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3.7 ENERGY FARMING

In this next section a number of studies are described which look at the feasibility of energy farming in New Zealand. The studies were initiated as a response to the energy crises in the mid 1970s and early 1980s and should be considered in this light.

Conclusions are offered as to the applicability of this research in relation to policies and options for GHG emissions reduction.

3.7.1 Ethanol as a Transport Fuel

In an early survey of literature Kardos and Mulcock (1977) looked at the possibility of ethanol from agricultural crop as a transport fuel. The report concluded that sugar beet would appear to be the most suitable crop. Adding 10 percent of pure ethanol to all petrol used in New Zealand (204 million litres) would require 40,000 to 45,000 hectares of land planted in sugar beet.

Returns showed that sugar beet would be more than competitive with alternative crops that could be grown in the area. It appeared that ethanol could be produced at a competitive price from sugar beet priced at a level that would give a good return to the grower. The cost of ethanol produced in New Zealand from sugar beet, in September 1976 prices, was estimated to be 29.1 cents per litre. The price of petrol at that time excluding tax was 22.3 cents per litre which is 27% higher in real terms than in 1992.

3.7.2 Technical & Economic Aspects of Energy Farming

Harris, et al (1979) examined in some detail the concept of energy farming for transport fuels in New Zealand. They attempted to show how energy farming could he used to enable New Zealand to have substantial quantities of transport fuels from an available and renewable indigenous energy source. Their report set out the main technical and economic aspects of energy farming and propounded a set of guidelines along which they believed energy farming should, or could be developed.

The report examined broad concepts only, so that the results were solely indicative. The writers considered the order of accuracy of the cost calculations was not high, however, they contended that the value in the study was that all crops considered and all processing routes determined were carried out on the same basis so that all figures were comparable. This resulted in a ranking of crop process routes and thus indicated in which directions the current and future programmes should or should not proceed.

The conclusions of the study related to the potential for energy farming on a scale which would enable it to contribute substantially to future transport fuel requirements. The study indicated that costs of production of large quantities of transport fuels from biomass were of the order of 0-50 percent above the 1978 ex refinery cost of petrol. It should be noted that prices for petrol in 1978 were 17 percent higher in real terms than in 1992.

Examples of the cost of different transport fuels were given in the report. For example:

  1. Petrol ex refinery:

Cost 12.8 cents per litre, with an equivalent energy cost of 37 cents per Giga joule

  1. A plant converting fodder beet to ethanol using a feed stock cost of $4 per tonne of oven dried (OD) material, in a processing plant size of 1,000 OD tonnes per day:

Costs of production (15 percent blend) 13 cents per litre. The cost of pure fuel was 17.5 cents per litre for an energy rating of 57 cents per Giga joule. The ratio of feed stock cost over total cost was 72.

  1. A plant converting radiata pine to methanol with a feed stock cost of $2.50 per tonne OD in a plant size of 2,500 oven dried tonnes per day:

Cost of production 11 cents per litre in a 15 percent blend of petrol. The cost of production for pure methanol was 18 cents per litre with an energy cost of 64 cents per Giga joule. The feed stock cost over total cost was 32 percent.

In terms of net energy, the report concluded that energy farming would introduce a degree of flexibility into New Zealand's energy supply system and economic system. It noted that it would be possible to achieve a high net output of energy after all energy inputs were taken into account. It was considered that there were large areas of land suitable for growing radiata pine, maize, sugar or fodder beet and lucerne for energy farming. Detailed studies were considered necessary to determine the true availability of land on a regional or local basis. Transport costs for a specific site location would have to be investigated since transport was a major cost component of the final product cost.

The report also considered that such issues as land tenure, existing land use and environmental questions were quite complex and all would need to he settled before a definitive statement could be made about whether particular parcels of land could become available for energy farming. It considered there was much uncertainty about crop yields and land availability which made it difficult to assess the ultimate potential of energy farming.

