EPRG 0924

A. Méjean and C. Hope

Modelling the costs of energy crops: A case study of U.S. corn and Brazilian sugar cane

EPRG 0924 Non-Technical Summary | PDF

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Abstract: High crude oil prices, uncertainties about the consequences of climate change and the eventual decline of conventional oil production raise the prospects of alternative fuels, such as biofuels. This paper describes a simple probabilistic model of the costs of energy crops, drawing on the user’s degree of belief about a series of parameters as an input. This forward-looking analysis quantifies the effects of production constraints and experience on the costs of corn and sugar cane, which can then be converted to bioethanol. Land is a limited and heterogeneous resource: the crop cost model builds on the marginal land suitability, which is assumed to decrease as more land is taken into production, driving down the marginal crop yield. Also, the maximum achievable yield is increased over time by technological change, while the yield gap between the actual yield and the maximum yield decreases through improved management practices. The results show large uncertainties in the future costs of producing corn and sugar cane, with a 90% confidence interval of 2.9 to 7.2 $/GJ in 2030 for marginal corn costs, and 1.5 to 2.5 $/GJ in 2030 for marginal sugar cane costs. The influence of each parameter on these supply costs is examined.

Keywords: Biofuels; Uncertainty; Experience curve; Land suitability

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