Corn Stover As A Bioenergy Feedstock: Identifying And Overcoming Barriers For Corn Stover Harvest, Storage, And Transport

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Corn Stover As A Bioenergy Feedstock:

Identifying And Overcoming Barriers For Corn

Stover Harvest, Storage, And Transport

Prepared by:

Daniel Klingenfeld

Prepared for:

National Commission on Energy Policy

Washington, DC

Faculty Advisor:

Henry Lee

Seminar Leader:

Monica Toft

2008 Harvard Kennedy School Policy Analysis Exercise

This report has been prepared in partial fulfillment of the requirements of the Master in Public Policy (MPP) degree at the Harvard Kennedy School

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Acknowledgements

I would like to thank several people who have helped make this project advance and who contributed to shaping its content: Brian Turner, Policy Analyst at the National Commission on Energy Policy (NCEP) and supervisor for this project, guided me with detailed comments and suggestions on earlier versions of this work. I am grateful to him and Sasha Mackler, Director of Research at NCEP, for the opportunity to conduct research directly in Iowa. I would like to thank Professor Henry Lee, my PAE advisor at the Harvard Kennedy School, for his critical review and candid comments, which helped me to focus on the key issues and to improve my policy recommendations. Among the people who devoted their time for interviews, I would particularly like to thank George Naylor for the warm reception at his farm house as well as for spending a whole day with me driving around Greene County, Iowa, in order to meet with other farmers and experts. Finally, Andrew Foss, MPP candidate at the Kennedy School, deserves credit for having read this paper and corrected language mistakes.

Client Information

The National Commission on Energy Policy is a bipartisan group of 20 of the nation’s leading energy experts – representing the highest ranks of industry, government, academia, labor, consumer and environmental protection – supported by research and communications staff based in Washington, DC. Following the publication of the Commission's long-term energy strategy Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges in 2004, the Commission will focus on three critical long-term issues: oil security, climate change, and energy infrastructure adequacy and siting.

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Executive Summary

The search for alternative energy sources is intensifying in the United States and around the world in response to concerns about the dependability of energy supply from politically unstable regions and the need to reduce greenhouse gas emissions. In the U.S., corn stover is seen as a promising bioenergy feedstock for liquid fuels production or for direct co-firing: already today, corn stover is produced in relatively large quantities and combines local availability with limited lifecycle greenhouse gas emissions associated with its use. In addition, food-versus-fuel tradeoffs, as seen with first-generation biofuels derived from starch, are practically non-existent with this and other cellulosic feedstocks. Yet there is currently no market for corn stover as an energy source, and major barriers exist along the entire value chain, including the processing stage.

This paper focuses on the harvest, storage, and transport section of the corn stover supply chain. It identifies and analyzes important barriers that need to be addressed in order to make the promises of corn stover as a bioenergy feedstock become a reality. Key findings include:

 Soil health: Preventing erosion and maintaining soil organic carbon levels limit the amount of corn stover that can be harvested in a sustainable manner.

 Harvest technology: A long-term market signal is needed to accelerate the development and deployment of specialized harvesting equipment.

 Storage: Coordination costs among the many parties involved in a distributed storage system need to be addressed, and financing might become an issue for more complex storage layouts.

 Transport:Risk-aversion and uncertain economics in biomass transport could delay deployment of sufficient transport capacities.

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 Farmers' willingness to supply: Knowledge gaps, market uncertainties, and environmental concerns reduce farmers’ willingness to supply corn stover and inhibit investments in technology.

In light of these major challenges to corn stover use, this paper proposes a policy framework that responds to seemingly conflicting objectives. On the one hand, the desired outcomes of increased domestic energy supply and reduced greenhouse gas emissions call for policy incentives to overcome institutional and technical barriers as well as to address current knowledge gaps in order to enable large-scale biomass use. On the other hand, sustainability criteria call for restrictions in order to preserve soil conditions vital for sustained productivity of agricultural lands. Based on an evaluation of economic impacts, political acceptability, and environmental soundness, the paper suggests the following concrete measures:

 Education and outreach: As a first step to address the barriers mentioned above, this paper argues for a joint effort of Farm Service Agencies and the Natural Resources Conservation Service to develop and implement an information initiative disseminating knowledge about corn stover harvest and marketing aspects. Detailing harvest and storage options would give farmers information they need to make investment decisions. In addition, farmers could better appreciate the quantity that could be harvested sustainably without damaging the long-term productivity of soils.  Facilitate coordination: Within the existing structure of the USDA Rural

Development Program, forums should be created to help farmers share knowledge and pool their purchasing power for storage systems. Providing assistance for the

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formation of farmer co-operatives dealing with this aspect of the supply chain would be a further element of this initiative.

 Subsidy: Next to closing the information gap, actively stimulating farmers' willingness to supply is recommended through a fixed government co-payment for every ton of corn stover supplied, financed in part by moving the incidence of existing bioenergy subsidies to the farm level. The co-payment would send a long-term market signal, enable investments in harvest and storage technology, and indirectly stimulate the commercialization of specialized harvesting equipment.

 Public-Private Partnership: Risk-aversion and uncertainty surrounding biomass transport should be addressed in a timely manner by means of an equity participation of the government in a transport public-private partnership for a first demonstration project. As an outcome of this risk-sharing structure, experience gained with the operation would be made publicly available to encourage entrepreneurial activity once the feasibility of this part of the supply chain has been demonstrated. A similar system is also proposed for more complex storage systems.

 Land management plans: Finally, environmental criteria are becoming increasingly salient as a growing bioenergy industry develops. In order to mitigate erosion and soil organic carbon loss, receipt of the government co-payment should be linked to the development and implementation of individual land management plans, defining maximum biomass offtake rates and further management criteria. An innovative framework for developing and monitoring these plans is proposed.

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Introduction: Using Corn Stover For Bioenergy Applications

U.S. demand for biomass to be used in energy applications is likely to grow in the future. Two main drivers are pushing this evolution: on the one hand, concerns about national security with respect to growing energy imports from geopolitically unstable regions have led to a search for alternative supplies. On the other hand, there is mounting evidence of the detrimental and potentially catastrophic impacts of rising atmospheric greenhouse gas concentrations on global climate. Next to demand side management approaches, which have a tremendous potential in limiting the growth and eventually lowering overall energy demand, supply security and greenhouse gas reduction objectives can also be addressed by an increased domestic energy supply from biomass. Assessing the resource potential of various biomass feedstocks and evaluating their potential use against a set of criteria, particularly sustainability and economics, is important for determining what part bioenergy can play in transforming the national energy system.

