Economic aspects of willow growing in Sweden Håkan Rosenqvist, SLU Sweden Thanks to different EU projects, SLF and Värmeforsk for funding

Important economic variables in the decision-making process ·     Profitability ·       Utilization of existing resources and its alternative value ·       Risk spreading aspects

What should the payment for biofuels from energy crops be from the farmers point of view? Farmers need compensation for: Costs for growing the crop Costs for land Payment for new crop and risk compensation

Risk and risk reduction

Examples of risk reduction in energy crop cultivation Increased knowledge Cultivation technology Subsidies Contract design Portfolio thinking

Energy Crop Production Costs Growing Costs for Cost for Crop cost land risk and EUR/GJ EUR/GJ new crop Yield Sum Tdm Willow 9 4.1 0.0-0.5 0.9 5.0-5.5 Poplar 9 4.4 0.0-0.5 1.1 5.5-6.0 Reed canary grass 7.5 6.0 0.0-0.6 0.4 6.4-7.0 Miscanthus 10 7.1 0.0-0.5 0.8 7.9-8.4 Hemp 10 8.2 0.0-0.4 0.4 8.6-9.0 Triticale whole crop 11 6.5 0.0-0.4 0.2 6.7-7.1 Straw 3.7 0 0.1 3.8

Yield level, tonne DM per hectare 5 6 7 8 9 10 11 12 13 14 60 3.4 3.0 2.7 2.5 2.4 2.3 2.1 2.0 1.9 70 4.0 3.6 3.2 2.8 2.6 80 4.6 4.1 3.7 2.9 90 5.2 4.2 3.9 3.3 3.1 100 5.8 4.7 4.3 3.5 110 6.5 5.7 4.8 4.5 120 7.1 6.3 5.3 4.9 130 7.7 6.9 6.2 5.4 5.1 4.4 Cost level (%) Cost for willow today, (EUR/GJ)

More important to increase the price for willow and RCG than yield level

Willow production costs in Northern Europe

High costs with small area of willow

Crops for today or the future? Different cost reduction potential for different crops Today's large crops have the lowest cost-cutting potential There is knowledge and infrastructure for today's crops such as cereals and rapeseed Plant breeding, technology and organizational development can reduce future costs.

Expected cost reduction potential during 15 year, compared with cereals Willow 32% Miscanthus 18% RCG 15% Hemp 12% Straw 7% Triticale (in bales) 6%

Cost breakdown example, Reed canary grass/switchgrass Willow

Planting costs per hectare in Sweden during the pioneer stage of growing Salix (in real terms, excl. plant stock).

Comparison for Salix plantations in Northern Ireland between pioneer costs and costs based on Swedish experience.

Willow growing in Sweden (New subject in presentation)

Willow in Sweden 2016 Willow in Sweden is concentrated to different regions. Most of the willows are located around the lake Mälaren close to Stockholm. ● Särskilt om Salix Källa: Jordbruksverket

Important factors in Sweden for willow planting Set-a-side land Subsidies for planting Environmental taxes Forest residues has created a wood fuel market in Sweden Chips from forest residues can delivered all year around

Farmers motives for planting Salix. In summary, they were:

Influence on Salix activity from certain farm characteristics

The characteristics of farmers, who regret their Salix plantation, compared to others, are

Farmers, who reduce their Salix plantation, have these characteristics compared with other farmers: ·    less land ·    more forest land ·    more often work outside the farm ·    less hours work on the farm ·    less use of advice

Soils for willow plantation

Location of the willow plantations in Sweden

Reasons for reduction of plantations

Some reflections and experience of Salix based on 74 meetings about the energy crops economy in 2011 - 2014

Experiences from meetings with mainly Salix growers Salix growers are not a homogeneous group Are both satisfied and dissatisfied growers

Satisfied Salix growers Many of the satisfied growers seem to be engaged in sales and cultivation Sludge is used as a way to increase the profitability

Reasons for dissatisfaction Have not harvested the year they wanted. Low harvest net income Difficult to sell salix Organization around harvest is sometime poor. Selling of chips and organizational issues appear to be a major problem for salix cultivars than biology and harvesting technology

Engage important Satisfied growers seem to engage more in their cultivation than dissatisfied growers Important to create engagement to growers Salix meetings have increased engagement with growers Many salix growers seem to feel unsure about their crops.

There are a large number of farmers who do not like Salix and not grow Salix. Arguments from this group are: Ugly Destroy drainage Difficult to sell salix Failure to grow energy when food is needed in the world Problems to restore the soil to food crops Knowledge of Salix is ​​often relatively low in non-salix farming farmers. Seems that salix is ​​not a "status crop" to grow.

Collaborate with local driving forces is important There is a need for a driving entrepreneurs for things to happen One way to increase Salix area is to collaborate with and focus on actions in areas where there are driving Salix people. If there is no local support, it is difficult to start with Salix. There are conflicts between different Salix contractors, which maybe hold back cooperation.

Questions to think about! How do we work to get increased cultivation of Salix and other energy crops where there are proper economic conditions? How are the right conditions for profitable Salix cultivation or other energy crops created?

