Modeling Energy Security and Economic Sustainability Issues of the U.S. Biofuel Industry

Rocío Uría-MartínezPaul N. Leiby

Gbadebo Oladosu30th USAEE Conference

Washington, DC. October 10, 2011

Research sponsored by the Laboratory Directed Research and Development Programof Oak Ridge National Laboratory, managed by UT-Battelle, for the U.S. Department of Energy

OBJECTIVES

Exploring energy security and economic sustainability implications of U.S. biofuel industry configurations and policies using system analysis tools

Abiding national objectiveCentral motivation for 2007

EISA legislation

How could future boom and bust cycles in biofuel infrastructure

be avoided/mitigated?

Long-run optimization &

Short-run simulations

Where in the supply chain issupport most needed?Should it be taxes, subsidies, mandates, loan guarantees?

Combinations of-feedstocks-logistics designs-conversion technologies-biofuel types-…

ENERGY SECURITY

How correlated are ethanol and gasoline prices? For parity pricing on a gge basis,

Pethanol = 0.67* Pgasoline

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

11/2

/200

912

/2/2

009

1/2/

2010

2/2/

2010

3/2/

2010

4/2/

2010

5/2/

2010

6/2/

2010

7/2/

2010

8/2/

2010

9/2/

2010

10/2

/201

0

11/2

/201

0

12/2

/201

0

1/2/

2011

2/2/

2011

3/2/

2011

4/2/

2011

5/2/

2011

$/ga

llon

unleaded 87 octane gasoline ethanol

WHOLESALE GASOLINE AND ETHANOL PRICESCHARLOTTE (NC)

It is not just about displacing gasoline but also about creating reliable supply chains that are resilient to market shocks

Cross-Correlations of Monthly Commodity Price Changes, 1990-Jan to 2008-Dec

1990+ Crude Oil Sugar Wheat Maize Softwood

Crude Oil 100% 3% 5% -1% 1%

Sugar   100% 20% 10% 2%

Wheat     100% 46% -23%

Maize       100% -10%

Softwood         100%

Biofuels link agricultural and energy commodities

Correlation coefficient = 71%

Data: IMF/IFS database, Commodity Prices & Indices,

Ethanol Plant Operating Margins Volatile, and Collapsed to Near Minimum Sustainable

Sources: Renewable Fuels Association, Official Nebraska Government Website

Net corn cost

Other Operating Costs

Gasoline Price

Capacity Installed

Capacity Idled

Capacity Under Construction

U.S. Grain Ethanol Capacity vs. Gasoline Price

Plant “margin”

Ethanol price

Line indicates minimum sustainable returns (“margin”) to Ethanol Production Plant. Actual returns highly variable.

ECONOMIC SUSTAINABILITY

Market volatility has been very challengingfor the developing biofuels industry

Diesel, middle & heavy cuts, chemicals

Imported Ethanol

Petroleum Refineries

Imported Crude Oil

Domestic Crude Oil

Gasoline

Conventional Vehicles

Light Heavy

Imported Gasoline Biorefineries

Long Run Vehicle Choice

Co-products

Short Run FFV Fuel

Choice

FFVs

Ethanol

E85

Blending & Retail

Inventories

CornCellulosicfeedstocks

Inventories

E10

balesuniformformat

SYSTEM CONFIGURATION MATTERS FOR ENERGY SECURITY AND ECONOMIC SUSTAINABILITY

BioTrans model accounts for two types of inventories:

INVENTORIES

Speculative inventories- held only when the market signals arbitrage opportunities

Working inventories- held for operational reasons(typical stock-to-use ratio is 15%)

0 , 0)(0 , 0)(

1

1

tttt

tttt

SPkPESPkPE

Net marginal cost of storage = marginal cost – convenience yieldConvenience yield is the benefit from holding a physical commodity

Will biomass/ethanol speculative inventories keep probability of stockout sufficiently low?Is 15% a reasonable stock-to-use ratio for biomass feedstocks and/or ethanol?

End-of-cropyear US stocks of wheat as a function of CBOT futures spreads

-25

-20

-15

-10

-5

0

5

10

0 50 100 150 200 250 300 350

million bushels

May

/Jul

y fu

ture

s ca

rryi

ng

char

ge in

per

cent

as

of M

ay

U.S. Petroleum Stock Variation 2005-2009 (Including SPR): - Typical within-year stock variation: 6% (9% excl SPR).