Corn stover’s potential applications range from an input in bio- or thermochemical conversion processes for the production of liquid fuels to a direct energy source in biomass co-firing applications. As a cellulosic or second-generation feedstock, corn stover can be used in bioenergy applications without directly affecting food production. This contrasts with corn grain, the feedstock currently used for the bulk of U.S. ethanol supply.

The term corn stover describes the residue left on the soil surface after corn grain has been harvested. It consists of cob, husks, leaves and stalk fractions.1Contrary to other crops currently being investigated for use as bioenergy feedstocks, such as switchgrass, hybrid poplar, and willow, corn stover is already produced in large quantities. Stover constitutes the co-product of

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the high-value corn grain fraction, which explains its abundance. This widespread physical availability could eventually make corn stover a widely used bioenergy commodity – conditional upon overcoming various barriers analyzed in this paper.

To date, corn stover has been harvested in limited quantities, mainly for animal bedding, feed, and for some industrial uses.2 The potential additional resource availability for bioenergy applications, such as ethanol production from cellulose or biomass co-firing, makes corn stover appear to be a logical next focus in optimizing the use of ecosystem goods. Moreover, corn stover can be considered as a bridge between corn grain and dedicated energy crops.3 As such, the findings related to corn stover use for bioenergy, both in terms of harvesting, storage, and transport practices as well as in terms of policy considerations, can be most valuable in expanding bioenergy use from agriculture in general – and in recognizing its limitations.

This paper will focus on the harvest, storage, and transport aspects of the corn stover supply chain. Based on an analysis of current issues associated with each of these three supply chain segments, the paper will identify barriers to corn stover use, assess their importance, and evaluate various policy options for overcoming these barriers. As will be shown throughout the discussion, the central policy question to be answered is how to encourage corn stover supply while simultaneously addressing ecological constraints arising from increased use of this biomass resource. Criteria for weighing and deciding among alternatives include political feasibility, environmental effectiveness, and economic consequences. By evaluating various policy options, the paper also attempts to provide transferable insights into biomass management more generally.

2

Sokhansanj et al., Stochastic Modeling of Costs of Corn Stover Costs Delivered to an Intermediate Storage Facility, ASAE meeting presentation, 2002, p.3.

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Methodology and Objectives in Policy Development

"Just because stover grows on the field does not mean we have to use it."4 This very direct statement by an Iowa farmer points to questions policy makers have to ask and answer before embarking on specific policy design and implementation. At present, no larger market exists for this feedstock. This creates uncertainty, but there are other barriers to corn stover harvest, storage, and transport.

Given the expected benefits in terms of increased domestic energy supply and reduced greenhouse gas emissions, expanding the use of biomass in energy applications appears desirable. From this macro perspective, it would seem as if a future corn stover policy should be designed so as to maximize feedstock supply, first and foremost targeting existing biomass reservoirs, such as corn stover.

However, as will be shown, the question of possible and desirable feedstock supply quantities is more complex, as corn stover is far from being agricultural "waste": significant constraints related to sustainability exist that affect farmers' willingness to supply with negative consequences for supply chain economics.

Most of the information presented in this paper was gathered during a research trip in January 2008 to Iowa, the biggest corn-growing state of the country. During that trip, interviews with a dozen people were conducted, including professors and researchers at Iowa State University, farmers, and experts in the field of storage and feedstock supply chain logistics. Insights from these interviews are combined with recent findings of scientific studies relevant for policy development.

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The presentation of current issues in stover harvest, storage, and transport will form the basis for identifying and analyzing existing barriers to corn stover use as a bioenergy feedstock. Although the discussion will be technical at some points, an understanding of the underlying issues is essential to motivate the policy recommendations developed thereafter. The paper will point to various institutional, ecological, and technological barriers, which often are interrelated. The importance of overcoming each of the barriers is then assessed. Generating policy options and weighing alternatives is the next step in the analysis before making recommendations as to how best to address the most important barriers to corn stover use. The ultimate objective of this paper is to present a balanced policy proposal for the future of corn stover use in the United States. This policy proposal should also be relevant to the further expansion of the bioeconomy more generally.

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Identifying And Analyzing Barriers Associated With Corn Stover Harvest,

Storage, And Transport

Biophysical availability of corn stover with limited growth prospects

The primary drivers determining the biophysical supply of corn stover are:  The ratio of corn stover to corn grain yield

 The amount of acres of corn planted  Land quality

 Regional climate  Management practices

In addition, changing weather patterns induce variability in yearly biomass availability. The national yearly corn stover supply can be estimated by relating it to corn grain yields, on which statistics exist: as a good approximation, the dry matter5 weight of a corn plant is split equally between the grain and stover fractions.6 The total dry matter weight of grain harvested therefore provides a basis on which to estimate national or regional stover biomass availability.7 However, one additional adjustment needs to be made: typically, corn grain yields are indicated based on 15.5% moisture content.8 As a consequence, the total grain yield needs to be reduced by 15.5% in order to obtain an approximation for the current overall stover resource availability.9

5

As a convention, in order to make the weight (and energy content) of biomass at different moisture levels comparable, the weight is calculated on a dry matter (DM) basis at 0 percent moisture content.

6_Vagts,_{Nutrient Content and Value of Corn Stover}_{, Iowa State University Extension,}

http://www.extension.iastate.edu/nwcrops/corn_stover.htm, January 2005.

7

Ibid.

8_Ibid. 9_Ibid.

