Abengoa offers details on biomass supply agreement

By Kris Bevill | April 19, 2011

Abengoa, a Spain-based renewable energy producer and technology provider, announced it has secured its biomass requirements for a planned 25 MMgy cellulosic ethanol facility which it will begin constructing near Hugoton, Kan., this summer. The facility is expected to become operational in 2013 and will use approximately 315,000 tons total of corn stover and wheat straw to produce ethanol as well as generate 25 megawatts of electricity, enough to supply all of the plant’s power needs.

Gerson Santos, executive vice president for Abengoa Bioenergy New Technologies, said 60 farmers located within a 50-mile radius of the facility have signed contracts to provide feedstock to the plant. The majority of the contracts are for feedstock located within 20 miles of the plant, he said, however expanding the radius out to 50 miles will ensure the plant will have more than enough feedstock for its operations. Santos said that radius will provide the facility with 90 percent more feedstock than what it is expected to actually use.

Some question has been raised recently as to farmers’ willingness to contribute financial investment or manpower to crop residue harvest operations. Santos said Abengoa is taking a blended approach to its feedstock procurement activities. So far, approximately half of the participating farmers are interested in harvesting the feedstock themselves, he said. Abengoa will send contracted harvesters to complete the job on the remaining acres. Farmers who do decide to harvest the residue themselves will have to meet Abengoa’s quality specifications, Santos said. The company has spent two years developing a recommended harvest system with the objective of limiting the amount of dirt that is collected when biomass is harvested. A field day was held last year to provide area farmers with a first-hand look at the equipment modifications that would be required to meet those standards. Modifications are minimal, Santos said, and consist mostly of front-end modifications to tractors. Many of the farmers contracted so far are large operators with the equipment and manpower to fill the additional harvest requirements, Santos said.

The vast majority of farmers supplying biomass to Abengoa will be paid $15 per dry ton for their residue. Three payment options were offered on the contract: a fixed price of $15 per dry ton, a lower base price with additional profit sharing, or a lower base price with an additional payment to compensate for nutrients removed from the field during harvest. “Those were three options that when we working with the farmers early on, they pretty much demanded,” Santos said. “After we started the process of signing the contracts, I would say more than 95 percent of them have chosen the fixed price.” Farmers who decide to do their own harvesting will be compensated, but only at prices comparative to the contractor’s base price. “Certainly, we are not going to pay them any more than what our contractor will charge us,” Santos said.

Approximately 120,000 tons of feedstock, at a ratio of 70/30 corn stover to wheat straw, will need to be harvested in the next two years to provide enough material for the plant’s initial requirements. Santos estimates about 50,000 tons may be harvested this fall. “This is really to test the system and to make sure we will have enough material when we start,” he said. “We’re hoping to start the operation in the summer of 2013. Between the material we harvest in 2011 and 2012 we should have more than enough to run for several months before the 2013 harvest.”