Many landowners do not rely on economic equations (e. g. net present value, internal rate of return or equal annual equivalent) to determine the “optimal” rotation age or planting spacing when growing pines. Often, they ignore the time value of money and, instead, adopt objectives that overshadow profit motives. As a result, some use shorter rotations (e. g. 8-year) or plant more seedlings (e. g. > 1700/ha) or spend more for intensive management than would be optimal for profit maximization (Figure 10.3). When economics is the primary objective, then the optimal rotation age will be a function of the desired interest rate. For example, when the interest rate charged by a financial company is 5%, the optimal rotation for pine biomass on some sites might be 17 years (Table 10.7). In contrast, a shorter rotation might be used when the landowner borrowed money at a 12% rate.

Landowners who are risk-adverse typically prefer short rotations over long ones. This might occur when the risk of losses due to fire, insects, disease or hurricanes is high. As a result, short biomass rotations might be attractive to some, especially when the expected return on investment is greater than 9%. Some landowners might be willing to accept a reduction of $9/ha/yr in equal annual equivalent (Table 10.7) if it resulted in reducing the risk of losing trees to beetles and disease.

In the cases where there is only one price per green tonne (regardless of tree size), the economic rotation is no greater than the age at maximum mean annual increment. Typically, the year when maximum mean annual increment occurs varies with site productivity. Sites high in productivity (e. g. >15 Mg/ha/yr) will achieve shorter “biological” rotations than

low productivity sites (e. g. <8 Mg/ha/yr). For example, some productive sites may result in a “biological” rotation of 19-20 years while the economically attractive rotation may be 13-17 years (Table 10.7).

Forest plantations are often on sites that generate lower rental rates for alternative land uses, such as crop agriculture or animal grazing. In addition, government policies that lower property tax rates for forest land or offer conservation payments offset potential rent from other land uses. As a result, the economic analyses of forest plantations seldom include annual rent as an input. The exclusion of market-based annual rent payment yields, on balance, longer economic rotations than when annual rent is included.

Although profits could be achieved for a landowner who sells biomass to a refinery that produces synthetic diesel fuel, the economic incentive is often greater when the grower is also the end user. For example, one green tonne of pulpwood may be worth $9 in the forest, $26 at the roadside, and $32 at the power plant. However, for a homeowner, the wood might be sufficient to offset $135 in fuel oil (2012 prices). Therefore, one green tonne of pine biomass is worth perhaps 12 times more to a landowner who burns wood as an energy source (to furnish heat to their business) when compared to a landowner who sells pine logs on the open market (to a pellet mill or a Biomass Fluid Catalytic Cracking (BFCC) plant).

Some landowners add value to their pine logs by splitting and drying the wood for use as firewood. In some regions of the United States, split, air-dried pine firewood is currently sold for $65/m3. A landowner could either sell a green cubic meter of pines for $9 to a wood dealer or, after drying and splitting, could deliver it to homeowners for seven times that amount. Homeowners who purchase firewood do so because the cost of heating their home with wood is less than heating with fuel oil.

The least economical use of pine is as a substitute for coal, but one of the most economical uses is as a substitute for gasoline. During the Second World War, supplies of gasoline were limited and, therefore, many vehicles in Europe were converted to run on wood gas (also known as producer gas). In Sweden, there were over 70 000 of these vehicles at that time.

Currently, only a few individuals own vehicles that can be powered with wood gas. The senior author of this chapter actually owns a modified truck that can run on either gasoline or wood gas (Figure 10.4). This vehicle gets about 8.5 km per liter of gasoline or 2.4 kg of dry pine blocks («12% od moisture content). What is surprising is that the engine is more efficient when running on wood-gas. If one liter of untaxed gasoline costs $2 and one kg of dry pine block cost $0.06, then annual fuel costs (assuming 34 000 km) would be $8000 when using gasoline compared with a cost of only $240 when using wood gas.

10.3 Government Regulations

Globally, differences in governmental regulations can affect a landowner’s desire to estab­lish pine biomass plantations. Therefore, even when the price of coal is essentially the same in two countries, government policies can greatly affect the incentive for establish­ing plantations of pine. For example, policies regarding carbon dioxide have resulted in a decline in planting pines in New Zealand. In South Africa, policies regarding water limit the areas where pines may be established for energy (but establishing grasses for energy is permitted). Some regional governments have regulations concerning wood smoke pollution and the associated health effects.

10.4 Final Comments

In various countries, growing pines in plantations, for uses other than energy, is an econom­ically viable enterprise. In addition, pine firewood and pine residue will continue to provide energy to homes and mills throughout the world. For example, bioenergy (from pine and other sources) provides more energy to Sweden than oil or hydropower or nuclear power. Although the technology to produce electricity and liquid fuels from pine is available, so far few pine plantations have been established solely for the production of bioenergy. This is partly because pine biomass can also be obtained from thinnings, mill residues, harvest residues and from pine scraps transported to landfills. However, the number of pine biomass plantations might increase dramatically if the prices paid (per Mg) by biomass plants skyrocket.

Claims about short-rotation woody biomass crops have been made for more than four decades. During that period, many predictions about prices, yields, and seedling planting rates have not been achieved. Therefore, we are hesitant to make any claims regarding the future extent of short-rotation pine plantations. However, those considering harvesting pines on an eigh-year rotation for bioenergy may wish to consider the following points:

• Some bioenergy reports have likely overestimated the expected yield/ha of short-rotation pine plantations (on average sites) harvested before the year 2030.

• Few (if any) landowners will invest $43 to grow and harvest a dry Mg of pine biomass when the price paid at the farm gate is only $40 per dry Mg.

• Most planting densities recommended for pine biomass are not the economically opti­mum for a landowner who sells harvested wood at the roadside and who wishes to maximize the land expectation value.

• Several studies that evaluate the optimum tree planting density do not consider any additional costs associated with harvesting small diameter logs.

• Unrealistic goals for the establishment of biomass plantations (of any species), will prove difficult to achieve.

• Some researchers have an inherent bias against pine, since there are few researchable bottlenecks for large-scale establishment of pine plantations.

• Some individuals have ignored the law of diminishing returns when stating that increasing silviculture intensity will lower the unit cost of producing pine biomass.

• In order to achieve 5.3 million ha of short-rotation plantations by the year 2022, it is first necessary to be able to produce a sufficient quantity of planting stock (perhaps 1 billion plants per year for energy crops plus an additional 0.9 billion seedlings for longer-rotation pines).