Elsevier

Energy Policy

Volume 41, February 2012, Pages 484-493
Energy Policy

Price projections of feedstocks for biofuels and biopower in the U.S.

https://doi.org/10.1016/j.enpol.2011.11.009Get rights and content

Abstract

The economic availability of biomass resources is a critical component in evaluating the commercial viability of biofuels. To evaluate projected farmgate prices and grower payments needed to procure 295 million dry Mg (325 million dry tons) of biomass in the U.S. by 2022, this research employs POLYSYS, an economic model of the U.S. agriculture sector. A price-run simulation suggests that a farmgate price of $58.42 Mg−1 ($53.00 dry ton−1) is needed to procure this supply, while a demand-run simulation suggests that prices of $34.56 and $71.61 Mg−1 ($30.00 and $62.00 dry ton−1) in are needed in 2012 and 2022, respectively, to procure the same supply, under baseline yield assumptions. Grower payments are reported as farmgate price minus resource-specific harvest costs.

Highlights

► We model biomass prices needed to meet projected demand for biofuels and biopower. ► Combined projected demand is 295 million dry Mg of biomass by 2022. ► A farmgate price of $58.42 Mg−1 in 2022 meets demand under a price-run scenario. ► A farmgate price of $71.61 Mg−1 in 2022 meets demand under a demand-run scenario. ► Higher farmgate prices incentivize adoption of dedicated crops.

Introduction

Second-generation biofuels are expected to be an important contribution to renewable energy options in the U.S. and internationally. Advanced biofuels can displace non-renewable liquid transportation fuels and provide environmental and economic benefits. Research and development currently aims to produce advanced biofuels that are cost-competitive with conventional fossil fuels. This research evaluates feedstock price as a component of total delivered cost of cellulosic biofuels.

The Office of Biomass Programs (OBP) in the U.S. Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy (EERE) administers research and development efforts across industry, academic institutions, and national laboratories. OBP aims to foster commercialization of the bioenergy industry in the U.S. that will enhance U.S. energy security, reduce dependence on oil, provide environmental benefits, and create economic opportunities. The OBP publishes a Multi-Year Program Plan (MYPP) (2010), which is a dynamic document outlining the DOE's strategy for research, development, and deployment of various biomass technologies. The program aims to support the Energy Independence and Security Act of 2007 (EISA), with the goal of producing and using 136 billion liters (36 billion gallons) of renewable fuels by 2022. This ramp-up of biofuels use includes second-generation cellulosic biofuels and biomass-based diesel, and must accommodate additional projected demand for biopower (i.e. electricity generation from biomass).

The MYPP includes projected price targets for liquid fuels. Embedded in fuel price targets are costs associated with feedstock conversion (biochemical and thermochemical) processes, transportation, storage, and preprocessing and handling. Also included are production and procurement costs, here referred to as “grower payments”. Grower payment, the equivalent of stumpage price for forestry resources, is the price required for rights to harvest material from the field, and includes cost of production, profit, and, in the case of crop residues, compensation for soil nutrient removal. Succinctly, grower payment is farmgate price minus harvest cost. Similarly, for forest resources, stumpage price is the price of roadside chips, minus harvest and chipping costs.

Previous MYPP grower payments were estimated based on an analysis of production costs for energy crops and nutrient values for crop residues to meet initial, low-volume demands for biofuel feedstocks. Under 2009 MYPP projections to 2012, grower payments for herbaceous crops and residues were reported as $17.53 Mg−1 ($15.90 dry ton−1) (2007$) comprising 45% of total feedstock cost, while woody feedstock grower payments were $19.32 Mg−1 ($15.70 dry ton−1) comprising up to 31% of total feedstock cost (U.S. Department of Energy, 2010). However, a range of factors are likely to influence actual grower payment prices in the future, including feedstock supply and demand, competing market alternatives, biomass yield and productivity, and costs of production. This analysis aims to improve MYPP grower payment price projections by accounting for these factors.

The objective of this paper is to calculate grower payments needed to supply projected feedstock demand to meet both EISA targets beyond 2012 and additional demand for biopower in the U.S. To calculate grower payments of agricultural residues and energy crops, this research employs POLYSYS, a national simulation model of the U.S. agriculture sector that has been previously used in bioenergy and carbon policy analysis (De la Torre Ugarte et al., 2009, De la Torre Ugarte et al., 2006, Dicks et al., 2009, Hellwinckel et al., 2010, Larson et al., 2010, U.S. Department of Energy, 2011, Walsh et al., 2007). This analysis combines exogenously calculated stumpage prices for forest resources and wood wastes with the agricultural resources modeled in POLYSYS to meet the combined demand estimated for both the EISA mandate and projected biopower increase.

Section snippets

Agricultural land-use modeling

The POLYSYS modeling framework can be conceptualized as a variant of an equilibrium displacement model (EDM). EDMs establish simultaneous systems of generalized functions where endogenous variables are measured as proportionate changes and are a function of proportionate changes in exogenous, or curve-shifting, variables. The equilibrium market is shocked exogenously and the impacts of this disturbance are approximated by linear combinations of the products of the exogenous variables and their

Methods

Steps for the workflow for this analysis are enumerated in Fig. 2. These include: (1.a.) quantifying projected feedstock demand for biorefineries, (1.b.) quantifying projected feedstock demand for biopower, (2) calculating combined farmgate demand, (3) modeling projected farmgate prices in POLYSYS, and (4) deriving feedstock-specific grower payments. Following is a description of these steps.

Step (1.a.): Quantify projected feedstock demand for biofuels. EISA mandates for advanced biofuels from

Results and discussion

To supply the combined national feedstock demand shown in row (d) of Table 1, farmgate prices of $58.42 dry Mg−1 ($53.00 dry ton−1) and $34.56–71.60 dry Mg−1 ($30.00–62.00 dry ton−1) are needed under the price-run and demand-run scenarios, respectively (Table 4). Under the price-run scenario, a farmgate price of $58.42 dry Mg−1 procures five times the needed supply in 2013, but close to the 318 million dry Mg required in 2022. As expected, this high initial contract price encourages quicker adoption of

Conclusions

Biomass feedstocks to meet EISA advanced biofuels mandates are estimated to increase from 21 to 224 million dry Mg from 2012 to 2022. Additional demand for projected biopower is likely to increase from 18 to 71 million dry Mg from 2012 to 2022. Combined farmgate demand to serve both biofuels and biopower demand, including losses, is estimated to increase from 40 to 295 million dry Mg between 2012 and 2022.

Feedstock price, influenced by competition from other crop alternatives and competing

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