Evaluations of integrated versus stand-alone cellulosic ethanol production from sugarcane bagasse/straw [5] demonstrated that some scenarios for the integration of first and second generation ethanol production in Brazil present better economic results than optimized first generation ethanol production. Integrated scenarios can increase up to about 40% ethanol production per unit of sugarcane processed and increase the internal rate of return by about 2% per year in comparison to optimized first generation ethanol production. These results show that the ethanol average cost from an integrated first and second generation ethanol production can be cost competitive with first generation ethanol and gasoline at current oil prices, if the projected process performance is achieved. The current challenge regarding cellulosic ethanol production lies in gaining a competitive and sustainable scale for achieving the consolidation of industry standards of production. Naturally, having the best conditions in relation to the cost and availability of raw materials are essential factors for the success of this strategy, and Brazil presents several advantages considering the favorable environment for integration of second generation ethanol in the efficient and well established first generation ethanol production chain.

The internal market for ethanol in Brazil has steadily increased, driven by the government mandates of 18-25% ethanol in gasoline, as well as the widespread use of flexible fuel vehicles, which can run on any fuel mix between gasoline and pure hydrated ethanol. It is expected that the existing storage, blending and distribution infrastructure of 1G ethanol will benefit the commercialization of cellulosic ethanol in Brazil.

Regarding the potential external demand for cellulosic ethanol, current trends might foster production of 2G ethanol in Brazil. In the United States, the revised Renewable Fuel Standard (RFS2) puts emphasis on both advanced biofuels and cellulosic biofuels. First generation sugarcane ethanol is classified as advanced biofuel, since it meets the threshold of 50% reductions in greenhouse gas emissions compared to fossil fuels displaced. Under the RFS2, cellulosic biofuels will have an increasing share of the biofuel market in the United States, reaching 16 billion gallons by 2022. The current trend in the European Union for reduced reliance on conventional biofuels that could potentially compete with food or fiber, and to substantially increase the share of cellulosic biofuels from crop residues, waste, woody material, can also provide incentives for growth of cellulosic ethanol production in Brazil.

The complete system described in this example has three storage features. Round bales, because the rounded top sheds water, can be left in the field for a short time (days) before in-field hauling. This in-field storage provides the advantage of uncoupling the harvest and in-field hauling operations, and thus provides an opportunity for improving the cost efficiency of both operations. The farmgate contract holder has the opportunity to bale when the weather is right and haul later — there is no requirement to delay baling for in-field hauling to catch up.

The second storage feature, satellite storage (SSL), provides the needed transfer point between in-field hauling and highway hauling. The system in this example envisions that the SSLs will be located so that the ton-mile parameter for each SSL will be not more than two miles. (This means that, averaged across all tons stored at that SSL, each ton will be hauled less than two miles from the production field to the SSL.) This constraint gives the farmgate contact holder an upper bound for their in-field hauling cost.

The third storage feature, at-plant storage, provides the needed feedstock buffer at the plant. Those building a bioenergy plant would like to operate with just-in-time (JIT) delivery

of feedstock, as this gives them the lowest cost for receiving facility operation. If JIT is not possible, they want the smallest at-plant storage for cost-effective operation of the plant. There is obviously a trade-off in the logistics system design between the higher cost to purchase JIT delivery, and the cost of at-plant storage operations.

Many of the variables that determine the delivered cost of woody biomass have spatial attributes. Transportation distance is often cited as a critical constraint on the financial feasibility of biomass utilization but in a heterogeneous landscape the distribution, quality, ownership, management and accessibility of forestland also have spatial dimensions that influence biomass supply. The following section discusses the tools and approaches that are used to perform spatial analysis of feedstock supply to inform logistics. Though the techniques can be complex, their broad purpose is to help estimate how much biomass can be supplied to a specific facility at a given cost.

“The emerging bioeconomy is likely to result in the single largest reconfiguration of the agricultural landscape since the advent of industrial agriculture. This change includes a large-scale shift toward perennial plants, increased appropriation of net primary production for biomass relative to food, and intensification of crop production on marginal, previously fallowed lands” [71]. In most of the developed world, the current system of agriculture has grown over the last 150 years with accelerating changes for the last 65-70 years. The biofuels revolution in agriculture and forestry could be largely complete in 10-15% of that time (2005-2022) if RFS2 goals are met. Even with delays in meeting these goals, which now seem inevitable, changes are likely to be largely completed in 25-30 years. To both assure that mandated sustainability goals are met and that bioenergy resources are available into the future, new knowledge and new tools are needed to evaluate the sustainability of this revolutionary change in the modern societal role of agriculture and forestry. The most appropriate means to analyze options for sustainability of the bioenergy based economy is to focus on net energy from a combined feedstock production/conversion technology and to determine the environmental costs per unit of net energy [35]. Minimizing the environmental cost per unit of net energy will help meet both short and long-term economic and environmental goals for bioenergy. It is likely that investments and policy decisions that do not seek to minimize the environmental cost per unit of net energy will decrease the long-term sustainability of bioenergy. Although in the short run other policy and technical considerations may drive investments in less sustainable directions, “footprint” evaluations based on net energy from a given final fuel product are needed to establish the right mixes of feedstocks and fuels for every region.

