Cost evaluation of alternative switchgrass producing, harvesting, storing, and transporting systems and their logistics in the Southeastern USA

Abstract

Purpose

The US Department of Energy has a goal to make ethanol from biomass cost competitive with petroleum by 2012. Feedstock procurement is expected to represent a significant portion of the operating costs for a refinery that produces ethanol from biomass such as switchgrass. Thus, cost‐effective feedstock logistics will be a key factor for the future development of a capital intensive cellulosic ethanol industry. The purpose of this paper is to analyze the cost of various logistic methods of switchgrass production, harvesting, storing, and transportation.

Design/methodology/approach

This study applied enterprise budgeting and geographical information system (GIS) software to analyze the costs of three logistic methods of acquiring switchgrass feedstock for a 25 million gallon per year refinery. Procurement methods included traditional large round and rectangular bale harvest and storage systems and satellite preprocessing facilities using field‐chopped material. The analysis evaluated tradeoffs in operating costs, dry matter losses during storage, and investment requirements among the three systems.

Findings

Results suggest that the preprocessing system outperformed the conventional bale harvest methods in the delivered costs of switchgrass.

Practical implications

The cost savings in harvest, transportation, and dry matter losses for the preprocessing system offset their extensive capital costs and generated cost advantages over the conventional methods.

Social implications

The traditional round bale system has a higher overall investment cost, may not be the most cost‐effective way to procure switchgrass feedstock for a refinery, and may limit farmer participation in the feedstock value chain.

Originality/value

GIS methods combined with enterprise budgeting can be useful tools for evaluating investment in feedstock supply chain infrastructure.

Citation

Larson, J.A., Yu, T., English, B.C., Mooney, D.F. and Wang, C. (2010), "Cost evaluation of alternative switchgrass producing, harvesting, storing, and transporting systems and their logistics in the Southeastern USA", Agricultural Finance Review, Vol. 70 No. 2, pp. 184-200. https://doi.org/10.1108/00021461011064950