The report considered there were basically two process routes which could be taken. The first, fermentation plants, was considered to be favoured in the initial stages of an energy farming programme. The second route, through gasification, tended to be economic at a larger scale. In all cases it was noted that feed stock cost was a high proportion of the total cost of producing a fuel. As a result, it was clear that the use of low cost feed stocks could greatly alter the economic viability of individual processing plants.

For energy farming at the scale discussed in the report it was considered essential to develop a fully integrated agro-industrial system for efficient production of transport fuel.

Because of the high proportion of material taken away from the site, the effect of energy farming on soils and water, particularly the growing and harvesting of short rotation forests, would need to be carefully studied.

It was considered that the processing of crops into transport fuels did not appear to have major environmental problems. The development of the new industry offered the opportunity for design incorporating facilities in management practises which minimised environmental impacts from the outset.

The greatest potential social benefits appeared to lie with the opportunities to increase the population of small rural towns. In relation to intensive cropping of maize in the Waikato it was shown that diversification into an energy farming crops would have the main effect at the farm level, with other consequential effects. In relation to large scale forestry, it was considered that energy farming would induce high levels of social change particularly in rural settlement patterns.

The time scale for the implementation of energy farming at a substantial scale was found to be quite long.

3.7.3 Review of Energy Farming

A year later, Harris et al (1980) reviewed the findings of the previous study on the basis of: critiques written by a wide range of people, workshops, seminars, reports compiled by workshop groups and a wide range of discussions and meetings. The review did not disclose any major disagreement with the conclusion that energy farming could provide substantial amounts of transport fuels. There was some disagreement with the conclusion that the cost of biomass based transport fuels may not be significantly above the cost of imported petrol. There was also debate as to whether other indigenous feed stocks could provide transport fuels more cheaply.

On the basis of indicative costings in 1980, the cost of large quantities of transport fuels were considered to be in the range of 30 to 50 percent above the ex refinery cost of petrol. It should be noted that petrol prices at that time were 47 percent higher in real terms than the 1992 cost of petrol. It was not clear why the price of biomass fuel was still higher than petrol even though petrol prices had moved considerably higher over the one-year period.

In terms of an ongoing programme the review considered that the concept of a 200 OD tonne per day ethanol plant showed promise along with a 500 OD tonne per day methanol plant.

3.7.4 Alcohol Fermentation & Anaerobic Digestion

Higginson and Thornton (1980) looked at the feasibility of linking an alcohol fermentation and anaerobic digestion process to a system for the production of both alcohol and methane from organic substrate. While the process proved to be technically feasible no comment was made as to its economic feasibility.

3.7.5 Small Scale Ethanol Plants

Bio-energy Developments Ltd (1982) reported on an on-going investigation into small-scale ethanol plants suited for application at the farm level in New Zealand. The aim was to determine whether an ethanol plant aimed at providing fuel for use on the farm was feasible. The analysis showed that an annual maximum production limit of 50,000 litres for an individual farm was a realistic design criterion.

It was concluded that constraints to implementation were predominantly economic rather than technical. Unit production costs varied from 60 cents to $4 per litre of ethanol fuel, with plants using beet or waste potatoes as a feed stock. In most situations the unit cost of ethanol produced exceeded the priced of the petroleum fuel displaced. Based on economic considerations alone, fuel ethanol did not represent an alternative fuel option that would have widespread application in New Zealand.

3.7.6 Potential for Energy Farming in the Waikato

A study was undertaken by Kingston et al (1983) on the development and demonstration within the Waikato region of a methodology for determining the potential of energy farming at the regional level. It also looked at the implications for regional development. The report was largely concerned with crop selection procedures, land suitability assessment for selected crops and the detailing of crop management programmes and growing costs. The report considered major biomass production options including agricultural crops such as single growing and processing feed stocks, and short rotation energy forest regimes. These were all found to warrant further consideration for large scale energy farming in the Waikato within a 20 year time frame.

