Current and future financial competitiveness of electricity and heat from energy crops: A case study from Ireland

It has been demonstrated that Miscanthus and willow energy-crop cultivation could be economically competitive with current agricultural land uses at a farm-gate biomass price ranging from €70 to €130 t−1 dry matter [Styles, D., Thorne, F., Jones, M.B., in review. Energy crops in Ireland: An economic comparison of willow and Miscanthus production with conventional farming systems. Biomass and Bioenergy, May 2006]. This paper uses the same farm-gate prices to calculate the economic competitiveness of energy crop electricity and heat production, using a net-present-value (NPV) approach (20-year period, 5% discount rate). Direct and gasified co-firing of willow wood with coal would result in electricity generation 30% or 37% more expensive than coal generation, at current coal and CO2 allowance prices and a farm-gate biomass cost of €100 t−1. ‘Break-even’ CO2 allowance prices are €33 and €37 t−1, respectively. However, co-firing of Miscanthus with peat is close to economic competitiveness, and would require a CO2 allowance price of €16 t−1 to break-even (against a current price of €12 t−1). NPV analyses indicate that wood heat is significantly cheaper than oil, gas or electric heat, excluding existing wood-boiler installation subsidies. Discounted annual savings range from €143 compared with gas to €722 compared with electric heating at the domestic scale and from €3454 to €11,222 at the commercial scale. Inclusion of available subsidies improves the comparative economics of domestic wood heat substantially. The economic advantage of wood heat is robust to variation in fuel prices, discount rates and heat loads. The greatest obstacles to energy-crop utilisation include: (i) a reluctance to consider long-term economics; (ii) possible competition from cheaper sources of biomass; (iii) the need for a spatially coordinated supply and utilisation network.