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Recent estimates of potential national corn stover availability based on the above described methodology put national stover production at 196 million mega grams (Mg)10 using averages from 1995-2000.11 Even though an upward trend in corn production exists, there is significant year-to-year variation.12 Based on the 1995-2000 average and seen from a regional availability perspective, the Corn Belt states of Iowa (35.9 million Mg), Illinois (30.9 million Mg), Nebraska (23.5 million Mg), and Minnesota (19.4 million Mg) make up for more than half of total national stover production.13

A comparison to expected ethanol yields will help put the figures of current potential stover availability into perspective: for liquid fuels applications based on cellulosic conversion technology, one estimate puts conversion efficiency at 79 gallons of ethanol per short ton of stover dry matter.14 For our comparison, we shall use a current nationwide availability of corn stover of around 200 million Mg in order to account for seasonal variability in corn and corn stover productivity. Converting around 50% of total available stover biomass would yield 8 billion gallons of ethanol. As the paper will point out, harvesting an average of 50% of corn stover biomass would probably be unsustainable, as the resource would be over-utilized given current farming practices. Nevertheless, even at a 50% stover offtake rate, the energy-adjusted equivalent of 5.3 billion gallons of gasoline constitutes only 3.8% of U.S. gasoline demand in 2006. This comparison highlights that corn stover has the potential to make a certain contribution

10_{A mega gram (Mg) is equivalent to one metric tonne or around 1.1 short tons.} 11

Graham et al., Current and Potential U.S. Corn Stover Supplies, Agronomy Journal 99:1-11, 2007, p.5.

12_{Ibid, p.5.} 13_{Ibid, p.7.} 14

The expected conversion efficiency is drawn from a presentation by Jill Euken, Field Specialist/Agricultural Engineering, Iowa State University Extension, Impact of Ethanol on Iowa Agriculture, 2008, p.27, citing Wallace et al., 2005, USDA/USDOE. The number quoted is a projection and other estimates give a wider range of conversion efficiency.

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to liquid fuels supply, but that it can only be one element of many in a national strategy to meet current and future energy challenges.15

Biophysical supply of the feedstock therefore is a fundamental barrier to the overall amount of energy ultimately derived from this resource. Over the long run, this applies in a macro perspective limiting the size of the corn stover-based bioenergy industry. In the short run, it is already an important factor when it comes to field-specific sustainability constraints for corn stover supply to individual bioenergy facilities.

In this context, the question arises if corn plants could be optimized so as to yield a higher proportion of stover relative to grain yields. Having additional biomass available would loosen many of the ecological constraints on corn stover harvest, which will be outlined in more detail in the following sections. Yet historically, the development of traits has focused on higher corn grain yields, with stover only being the co-product of the high-value corn grain fraction. Looking ahead, if corn stover were to become a more valuable product, optimizing biomass yields for corn would be feasible. However, since the corn plant converts solar energy at a certain efficiency to produce stover and grain, a compromise with grain yields would have to be found, as production of one part of the plant could be maximized at the expense of the other.16 In light of current high prices for corn grain, the existing incentive structure, and the resulting increased profitability for farmers to maximize grain yields, high demand for dedicated corn stover-maximizing traits appears to be an unrealistic scenario.17 At best, farmers could choose stover hybrids optimized for silage among existing traits to produce higher biomass yields but, essentially, plant development

15

It should however be noted that 8 billion gallons of ethanol from corn stover would constitute 50 percent of the current mandate for cellulosic biofuels set at 16 billion gallons by 2022.

16_{Interview with Dr. Robert Anex, Associate Professor, Iowa State University, 18 January 2008.} 17_Ibid.

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will likely remain driven by corn yield.18 As an intermediate conclusion, the ratio of corn grain to corn stover is not expected to change towards corn stover and, at best, corn stover availability might move up in line with increasing grain yields. More realistically, however, the proportion of the stover fraction might actually decline as corn grain yield is increased further. This phenomenon has been observed empirically in two studies that find a negative correlation between grain dry weight and total plant dry weight over several years of corn production.19

The evidence indicates that the biophysical supply barrier of corn stover is not likely to be overcome through improved varieties. In addition, land quality and climate are factors that cannot be adjusted. Nevertheless, higher corn stover production could be achieved by increasing the total acreage of corn planted. Two main options are possible in this respect:

 Converting additional land to corn

 Changing management practices to continuous corn planting, away from the more common corn/soybean rotation

However, the tradeoffs on each of these options are important: additional corn acreage would either have to displace other crops on existing farmland or have to expand into lands of high ecological value set aside under the Conservation Reserve Program (CRP). The first option would lead to higher prices for the displaced commodities, exacerbating the food-versus-fuel problem, which cellulosic feedstocks were supposed to mitigate. The second option poses obvious conservation problems as intensive farming is resumed in ecologically more fragile areas. Because of their fundamental drawbacks, these two options are not explored further in this paper.

18_{Interview with Brian Berns, Agronomy Sales Specialist, Farmers Co-operative Company Farnhamville, 14 January}

2008.

19

Linden et al., Long-term grain and stover yields as a function of tillage and residue removal in east central Minnesota, Soil Tillage Res. 56:167-174, 2000; Montross et al., Economics of collection and transportation of corn stover, ASAE Paper 036081, July 2003.

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Having discussed the biophysical supply of corn stover in the United States and the barriers to increasing resource availability, the focus will now be narrowed to examine sustainability constraints in corn stover harvest.

Sustainable offtake rates for corn stover as biophysical supply constraint

As will be pointed out, sustainability constraints are a major barrier to corn stover use: the amount of corn stover that can be harvested is limited by the need to preserve long-term soil productivity. In fact, corn stover cannot be regarded as agricultural waste and its use cannot be greatly expanded, because stover left on the field to decay mitigates wind and water erosion and contributes to replenishing soil organic carbon (SOC).20,21

So far, most sustainable stover offtake estimates have been limited by the need for residue to control erosion.22 A recent study evaluated erosion constraints to stover collection on a nationwide basis while also implicitly considering crop productivity and soil nutrient constraints.23 This was done by recognizing the value of residues for maintaining soil moisture and including the cost of fertilizer to replace nutrients removed.24 Moreover, an equipment constraint due to current limitations in collection efficiency was added, specifying the maximum amount of corn stover collected under any conditions at 75%.25 Based on these premises and taking the maximum constraint as the limiting factor, the model yields a total annual collectable

20_{Wilhelm et al.,}_{Corn Stover Soil Organic Carbon Further Constrains Biomass Supply}_{, Agronomy Journal 99:}

1665-1667, 2007, p.1665.