Economy in SRC with- and without waste water and sludge

Production costs and profitability

Yield for the different crops used in the calculations Höstvete sås på hösten och skördas nästkommande vår. I Sverige odlas främst höstvete (85%), men internationellt dominerar vårveteodling. Höstvete ger större skördar än vårvete och odlas som brödsäd och som fodersäd. Höstvete innehåller mindre mängd gluten än vårvete och används därför främst till kakor, kex, kaffebröd och en del matbröd där volymen inte är så viktig. Vårvete: sås på våren och skördas på hösten samma år. Det finns olika varianter av vårvete. Vad som skall odlas bestäms av kvarnarna och den vanligaste sorten i Sverige heter dacke. En annan mindre odlad variant benämns vinjett.

Costs and income included in the following calculations All costs except the costs for land are included, e.g. OH, depreciation, interest rates and own work No subsidies are included, except the 500 € in establishment cost subsidy for willow SRC Basic Payment Scheme and greening CAP subsidies are not included in the calculations Depreciation expense is the allocated portion of the cost of a company's fixed assets that is appropriate for the accounting period indicated on the company's income statement. For instance, if a company had paid $2,400,000 for its office building (excluding land) and the building has an estimated useful life of 40 years, each monthly income statement will report straight-line depreciation expense of $5,000 for 480 months. 

Production costs (€/MWh) 2 Faktorer som påverkar costs för : - Ettåriga - Handling är dyrare för att hantera (no drying for salix) 1 t DM = 4.39 MWh 5 kg N per ton DM Efter varje gång, 7 gånger/22 år, 22 kg P 3 åriga kalkyler = cutting cycle

Gross margins (€/ha/yr) På de middle-high Salix (1143 kr) är salix bättre… även om wheat (autumn-bread) is higher (2372) there is a question if there is available land within the crop rotation… we should look into the average of wheats and barley, then the situation is not so advantageous for cereals

Cost division in SRC (in €) Willow SRC, production period 22 yr, fertilised only after harvest, new clones   Average harvest (22 yr) = 8,78 Establishment 11% Fertilisation 13% Harvest and field transport 33% Tranport to DHP 19% Selling costs 5% Termination 1% Management and OH costs 10% Interest rate 9% Sum 100% Establishment is a relative small part of the costs, therefore a farmer should use good plant material. Biggest part (52%) is associated to harvest

Things that improve profitability Engagement in the management/cultivation and selling of chips Well-managed crops that result in high yields Geografical localisation Municipal sludge and/or wastewater Collaboration between all parts

Examples of business concepts with energy crops as a base Selling heat Dry and sell chips Briketting of various feedstock Take care of sludge or wastewater Feed pigs in SRC

(New subject in presentation) Waste water irrigation in willow

Photo WW

Some of the most important conclusions about waste water irrigation are (1) Saved costs in treatment works is much more important than saved costs and higher yield in the willow plantation. Its important to find right treatment works which have high costs in traditional treatment and low costs for vegetation filter.

Some of the most important conclusions about waste water irrigation are (2) Pumps, ponds and pipes to field are higher costs than the irrigation equipment in field. Fixed costs are higher than variable costs.

Positive factors to keep costs per kg N and P on a low level are High N and P applications per hectare per year. Long irrigation session. High N and P concentration in the wastewater. Short distance between treatment works and the vegetation filter. Large area of willows.

Costs per ton sludge from Swedish treatment work Costs per ton sludge from Swedish treatment work. Spreading is not included in the costs. Method Number Average Costs, Euro   Soil for green areas 68 23 Landfill incl. tax. 12 65 Burning 2 55 Agriculture 14 22 Salix 9 22

Sludge application to SRC Receiving sludge in SRC fields increase the economy of SRC Compensation varies A common increase on farm profitability is ca 50 € /ha/yr… …but there are broader margins if you consider the alternative ways to treat sludge in ww treatment plants

Wastewater application 85-90% saving costs for the wastewater treatment plants (per treated kg N) Increased biomass production and saving fertilisation costs (ca 15%)

Costs in treatment works for separating of nitrogen and phosphorus

Good conditions for waste water irrigation when: Need for new investment in treatmentwork Short distance between treatmentwork and willow field. When it not need ponds for storage the water during wintertime. Right entrepreneurs, right people at treatmentwork and right people at the municipality

Some of the most important conclusions about waste water irrigation are Saved costs in treatment works is much more important than saved costs and higher yield in the willow plantation. It´s important to find right treatment works which have high costs in traditional treatment and low costs for vegetation filter. Pumps, ponds and pipes to field are higher costs than the irrigation equipment in field. Fixed costs are higher than variable costs.

Positive factors to keep costs per kg N on a low level are High N-applications per hectare per year. High N-concentration in the wastewater. Long irrigation session. Short distance between treatment works and the vegetation filter. Large area of willows.

Costs for wastewater irrigation Investment for irrigation about 5 000 Euro per hectare with 10 hectares irrigation. Operation costs about 6 Euro per 100 cubicmetre water

Rosenqvist’s own willow SRC field Agricultural soil, 110 ha Good soil: 85 ha Less good soil: 25 ha Forest: 100 ha Willow SRC: 6 ha Willow on the worst part Planted 1994 Older clones with low production Not fertilised Harvested 4 times Last harvest: 2016 Winter 2014-2015 was the market poor. I move the harvesting to next winter.

Harvest in 2016 Harvest: 29 ton DM/ha after 7 years Price per ton DM: 75 € (17 € per MWh) Income: 2 176 €/ha Harvest costs: 830 €/ha Transport (100 km): 652 €/ha Loading: 119 €/ha Netto per ha: 576 €/ha

Mistakes made Too small turning points for the harvest equipment Two different clones with different yields Too humid at a small part in a small part of the field

Thankyou!