Economic aspects of willow growing in Sweden

Transcription

1 Economic aspects of willow growing in Sweden Håkan Rosenqvist, SLU Sweden Thanks to different EU projects, SLF and Värmeforsk for funding

2 Important economic variables in the decision-making process Profitability Utilization of existing resources and its alternative value Risk spreading aspects

3 What should the payment for biofuels from energy crops be from the farmers point of view? Farmers need compensation for: Costs for growing the crop Costs for land Payment for new crop and risk compensation

4 Risk and risk reduction

5 Examples of risk reduction in energy crop cultivation Increased knowledge Cultivation technology Subsidies Contract design Portfolio thinking

6 Energy Crop Production Costs Growing Costs for Cost for Crop cost land risk and EUR/GJ EUR/GJ new crop Yield Sum Tdm Willow Poplar Reed canary grass Miscanthus Hemp Triticale whole crop Straw

7 Yield level, tonne DM per hectare Cost level (%) Cost for willow today, (EUR/GJ)

8 More important to increase the price for willow and RCG than yield level Higher yield ==> higher need for fertilizer higher harvesting and transport cost per hectare lower harvesting costs per GJ

9 Willow production costs in Northern Europe Pr od uct ion co st ( / GJ ) cost of land (short term) cost of risk cost of cultivation Cereals price ( /ton)

10 High costs with small area of willow

11 Crops for today or the future? Different cost reduction potential for different crops Today's large crops have the lowest cost-cutting potential There is knowledge and infrastructure for today's crops such as cereals and rapeseed Plant breeding, technology and organizational development can reduce future costs.

12 Expected cost reduction potential during 15 year, compared with cereals Willow 32% Miscanthus 18% RCG 15% Hemp 12% Straw 7% Triticale (in bales) 6%

13 Cost breakdown example, Reed canary grass/switchgrass Willow 7 7 EUR/GJ Cost for risk Cost for land Overhead Administration Winding up Brokerage Road transports Loading out Store-keeping Loading in Transport to farm Cutting and baling Fertilization Establishment EUR/GJ Costs for risk Costs for land Overhead Winding up Administration Weed control Brokerage Field transports Harvest Road transports Fertilization Establishment 0 Today Large scale Future 0 Today Large area Future

14 Planting costs per hectare in Sweden during the pioneer stage of growing Salix (in real terms, excl. plant stock).

15 Planting costs per hectare in Sweden during the pioneer stage of growing Salix (in real terms, excl. plant stock). Year Index (1988=100)

16 Comparison for Salix plantations in Northern Ireland between pioneer costs and costs based on Swedish experience.

17 Comparison for Salix plantations in Northern Ireland between pioneer costs and costs based on Swedish experience. Cost factors Costs for pioneer grower GBP/ha/year Standard costs based on Swedish experience GBP/ha/year Establishment Fertiliser Fertilisation spreading (high) Fertilisation spreading (low) Road transports Harvest Field transports Administration 7 7 Winding up 5 5 Sum of costs

18 Willow growing in Sweden (New subject in presentation)

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21 Important factors in Sweden for willow planting Set-a-side land Subsidies for planting Environmental taxes Forest residues has created a wood fuel market in Sweden Chips from forest residues can delivered all year around

22 Farmers motives for planting Salix. In summary, they were: changing the workload on the farm good income from sale of chips subsidies and expected policies land more suitable for Salix than for cereals

23 Influence on Salix activity from certain farm characteristics positive influence Farm Size Forest land Lease to others Owner age Institutional owner negative influence Pasture Tenancy Owner very young or very old Animal husbandry

24 The characteristics of farmers, who regret their Salix plantation, compared to others, are more renting out of land more set-aside land more forest land more often work outside the farm

25 Farmers, who reduce their Salix plantation, have these characteristics compared with other farmers: less land more forest land more often work outside the farm less hours work on the farm less use of advice

26 Soils for willow plantation Type of land Percent of farmers Poorer land than avearage 59 Better land than avearage 12 Coarse soil 30 Clay soil 52 Organic soils 18 Fertilized 75 Weed control 80 Leased land 9

