Two options for harvest equipment were evaluated in the analysis: 1) purchased
equipment dedicated to switchgrass harvest, and 2) custom hiring of equipment and labor to complete harvest and storage logistics. For the conventional hay harvest scenario, there are 16 systems compared in the net present value analysis (two harvest equipment options and
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eight different harvest and storage options). The net present value of cash flows for the 10 year life-span of the project is determined by land lease payments, management costs, capital investment outlays, operating costs, revenue and the discount rate. The land lease payments vary based on the harvested acreage among different harvest and storage systems. The management costs for all traditional systems are the same every year, which comprises a small proportion of the total annual cost.
Based on the switchgrass sale price of $75/dt, 10% discount rate, $2.75/gallon fuel
price, $9.75/hour wage rate, and having the BCAP subsidy, all of the conventional hay harvest custom hiring systems produced positive net present values, and all of the
conventional hay harvest purchasing systems produced negative net present values (Table 18). The custom hire harvest equipment scenario has much less capital investment costs than the purchased harvest equipment for each system. The conventional hay harvest system that had the largest net present value of net cash flows was round bales stored on pallets without a tarp following harvest using custom hired equipment, which equals a net present value of $22 million. The least profitable system is rectangular bale stored on gravel with a tarp following harvest using purchased equipment, and the net present value of cash flow is −$27 million. The large negative number is due to non-existent sales revenue during the first three years, and all equipment is purchased in year zero. The biorefinery does not start operating until the beginning of year four, which has a significant influence on net present value. Among the custom hiring harvest equipment systems, the lowest net present value system is the rectangular bales system where bales are stored on gravel with a tarp, and the net present value of cash flow is $7 million. On the other hand, among the purchased harvest equipment systems, the system with the smallest loss is the mixed-bale stored on pallet with a tarp system, with a net present value of −$12 million. For all of the feedstock supply
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configuration with negative net present values, the corresponding break-even switchgrass sale price is higher than $75/ton. In order to receive a zero net present value (ie, a compound rate of return of 10%), the break-even price for the conventional hay harvest using purchased equipment scenario was $97.54/dt. The break-even price is needed to ensure the net present value of cash flow is not negative. For the positive net present value systems, the break-even sale price is less than $75/dt (Table 18).
The base system net present value is determined based on having the BCAP subsidy,
the switchgrass price is $75/dt, the discount rate is 10%, the fuel price is $2.75/gallon, and the wage rate is $9.75/hour. For different harvest and storage systems in the traditional scenario, the results of sensitivity analysis for the BCAP subsidy, switchgrass sale price, discount rate, fuel price, and wage rate are shown in Table 19. Without the BCAP establishment subsidy in year zero and harvest subsidy in year four and five, the net present value of cash flow were negative for all feedstock supply chain configurations evaluated in the analysis. Without the BCAP subsidy, the NPV of all the conventional hay harvest systems with custom hired equipment become negative (Figure 4.1). In addition, the switchgrass sale price influences the net present value by impacting revenue from sales to the biorefinery starting in year 4. When the sale price is higher, cash inflows are higher and begin to offset the considerable cash outflows in the first few years as the switchgrass stands are established and feedstocks are built up (Figure 4.2). When the purchased harvest equipment system is used, the $90/dt sale price results in a positive net present value if switchgrass is harvested by round baler and stored on pallets with or without a tarp, or when the mixed-bale system is used and
switchgrass stored on pallets with a tarp. If the sale price is $60/dt, the custom hired
equipment systems yielded a negative net present value, except for the round bale stored on pallets systems and the mixed-bale stored on pallets with a tarp system. The discount rate is
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also an important factor that influenced the net present value of alternative traditional bale systems. Compared to the custom hiring systems, the purchasing equipment systems are much more influenced by the discount rate (Figure 4.3). Among different harvest and storage systems, the fuel price has the strongest influential in the rectangular bale stored on the gravel with a tarp system (Figure 4.4). Wage rate has little influence on net present value compared with other factors (Figure 4.5). In the sensitivity analysis, BCAP and switchgrass sale price are the two most important factors influencing net present value given the assumption that sales would not start until year 4. If the switchgrass sale price is $90/ton, the round bale system stored on pallets with a tarp after harvest and using custom hired equipment had the highest net present value of $39 million. When calculated without the BCAP subsidy, the rectangular bale system stored on gravel with a tarp after harvest by purchased equipment resulted in the lowest net present value with a dollar value of −$62 million.