The Economics of Feedstocks - Calculating Your Cost of Producing Energy Crops and Crop Residues Madhu Khanna and Nick Paulson University of Illinois, Urbana-Champaign

Corn Stover Switchgrass 300 Acre Energy Farm at University of Illinois Miscanthus Many Feedstock Choices for Next Generation Biofuels Miscanthus Agave

Energy Crop Yield Based on Experimental Research on Miscanthus and Switchgrass  Over 10 years of experimental research at the 300 acre Energy Farm at the University of Illinois and several other locations  Calibration and validation of a DayCent Model, allows  Extrapolation of crop yield simulation to entire rainfed US

A decision tool to enable a profitable choice of feedstock  Choice among three sources of biomass  Miscanthus, switchgrass and corn stover  Useful for landowners deciding whether and which crop to produce for biomass at a given price and location  Processors and aggregators of biomass seeking to contract for biomass  or lease land for vertically integrated production of an energy crop  Accounting for support from the Biomass Crop Assistance Program (BCAP)

Key Components of Cost of Biomass  Yield per acre  Cost/Type of land for energy crops  Establishment cost and length of establishment period  Input and equipment costs  Harvesting, storage, transportation  Discount rate: time value of money

Functionality of the Feedstock Cost and Profitability Calculator  County specific default values for crop yields and costs  Users can input own/site-specific values  discount rate, establishment/input/equipment costs, harvest and storage losses, lifespan  Calculate the cost of converting land from corn/soy to energy crop  For corn stover: choose the rotation and tillage methods, nutrient application rates  Calculate value of BCAP subsidies  Outputs: Total Expenses, Revenues and Returns per Acre  Available as an Excel File that can be downloaded and operated on your computer from

Low Quality Land Yields vary across locations and with land quality Miscanthus Switchgrass Corn Soybean High Quality land

Cost of energy crops lower on low quality land  Miscanthus and switchgrass yields are 5-10% lower on low quality land compared to high quality land  But lower cost of low quality land more than offsets this  Land quality affects the opportunity cost of converting land for energy crops  Highest foregone returns that could be earned with an alternative use of the land  Fixed cost: results in high per ton cost of feedstock with low yields  On high quality land: profits from row crops: corn/soybean for cropland  On low quality land : Conservation Reserve Program rental payment

Breakeven Price Calculation  Price needed each year of the life of the energy crop for the present value of revenues = present value of costs of production.  It will decrease  If the lifespan of the crop is longer  Yield is higher  Establishment cost is lower  Opportunity cost of land is lower  Discount rate is lower  For corn stover: Price needed to cover the incremental costs of collecting, harvesting, storing and adding replacement fertilizer. It decreases  With yield  With collection rates: higher with no-till practice

Breakeven Prices of Miscanthus and Switchgrass $ per ton Marginal Land Switchgrass Cropland Miscanthus

Cost of Corn StoverLeast Cost Feedstock by County Competitiveness of Feedstocks Differs Across Locations

Biomass Crop Assistance Program: Lowers the break-even price of biomass Features of BCAP built into the calculator  Matching payments: $20 per ton for up to 2 years  Establishment cost share: 50% with a cap of $500 per acre  Annual payments for up to 5 years  Based on CRP rental rates for cropland  Based on pastureland rental rates for cropland-pasture  Reduced once harvesting starts depending on the type of facility the biomass is being sold to

Risk Premium $ per ton Yield Riskiness Relative to Corn Miscanthus Switchgrass

Planned additions  Extending the Feedstock Cost Calculator  To poplar and energy cane  Life cycle greenhouse gas emissions intensity per ton of biomass  Riskiness of yield and income with biomass production  Feedstock Cost Calculator available at:  Send feedback and comments to:

Publications  Dwivedi, P., W. Wang, T. Hudiburg, D. Jaiswal, W. Parton, S. Long, E. DeLucia, and M. Khanna, “Cost of Abating Greenhouse Gas Emissions with Cellulosic Ethanol. Environmental Science and Technology,” 49(4): , 2015  Song, Y., A. K. Jain, W. Landuyt, H.S. Kheshgi, and M. Khanna “ Estimates of Biomass Yield for Perennial Bioenergy Grasses in the United States,” Bioenergy Research doi /s , 2014  Miao, R. and M. Khanna, “Are Bioenergy Crops Riskier than Corn? Implications for Biomass Price,” Choices, 29(1), 6 pages, 2014  Jain, A., M. Khanna, M. Erickson and H. Huang, “An Integrated Biogeochemical and Economic Analysis of Bioenergy Crops in the Midwestern United States,” Global Change Biology Bioenergy, 2: 217–234, 2010  Khanna, M., B. Dhungana and J. Clifton-Brown, “Costs of Producing Miscanthus and Switchgrass for Bioenergy in Illinois,” Biomass and Bioenergy, 32: 482 – 493,  Khanna, M., “Cellulosic Biofuels: Are They Economically Viable and Environmentally Sustainable?” Choices, 3 rd Quarter 23(3): 16-21, 2008