The profitability of an arable wood crop for electricity

Abstract

There is a need for both alternative farm enterprises and renewable energy sources. This paper considers the economics of a short rotation coppice crop as part of the farm from which to produce electricity, an enterprise which, if profitable, would satisfy both needs. The fanner uses labour from the conventional side of the farm during the winter, an otherwise slack period, to harvest the coppice. Wood chips are produced for use as fuel for an on-farm “generating system”. This consists of a gasifier, engine and electricity generator connected to the National Grid. The paper uses a whole farm linear programming model to calculate the profit of the farm without the new enterprise. By considering the additional incomes and expenditures caused by the new enterprise the profitability of the arable wood crop is assessed over a period of years using net discounted present values of the enterprise cashflows. The sensitivity of the profitability to uncertain factors, such as the generating system cost, are varied to assess which factors have the greatest impact. The results show that the new enterprise can be profitable, particularly on farms with low yielding potential. However, the profit is extremely sensitive to the most uncertain factor, the generating system cost. For the enterprise to break even at the end of 20 years the generating system capital cost would need to be of the order of £100–450/kW depending upon the values of other factors such as electricity prices, crop yields, harvester cost and the future expectations.