Economics

Economics of growing energy crops.

 It is difficult to get the economics of energy crop production to weigh up without  grant support. The costs of establishment are currently high, though likely to drop as the industry grows.  Until July 2006 Growers in England could claim establishment grants under the Energy Crops Scheme funded by Defra. This scheme has now ended but it is hoped that UK wide schemes will come into force from 2007 onwards.  Current sources of grant funding are covered on the grants page.

Energy crops such as willow and Miscanthus need to be viewed as long term investments. The crops are in the ground for around 20 years, and if establishment costs are annualised over this time frame they compare more favourably against other crops.  One current advantage energy crops currently have over arable crops is that they can be grown on set-aside land.

Miscanthus

The main costs associated with Miscanthus are associated with purchase and planting of the rhizomes.As planting and harvesting costs are primarily contractor costs, fixed farm costs are likely to decrease as area planted increases.  Miscanthus can be planted and harvested using some standard farm equipment so there are options to save costs by carrying out your own planting and harvesting. However, as effective establishment is crucial to the future economic viability of the crop option the self-planting option needs carefully consideration.  If you want to reduce contractor costs and have the machinery self-harvesting is the better cost saving option. 

The Miscanthus cost calculator can help you work out the rough costs of Miscanthus production.

Gross margins from the crop are determined by the sale value and haulage costs. Biomass crops are by nature very bulky commodities and haulage costs have an effect on gross margins.  The Gross margins of local heat production can be four times higher than selling harvested crops to a power station for example.  In addition selling energy as CHP heat/electricity can offers significantly higher margins than simply selling the harvested crop as fuel.  The Miscanthus cost calculator allows you to consider potential gross margins.

SRC

The main costs associated with SRC are during the planting and establishment phases.As with Miscanthus, the planting material is currently expensive at around 7p/cutting.  Planting and harvesting, requires specialised equipment and as a result it is largely a contractor operation, with fixed farm costs being likely to decrease as area planted increases.  An assessment of the economics of willow production can be found from page 5 onwards in the the SAC report 'The potential contribution of alternative sectors to a sustainable agricultural industry and rural economy in Wales'

As the economics of production are tied to local prices and subject to change the SRC cost calculator can help you work out the approximate costs of SRC production based upon your knowledge of local costs.  

Economics of biomass technologies

Woodfuel Wales website is an excellent resource for economic considerations on biomass boilers, CHP systems and for comparisons against fossil fuels.

• Grants