21_{Soil organic carbon results from the accumulation of decomposing plant tissue initially produced by means of}

converting atmospheric CO2 and solar energy into organic material. SOC levels can vary from less than 1 percent in

many sandy soils to above 20 percent in soils found in wetlands or bogs. Source: McVay et al., Soil Organic Carbon and the Global Carbon Cycle, Kansas State University, Department of Agronomy, Publication MF-2548, October 2002.

1665-1667, 2007, p.1665.

23

24_{Ibid., p.1.} 25_{Ibid., p.2.}

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stover weight of 58.3 million Mg, or just under 30% of national stover supply (approximately 196 million Mg).26 The study shows that almost two thirds (62%) of the supply comes from three major corn producing states: Iowa, Minnesota, and Illinois. Wind erosion significantly constrains stover supply from Nebraska and might be a limiting factor in some areas of other Corn Belt states that have not been assessed under this criterion. The estimated average offtake rate of 30% is based on current rotation and tillage practices and includes significant geographical variability.27 If no-till practices were universally adopted, the total harvestable stover supply according to the model would increase to 101.2 million Mg, which corresponds to roughly 50% of biomass available.28 Changing land management practices to no-till thus appears to be an important mitigation strategy to address resource constraints.

Going further, recent research indicates that the amount of stover needed to maintain soil organic carbon is generally greater than what is required to prevent erosion, which makes SOC retention the limiting factor in stover offtake.29 Soil organic carbon is associated with important properties, such as nutrient retention and recycling, soil structure improvement, enhancement of water exchange characteristics, and improved microbial life within the soil.30 In addition, SOC has a positive effect on crop yields, underscoring the value of biomass left on the field under current farming practices.31 Finally, variations in soil organic carbon are indicative of the effective sequestration of atmospheric carbon in soils, which is of interest in lifecycle greenhouse

26

Ibid., p.6.

27_{The study indicates that about 93% of harvestable stover comes from land where at least 2 Mg of stover can be}

collected per hectare at costs below $33.07 Mg-1 ($30 ton-1). Over 50% of collectable stover comes from fields where more than 4 Mg per hectare can be harvested at costs below $27.56 Mg-1 ($25 ton-1).

28

1665-1667, 2007, p.1665.; This strict interpretation of SOC as the limiting factor was somewhat challenged by Dr. Robert Anex (interview on 18 January 2008): erosion can be the limiting factor for soils with a steep slope and carbon added back to the soil by tilling in order to replenish SOC could in fact expose the soil to more erosion.

30_{Ibid., p.1665.} 31_{Ibid., p.1665.}

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gas assessments. Looking ahead, an integrated market for carbon dioxide making use of cap-and-trade mechanisms with agricultural offset credits could further reward the stabilization or even the buildup of soil organic carbon in agricultural soils.

For the Corn Belt, using averages of 10 counties, the study indicates a maximum allowable offtake rate of corn stover to retain soil carbon of only around 40%. This figure is based on a typical corn grain yield of 170 bushels per acre (10.7 Mg/ha) and increases with yield.32 However, the allowable offtake rate corresponds to a no-till or conservation tillage regime in conjunction with continuous corn33, which produces more biomass than a corn/soybean rotation.34 In contrast, the less fertilizer-intensive corn/soybean rotation widely practiced across the Corn Belt35 yields an average sustainable offtake rate of only 12% for every year corn is planted, and this only applies under no or conservation tillage!36 One reason why the sustainable offtake rate falls so steeply under this rotation regime is the significant biomass offtake for typical soybean harvest, leaving almost no above-ground biomass with only a limited root system to replenish SOC.

The following chart from the study by Wilhelm et al. (2007) summarizes the discussion and outlines the importance of corn yield and management practice on harvestable corn stover. The latter aspect is underscored by the lower harvestable stover quantities under moldboard plow, the traditional and most invasive tillage technology.

32_{Ibid., p.1665.}

33_{Continuous corn refers to a cropping regime, under which corn is grown on the same land year-on-year without}

rotating it with other crops.

1665-1667, 2007, p.1665.

35

Over 80% of farmed land in Iowa; nitrogen, phosphate, and potassium fertilizer input only for the corn planting season.

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Even though SOC levels change slowly over time and continued research needs to confirm these assessments over longer time horizons, the implications for policy can be far-reaching:

 In most instances, the limiting factor in sustainable corn stover offtake rate is not erosion but soil organic carbon.

 The average available stover supply that can be harvested sustainably under current cropping practices is generally lower than indicated by studies focusing solely on erosion control.

 The variability of results within each cropping and tillage system points to a policy that takes local soil conditions and farming practices into account. Regional Harvestable corn stover related to corn yield and land management practice

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averages in terms of offtake rates, for example for the entire Corn Belt or even for individual states, are too broad and do not reflect the specificity of local conditions.37 Geography thereby becomes a key differentiating factor, precluding biomass use in some areas while making it possible in others: despite the rather restrictive average results, varying soil properties and geography lead to significantly higher specific offtake rates, even under corn/soybean rotation, in several counties.38 This regional variability will be a factor in locating bioenergy facilities in areas where higher sustainable offtake rates can be achieved. As a consequence, substantial biomass supply to a bioenergy facility within a reasonable collection radius would be possible, keeping transport costs down.  If erosion control and maintaining SOC levels were the only environmental criteria

governing a future corn stover policy, incentives for corn stover supply could lead to more continuous corn acreage, requiring yearly fertilizer input as opposed to a corn/soybean rotation. The negative consequences of more energy-intensive fertilizer use, increased groundwater contamination through percolation of nutrients, and a stronger need for pest-resistant bioengineered plants need to be taken into account when developing a policy framework.39

The next section will identify constraints to corn stover harvest and point to mitigation options.

37_{Interviews with Dr. Robert Anex, Associate Professor, Iowa State University, 18 January 2008 and Jill Euken,}

Field Specialist/Agricultural Engineering, Iowa State University Extension, 16 January 2008.

38

Interview with Jill Euken, Field Specialist/Agricultural Engineering, Iowa State University Extension, 16 January 2008.