- Max variation over 5 years: 22%.- Stocks are ~16% of annual demand (~25% incl SPR)

Source: IAF Advisors, Feb. 4, 2009

These 5-year peak levels set in 2006 & 2007

5-year Ave.

5-year Min.

1,500,000

1,800,000

Corn production, and stocks fluctuate widely, (seasonally, and year to year), far more than oil

- Typical within-year stock variation of 4X (400%).- Year-to-year peak variation over 5 years: 33%.

- Stocks are ~80% of annual demand

Source: USDA, ERS, Feedgrains database

Corn Stocks, Production and Consumption (quarterly/seasonal)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2001 2002 2003 2004 2005 2006 2007 2008

Mill

ion

Bus

hels

Beginning stocks

Production

Consumption

Long Term StorageBales stacked along

edge of field$5.36/dry ton

TransportBales on flatbed truck

$4.61/dry ton; $0.12/dry ton-mile

Conventional Design

Long Term StorageBales stacked along

edge of field$4.7/dry ton

TransportBales on flatbed truck

$4.61/dry ton; $0.12/dry ton-mile

PreprocessingSingle grind

$13.03/dry ton

HandlingConveyors, dust control

$0.21/dry ton

DensificationPelleting

$22.37/dry ton

TransportPellets in train$5.23/dry ton,

$0.027/dry ton-mile

Short Term QueuePellets in bins

FARM

BIOREFINERY(optimal size = 0.69 M dry tons)

FARM

DEPOT

Baled switchgrass

Uniform format Design

Baled switchgrass

PreprocessingSingle grind

$13.03/dry ton

HandlingConveyors, dust control

$2.38/dry ton

Short Term QueueBales on asphalt pad

Short Term QueuePellets in binsBIOREFINERY

(optimal size = 6.38 M dry tons)

Averagedistance =10 miles

Averagedistance =71 miles

Averagedistance =205 miles

BIOMASS FEEDSTOCK LOGISTICS SYSTEM DESIGNUniform format biomass as a way of reducing risk for biorefineries:• by broadening

feedstock base• by offering

homogeneous quality

FLEXIBLE BIOREFINERIES

Feedstocks Ethanol conversionprocesses

Co-products

corn

stover

switchgrass

forest residues

dry milling

biochemical

multifeedstockbiochemical

multifeedstockthermochemical

DDGs

electricity

higher alcohols

carbon fiber

Biorefinery feedstock costs i

ii ZcC **

j

jj QPR **Biorefinery revenue

i= feasible feedstock setJ=feasible output set=feedstock i fraction=output j fractionZ= total input (dry tons)Q=total output (gallons)

0.60.70.80.91.01.11.21.31.4

0%

10%

20%

30%

40%

50%

60%

2006

01

2006

05

2006

09

2007

01

2007

05

2007

09

2008

01

2008

05

2008

09

2009

01

2009

05

Etha

nol/

Suga

r Re

lativ

e Va

lue

Etha

nol/

Suga

r Ex

port

Qua

ntity

Fraction of sugarcane used for ethanol versus relative export revenues (2006:M1 - 2009:M8)

"percent of cane used for ethanol"

relative export value: ethanol/sugar

Brazilian sugarcane mills allow for changes in biorefinery product mix in response to relative product value

FLEXIBLE BIOREFINERIES

FLEXIBLE FUEL VEHICLES

How much retail capacity is needed if RFS-2 advanced cellulosic biofuel objectiveIs attained entirely/partially with ethanol?How much would it cost to build that capacity?

20092011

20132015

20172019

20212023

20252027

20292031

20332035

0

5

10

15

20

25

30

35

40

45

50

RFS2 Volumetric Requirements and Ethanol Demand Potential

RFS2 Conventional BiofuelsRFS2 Conventional Plus Advanced Cellulosic BiofuelRFS2 Conventional Plus Total Advanced BiofuelE10 BlendwallFFV Max E100 use

Billi

on G

allo

ns

Needed to increase consumption of ethanol beyond what can be absorbed in E10 blend

BioTrans Stochastic Short-Run SimulationsSimulate monthly over 1 year (Python) -Shocks from oil producer behavior, disruptions and accidents-Shocks to yields from weather events: droughts, floods, pests-Infrastructure reliability

APPROACH: BioTrans System Design is Novel, While Building on Existing Capabilities

POLYSYSSimulate bioenergy crop production given changes in policy, economic, or resource conditions