The theoretical temporal variability associated with three biomass supply options is shown in Figure 14.1, representing conversion to densified biomass from multiple rotations of a dedicated short-rotation woody crop, two intermediate thinnings from a stand grown primarily for sawlog production, and logging residues utilized only during final harvest in a sawlog production system.

From Figure 14.1, it should be evident that there is an interaction of temporal and spatial variability at play in utilizing woody biomass from forestry activities that may be less relevant for agricultural crops. In particular, woody biomass from stand thinning operations and logging residues from an intermediate or final harvest may be spaced as much as an entire rotation length (25-100 years) apart at any fixed point on the landscape. Thus, in order for woody materials from logging residues to adequately supply annual demand for a depot or conversion facility, spatial rotation of management activities between the stands that make up an estate ownership or management area is needed. Accurate characterization of the frequency of treatments performed, types of woody biomass available, spatial pattern, and transportation network associated with projected annual utilization within a draw region is critical for long-term supply planning.

Two common ways to manage long-term supply planning in well-regulated, managed forests are area control and volume control. Strict area or volume control are most eas­ily applied in even-aged silvicultural systems growing a single cohort of trees from the

regeneration phase to final harvest, it is the harvesting of the primary sawlog crops that result in logging residues utilized for woody biomass. Area control is realized when, for a given estate area of size A hectares and a stand rotation length of N years, A/N hectares are harvested each year. Volume control refers to the case in which a fixed target sawlog vol­ume, (V + G)/N, is harvested over the rotation length, N, from all standing timber volume (V) plus growth (G) over that time period. For example, in the inland northwestern United States, it is assumed that the yield of useable woody biomass from terminal harvest logging residues falls between 0.5 and 1.5 bone dry tons (BDT) per 1000 US board feet, or 2.4 m3, of sawtimber volume. Depending on regional variability, a typical mature stand might have between 15 000 and 25 000 U. S. board feet (15-25 MBF) per acre (0.4 ha) or more. At moderate residue concentration, in a productive and mature stand in the inland northwest, approximately 25 BDT of logging residues might be available for every 0.4 hectares of sawlog volume harvested, or 61.75 BDT per hectare. Thus, yields from harvesting potential available woody biomass are considerably larger, more spatially variable, and less frequent than yields from agricultural crops on a per unit area basis.

Discussion to this point in the chapter has largely ignored risk and uncertainty. Crop production is inherently risky and uncertain due to the effects of weather, biological fac­tors including disease and pests, and markets. The actual quantity produced and the price received for a crop may differ considerably from levels expected by the farmer at planting time. Economics of sustainable cellulosic feedstock for biofuels must include considera­tion of risk and uncertainty. Economists distinguish between risk and uncertainty. Risk is defined here as the possibility of two or more outcomes to an action or decision where the probabilities of occurrence of each outcome are known. Uncertainty is defined here as the possibility of two or more outcomes to an action or decision where the probability of each outcome is unknown. The economic implications of risk in crop production are critical to farmer decision making. A failed crop or sharply reduced prices for the crop result in financial losses for the farmer. A series of financial losses may result in financial collapse and loss of the farm business. A cellulosic energy production system is also vulnerable to risk where loss of feedstock supply or adverse variation in prices may bankrupt processors and other businesses in the supply chain.

Social sustainability is not a result of the cropping system but in the way that the crop is grown by whom and where. Any biomass, including switchgrass, miscanthus, wheat straw and corn stover, can be grown in ways that contribute to the social sustainability of the producers, workers and local community, or in ways that limit the access of those stake­holders to natural, cultural, human, social, political, financial and built capital. When social sustainability is ignored, and fuels from biomass are viewed as simply a technical problem, it is likely that social inequality and social displacement will occur with serious societal repercussions. Managing investments may be more important for social sustainability than managing cropping systems. Since production of biofuels from biomass requires vertically integrated value chains, attention to land grabs and speculation by those at the end of the value chain to control the feedstock supply can have serious social consequences that impact not only social sustainability but ultimately environmental sustainability as well.

