As one of the most developed provinces in China, Jiangsu Province has been actively developing bio-energy in order to deal with its electricity supply shortage. By the end of 2010, there are 12 grid-connected straw-based power plants, but only two of them are profitable in this province. This paper presents a simple and detailed method for estimating the cost of straw-based power generation with life cycle analysis, and identifies the main causes for the financial deficit of these plants through a sensitivity analysis and survey. It concludes that: (i) compared with coal-fired power generation, the cost of straw-based power generation is indeed high. (ii) The fuel cost takes the largest share in the operation cost. (iii) The basic causes of the high cost are from straw characteristics, mismatch between demand and supply, immature technology, inappropriate project planning and low motivation of farmer selling straw. Based on the basic causes, we propose the countermeasures. (c) 2012 Elsevier Ltd. All rights reserved.