An example of the detailed production costs in the mid-1990s of two commercial herbaceous crops grown without irrigation in the Corn Belt of the U. S. Midwest, the perennial alfalfa and the annual corn, is shown in Table 4.14 (University of Illinois Urbana-Champaign FaRM Lab, 1995). The economics are shown for the maintenance and harvesting of established alfalfa. The cost of planting in the first year is therefore excluded. For corn, no-till, no-rotation planting is used. This technique affords the lowest production cost, although attention must eventually be given to counteract any adverse effects on soil chemistry. Alfalfa has been proposed as a dedicated energy crop and corn is a commercial feedstock for fuel ethanol production. The analysis showed that the annual loss in nominal dollars was about $115/ha for alfalfa and $101/ha for corn. It is evident that at the production costs, reported yields, and market prices at that time, production of either crop could have led to a significant loss for the farmer. It is also evident that the major variable cost factors are chemicals and harvesting labor, and the major fixed cost is land rent.

It is immediately apparent from this assessment that situations can exist that would make alfalfa and corn production profitable. If the land is rented at much lower cost than indicated in Table 4.14 or is owned by the farmer with no outstanding debt, or the crops are grown on one or more family farms where resident labor is available, the economics can be quite different and favorable. Many scenarios can be envisaged that will improve the net return. The point is that what may appear to be uneconomic at first is subject to change when the details are analyzed and appropriate actions can be taken to improve profitability. The difficulty of accurately predicting market prices is another factor that complicates matters further. Indeed, it was only a few months after this analysis that the market price of corn began to increase at a rapid rate and to reach an all-time high of over $5.00/bu, which effectively

“Adapted from University of Illinois Urbana-Champaign FaRM Lab (1995). bOne bushel (0.03524 m3) of corn is approximately 25.4 kg (56 lb).

doubled the farmer’s revenue. Careful consideration of all cost factors is obvi­ously necessary, but there is no approach to the elimination of all risk when growing a dedicated energy crop, or any other crop for that matter.

An economic analysis of the delivered costs of virgin biomass energy in 1990 dollars has been performed for candidate virgin herbaceous and woody biomass for different regions of the United States (Fraser, 1993). The analysis was done for each decade from 1990 to 2030 for Class I and И lands, but only the results for biomass grown on Class II lands for the years 1990 and 2030 are shown in Table 4.15. The total production costs for biomass were projected with discounted cash flow models, one for the herbaceous crops switchgrass, napier grass, and sorghum, and one for the short-rotation production of syca­more and hybrid poplar trees. The delivered costs are shown in Table 4.15 in 1990 $/dry t and 1990 $/MJ and are tabulated by region and biomass species.

"Adapted from Fraser (1993). Discounted cash-flow models account for the use of capital, income taxes, time value of money, and operating expenses. Real after-tax return is assumed to be 12.0%. Short-rotation model used for sycamore and poplar. Herbaceous model used for other species. The costs are in 1990 dollars. The yields in 1990 are on Class II lands. The average total field yields are for the entire region on prime to good soil, less harvesting and storage losses. The yields in 2030 are assumed to be attained through research and genetic improvements. Short — rotation woody crops (hybrid poplar and sycamore) are grown on 6-year rotations on six indepen­dent plots. Net income is negative for first 5 years for each SRWC plot.

The yield figures for 1990 were obtained by the analysts from the literature and the projected yields for 2030 were assumed to be achievable from continued research. The annual, dry biomass yields per unit area have a great influence on the final estimated costs, as would be expected. This analysis indicates that the lowest-cost energy crop of those chosen can be different for different regions of the country. A few of the biomass-region combinations appear to come close to providing delivered biomass energy near the U. S. Department of Energy cost goal. But realizing that there are many differences in the method­ologies and assumptions used to compile the 1990 costs for delivered fossil fuels in Table 4.13 and delivered virgin biomass energy in Table 4.15, it appears that many of the biomass energy costs are competitive with those of fossil fuels in several end-use sectors, even without incorporating the yield improve­ments that are expected to evolve from continued research on biomass en­ergy crops.

However, it is essential to recognize several other factors in addition to the basic cost of virgin biomass and its conversion when considering whether the economics are competitive with the costs of other energy resources and fuels. Some potential biomass energy feedstocks have negative values; that is, waste biomass of several types such as municipal biosolids, municipal solid wastes, and certain industrial and commercial wastes that must be disposed of at additional cost by environmentally acceptable methods. These biomass feed­stocks will be discussed in the next chapter, but suffice it to say at this point that many generators of waste biomass will pay a service company for removing and disposing of the wastes, and many of the generators will undertake the task on their own. These kinds of feedstocks often provide an additional economic benefit and revenue stream that can support commercial use of biomass energy.

Another factor is the potential economic benefit that may be realized from the utilization of both waste and virgin biomass as energy resources due to current and future environmental regulations. If carbon taxes are ever imposed on the use of fossil fuels in the United States as they have been in a few other countries to help reduce undesirable automobile and power plant emissions to the atmosphere, additional economic incentives will be available to stimulate development of new biomass energy systems. Certain tax credits and subsidies are already available for commercial use of specific types of biomass energy systems (Klass, 1995).