EXPLORING THE POTENTIAL TO PENETRATE THE ENERGY MARKET FOR TENNESSEE-PRODUCED SWITCHGRASS

The need for alternative sources of energy which are renewable and environmentally friendly has focused attention on the development of biomass-based energy sector. Lignocellulosic energy crops such as switchgrass are considered potential feedstock for biomass-based energy because of wide range adaptability in conjunction with lower input requirements. However, the costs of the collection, storage, and transportation of the low density feedstock from farm to conversion facilities in the switchgrass supply chain pose a major barrier to the development of bioenergy sector.

The objective of the present study is to determine the optimal logistics configuration for Tennessee-produced switchgrass to penetrate the energy market via a collection/distribution hub. A mathematical programming model in integration with the Geographic Information System (GIS) was used to maximize the net present value of the profit of a collection hub/depot serving both switchgrass producers as well as bioenergy markets. A total of seven logistics scenarios were evaluated: the Baseline scenario utilized a conventional baler harvest and storage system used in the study area, while the other six scenarios incorporated various preprocessing technologies to increase the density of feedstock before delivery to local or international markets.

The results showed the economic challenges of feedstock logistics: only one of the seven evaluated logistics configurations was found to be profitable for the collection hub/depot with the given assumptions. With an increase in fuel prices, it was even difficult to penetrate the energy markets for Tennessee produced switchgrass. However, if investment risk could be lower, two logistics configurations targeting international markets would become profitable. The results imply that government intervention in the bioenergy industry in the form of incentives, policies, or carbon trading mechanism can reduce the risk of investment in this market and hence increase the profitability and prompt the development of advanced bioenergy industry.