The economics of short rotation coppice in Germany

Abstract

Abstract Short Rotation Coppice (SRC), which entails managing wood plantations as perennial energy crops on agricultural land, has the potential to contribute significant amounts of wooden biomass to Europe's energy mix. Yet, uncertainty prevails about the future of key economic variables determining the viability of SRC cultivations. Consequently, agriculturists face challenges when conducting ex-ante economic analyses of SRC projects and measuring performance against the alternative, agricultural crops. This paper scrutinises five key determinants of SRC economic viability: yield level, woodchip market price, subsidies, cost level and opportunity costs for conventional agricultural crops. By utilising site-specific conditions and different future scenarios we provide a comprehensive economic appraisal of SRC plantations for agriculturists. We focus our analysis on Germany. Our results show that SRC plantations are less profitable under the medium scenario when compared with agricultural crops. Notwithstanding, favourable political and economic conditions such as subsidies, lower costs and higher woodchip prices can lead to SRC's superior profitability. If the German government is serious about improving investments conditions for commercial SRC plantations, we recommend introducing sufficient, efficient and consistent subsidies.