The payback period from investing in willow as an energy crop is 16 years and for miscanthus is nine years, according to an article by Daragh Clancy and colleagues in the Teagasc Rural Economy Research Centre and UCD, who have been analysing the returns from willow and miscanthus production in Ireland.
Farmers who diversify into biomass crops can receive establishment grants to offset part of the initial set-up costs.
The research addresses some of the information deficit about the economics of biomass crops in Ireland. They found that, given realistic assumptions and costings, both willow (1.62%) and miscanthus (10.15%) generate positive internal rates of return and can, therefore, be considered financially viable.
However, at least in the case of willow, the additional return is probably too low for most farmers to invest in this enterprise, while foregoing average returns from a conventional enterprise. Miscanthus consistently outperformed willow in terms of investment performance. Consequently, based on these results, miscanthus is most likely to be the biomass crop of choice.
The price level is also highly uncertain as the market for energy crops in Ireland is still in its infancy. Moreover, the lengthy production lifespan of energy crops serves to heighten the level of risk associated with key parameters. Uncertainty about critical variables such as the annual yield level and the energy price make it difficult to accurately calculate the returns of such investments. However, ongoing research projects in Teagasc Oak Park Crops Research Centre are addressing these knowledge deficits.
“Accordingly, it can be expected that the risk-averse nature of many farmers is likely to hinder widespread adoption during the pioneer stage of the bioenergy market in Ireland. More widespread adoption is only likely when the economic merits of these crops have been proven over an extended period,” concluded Clancy.
This article was featured in 'TResearch', Volume 4, Number 1, Spring 2009.
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