27 Location of the willow plantations in Sweden Area % willow of Average yield % forage total arable of barley, crop of total land tonnes/ha arable land Ss, plain district in Svealand Gns, plain district in northern Götaland Mss, forest district in central Sweden Gss, plain district in southern Götaland Gmb, central district in Götaland

28 Reasons for reduction of plantations

29 Reasons for reduction of plantations Stated as most important reason (number of farmers) Stated as a secondary reason (number of farmers) Failed growth due to weeds 15 7 Failed growth due to frost 4 0 Failed growth due to dry soil 8 0 Failed growth due to wrong plant variety 4 0 Failed growth due to unsuitable soil 1 2 Failed planting 1 0 Failure for other reasons 12 5 Cereals have improved profitability since planting 4 0 Other reasons, biological 0 0 Other reasons, economic 2 1

30 Some reflections and experience of Salix based on 74 meetings about the energy crops economy in

31 Experiences from meetings with mainly Salix growers Salix growers are not a homogeneous group Are both satisfied and dissatisfied growers

32 Satisfied Salix growers Many of the satisfied growers seem to be engaged in sales and cultivation Sludge is used as a way to increase the profitability

33 Reasons for dissatisfaction Have not harvested the year they wanted. Low harvest net income Difficult to sell salix Organization around harvest is sometime poor. Selling of chips and organizational issues appear to be a major problem for salix cultivars than biology and harvesting technology

34 Engage important Satisfied growers seem to engage more in their cultivation than dissatisfied growers Important to create engagement to growers Salix meetings have increased engagement with growers Many salix growers seem to feel unsure about their crops.

35 There are a large number of farmers who do not like Salix and not grow Salix. Ugly Arguments from this group are: Destroy drainage Difficult to sell salix Failure to grow energy when food is needed in the world Problems to restore the soil to food crops Knowledge of Salix is often relatively low in nonsalix farming farmers. Seems that salix is not a "status crop" to grow.

36 Collaborate with local driving forces is important There is a need for a driving entrepreneurs for things to happen One way to increase Salix area is to collaborate with and focus on actions in areas where there are driving Salix people. If there is no local support, it is difficult to start with Salix. There are conflicts between different Salix contractors, which maybe hold back cooperation.

37 Questions to think about! How do we work to get increased cultivation of Salix and other energy crops where there are proper economic conditions? How are the right conditions for profitable Salix cultivation or other energy crops created?

38 Economy in SRC with- and without waste water and sludge

39 Production costs and profitability

40 Yield for the different crops used in the calculations Crop Low yield Low-middle yield Middlehigh yield High yield Willow (fertilised) 4,5 6,0 7,5 9,0 Willow (sludge) 4,5 6,0 7,5 9,0 Willow (cutting cycle) 4,5 6,0 7,5 9,0 Reed canary grass 4,5 5,5 6,8 8,2 Hemp 4,5 5,7 7,0 8,5 Wheat (bread) 4,2 5,5 6,8 8,3 Wheat (spring) 3,5 4,5 5,5 7,0 Barley (feed) 3,0 4,2 5,4 6,9 Rapeseed 1,5 2,3 3,3 4,0

41 Costs and income included in the following calculations All costs except the costs for land are included, e.g. OH, depreciation, interest rates and own work No subsidies are included, except the 500 in establishment cost subsidy for willow SRC Basic Payment Scheme and greening CAP subsidies are not included in the calculations

42 Production costs ( /MWh) Crop Low yield Low-middle yield Middlehigh yield High yield Willow (fertilised) Willow (sludge) Willow (cutting cycle) RCG Hemp Wheat (bread) Wheat Barley (fodder) Rapeseed Straw

43 Gross margins ( /ha/yr) Crop Low yield Low-middle yield Middlehigh yield High yield Willow (fertilised) Willow (sludge) Willow (cutting cycle) RCG Hemp Wheat (bread) Wheat Barley (fodder) Rapeseed

