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SID 5

Research Project Final Report
Note
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of its completed research projects in the
public domain wherever possible. The
SID 5 (Research Project Final Report) is
designed to capture the information on
the results and outputs of Defra-funded
research in a format that is easily
publishable through the Defra website. A
SID 5 must be completed for all projects.
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
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SID 5 (2/05)
Project identification
1.
Defra Project code
2.
Project title
NF0431
Farm Level Economic Impacts of Energy Crop
Production
3.
Contractor
organisation(s)
Dept of Land Economy, Cambridge
Scottish Agricultural College
Imperial College Consultants Ltd
54. Total Defra project costs
5. Project:
Page 1 of 5
£
38,410
start date ................
01 September 2004
end date .................
14 June 2005
6. It is Defra’s intention to publish this form.
Please confirm your agreement to do so. ................................................................................... YES
NO
(a) When preparing SID 5s contractors should bear in mind that Defra intends that they be made public. They
should be written in a clear and concise manner and represent a full account of the research project
which someone not closely associated with the project can follow.
Defra recognises that in a small minority of cases there may be information, such as intellectual property
or commercially confidential data, used in or generated by the research project, which should not be
disclosed. In these cases, such information should be detailed in a separate annex (not to be published)
so that the SID 5 can be placed in the public domain. Where it is impossible to complete the Final Report
without including references to any sensitive or confidential data, the information should be included and
section (b) completed. NB: only in exceptional circumstances will Defra expect contractors to give a "No"
answer.
In all cases, reasons for withholding information must be fully in line with exemptions under the
Environmental Information Regulations or the Freedom of Information Act 2000.
(b) If you have answered NO, please explain why the Final report should not be released into public domain
Executive Summary
7.
The executive summary must not exceed 2 sides in total of A4 and should be understandable to the
intelligent non-scientist. It should cover the main objectives, methods and findings of the research, together
with any other significant events and options for new work.
Note: This is an abridged version of the Executive Summary which appears in the main report.
Background and Objectives
The Government has set a target for 10 per cent of all electricity to be generated from renewable sources
by 2010 (20 per cent by 2020). There is also the EU Biofuels Directive, for which targets for the use of
renewable fuels are 2 per cent by the end of 2005, and 5.75 per cent by 2010.
Energy crops are a possible source of heat, electricity and transport fuels. However, relatively little work
has been undertaken on the likely impact of the adoption of energy crop production at the farm level. This
study therefore analyses the costs and returns of the main crops (willow short rotation coppice,
Miscanthus, wheat, sugar beet, oilseeds); the returns necessary to mobilise resources in agriculture to
produce these crops and; the implications for the profitability of farming. In addition, links are made with
existing studies of conversion efficiency and costs, fuel chain energy and carbon balances.
This study is unique in that it involves a survey of current energy crop producers in England to establish
on-farm costs of production. Farm level data were also used to establish estimates of the costs of
production of conventional arable crops that could be used as feedstocks for energy.
Conclusions - Farm Level Implication
Table ES1, constructed using standard assumptions concerning yields, prices and costs, highlights the
estimated average returns at the farm level from the major crops considered in this study and production
costs per tonne.
Table ES1: Summary of Production Margins from Different Energy Crops - using
Standard Assumptions¹
Crop
Short Rotation Coppice
- Willow Miscanthus
Wheat
Sugar Beet
SID 5 (2/05)
Production
Cost
£66 /odt
£46 /odt
£97 /t
£24 /t
Page 2 of 5
Gross Margin
(£/ha)
97
75
301
541
Net Margin
(£/ha)
-163
-171
-216
24
Oilseed Rape
£204 /t
305
¹ Details of underlying assumptions can be found in Chapter 4 of the main report
-212
Under the assumptions used in this study, energy crops are considered unviable on the basis of current
production costs (Table ES1) and are unlikely to be widely grown without more long-term commitments.
In particular it was found that: costs of production of biomass crops on the basis of gross margin only, are
roughly equal to the likely market price; and cost of production on the basis of net margins (even with
minimal fixed costs) are much greater than the market price
It is estimated that in order for energy crops production to break-even at the farm level when fully costed
(and therefore be viable in the long run), yields (prices) would need to rise by 78 (60) and 88 (60) per cent
for Miscanthus and SRC, respectively. In terms of the energy crop payment (subsidy), it is estimated that
this would have to rise to £218 and £193 per hectare per year for Miscanthus and SRC respectively from
the current level of approximately £30.
The recent reforms of the CAP have occurred through decoupling rather than price cuts. Thus the reforms
are unlikely to increase the viability of using conventional arable crops for energy production. The
proposed reform of the sugar regime, whilst again reducing the profitability of production, does potentially
benefit energy crop production as it involves large cuts in the supported price.
Energy Production Costs
On the basis that returns to farmers were sufficient to cover their full costs of production, estimates were
made of the likely final cost of energy from the alternative crops analysed in this study. These are
summarised in Table ES2.
