Producer Willingness and Ability to Supply Biomass

Given the recent interest in renewable energy from agriculture based on row crop waste and energy crops, this paper takes a transaction cost view of biomass supply chain strategies. First an investigation of the biomass and bioenergy literature reveals a need for an organizational perspective on emerging bioenergy industries. Second, transaction cost economic theory is applied to the general relationship between biomass producer and processor. Finally the case of the Iogen Corporation is examined to identify their planned biomass supply chain strategy as they attempt to commercialize their cellulose ethanol technology. Two general options emerge: one where processors can choose to enter developed biomass areas and expect to use spot markets with low transaction costs but experience intense competition for biomass and another where the processor enters an undeveloped biomass area, expects the use of long term contracts with higher transaction costs but can expect less intense competition.