39_{Interviews with George Naylor, Iowa Farmer, 14 January 2008 and Dr. Matt Liebman, Professor of Agronomy,}

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Corn stover harvest40

Weather, labor, and marketing as harvest constraints and factors for technology choices

Corn stover harvest needs to satisfy a set of criteria, some of which present significant barriers that must be overcome for this crucial element of the supply chain work at scale:

 Timeliness of operation and convenience is a fundamental requirement for biomass harvest, given in particular the weather factor in the Corn Belt: rain and even early ice storms could lead to fast deterioration of stover to be collected and could at the extreme make stover harvest outright impossible.41 With the typical corn harvesting season starting in October and running into November, the time window for corn harvest can be very narrow, as indicated by anecdotal evidence about snow and ice storms in late October covering the land and making further harvesting impossible.42 Dependable feedstock supply is absolutely critical for future large-scale bioenergy applications, as is revenue certainty from biomass harvest. Decision criteria therefore include the number of passes to collect corn stover and combine speed for corn stover harvest.

 Soil contamination of biomass needs to be minimized, particularly for feedstock to be used in cellulosic bioenergy applications, which require a high consistency of inputs and a minimum level of impurities.43

 The need for additional labor during harvest time is a constraint, as temporary workers are scarce, particularly around that time of the year.

40_{Unless otherwise indicated, information in this section is based on an interview with Dr. Stuart Birrell, Associate}

Professor, Iowa State University, 15 January 2008 and a presentation by Dr. Birrell entitled Biomass Harvesting, Transportation and Logistics.

41

Interview with Jerry Peckumn, Iowa Farmer, 14 January 2008.

42_{Interview with George Naylor, Iowa Farmer, 14 January 2008.}

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 From a corn marketing perspective, harvest technology should yield two separate harvest streams of grain and biomass for farmers to retain versatility in marketing grain individually.

 A further criterion for harvest technology is the density of the biomass stream produced in order to allow for weight-limited transport at lowest cost.

 Finally, the capital cost of new harvest equipment is important, as is the possibility of using the equipment for other purposes, as this would allow the costs to be spread across various crops.

Single-pass dual-stream as preferred harvesting technology

There are three major competing technologies for harvesting corn stover: conventional multi-pass forage harvesting systems, single-pass combined-stream harvesting systems, and single-pass dual-stream harvesting systems.

The conventional multi-pass forage harvesting system is currently being used for limited corn stover collection, mostly for cattle feed. As the name indicates, stover harvest is done in a multi-pass operation, where the combine harvests the corn grain and blows other plant fractions out of the back of the machine onto the field. In a second operation, this loose residue is windrowed and then baled with a baler, either directly or in a third pass.

The second stover harvesting option, a single-pass combined-stream harvesting system, consists of a low-cost whole plant harvester that can be used independently of a combine, for example mounted on a tractor. This type of machinery produces a single combined stream of corn grain and stover fractions.

In a single-pass dual-stream harvesting system, the third technology option, a modified combine collects grain and stover and separates them into two different harvest streams.

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Against the criteria described in the previous section, there are tradeoffs with each of the technology choices under study. Advantages of multi-pass technology include compatibility with existing equipment, such as grain combines, and ease of an initial ramp-up of biomass production without major new capital investments by farmers. This type of harvesting technology could also be used in dryer climates with larger harvesting windows, where timeliness of operation is not as important as in many regions of the Corn Belt. The use of biomass in co-firing applications, where impurities are more tolerable, also allows for multiple-pass harvest.

On balance, however, the single-pass dual-stream harvesting system best addresses the crucial factors of timeliness and convenience of operations, feedstock quality, and labor input, as well as separate grain and biomass availability. In addition, a single-pass dual-stream combine can be equipped with various heads for different crops, allowing capital costs to be spread around. Moreover, local conservation requirements set to prevent soil organic carbon loss and erosion might require variable stover collection rates on a field-by-field scale, which could be achieved by means of a dedicated single-pass dual-stream biomass harvester with dynamic collection capabilities.

Disadvantages of this harvesting system include the high cost for the combine harvester. Farmers or custom operators44 would have to make a substantial investment requiring a long-term view of a viable corn stover market. A mitigating factor to this assessment is that newer combines could probably be retrofitted for around $30,000 to $60,000. Combine development is still in the experimental stages, however, and it will take several years before a finished product will become available to farmers. Attention should therefore be drawn as to the compatibility of timescales between building bioenergy conversion facilities and ensuring readiness and

44_{In general, custom operators are specialized companies owning and operating farming equipment and offering}

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penetration of new harvesting technology. As described in the annex to this paper, a qualification to this constraint is the use of a modified harvesting method for the first experimental corn stover plant, which solely relies on corn cobs as biomass input.

Finally, the single-pass dual-stream system poses the logistics challenge of two different harvest streams, with the corn stover fraction having a low density of only 3-4 pounds per cubic foot. As a result, transport would be volume-limited, increasing overall supply chain costs and posing storage challenges. Additional pre-processing before transport, such as chopping (which increases the density to 14 lbs/ft3) or pelletizing could reduce transport cost. Yet important technical tradeoffs exist: additional equipment would need to be integrated into the combine, increasing weight, power consumption, and complexity. Safety concerns as to possible dust explosions during biomass compaction are further constraints.

Given these tradeoffs, for the short to medium term, experts see an adoption path for machinery, which minimizes changes required and which basically relies on standard combines with additional optional attachments for biomass harvest. More specialized biomass harvest systems with densification capabilities require significant changes in overall machine design and are more likely to be commercialized and adopted once a mature market for biomass feedstock is established.

Clear long-term signal needed for technology deployment and adoption

As pointed out in the previous section, add-on equipment allowing single-pass dual-stream harvest is still in development. In a general sense, technology adoption is dependent on the formation of a market for corn stover and a high willingness of farmers to supply this feedstock, sending a clear signal to equipment manufacturers. As will be shown in detail following the discussion of storage and transport aspects, at this point, farmers are reluctant to

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invest due to uncertainty about possible future policy changes and a variety of other factors.45 A clear long-term signal is needed for investments in biomass harvesting technology with various possible policy options available. Since this question requires a longer analysis of alternatives with effects reaching beyond the harvesting section, the problem will be picked up in the second part of the paper focusing on policy mechanisms.