Table ES2 Summary ranges for liquid biofuel and biomass chain fossil energy inputs,
greenhouse gas emissions and costs
Liquid Biofuel Supply Chain
Fossil Energy
Requirement
(GJf/GJ output)
Low
Ethanol from Wheat
Ethanol from Sugar Beet
Ethanol from Wheat Straw
Biodiesel from Rapeseed
Rapeseed oil from oilseed rape
Biomass Combustion Supply
Chain
High
GHG
Emissions
(kgCO2eq./GJ)
Low
Cost
(£/gasolineequivalent litre)
High
Low
High
0.27
0.90
0.30
0.92
0.13
0.28
0.39
0.44
0.29 ± .02
51.48
79.45
28.00
51.00
5.30
13.00
49.00
54.00
31 ± 2
0.36
0.41
0.29
0.38
0.57
0.55
0.44
0.87
Fossil Energy
Requirement
(GJf/GJ output)
GHG
Emissions
(kgCO2eq./GJ)
Low
High
Low
High
Electricity from Wheat Straw
0.57
0.65
65.00
67.00
Electricity from Miscanthus
0.25
0.29
25.00
27.00
Electricity from Willow SRC
0.36
0.40
22.37
26.37
Heat from Wheat Straw
0.28
0.31
23.62
25.62
Heat from Miscanthus
0.17
0.19
8.64
10.64
Heat from Willow SRC
0.10
0.14
6.01
10.01
CHP from Wheat Straw
0.29
0.30
23.62
25.62
CHP from Miscanthus
0.18
0.19
8.64
10.64
CHP from Willow SRC
0.24
0.28
15.20
19.20
Note: assumptions underlying these figures can be found in Chapter 6
(p/kWe for
electric or CHP
chains: p/kWth
for heat-only
chains)
Low
High
5.98
5.98
6.02
6.65
5.38
7.67
1.42
1.62
1.40
1.84
1.67
2.20
4.74
5.71
4.57
6.30
3.82
8.26
Assuming that fossil fuel equivalents are around 2 p/kW for electricity generation 2 p/kW for gas heating ,
and around 26 pence per litre for gasoline, it is clear that energy production from farm crops are not
commercially competitive in the absence of support from Government. The only viable exception might be
small scale heating plants (or CHP) using SRC or Miscanthus in areas not connected to gas mains. There
are thus efficient niche markets that exist for biomass fuelled heating (or CHP) in areas without gas, or
where there are strong environmental grounds.
The price differential for large-scale power operations between biomass and conventional fuels might be
SID 5 (2/05)
Page 3 of 5
overcome by Renewables Obligation Certificates (ROCs). However, the current ending date for co-firing
precludes producers entering into the necessary long-term planting contracts with growers.
There are of course a number of alternative sources of renewable energy available to the Government to
meet its obligations with respect to electricity generation. However, in terms of biofuels there are currently
few viable alternatives. Therefore it may be argued that this market will have to be stimulated for the UK
to achieve its targets. If bioethanol were produced from wheat at the rate of 1 Mt per year this would
consume 3 Mt of wheat, and would produce sufficient fuel to meet the 5.75% share of petrol. This study
concludes that due to the ongoing process of trade liberalisation that, unless imports can be prevented,
then the benefits of such a market are unlikely to be directly felt by domestic agricultural producers. For
example, it is understood that Brazilian ethanol is imported into the UK at around 26 pence per litre, much
less than the estimated minimum cost of production in the UK of 36 ppl.
Domestic oilseed rape could be used as a biodiesel feedstock but is not at present being so used. Again,
the introduction of the Renewable Transport Fuel Obligation could alter the situation considerably.
Although import penetration is again an issue, the current deficit situation in the EU for oilseeds and the
potential barriers to other oilseeds being substituted for oilseed rape might mean that the development of
such a market could lead to higher prices for producers and therefore benefit the agricultural sector. On
grounds of economic efficiency for society as a whole this outcome might not be considered ideal.
Beyond purely economic considerations it is clear that the costs of carbon emission abatement from the
enterprises considered in this study far exceed the £70/tC recommended by the government. However,
for road fuels these are the only available options for carbon abatement.
Project Report to Defra
8.
As a guide this report should be no longer than 20 sides of A4. This report is to provide Defra with
details of the outputs of the research project for internal purposes; to meet the terms of the contract; and
to allow Defra to publish details of the outputs to meet Environmental Information Regulation or
Freedom of Information obligations. This short report to Defra does not preclude contractors from also
seeking to publish a full, formal scientific report/paper in an appropriate scientific or other
journal/publication. Indeed, Defra actively encourages such publications as part of the contract terms.
The report to Defra should include:
 the scientific objectives as set out in the contract;
 the extent to which the objectives set out in the contract have been met;
 details of methods used and the results obtained, including statistical analysis (if appropriate);
 a discussion of the results and their reliability;
 the main implications of the findings;
 possible future work; and
 any action resulting from the research (e.g. IP, Knowledge Transfer).
The project report to Defra may be found in the file: “Camb_ECrops_FinRep.doc”
References to published material
9.
