Biochains Economic Evaluation

Bee is a packaged computerised model which performs full economic evaluation of bioenergy chains based on the cultivation and production of biomass from different bioenergy crops. It examines the whole chain from farm to useful energy or fuel delivered at the conversion plant gate and it may analyse more than one crops and more than one conversion technologies at the same time. Some parts of the model are based on completed previous modelling work and some others, such as the economic analysis have been especially prepared for Bio-Energy Chains. The economic analysis is common to all modules of the package and offers the necessary information and decision making material as required in commerce and industry today. It is primarily intended to cover the needs for the economic analysis of bioenergy chains, but its agricultural module is general enough to be capable of evaluating plants or plantations other than bioenergy crops as well.

Bee consists of two major modules:

(a) The AgrEcon module, for the economic analysis of agricultural production,

(b) The TransEcon module, for the economic analysis of Transportation and Storage costs.

(b) the ConvEcon module, for the economic analysis of biomass to energy conversion.

Each module performs economic analysis based on supplied data or pieces of information maintained by the model itself. The analysis consists of all the steps necessary for decision making and capital budgeting, i.e. cost analysis, and investment appraisal. For this purpose it maintains monthly Balance Sheets, Cash Flows and Income Statements of each and all of the Project modules. It also estimates and analyses the full cost of biomass production and calculates the most important financial indices and criteria of investment appraisal.

For economic analysis, the definition of cost is broader than the cost reported for tax purposes. In accounting, the concept of actual historical cost is central, but it ignores several important components of economic costs. These items are costs associated with the use of financial (including equity) capital, long-lived factors such as equipment and buildings owned and used by the business, and the contribution of unpaid time and effort provided by the farm operator and family members. Estimates of such implicit costs must be obtained using the economic concept of “opportunity costs”. (AEEA, 2000).