• Traditional model — The producer grows, harvests, stores, and delivers raw material (biomass) in accordance with a contract with the processing plant. Deliveries are made to ensure that the plant has a supply for continuous operation during the processing season, which for most agricultural industries is only part of the year.

• Cotton model — The producer grows, harvests, and stores the raw material (seed cotton) in modules at the edge of the field (Figure 13.2). The gin (processing plant) operates a fleet of trucks to deliver the modules as required for operations during the ginning season. Farmers are paid for the seed cotton that crosses the scale at the gin. The gin operates a warehouse and stores bales of ginned cotton for periodic delivery to its textile mill customers throughout the year.

• Sugarcane (Texas) model — the producer grows the crop. The sugar mill takes ownership of the crop in the field and harvests and delivers it for continuous operation during the processing season. (Sugarcane must be processed within 24 hours of harvest, so storage is not part of the sugarcane system.)

The advantage (or disadvantage, depending on perspective) of the traditional model is

that all quality issues reside with the producer. There is no question who is responsible

if a quality standard is not met. Business people planning the operation of a bioenergy plant tend to prefer this model, though they typically balk at paying a feedstock price that adequately compensates the producer for their additional risk.

The advantage of the cotton model is that the specialized equipment needed for hauling the modules is owned by the gin. The producer does not have to own equipment that will be used only a few times per year. The gin uses its module haulers many more hours per year, thus the hauling cost ($/ton) is less than can be achieved by an individual producer. Typically, gins haul modules in the order they are “called in” by the growers. Module storage time in the field, and any subsequent losses are not dealt with in the grower-gin contract. The grower is paid the contract price for the mass of cotton fiber (and co-products) that the gin produces from a particular module.

The advantage of the Texas model is that the producer does not have to own any harvesting or hauling equipment. The disadvantage is that the producer does not have control over the time of harvest. Sugar content peaks in the middle of the season and a producer who has cane harvested early, or late, sells less sugar. Fortunately, this issue is addressed in the producer contract.

Unlike disk and drum chippers that slice and chunk wood into smaller particle sizes through cutting knives that slice fiber, grinders separate wood through a mashing and tearing or fibers. Thus, grinding may be more effective at lower moisture contents. Horizontal grinders such as that shown in Figure 14.8 have a rectangular open top for loading, with a conveyor and feed roller infeed that forces residues against the grinder, and then ejects hog fuel along an in-line conveyor outfeed. Vertical grinders, more commonly called “tub” grinders, have a large, cylindrical open top in which residues are loaded, and rely on gravity to feed the grinder.

Grinders, both of the tub and horizontal varieties, have an important place in the cur­rent infrastructure for woody biomass processing. The quality of the product resulting from grinders is generally of lower quality than a chipped product. Grinders tend to be more forgiving of soil and other contaminants, with the result that a higher proportion of these undesirable materials typically find their way into the product. Material processed in grinders is most often suitable for boiler fuel, in part because large biomass boiler systems tend to be less sensitive to ash content. Grinders are better adapted to locations where cut-to-length logging is common. In these operations, logging slash tends to be dispersed throughout the logging site. Logging residues are generally forwarded to the roadside or other locations where they can be accessed by the grinding equipment. Grinders are paired with a knuckle-boom loader and the outfeed discharges into a chip van of some sort. The ground product tends to be inconsistent in size and shape, and thus is not a preferred fuel or feedstock.

The choice of tub versus horizontal grinder is largely dependent on the type of material being processed. Tub grinders are better adapted to odd-shaped pieces, such as stumps, short bole sections, and the like. Horizontal grinders are more efficient at processing material with a more linear configuration, such as tree-length material or long tops and limbs. Horizontal grinders are capable of very high throughputs, making them efficient options where the product is acceptable.

A puzzle for many who develop pro-formas for cellulosic crop to chemical systems is what amount to budget for land. This puzzle arises from the endogeneity of land rent in the supply and demand functions of crops. In other words, when demand for a new crop is introduced to an existing equilibrium in agricultural crop markets, the use of land to produce that crop reduces the supply of land available to other crops. Reduced supply of an input reduces the supply of those crops. The new equilibrium price for those crops is higher as reduced supply interacts with constant demand. With higher crop prices and all else held constant, farmers bid up the demand for land. Land rents increase and if land rents are sustained at a higher level, the sale price of agricultural land rises. Developers of new crop-to-chemical systems should anticipate paying at least current land rents to start and perhaps higher land rents to sustain supply through time.