This section should be used to record links (hypertext links where possible) or references to other
published material generated by, or relating to this project.
SID 5 (2/05)
Page 4 of 5
ADAS, Ecofys. (2003). The Impacts of Creating a Domestic UK Bioethanol Industry. Report for the East
of England Development Agency: Cambridge.
ADAS: Bullard M. (????). Miscanthus Agronomy (for Fuel and Industrial Uses). Final Project Report,
Ministry of Agriculture, Fisheries and Food: London
AEA Technology. (2002). International resource costs of biodiesel and bioethanol. Report for the
Department for Transport
Anon. (July 2004). National Farmers’ Union BIOFUEL POLICY. NFU: London
Bullard, M.J. & Nixon, P. (1999). Miscanthus Agronomy (for fuel and industrial use) NF0403, MAFF
Report.
CSL, Sand Hutton: D.B. Turley, N.D. Boatman, G. Ceddia, D. Barker and G. Watola. (2003). Liquid
biofuels – DEFRA: London.
Culshaw, Damien. (2001). IEA Task 30 Short Rotation Crops for Bioenergy Systems: UK Country Report.
Meeting: Denmark, Sept 22-25 2001.
DfT [Department for Transport]. (2004). Towards a UK Strategy for Biofuels - Public Consultation.
(www.dft.gov.uk/stellent/groups/dft_roads/documents/page/dft_ roads_028393-06.hcsp)
DTI [Department of Trade and Industry]. (2004). Renewable Innovations Review, DTI: London.
http://www.dti.gov.uk/renewables/renew_2.1.4.htm
Eyre, Nick.J., Fergusson, M., Mills, R. (November 2002). Fuelling Road Transport: Implications for
Energy Policy. DfT: London
EFRA [Environment, Food and Rural Affairs] Committee. (2003). Biofuels. Seventeenth Report of
Session 2002–03. House of Commons: London
Elsayed, M. A., R. Matthews and N. D. Mortimer. (2003). CARBON AND ENERGY BALANCES FOR A
RANGE OF BIOFUELS OPTIONS. Final Report for the Energy Technology Support Unit. Report
No. 21/3
Heaton, R.J., Randerson, P.F. & Slater, F.M. (1999). The economics of growing short rotation coppice in
the uplands of mid-Wales and an economic comparison with sheep production. Biomass and
Bioenergy. 17:59-71.
IACR Rothamsted: Riche, A.B. (2004). A Trial of the Suitability of Switchgrass and Reed Canary Grass
as Biofuel Crops Under UK Conditions. 4th Interim Report for the DTI: London.
ILEX Energy Consulting. (2004). The Impact of EU ETS on European Electricity Prices. Report for the
DTI: London.
Imperial College, Centre for Energy Policy and Technology: Woods, J. & Bauen, A. (2003). Technology
Status Review and Carbon Abatement Potential of Renewable Transport Fuels in the UK. Report for
the DTI (New and Renewable Energy Programme): London.
Larsson, S. & Lindegaard, K. {Agrobränsle AB}. (2003). Full-scale Implementation of Short Rotation
Willow Coppice (SRC) in Sweden. IEA Bioenergy, Short Rotation Crops for Bioenergy Systems,
Task 30. www.shortrotationcrops.com/willow.htm
Natusch, D.F.S. (1998). Bright Prospects for Energy Crops? Farm Management 10(3):145-155
Pitcher, Keith. (2001). The ARBRE project - Factors affecting siting of end use. DEFRA National Energy
Crops Conference 27 September 2001
The Royal Commission on Environmental Pollution. (2004). Biomass as a Renewable Energy Source.
SAC Agro Industrial Research Services: Cook, Peter. (2000). The Potential Contribution of Alternative
Sectors to a Sustainable Agricultural Industry and Rural Economy in Wales. Sectoral Research:
Biomass, Including Short Rotation Coppice. Report for NAWAD and the WDA.
SAC, Aberdeen. (2001). A review of the potential of giant grasses for UK agriculture. Final Project
Report for Defra: London
Scottish Forest Industries Cluster: S. Luker (Sept 2004). Woodfuel prices for heating. Information paper.
Sheffield Hallam University: M. A. Elsayed, R. Matthews and N. D. Mortimer. (2003). Carbon and Energy
Balances for a range of Biofuels Options. Final Report for the Energy Technology Support Unit
Sheffield Hallam University: N. D. Mortimer, P. Cormack, M. A. Elsayed and R. E. Horne. (2003).
Evaluation of the Comparative Energy, Global Warming and Socio-Economic Costs and Benefits of
Biodiesel. Final Report for Defra: London
Walsh, J. and Brown, T. (1998). The Economics of Short Rotation Coppice (Willow) in the UK: An
Analysis of Prospects. Economics (Resource Use) Division, Ministry of Agriculture, Fisheries and
Food: London
Walsh, John. (2001). Harvesting and Handling Costs for Energy Crops. Economics Division, DEFRA:
London.
SID 5 (2/05)
Page 5 of 5