biomass production and investments

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In this question we are going to calculate the cost price of an energy crop. The production of ”poplar” as an energy crop is a process with harvesting cycles of 4 years; 4 years after the trees are planted, they are harvested. A research project on the production of poplar is carried out. Land is bought, and sold again after the project finishes. Assume that the land can be sold for the same price as the purchase price. The following costs are estimated: 

 Land purchase price: €5000/ha (ha = hectare)

 ï‚· Annual overhead cost: €325/ha 

ï‚· Planting cost: €100/ha 

ï‚· Harvesting cost: €1388/ha 

Furthermore: ï‚· Estimated yield = 77 tonne/harvest/ha 

ï‚· Discount rate = 6% 

ï‚· Project lifetime = 4 years

 ï‚· Moisture content poplar = 52% 

ï‚· Energy content oven-dry poplar = 16 GJ/tonne LHV 

As we calculate the cost price of the poplar, the total NPV of the project has to be 0, so that the total costs and benefits are equal (Ctot = Btot). However, both costs and benefits need to be discounted: A yield in four years has a lower value as a yield now.

a. Calculate the Net Present Value (NPV) of the total net costs of the project (Hint: make a table of the costs per year. Selling costs of the land are negative costs). 

b. Give an expression for the NPV of the total benefits of the project. 

c. Give an expression for the cost price of the yielded poplar, in €/tonne. Calculate the cost price of the poplar in €/tonne. Hint: If NPV = 0, then the total benefits = total costs. 

d. The harvested poplar is used as fuel in a power plant; efficiency power plant is 40%. Calculate the fuel costs of the electricity price when the (oven-dry) biomass is combusted in this power plant. 

e. If there was no biomass, coal would have been combusted in this power plant. Calculate the CO2 mitigation costs, in €/tonne CO2, of the biomass. The fuel cost price of electricity from coal is €0.035/kWh.

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