BLMModeling framework developed at INL to simulate bioenergy feedstock supply logistics from the field to biorefinery

TAFV, HyTrans ORNL Dynamic market optimization to balance

motor fuel supply to demand

Oil Security Metrics ModelProvide framework for quantifying and measuring energy and economic security impacts

BILTBiofuel supply chain transportation and optimization model developed at ORNL

Other Measures of Sustainability- Long run economic costs- GHG Emission Coefficients (GREET)- Water Use Coefficients

BioTrans-Long-Run ModelIntegrates summary representations from each of above- Dynamic Optimization by GAMS- Annual, 20 years- 9 Census Divisions- Multiple sectors- Balances markets and determines fixed capital (biorefineries, retail capacity)

Petroleum SectorSimple supply, Refineries (ORNL-RYM, NEMS runs)

Electric SectorExternal runs for demand (NEMS, ORCED)

2015

2025

2015

2025

2015

2025

CRN.DRYMILL.D4 STV.BCHEM.D4 PER.TCHEM.ROC

0

0.5

1

1.5

2

2.5

Conversion costLogistics costFeedstock cost$/

gallo

n

FEEDSTOCK VOLUMES USED INETHANOL PRODUCTION

BASECASE RESULTS: FEEDSTOCK SUPPLY MIX & COST

COST PER GALLON OF ETHANOL

Balanced set of cellulosic feedstocksis optimal at the national level althoughthere is regional specialization

Cellulosic ethanolcost is expected to be below that of grain ethanolfor most pathways

20102012

20142016

20182020

20222024

20262028

20300

50

100

150

200

250

300

perennialscorn stoverforest residuecorn

mill

ion

dry

tons

BASECASE RESULTS: FEEDSTOCK LOGISTICS DESIGN COSTS

Feedstock cost

Preprocessing cost

Transportation cost

Storage cost

Biorefinery capital cost

Biorefinery conversion cost

0 50 100 150 200 250 300

conventional

uniform format

billion $

Number of new cellulosic biorefineries (2010-2030)uniform format design: 203conventional design: 260

The tradeoff between transportation costs and capital costs does not provide justificationto adopt uniform format design for biomass feedstocks

Net present valueof costs associatedto production of grainand cellulosic ethanol(2010-2030)

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

20300

5

10

15

20

25

30

15% stock-to-use ratiounconstrained

mill

ion

dry

tons

20102012

20142016

20182020

20222024

20262028

20300

20

40

60

80

100

120

140

160

180

DRY MILLBCHEMBCHEMFLEXTCHEMFLEX

mill

ion

dry

tons

Flexible biorefineries help minimize total system costs over the planning periodeven though they are 20% more expensive to build

Supply availability for multiple feedstocks changes over time anda flexible biorefinery can adjust to those changes

BASECASE RESULTS: STOCKS AND BIOREFINERY TYPES

On the other hand, the model only chooses to keep speculative stocks.Working stock costs do not meet a counterbalancing benefit under perfect foresight conditions

BIOREFINERY CAPITAL STOCK

CELLULOSIC BIOMASS INVENTORIES

Cost of E85 retail infrastructure is heavily dependent on load factor

10-15 c/gallon for utilization factorscomparable to those of E10 pumps

Over $1/gallon for low utilization factors

BASECASE RESULTS: E85 RETAIL CAPACITY

0

0.2

0.4

0.6

0.8

1

1.2

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

D3

D4

ROC

0

0.2

0.4

0.6

0.8

1

1.2

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

D3

D4

ROC

E85 STATION SHARE

E85 RETAIL LOAD FACTOR

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

D3

D4

ROC

E85 PUMP SHARE

Optimal station and pump share vary significantly from region to region

SCENARIO: FEEDSTOCK PRICE SHOCK Doubling the cost of corn and corn stover in years 2024 and 2025

DRY MILL ACTIVITY LEVEL (Census Division 3)

FB1SU1_shock FB0SU0_shock

Census Division 3 0.16 0.58

Census Division 4 1.09 1.08

Rest of the country 1.05 0.99

Total 0.96 0.96

2024 BIOFUEL PRODUCTION RELATIVE TO BASELINE2010

20122014

20162018

20202022

20242026

20282030

0

1000

2000

3000

4000

5000

6000

7000

FB1SU1 FB1SU1_shock

mill

ion

gallo

ns

20102012

20142016

20182020

20222024

20262028

20300

1000

2000

3000

4000

5000

6000

7000

FB0SU0 FB0SU0_shock

FB1: flexible biochemical availableFB0: flexible biochemical not availableSU1: stock-to-use ratio >=15%SU0: unconstrained stocks

