The choice of which energy crop to grow has a significant impact on production economics, especially establishment costs and how they are treated. Many farmers are accustomed to growing annual crops whose production systems require a more basic annual operating capital scenario, under which establishment costs are financed through a credit line or out of cash reserves. The return comes in the same operating year when the annual crop is harvested. Due to weather, market, and other risks, annual crop production is a high but short-term risk scenario.

Managing establishment costs for perennial crops is somewhat different. With a perennial, the producer must pay establishment costs up front, similar to an annual. However, the producer’s return that will repay those establishment costs may come over a long period of time (e. g., ten years or more in some cases). This high up-front cost without quick recovery can be a barrier to many producers.

Programs such as the United States Department of Agriculture’s (USDA) Biomass Crop Assistance Program (BCAP) and other incentives have sought to overcome this hurdle by providing producers cost-sharing assistance during the establishment year. BCAP repays producers for 75% of the establishment cost (www. fsa. usda. gov/bcap). Some states are evaluating methods by which they can create programs to assist with feedstock estab­lishment and production costs. The challenge is that the long-term viability of incentive programs like BCAP and state incentives has yet to be proven. Furthermore, incentives such as these may become rarer in the current governmental fiscal climate and will likely be subject to political discourse. Nonetheless, to ensure development of a viable bioenergy industry, additional methods of overcoming these costs must be found.

One potential model is to have the biomass consumer, the conversion facility, include costs of establishing perennial biomass crops as part of the overall project financing package. As an incentive to recruit landowners and farmers to produce biomass, the production facility could offer establishment assistance by cost sharing or by providing inputs such as seed at no charge. The biomass consumer would like get a lower feedstock price for a defined period of time in return. However, the assistance from the downstream user mitigates risk to the landowner as well as the facility by making it easier to enroll land into energy crop production.