In the following, storage and transport aspects of the supply chain will be analyzed.

Cost, logistics, biomass quality, and coordination challenges critical to storage options

Different storage and transport systems are likely to develop for corn stover use. The choice is principally among three main storage systems: distributed on-farm storage coupled with some buffer storage at the bioenergy facility, satellite distribution similar to today's grain elevators with larger intermediate storage and potentially feedstock pre-processing to ensure consistency, and finally massive central storage directly at the bioenergy plant.46 Some experts see the latter option as unrealistic and expect a combination of the first and second storage systems.47The major factors determining the storage system chosen are:48

 Cost of storage type

 Degradation rate of biomass

 Institutional factors, such as coordination cost  Transport constraints

 Labor needs also associated with transport

45_{Interview with Jill Euken, Field Specialist/Agricultural Engineering, Iowa State University Extension, 16 January}

2008.

46

Interview with Dr. Stuart Birrell, Associate Professor, Iowa State University, 15 January 2008.

47_Ibid. 48_Ibid.

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Key barriers with massive centralized storage include labor shortages during a short harvest and transport window, considerable traffic problems with potential delays due to simultaneous material movement needs, and finally a poor capital utilization of transport and loading equipment, which needs to exist in far greater proportions as compared to a storage and transport system to spread the workload over a larger time horizon. Coordination costs between the limited number of affected parties might be relatively low compared to these technical barriers.

In contrast, more distributed storage systems with either on-farm storage or grain elevator-type intermediate storage depots address some of the technical drawbacks of centralized storage by offering advantages in terms of leveling out peaks in the supply chain: transport and loading equipment can be utilized in a more optimal way, which should lead to lower transport costs and a better use of existing infrastructure (roads). At the same time, the initial investment in several distributed storage depots could be more expensive than a single facility and requires the commitment of a number of parties, in particular when it comes to on-farm storage, in order to ensure storage capacities at scale once feedstock demand ramps up. As a result, coordination costs among the many parties concerned are most probably higher. Policy development should therefore address the financing barrier as well as strive to facilitate coordination.

Uncertainties and risk-aversion hampering corn stover transport demonstration at scale

With respect to biomass transport, three issues stand out:  Technology

 Ownership  Economics/Scale

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When it comes to the future industry structure in biomass transport, anecdotal evidence from interviews indicates that road transport by truck from farms to intermediate storage depots or directly to a bioenergy facility appears to be the option of choice. This technology option requires additional capital investments, because the self-unloading trailers needed for biomass transport have relatively high upfront costs compared to the grain trailers currently in use.49 Given the limited alternative uses of this equipment for farming, direct ownership by farmers is unlikely, contrary to what is the case for most truck and trailer combinations used for grain transport today.50

A promising strategy to overcome this barrier could focus on the role of custom operators specializing in biomass transport, such as dedicated logistics companies or logistics divisions of bioenergy plants. Relying on specialized companies for biomass transport could prove to be particularly cost-effective with respect to on-farm or intermediate storage systems, which are seen in this paper to be the preferred storage option: the requirement to continuously move feedstock would maximize capital utilization and lower specific transport costs. Labor needs would equally be smoothed out over the year. From a farmer's perspective, the convenience of not having to manage and service additional capital items is another advantage.

Nevertheless, uncertainties as to overall economics remain, including process constraints associated with loading biomass on trailers.51 Here, further research and field demonstration is required in order to determine performance and costs. In a more general manner, transporting important amounts of biomass, even spread more evenly over the year, is considered a major

49

Interview with BJ Shany, Commodity Manager, POET Biorefining, Emmetsburg, 17 January 2008.

50_Ibid. 51_Ibid.

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challenge by many experts, and its consequences are not yet fully appreciated.52 Risk-aversion by custom operators might create a time lag between transport demand and supply, with policy potentially having a role in ensuring timely demonstration of logistics capabilities.

Finally, the degree of farmers' willingness to supply corn stover for bioenergy has important implications for the entire corn stover supply chain. The magnitude of this issue and its wider implications will be assessed in the following section, which integrates the elements of corn stover harvest, storage, and transport discussed so far.

Multifaceted barriers to farmers' willingness to supply corn stover53

Farmers' willingness to supply corn stover is a key factor in making the corn stover supply chain work: the proportion of farmers making stover available has a direct impact on the dimension of collection radii for feedstock for a given processing plant size, with consequences for transport cost and overall bioenergy economics. Farmers' decisions are also important for the speed of harvesting technology adoption as well as for the feasibility of distributed on-site storage concepts, as highlighted previously. Important factors determining farmers' willingness to supply corn stover are:

 Knowledge about corn stover harvest and marketing  Farmers' attitudes and beliefs about residue management  Confidence in the market for corn stover

 Environmental concerns

52

Interviews with Brian Berns, Agronomy Sales Specialist, Farmers Co-operative Company Farnhamville, 14 January 2008, Dr. Chad Hart, Scientist, Iowa State University, 16 January 2008, Dr. Michael Duffy, Professor, Iowa State University, 16 January 2008, and Dr. Robert Anex, Associate Professor, Iowa State University, 18 January 2008.

53

The figures quoted in this section are taken from a survey by Dr. John Tyndall, Natural Resource Economist, Iowa State University, Corn Stover as a Biofuel Feedstock in Iowa: Characterizing Farmer Interest to Supply,

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 Farm-level economics

A representative survey54 among Iowa farmers conducted post harvest 2006 and involving samples from various regions of the state found that only 17% of all farmers would be interested or very interested in supplying corn stover, 37% are neutral, and almost half of all farmers (46%) are either not interested or not at all interested. This rather sobering outlook as to farmers' willingness to supply corn stover requires investigating what the barriers to higher willingness to supply are and how policy can address these.

A first barrier relates to how knowledgeable farmers are about harvesting and marketing corn stover: only 4% of farmers feel very informed, whereas 41% say they are not knowledgeable at all, and 28% say they are a little knowledgeable. Clearly, most farmers in Iowa are in the learning phase of this potential market and this knowledge gap needs to be addressed before farmers can be expected to make investments and commit themselves to supplying feedstock. In a different perspective, given farmers' need for more information, the survey results indicate perceived barriers, whose evaluation might change as farmers become more knowledgeable. Finally, the questions asked in the survey were based on a supply chain relying on a multi-pass forage harvest system, which presents certain drawbacks, as pointed out earlier. These factors point to some caution when interpreting some of the results presented in the following.