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

FB1SU1 FB1SU1_shock

$/gg

e

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

FB1SU1FB1SU1_shock

$/ga

llon

ETHANOL PRICE AT BIOREFINERY GATE_ROC

E10 PRICE AT THE PUMP_ROC

Feedstock price shock propagates to ethanol but not to the pump

SCENARIO: FEEDSTOCK PRICE SHOCK

A 100% increase in supply costsfor corn and stover leads to:

51% increase in Pethanol (FB1SU1)58% increase in Pethanol (FB0SU0)

2.8% increase in PE10 (FB1SU1)3.1% increase in PE10 (FB0SU0)

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

11.21.41.61.8

22.22.42.62.8

3

FB0SU0FB0SU0_shock

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

FB0SU0FB0SU0_shock

SCENARIO: FEEDSTOCK PRICE SHOCK

Total NPV of costs and savings from flexible biochemical biorefineries (FB)and 15% stock-to-use ratio (SU) (2010-2030)

Cost of adding FB and SU to the system: $14.2 billion

Cost of coping with disruption with FB and SU: $7.1 billionCost of coping with disruption without FB or SU: $13.4 billion

Net savings from FB and SU: $6.3 billion

We would need 2.2 shocks of this magnitude over a 20-year periodto make the flexibility investment worthwhile

Even though the system as a whole experiences savings, some supply chain participants(dry mill owners) are actually made worse off by the extra flexibility

FINAL REMARKS

Biofuels are an important piece of the puzzle in the quest for alternative fuels that would reduce U.S. dependence on petroleum

However, we should think more rigorously about how energy security is obtained, and how the biofuel supply chain itself can improve resilience.

Demand flexibility is currently limited by the “blend wall”: E10 blends cannot absorb ethanol volumes much beyond current production levels

With diverse feedstocks and technologies, a major supply/price shock for a single feedstock may have only a modest effect on retail prices of fuel blends, but could have pronounced effects on the profitability of biorefineries

Flexibility elements (inventories, FFVs, flexible biorefineries, biomass preprocessing)reduce price variance but increase average price

SUPPLEMENTARY SLIDES

Approach Effectively Aggregating and Disaggregating Across Different Scales (E.g. for Feedstock Supply Data)

Corn CD4 2010

3

3.2

3.4

3.6

3.8

4

4.2

4.4

0 2000 4000 6000 8000

million bushels

$/bu

shel

Fitted POLYSYS

POLYSYS DATA, e.g. Census Division 4

Aggregated to fitted continuous supply curve

FITTED CURVE FOR D4SB MODEL

Model Equilibrium on Fitted Curve

• Identify price level corresponding to cumulative production in the original data

• Identify counties producing under at model equilibrium for results display and sustainability analysis

Disaggregated model solution

Progress: State of development of LR model• V0.9 Implementation

– Complete analytical specification of LR Model, Multi-stage pathways, field to gas-tank

– Long-run, nonlinear dynamic model, 2010-2030– Depicts 7 stages in the feedstock’s path from farm to biorefinery– Census Division based (testing with regions 3 and 4, Rest-of-Country)– Four feedstocks (corn, stover, perennial grasses; forest), twenty annual

periods (2010-2030) and five conversion processes– “Working” stocks representation– Biorefinery technology choice

• Biochemical vs. thermochemical pathways• Initial representation flexible biorefineries (flex thermo, flex or ded

biochem)• Co-products

– Allows tracking economic sustainability (based on ethanol price, and co-products and key input prices) and environmental sustainability (e.g., GHG and water footprint) issues.

– Coupled to basic model of demand markets, vehicle and fuel choice

Data: IMF/IFS database, Commodity Prices & Indices, Monthly, 1970 to Dec 2008.

