At its core, the primary challenge with commercializing energy crop production for bioen­ergy is minimizing risk. This includes risk to the producer, risk to the biomass conversion facility developer, and risk to the institution(s) financing the project. Understanding and mitigating these risks are a part of the commercialization process. There are three primary areas of risk with energy crop commercialization. They are:

• Land recruitment.

• Establishment and supply ramp up.

• Annual yield risk.

As discussed earlier, recruitment of land is critical to all other aspects of the commercial scale supply chain. If a project is unable to secure the required amount of land in a given area, the entire project could fail. Addressing this risk begins with adequate planning. Finding a qualified partner to conduct a feasibility study on land recruitment will be critical. Feasibility studies will allow for the evaluation of many aspects of a given area’s land use, agricultural infrastructure, and willingness of farmers and landowners to participate. A feasibility study will help identify potential issues with a given location prior to the start of a project and/or enable better site selection processes.

Recruitment risk can also be reduced through incentive programs, like BCAP, that reduce cost and risk to landowners and farmers. Particularly with perennial crops, reducing the up­front cost to landowners though such a program or by covering a portion of establishment costs through the project will enhance the project’s ability to recruit land.

Significant risk is also associated with crop establishment and ramp up in yields to meet the demands of the biomass conversion facility at start-up. With perennial crops, the maximum yield of the crop is not reached until three years after establishment. This extended maturation of the plant requires commercial biomass supply chain developers to carefully plan establishment activities with the construction and subsequent start-up of additional biomass conversion facilities. Regardless of how well establishment is planned, several factors could disrupt the process and delay biomass supplies. Establishment of crops like switchgrass and miscanthus is not an easy task. As discussed in other chapters, precipitation, weed control, and other factors can make establishment difficult. If an acre of biomass crop is not successfully established and must be replanted, there will be an automatic delay in maturation of the crop by one year; this will thus affect anticipated delivery of biomass to the conversion facility.

To reduce establishment risk in energy crops, several best management practices should be employed. Firstly, areas with high populations of weed species known to compete with the target crop should be avoided. For all land types, site preparation in advance of planting can improve the likelihood of success significantly by reducing potential weed issues before they occur. Utilizing quality planting stock from reputable sources is also important. Seeded species require high germination rates for success and rhizome-type planting materials need to receive good care through rhizome harvesting and storage to enable adequate planting success. Finally, establishment-year management must be diligently carried out. Addressing competition issues and other fleld-by-fleld management concerns in a timely manner will significantly increase the likelihood of success. Additional tools, such as an increase in availability of applicable herbicides, will aid in management success.

The final key risk category is year-to year-variation in energy crop yield. While dedi­cated energy crops are more resistant to drought and other climactic factors, they are still susceptible. A drought that would wipe out a corn or soybean crop may reduce perennial energy crop yields by 20-30% [12]. Generally there will still be an adequate harvest and the stand will survive, but biomass yield will be reduced. There are also risks for pests and diseases that may impact the yield of dedicated energy crops. Planning to mitigate risk for this variation in yield, regardless of the source, will be difficult. As biomass conversion projects develop, energy crop production will be carefully monitored to match the annual volume of material required to operate a facility. Due to land and crop establishment costs, many projects will not have the ability to “overplant” a buffer supply to mitigate variation in yield from year to year. Therefore, planning to carry inventory over from year to year to buffer feedstock shortfalls is one method of addressing the risk. Identifying and plan­ning conversion facilities for alternative feedstocks to augment primary supplies is another method. Developing a diverse portfolio of feedstocks is a broad, impactful tool to help ensure long-term success for commercial energy crop systems.

Additional risks, those that may not be directly tied to energy crop supply chains, exist and can dramatically impact the overall biomass-based industry. These risks include the stability or lack thereof in state and federal policies related to bioenergy. Policies, such as the Renewable Fuel Standard (RFS), can successfully generate market demand for biomass and subsequent products. However, as of 2013, the RFS and other biomass related programs, such as BCAP, continue to be a controversial mandate in the political arena. The policy climate presents significant risk to the industry as a change in the policy or even discussion about changing the policy can impact capital investment availability and markets for existing facilities. Additionally, some sectors of the biomass-based conversion industry are operating or planning to operate technologies that remain relatively unproven in the market place. Inherent risk is associated with using new technologies at a commercial scale. With the reliance of some biomass-based industries on perennial energy crops, the failure of a conversion technology may leave a large island of biomass energy crops stranded without a significant market for use. Creating multiple markets and outlets for the biomass will significantly reduce risk associated with policy and technologies by providing biomass producers with alternatives.

Biomass conversion facilities that have the ability to accept multiple types of feedstocks will have inherently lower feedstock risks. This is a key method of risk mitigation. Fewer acres of each individual crop will reduce yield variation and production risks. An ability to use other feedstocks when a particular one falls short on supply provides adequate back up to keep the conversion facility in operation. A diverse feedstock supply can also reduce feedstock costs by decreasing storage and other production system costs. Without any question, management strategies that accommodate diverse feedstocks are the primary method for reducing risk in energy crop supply chains.

The second overarching method to reducing risk in commercial dedicated energy crop supply chains is improvement in energy crop genetics. These improvements will be critical, just as they have been for corn and soybean. Significant yield gains have been made in the last 10 years through genetic resistance to drought, disease, and other pests affecting those crops. Similar improvements are now being incorporated into energy crop production and additional, significant improvements are expected in the next several years. Improvements in yield alone will reduce risk from all factors. Less land will be required to produce the same amount of biomass while fewer acres planted reduces establishment and annual variation risk. Other genetic traits and factors, such as herbicide resistance and improved nutrient use efficiencies, will also help reduce establishment and yield risk.

To successfully commercialize the energy crop supply system for a given consumer, project participants, financiers, and others will all be evaluating risk throughout the system. Careful thought and pre-planning of the energy crop supply chain can mitigate a significant amount of problems downstream.

18.3 Conclusion

Commercializing dedicated energy crop supply chains is not an easy task. Significant hur­dles must be addressed to be successful. The good news is that a broad array of research and development (R&D) efforts have been and are underway. Government agencies, universi­ties, and private companies have all made significant investments in developing systems by which energy crop supply chains can be commercialized. Significant research and develop­ment activities have occurred and are occurring in herbaceous energy crops and dedicated woody crops in all sectors of the United States and abroad. These R&D activities have gen­erated a strong base of knowledge and expertise that commercial entities are now beginning to utilize at the commercial scale. It is projected that the United States could produce over one billion tons of biomass between 2025 and 2030 [13]. To produce that much biomass in a sustainable manner will require planning, a broad array of skills, and sound risk man­agement, as well continual improvement of the entire supply chain during the next decade. As the first few commercial scale projects begin operation in 2014 and 2015, all of the knowledge and skills developed will be put to the test. With the extensive work that has gone on in the past decade, we are well positioned to make the commercialization of dedicated energy crops a great success, a success that will benefit generations to come.

References