The survey asked farmers to indicate their beliefs about harvesting and marketing corn stover, based on a set of predefined questions linked to a Likert scale55 with the following results:

54_{The survey relied on regionally stratified random samples dividing the state of Iowa into four geographically}

distinct regions. The survey was sent to 1,500 Iowa crop farmers, with 602 completed surveys returned. Performing two non-response tests (early vs. late respondents; comparison with Iowa Ag Census) highlighted the representative character of the sample with fully generalizable results.

55_{The Likert scale allowed to rank the importance of each option by assigning numbers from 1 to 5 (1 = strongly}

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Harvesting corn stover from

fields will… N

Mean Scores (1 = strongly disagree;

5 = strongly agree)

increase the need for custom

baling.56 536 4.07

increase the need for clean

storage areas. 485 3.86

increase equipment needs. 537 3.85

increase the need for specialized management to ensure the quality of stover.

493 3.70

increase the need for joint

ownership of balers. 491 3.44

Selling corn stover to

bio-refineries would require… N

Mean Scores (1 = strongly disagree;

5 = strongly agree)

a long term contract (3-5

years) with the bio-refinery. 457 3.35

using a co-op to handle

delivery arrangements. 464 3.03

bank financing. 461 2.89

government subsidies. 449 2.61

In short, Iowa farmers see a need for an increase in capital investment for harvest and storage as well as a requirement for additional managerial knowledge. The role of custom operators in addressing these questions also appears to be important. Less certainty and more ambivalence exists with respect to a number of central policy questions, such as long-term delivery contracts with a bioenergy conversion facility, the role of co-ops, and bank financing as well as government subsidies. Apparently, there is some uncertainty as to the degree of risk involved with the sale of corn stover as well as with the general financing situation, but no major barriers for corn stover supply seem to exist in this respect. A possible explanation of this result would be the expected reliance on custom operators for stover harvest and transport who essentially absorb the market risk and make it unnecessary for farmers to invest in their own

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equipment. However, especially on the harvest side, facility operators are likely to expect farmers to invest in additional harvesting equipment as well as in on-site storage. Such investments require a long-term view of the market as well as favorable economics. Financing and government support could well become an issue again here.

Concerns about ecological impacts are a further barrier for farmers to supply corn stover, as responses to the expected consequences of 50% and 70% of total stover removal indicate. Already at the 50% level, a majority of farmers expected an increase in soil erosion and nutrient loss as well as a decrease in soil organic carbon, in-field moisture, and in-field wildlife habitat. At the 70% removal level, the proportion of respondents expecting the above-mentioned negative consequences increased significantly, and deterioration of water quality became another majority concern. In short, farmers are aware of potential ecological risks associated with stover harvest, which need to be addressed by a policy framework.

Finally, supply decisions of corn stover are likely also related to overall farm profitability: an earlier survey conducted in 2006 across Iowa (ISU Farm & Rural Life poll) indicated a higher willingness to supply, with 51% of farmers strongly agreeing that they would sell residue as a bio-refinement feedstock and 35% being uncertain about this question. Anecdotal evidence suggests that because of the strongly increasing corn prices throughout 2006, reaching $3.40 a bushel when the post harvest study was conducted, a significantly improved revenue situation for farmers under existing management practices reduced farmers' interest in gaining additional marginal income from stover sales. Such a conclusion is likely to be even more valid under current corn prices of above $5 per bushel. This finding is indicative of the complex dynamics governing farming decisions and the need for linking policy mechanisms in order to provide consistent incentives for corn stover supply.

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Overcoming Barriers For Corn Stover Harvest, Storage, And Transport

Framework for analyzing mitigation options

The preceding analysis of corn stover harvest, storage, and transport identified key barriers to be addressed by a policy framework. Even though these barriers are often cross-cutting, they can be grouped into three broad categories:

 Environmental constraints related to sustainable harvest rates and management practices

 Technological challenges and the current absence of large-scale supply chains  Knowledge gaps as well as uncertainty with respect to economics and market

stability leading to a limited willingness to supply by farmers

Policy options for each of these barriers must satisfy the three criteria of economic soundness, political feasibility, and environmental acceptability. Administrative feasibility will also be considered when analyzing the implementation of policy elements.

Since the supply chain is critically dependent on farmers’ willingness to make corn stover available, focusing on raising their willingness to supply is a fundamental point in a policy proposal and will be explored first. Options for addressing technological challenges, including the logistics constraints of moving biomass to a conversion facility, will be analyzed thereafter. Environmental constraints, which become more salient as a growing bioenergy industry develops, are discussed last.

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Addressing limited willingness to supply

Benefits of combining information and outreach with active market support

Based on the analysis presented, willingness to supply could be raised by:

 Educating farmers about the advantages associated with supplying corn stover, while essentially leaving ultimate supply to market forces driven by energy prices  Providing a long-term market signal giving more revenue certainty and investment

protection in order to actively encourage feedstock supply

The first option – educating farmers – would help decrease uncertainty and lead to a better appreciation of the resource potential that can be harvested sustainably without damaging the long-term productivity of soils. Information about harvest and storage options would give farmers the ability to decide whether they should make their own investments, seek co-operative ownership of equipment, or rely on custom operators. Such educational initiatives could for example be implemented by USDA agencies with a country-wide presence, such as Farm Service Agencies (FSA) or offices of the Natural Resources Conservation Service (NRCS). Additional resources required for such a program would be limited in scope as well as in time, as they would need to focus on creating content with a structure for outreach already in place. Some information is already available which can be built upon.57 Political feasibility of this non-intrusive measure does not appear to pose a problem. In addition, the program would be designed to also highlight environmental limitations of stover harvest, thus addressing ecological concerns.

