The economics of bioenergy production at farm level: An Irish Case Study

1. The economics of bioenergy production at farm level: An Irish Case Study D. Clancy1, 2, J. Breen1, A. M. Butler2, F. Thorne1, M. Wallace2 1 Rural Economy Research Centre, Teagasc 2 Department of Agribusiness, University College Dublin

2. Overview • Biomass Crops • Rationale • Irish Policy • Objectives • Results • Conclusions

3. Willow • Willow production often referred to as Short Rotation Coppice • Production lifespan of 15 - 22 years • First harvest in year 4, every 2/3 years after this • Can be grown on a wide variety of soils • Suitable for wet conditions – however there is a limit to this

4. Miscanthus • Miscanthus is a perennial tall woody grass • Production lifespan of 15 – 20 years • First harvest in year 2, every year thereafter • Slightly better soil quality than willow required, but can be grown on wide range

5. Rationale • Kyoto Protocol • Security of Supply • CAP Reform • Deurwaarder (2005): identified profitability at farm level as one of the main barriers to bioenergy production

6. Irish Policy • National co-firing targets: replace 30% of peat burned in three state owned power stations with biomass by 2015 • Approx 80,000 ha of willow or 41,000 ha of miscanthus would be required to meet the targets - currently > 3,000 ha • REFIT scheme is mechanism to achieve this target – offers power station price per GJ supplied by alternative energy

7. Irish Policy • Maximum allowable area for farmers in REPS or receiving disadvantaged area payments • Therefore biomass will need to be grown outside the region of power stations in order to meet target • Biomass is a bulky product – high cost of transportation will reduce area in which it would be viable to produce • Supply chain issues need to be resolved to further develop market

8. Bioenergy Scheme • Offers a grant for 50% of establishment costs (major barrier to entry) • Scheme only available for approx 700 ha in 2009 – far lower than required area • Scheme to end next year – no indication over whether it will be renewed, increases uncertainty in market

9. Research Objectives • Investigate the financial feasibility of willow & miscanthus • Address the uncertainty regarding the suitability of these crops to Irish growing conditions • Examine the competitiveness of biomass with traditional agricultural enterprises

10. Baseline Assumptions per hectare

11. Baseline investment results of willow and miscanthus

12. Results with alternative superseded enterprises

13. Conclusions • At current prices, willow & miscanthus generate positive returns and are potentially worthwhile investments • Approx 80,000 ha of willow or 41,000 ha of miscanthus would be required to meet the co-firing targets • Biomass will need to be produced outside region of power stations – large transportation costs

14. Conclusions • Analysis of the net effect on GHG emissions required • Greater incentives need to be offered in order to attract sufficient investment • Longer term support mechanisms required to reduce uncertainty

15. Thank you for your attention! Questions, comments and suggestions welcome