and
Non-Market Benefits
- Madhu Khanna and Basanta Dhungana
- Dept. of Agricultural and Consumer Economics
- University of Illinois at Urbana-Champaign
Research funded by Dudley Smith Initiative and
Illinois CFAR
2Potential Uses of Bioenergy Crops
Electricity generation by co-firing with coal in
power plants Conversion to cellulosic ethanol
Planting
3 Economic Potential of Bioenergy Crops
- Need to compete with row crops for land
- Yield per hectare
- Costs of production
- Opportunity cost of land
- Depends on row crop prices
- Need to compete with fossil fuels/renewable fuels
- Energy content relative to fossil fuels
- Cost of conversion to usable fuel
- Price of fossil fuels and renewable fuels
- Non-market benefits of bioenergy crops/fuels
- Policy induced value of non-market benefits
4Issues Addressed
- Profitability of growing bioenergy crops relative
to row crops in Illinois - Spatial variability in profitability of
Miscanthus - Competitiveness of bioenergy with fossil fuels
- Environmental benefits
- Carbon-dioxide emissions, sulfur-dioxide
emissions, soil carbon sequestration - Non-market value of environmental benefits
5Growing Conditions for Miscanthus in Illinois
Yield of Miscanthus simulated using 30 year
climate data on solar radiation, temperature,
frost dates, precipitation, soil evaporation and
water holding capacity at 2 sq km
level Temperature most important factor in leaf
expansion with optimal water and nutrients
6Yield/Hectare Miscanthus, Corn and Soybeans
7Annualized Costs of Production for Switchgrass
and Miscanthus
All cost estimates are in 2003 prices. Peak dry
yield for Switchgrass in September and Miscanthus
in October is assumed to be 9.42 and 35.8 t
ha-1, respectively. Costs are discounted at a
rate of 4.
8Annualized Cost of Production for Perennials and
Row Crops
- Low opportunity cost with Soybean price 5.1/b
Corn price 2.05/b High cost with 50 higher
crop prices - Miscanthus yield 35.8 t/ha Switchgrass yield
9.42 t/ha
9Breakeven Farmgate Price /t Breakeven
Delivered Price /t
- Market price of Bio-energy for co-firing with
coal for electricity generation based on heat
content 18/t-20/t - Minimum additional payment required is 24/t
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11Figures above bars represent cost of production
net of co-product credit Each pair of bars for
each feedstock represents cost of production with
corn price of 2.05/b and 3.07/b
respectively. Cost of production for corn-ethanol
is for a 40 M gallon ethanol plant in 2002-03
prices Cost of production for cellulosic-ethanol
is for a 25 M gallon ethanol plant in 2002-03
prices
12Cost of Ethanol Production from Miscanthus in
Illinois
Spatial variability in cost of ethanol production
from Miscanthus Cost range 1.8-2/gallon at corn
price of 2.05/b
13Environmental Benefits of Bio-energy Crops
- Soil carbon sequestration
- Conservation tillage potential for
sequestration/ha small 0.3-0.5 MT/ha/yr - Miscanthus/Switchgrass 3 times higher potential
to sequester 0.94-1.4 MT/ha/yr - Reduction in carbon emissions by displacing coal
or gasoline as fuels - Reduction in sulfur-dioxide emissions relative to
coal
14Greenhouse Gas Reduction Potential of Biofuels
Relative to Gasoline
Figures above the bars represent emissions/gallon
as a of emissions with gasoline equivalent to
one gallon of ethanol
15Carbon emission reduction includes carbon
sequestered in soil Corn price assumed to be
2.05/b unless otherwise stated
16Estimated are out of the total amount of carbon
emissions mitigated
175
Coal
5
15
15
5
15
100
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19Summary
- Profitability of Miscanthus varies spatially
- Depends on yields, transportation cost and
opportunity cost of land - Switchgrass not likely to be competitive with
Miscanthus for electricity generation or fuel
production - Bioenergy from Miscanthus not fully competitive
with coal or gasoline at current prices - Environmental benefits need to be accounted for
- Incentives for use of bioenergy crops need to
come from - Environmental policies restricting/pricing CO2
(20/t of CO2) - Renewable energy/fuel standards
- Alternatively, incentives for growing bioenergy
crops need to come from - Agro-environmental policy rewarding carbon
sequestration and reductions in soil erosion and
in nitrate run-off - Allowing bioenergy crop production on CRP land