As ethanol producers continue to eye commodity markets for feedstock cost relief, the first study to summarize the cost of biomass production has concluded that switchgrass can be produced on a commercial scale for $39 per ton.
Researchers at the University of Nebraska-Lincoln, in conjunction with the USDA Agricultural Research Service, contracted with 10 farmers from Nebraska, South Dakota and North Dakota to grow switchgrass for five years to evaluate the actual costs of biomass production. The study results are significant to both growers and biofuel producers, said UNL Agricultural Economics Department professor Richard Perrin. “Ultimately, if it’s commercially viable, that means it’s got to be commercially viable the way farmers can do it, not the way it can be done on a one-meter-square plot of land on an experiment station somewhere,” he said. “A company thinking about establishing a cellulosic ethanol plant in this area can look at these numbers and pretty reliably evaluate what it’s going to cost them in order to produce it.”
At the end of the five-year study, the average cost of growing switchgrass was around $60 per ton. Two of the 10 contracted farmers had previous experience growing switchgrass and were able to produce the crop for $39 per ton. “We think that large quantities could be produced by farmers at $50 per ton or so,” said Perrin, the primary economic analyst for the study. “The cost of production depends on knowledge, experience and skills.”
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The study demonstrated that as farmers become more accustomed to growing switchgrass, production costs will go down, Perrin said. He added, the average cost of switchgrass production would be reduced by an additional 15 percent if results were extended to a 10-year period, a more likely scenario when considering commercially planted crops.
After factoring estimated local transportation costs of approximately 13 cents per gallon, a total cost of 73 cents per gallon means cellulosic ethanol from switchgrass could be a viable competitor for corn, which has an estimated total cost of $1.25 per gallon. “Of course, it’s unknown as to the cost to convert the cellulose to ethanol once at the plant, but we’ve got about 40 cents or so to play around with,” Perrin said. “The bottom line suggests that switchgrass in this area will be competitive with corn as an ethanol source.”
From North Dakota to Florida, switchgrass can be grown in a large area of the country, Perrin said. “It’s a very good crop for the Southeast,” he added.
A similar study is currently being conducted by the University of Tennessee.
Despite these favorable numbers, farmers hesitate to grow more switchgrass because there’s “nobody to buy it,” Perrin said. There are six subsidized cellulosic ethanol plants in various stages of development, but none are located in the central United States. Abengoa has a pilot-scale cellulosic ethanol facility in York, Neb., but it doesn’t use much feedstock.
Perrin said participating farmers who had successfully grown switchgrass were “ecstatic” and look forward to the day when they can grow it commercially. “At this point, there’s nothing on the horizon that any farmer can see as a place to sell switchgrass to,” he said. “When the ethanol-producing industry becomes convinced that the renewable fuels standard is going to happen, they’ll start building some switchgrass plants in this area, and at the same time, they’ll be looking to sign some contracts with producers. Those two things will have to happen at the same time.”