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Economics of Biomass Production

Demand for biomass renewable energy feedstocks, especially among coal-fired heating plants in the northern plains region, is expanding. Biomass feedstocks can either supplement coal directly, or be gasified, to meet impending carbon regulations and/or generate carbon credits. Co-firing with biomass also generates renewable energy credits that enable utilities to meet state renewable energy mandates. Finally, cellulosic biofuel production is expected to be commercialized, further accelerating demand for biomass feedstock.

Farmers may collect biomass from a wide range of sources. Some of these include residues from existing crops, harvesting hay and forage crops for biomass instead of livestock feed, collecting biomass from native pastures and grasslands, or establishing dedicated biomass crops. Some of these may be annual crops while others are perennials. 

The economic decision to collect biomass is complex because farmers must not only consider direct harvest and processing costs but costs of crop establishment, if applicable. The latter requires allocation of establishment costs over more than one year of production. The farmer must then compare net returns from a biomass enterprise with other crop enterprises using a partial budget approach. Farmers will only have an economic incentive to produce and/or collect biomass if net returns exceed the profitability of other competing cropping opportunities.

To assist farmers with these calculations Haugen and Gustafson (2009) have developed a spreadsheet, Biomass Compare. This model allows farmers to compare potential profitability of new annual and/or perennial biomass crops with traditional crops produced.

  1. Farmers using the software enter anticipated costs and returns for both new biomass enterprises and traditional crops in separate sections of the spreadsheet.
  2. Next, a "reference" crop is selected in the Comparison Sheet. Either a traditional or biomass crop can be a "reference" crop.
  3. The spreadsheet then calculates equivalent biomass and traditional crop prices needed to provide similar profitability as the "reference" crop.

Farmers are advised to enter as much of their own information as possible to assure accurate results. Information on alkali percentage, carbon credits and BTUs (British thermal units) per pound of biomass are included so producers can evaluate different market opportunities.



Haugen, R. and C. Gustafson. "Biomass Compare." Dept. of Agribusiness and Applied Economics, North Dakota State University, Fargo, Dec. 2009.


Cole Gustafson, North Dakota State University

NDSU, Dept. 7620

P.O. Box 6050

Fargo, ND  58108-6050

Phone: 701.231.7261

Fax: 701.231.1008

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