44 Cost division in SRC (in ) Willow SRC, production period 22 yr, fertilised only after harvest, new clones Average harvest (22 yr) = 8,78 Establishment 11% Fertilisation 13% Harvest and field transport 33% Tranport to DHP 19% Selling costs 5% Termination 1% Management and OH costs 10% Interest rate 9% Sum 100%

45 Things that improve profitability Engagement in the management/cultivation and selling of chips Well-managed crops that result in high yields Geografical localisation Municipal sludge and/or wastewater Collaboration between all parts

46 Examples of business concepts with energy crops as a base Selling heat Dry and sell chips Briketting of various feedstock Take care of sludge or wastewater Feed pigs in SRC

47 (New subject in presentation) Waste water irrigation in willow

48 Photo WW

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50 Some of the most important conclusions about waste water irrigation are (1) Saved costs in treatment works is much more important than saved costs and higher yield in the willow plantation. Its important to find right treatment works which have high costs in traditional treatment and low costs for vegetation filter.

51 Some of the most important conclusions about waste water irrigation are (2) Pumps, ponds and pipes to field are higher costs than the irrigation equipment in field. Fixed costs are higher than variable costs.

52 Positive factors to keep costs per kg N and P on a low level are High N and P applications per hectare per year. High N and P concentration in the wastewater. Long irrigation session. Short distance between treatment works and the vegetation filter. Large area of willows.

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54 Costs per ton sludge from Swedish treatment work. Spreading is not included in the costs. Method Number Average Costs, Euro Soil for green areas Landfill incl. tax Burning 2 55 Agriculture Salix 9 22

55 Sludge application to SRC Receiving sludge in SRC fields increase the economy of SRC Compensation varies A common increase on farm profitability is ca 50 /ha/yr but there are broader margins if you consider the alternative ways to treat sludge in ww treatment plants

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57 Wastewater application 85-90% saving costs for the wastewater treatment plants (per treated kg N) Increased biomass production and saving fertilisation costs (ca 15%)

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59 Costs in treatment works for separating of nitrogen and phosphorus Costs N per kg Costs P per kg Treatmentwork ( inhabitans) 23 /kg N 73 /kg P Treatmetwork ( inhabitans) 10 /kg N 37 /kg P Treatmentwork (> inhabitans) 3 5 /kg N /kg P Source: NATURVÅRDSVERKET

60 Good conditions for waste water irrigation when: Need for new investment in treatmentwork Short distance between treatmentwork and willow field. When it not need ponds for storage the water during wintertime. Right entrepreneurs, right people at treatmentwork and right people at the municipality

61 Some of the most important conclusions about waste water irrigation are Saved costs in treatment works is much more important than saved costs and higher yield in the willow plantation. It s important to find right treatment works which have high costs in traditional treatment and low costs for vegetation filter. Pumps, ponds and pipes to field are higher costs than the irrigation equipment in field. Fixed costs are higher than variable costs.

62 Positive factors to keep costs per kg N on a low level are High N-applications per hectare per year. High N-concentration in the wastewater. Long irrigation session. Short distance between treatment works and the vegetation filter. Large area of willows.

63 Costs for wastewater irrigation Investment for irrigation about Euro per hectare with 10 hectares irrigation. Operation costs about 6 Euro per 100 cubicmetre water

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65 Rosenqvist s own willow SRC field Agricultural soil, 110 ha Good soil: 85 ha Less good soil: 25 ha Forest: 100 ha Willow SRC: 6 ha Willow on the worst part Planted 1994 Older clones with low production Not fertilised Harvested 4 times Last harvest: 2016 Winter was the market poor. I move the harvesting to next winter.

66 Harvest in 2016 Harvest: 29 ton DM/ha after 7 years Price per ton DM: 75 (17 per MWh) Income: /ha Harvest costs: 830 /ha Transport (100 km): 652 /ha Loading: 119 /ha Netto per ha: 576 /ha

67 Mistakes made Too small turning points for the harvest equipment Two different clones with different yields Too humid at a small part in a small part of the field

68 Thankyou!