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Several states have a renewable portfolio standard (RPS) and allow for biomass co-firing to meet the RPS requirements. In addition, a federal renewable fuel standard (RFS) mandates an increase in cellulosic ethanol production over the next decade. This paper quantifies the effects on local biomass supply and demand of different co-firing policies imposed on 398 existing coal-fired power plants. Our model indicates which counties are most likely to be able to sustain cellulosic ethanol plants in addition to co-firing electric utilities. The simulation incorporates the county-level biomass market of corn stover, wheat straw, switchgrass, and forest residues as well as endogenous crop prices. Our scenarios indicate that there is sufficient feedstock availability in Southern Minnesota, Iowa, and Central Illinois. Significant supply shortages are observed in Eastern Ohio, Western Pennsylvania, and the tri-state area of Illinois, Indiana, and Kentucky which are characterized by a high density of coal-fired power plants with high energy output.

Over the last years, the cellulosic biofuel mandate has not been enforced by the U.S. Environmental Protection Agency. The uncertainty surrounding the enforcement of the mandate in addition to high production and harvest cost contributes to farmers' hesitation to plant bioenergy crops such as switchgrass and miscanthus. Previous literature has shown that under uncertainty and sunk cost, the investment threshold is further increased because of the value associated from holding the investment option. This warrants the use of a real option model. In this paper, we extend previous literature by applying a real option model to bioenergy crop production in the United States. We show the spatial allocation of switchgrass under biomass price and agricultural return uncertainty. The empirical model identifies the counties in the contiguous United States that are most likely to change to switchgrass production. Our preliminary results indicate a very small share of land in switchgrass production even at high biomass prices.

Although a cellulosic ethanol mandate for 2022 is in place, significant political, economic, and agronomic uncertainty exists surrounding the attainability of the mandate. This paper evaluates the effects of bioenergy crop yield and cost uncertainty on land allocation and the feedstock mix for cellulosic ethanol in the United States. The county-level model focuses on corn, soybeans, and wheat as the field crops and corn stover, wheat straw, switchgrass, and miscanthus as the biomass feedstocks. The economic model allocates land optimally among the alternative crops given a binding cellulosic biofuel mandate. The model is calibrated to 2022 in terms of yield, crop demand, and baseline prices. The bioenergy and commodity prices resulting from a mandate are endogenous to the model. The scenarios simulated differ in terms of bioenergy crop types (switchgrass and miscanthus), bioenergy crop yields, bioenergy production cost, and the cellulosic biofuel mandate ranging from 15 to 60 billion gallons. Our results indicate that the largest proportion of agricultural land dedicated to either switchgrass or miscanthus is found in the Southern Plains and the Southeast. Almost no bioenergy crops are grown in the Midwest across all scenarios. The 15 and 30 billion liter mandates in the high production cost scenarios for switchgrass and in all miscanthus scenarios are covered to 95\% by agricultural residues. Changes in the prices for the three commodities are negligible for low cellulosic ethanol mandates because most of the mandate is met with agricultural residues. The amount of bioenergy crops brought into production at the highest imposed mandate result in price increases ranging from 5% for corn and soybeans to almost 14% for wheat.