The analysis indicated that maize grain was the most likely crop on which to base the development of a transport fuels (ethanol) processing industry in the study region. Results from the screening of short rotation forest crops, requiring agricultural quality land for optimal yields, indicated several promising regimes warranting further research.

In a total study area of 1.4 million hectares of land around 311,000 hectares of maize class I to Ill land was considered technically sustainable under good yields of management and strong growing support services. A major pre-requisite to any significant extension of maize growing was believed to be an improvement in profitability of maize relative to dairying. The sustainability of such an increase, would appear to be dependent on maintenance of profit margins once maize production was established, and on the continuation and improvement of grower support services.

3.7.7 Farm Scale Ethanol in Canterbury

A study on the applicability of a farm scale ethanol plant for New Zealand was undertaken at a site at Sheffield in Canterbury (Applied Combustion Systems Ltd, 1986). The plant drew on local crops of barley, potatoes and wheat as feed stocks. The report concentrated on the practical aspects of plant operation. The most significant factor effecting the viability of the project was the energy costs in operating an electric boiler. To reduce this cost a low unit rate night-time electricity tariff was seen to be essential. To meet this a large measure of automatic control was found to be necessary for the batch distillation process. The overall conclusion of the study was that the small-scale operation and high energy and labour costs made the economics of the venture unattractive.

3.7.8 Large Scale Ethanol Factory

Henderson (1986) looked at a large scale fuel ethanol factory designed for New Zealand conditions utilising 1,000 tonnes of sugar beet or fodder beet per day. The study looked at process option costs and any energy ratios. The results showed that the ex factory cost of sugar beet ethanol was 75.2 cents per litre in the anhydrous form, with fodder beet ethanol to be 9-10 cents per litre more expensive. At the price indicated, the anhydrous ethanol in a 10-20 percent blend with petrol was seen to be competitive with the 99 cents per litre pump price of early 1985, however this did not take account taxes at the retail level.

3.7.9 Commercial Scale Ethanol in the Waikato

KRTA/MeDermott (1986) looked at ways to develop and demonstrate a methodology for determining the potential and assessing the impact of energy farming on a commercial scale in the Waikato region. The report built on the crop screening and land resource assessment undertaken by Kingston et al, op cit. This phase 2 of the study considered a range of factors which were likely to influence land availability. The factors considered were physical, economic and social ones which effected land use decisions.

The analysis indicated that the economics of producing ethanol fuel from maize were poor in comparison with petrol. The relevant costs of petrol and ethanol would need to change markedly before energy farming became a serious possibility. The ready compatibility of maize growing and processing with the existing rural economy, and wide-spread of direct impacts on the dairy processing industry, suggest that a maize energy farming industry could fit in well in the Waikato. Impacts at the local level would be greater, though within the bounds of past changes in the region.

3.7.10 Energy Farming Unlikely to be Financially Viable

There have been a number of studies in New Zealand since 1977 looking at the possibility of energy farming. Most interest has centred on the production of ethanol as an additive to transport fuels. While the technical feasibility appears proven the projects were not financial viable. The cost of producing fuel from biomass exceeded that of petrol in all cases when compared on an equivalent basis.

Even when petrol prices rose substantially the cost of producing large quantities of biofuels was in the range of 30 - 50 % higher than petrol. This was when petrol prices were 36% higher in real terms than in 1992 (135 c/l in 1979 compared with 99 ell in 1992, in 1992 dollars).

In addition, there was an opportunity cost compared with alternative land uses. For example, there was a higher opportunity cost of land in dairying compared to maize for energy cropping.

The conclusion is that the relative price of petroleum fuels compared to biofuels would have to rise by at least 50 - 100% in order for biofuels to be competitive. Further work would be required to confirm this. It appears that there is a strong positive relation between the cost of biofuel production and petroleum fuel prices.

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