Nevertheless, against these positive points, simply informing farmers might not lead to a substantially increased corn stover supply: high-price corn might not justify investments in

57_{See for example USDA fact sheet on stover harvest:}

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machinery or modifications to the harvest system in order to gain marginal income from corn stover sales. The absence of a market for the product at this point and no successful supply chain demonstration at scale might remain roadblocks contributing to a chicken-and-egg problem of supply and demand. A slowly rising willingness to supply might equally discourage combine manufacturers from investing in biomass harvester development. As a consequence, educating farmers certainly is a step in the right direction but arguably needs to be combined with more direct measures focusing on active stimulation of the market for corn stover.

Active government policies targeting market stimulation could be implemented at the downstream level (e.g. at the conversion facility or at the blending level for liquid fuels), stimulating the market for corn stover and leading to more demand and higher prices for farmers. Policies could also target farmers directly by subsidizing corn stover supply, therefore allowing farmers to offer corn stover cheaper than they otherwise would and giving them an additional profit margin. Both measures carry the risk of stimulating intensive harvesting of biomass, potentially violating sustainability requirements. This question becomes even more important because the proportion of rented land in Iowa and across the Corn Belt has gone up: farmers are retiring and economies of scale lead to bigger average farm sizes.58 Currently, around 60% of acreage in Iowa is rented, most often under one-year rental contracts.59 A principal-agent problem arises, as farmers might proceed to over-harvest biomass for short-term profit maximization, thereby negatively impacting long-term land productivity, lowering the value of the land. Specific provisions against this risk could be written in leases but enforcement would fall back to land owners, which could prove to be costly and incomplete. Therefore, the incentive structure for corn stover supply itself should be designed with the aim of effectively protecting land

58

Interview with Dr. Michael Duffy, Professor, Iowa State University, 16 January 2008.

59_{Interviews with Dr. Michael Duffy, Professor, Iowa State University, 16 January 2008 and with Dr. Steven Fales,}

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owners from long-term degradation of their land without requiring their active monitoring. The target of future corn stover policy is therefore an important decision: linking payments to farmers directly to sustainability criteria would be easier to enforce and would have a superior motivational effects than relying on monitoring and verification by upstream buyers in order for them to receive additional incentives.

While environmental acceptability would be addressed by such a support policy, the degree of government intervention raises doubts about economic soundness and political feasibility. Granting farmers a subsidy in the form of a co-payment per ton of corn stover supplied would run counter to efforts to reduce distortionary government interventions in agriculture. However, energy supply from cellulosic feedstock is expected to require government support for the foreseeable future in order to be cost-competitive with conventional energy sources. A recalibration of planned support programs targeting the conversion stage by moving the incidence of part of the subsidies to the farm level could achieve a triple goal: it could raise willingness to supply by a more direct signaling, ensure the respect of sustainability criteria, and limit added federal outlays compared to purely additional subsidies.

Beyond outreach: co-payment for corn stover supply as key policy element

The benefits of an education initiative for farmers related to corn stover harvest and marketing appear to be compelling. Looking at the figures taken from the Iowa survey, addressing the needs of the almost 70% of farmers who say they are not knowledgeable at all or only a little knowledgeable is a precondition for seeing a viable supply for corn stover emerge in the future. Conducting another poll after completion of such a program would be very helpful in reassessing farmers' perception of barriers based on more knowledge, while at the same time not orienting towards only one type of harvest technology. Given the cross-cutting topics of corn

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stover economics, technology, and sustainability criteria, a joint effort of FSA and NRCS in drafting an information package is recommended. Wide outreach to corn farming communities across the country can be ensured due to the widespread geographical implementation of these service agencies.

Complementing this information initiative, an active support policy for corn stover focusing on the farm level should set a clear and dependable long-term signal essential for giving farmers confidence in the viability of the market for corn stover, with all the important signaling effects for equipment manufacturers but also for entrepreneurs in the field of biomass storage and transport.

In this context, as a first step and in order to reach higher willingness to supply, it appears important to focus on farmers in the feedstock supply area of Project Liberty, the country’s first cellulosic demonstration plant.60 Success with the first demonstration plant is a precondition for gaining further experience with corn stover supply chain logistics and for validating overall process economics. Successfully demonstrating the entire biomass supply chain at scale by rewarding first adopters could be critical in winning more widespread farmers' support and in making this part of the bioeconomy work. At this point, anecdotal evidence indicates that the price range for corn cobs the operator POET Biorefining is willing to pay, namely $30-$60 per bone dry ton, is probably not sufficient to motivate enough farmers to invest in additional harvesting equipment.61 A set co-payment, essentially a subsidy calculated per dry ton of corn cobs supplied, with a specified amount guaranteed for a period of in between 5 to 10 years to be recalculated thereafter, seems to be warranted to encourage early adoption, paving the way for more widespread biomass supply in the future by giving more investment certainty. Just as for

60

For a more detailed overview of the harvest, storage, and transport system of this pilot cellulosic plant termed Project Liberty, please refer to the discussion in the annex of this paper.

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existing commodity payments, Farm Service Agencies would coordinate the cash disbursement, facilitating implementation.

It is beyond the scope of this paper to determine the exact amount of the co-payment, as detailed economic analyses would need to quantify additional labor, capital, and time inputs in order to determine a fair value based on an appropriate rate of return. This analysis should be left to a more specialized study.

Making the payment of the subsidy conditional upon respecting environmental criteria – to be detailed in the third set of barriers to be addressed – would be an important element in avoiding over-harvesting of the biomass resource. Even though the program proposed would only be effective in the supply area around the Project Liberty plant, this paper suggests developing this structure further to become universally applicable as a biomass-based industry develops. As pointed out previously, the idea is not to hand out purely additional subsidies but to recalibrate overall existing government support between farming operations, bioenergy facilities and, in the case of liquid fuels production, blending operations. The objective is to further the goal of increased bioenergy supply while disposing of workable enforcement mechanisms at the farm level to ensure sustainable biomass offtake practices. Concerning Project Liberty, implementing a structure of conditional co-payments linked to sustainable harvesting practices could be an important test case for wider application across the country, even though selective feedstock use and geographic location of this specific plant are unlikely to pose conservation requirement problems.62 Looking ahead, conditionality of co-payments is particularly warranted in the perspective of further feedstock demand for co-firing and other applications, making use of additional corn stover fractions.

Corn Stover As A Bioenergy Feedstock: Identifying And Overcoming Barriers For Corn Stover Harvest, Storage, And Transport