Issue: Reliability - Variability of Biofuels Supply and Price

0

50

100

150

200

250

300

350

400

1970

M1

1971

M6

1972

M1

1974

M4

1975

M9

1977

M2

1978

M7

1979

M1

1981

M5

1982

M1

1984

M3

1985

M8

1987

M1

1988

M6

1989

M1

1991

M4

1992

M9

1994

M2

1995

M7

1996

M1

1998

M5

1999

M1

2001

M3

2002

M8

2004

M1

2005

M6

2006

M1

2008

M4

Pric

e In

dex

(Nom

inal

, 198

0-M

1 =

100)

OIL 3 SPOT PRICE INDEXMAIZE US(GULF PORTS)SUGAR CARIBBEAN (N.Y.)WHEAT U.S.GULF PORTSSOFTWOOD LOGS INDEX (UNITED STATES )

Cross-Correlations of Monthly Commodity Price Changes, 1990-Jan to 2008-Dec

1990+Crude

Oil Sugar Wheat MaizeSoftwoo

d

Crude Oil 100% 3% 5% -1% 1%

Sugar   100% 20% 10% 2%

Wheat     100% 46% -23%

Maize       100% -10%

Softwood         100%

• Gasoline/diesel and biofuels are subject to different long-run forces, and different supply/demand shocks; but are also linked

• Q: How do gasoline and ethanol prices move in relations to one another, • at different points in supply chain (plant-gate to retail)?• over the long run and short run?

• Q: What does this imply for diversification benefits of alternative fuels?

U.S. Census Regions and Divisions

Source: http://www.eia.doe.gov/emeu/reps/maps/us_census.html

1

9 8 4 3 2

5 6 7

ECONOMIC SUSTAINABILITYECONOMIC SUSTAINABILITY

0.1 0.2 0.3 0.4 0.5

0.600000000000001

0.700000000000001 0.8 0.9 10

0.20.40.60.8

11.21.4

utilization factor

$/ga

llon

number of retail stationsnumber of pumps per stationestimated maximum throughput per pump

Options to increase E85 throughput

increase number of E85 pumps in stations offering E85

increase number of retail stations offering E85

increase utilization factor of existing E85 pumps

Fixed parameters

for 100% load factor

for pump share=0.12

Costs:

$102,000/underground storage tank

$15,000/dispenser

E85 Retail Capacity Evolution

0.1 0.2 0.3 0.40.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

pump share

$/ga

llon

Annualized cost of new E85 retail infrastructure

Annualized cost of new E85 retail infrastructure

INITIAL ILLUSTRATIVE D4SB MODEL RESULTS: Biorefinery Flexibility Reduces Response Cost To Supply Shocks

Scenario: Doubling in the cost of stover in 2020 and 2021

FLEXIBLE BIOCHEMICAL AND THERMOCHEMICAL CONVERSION PROCESSES:

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

01000200030004000500060007000

Cellulosic Ethanol Production,Baseline

biochemical-stover biochemical-perennials

mill

ion

gallo

ns

STOVER-DEDICATED BIOCHEMICAL CONVERSION PROCESSES:

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

01000200030004000500060007000

Cellulosic Ethanol Production, Baseline

biochemical-stover thermochemical-perennials

mill

ion

gallo

ns

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

1000

2000

3000

4000

5000

6000

7000Cellulosic Ethanol Production, Shock

biochemical-stover thermochemical-perennialsm

illio

n ga

llons

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

1000

2000

3000

4000

5000

6000

7000Cellulosic Ethanol Production, Shock

biochemical-stoverbiochemical-perennials

mill

ion

gallo

ns

INITIAL ILLUSTRATIVE MODEL RESULTS: Biorefinery Flexibility Reduces Response Cost To Supply Shocks

Scenario: Doubling in the cost of stover in 2020 and 2021

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

Price Path for Cellulosic Ethanol

baseline-flexible biochemical

shock-flexible biochemical

baseline-inflexible biochemical

shock-inflexible biochemical

$/ga

llon

Scenario: Doubling in the cost of stover in 2020 and 2021 Census Division 4.

Production from Biochemical and Therrmochemical pathways, stover & perennial grass

No feedstock flexibility for Biochemical Complete feedstock

flexibility for Biochemical

Q biomass,field,r,t Q biomass,collection,r,t

Q biomass,transport,r,t QIN biomass,storage,r,t

QOUT biomass,storage,r,t Q biomass,storage,r,t

Q biomass,preprocessing,r,t Q biomass,other,r,t

Q formatted,preprocessing,r,t

Q formatted,refining,r,t

Q biofuel,refining,r,t

X biofuel,transport,r,tQ biofuel,transport,r,tM biofuel,transport,r,t

QIN biofuel,storage,r,t

Q biofuel,storage,r,tQOUTbiofuel,storage,r,tQ gasoline,refined,r,t Q biofuel,blending,r,t

Q blend,blending,r,t Q blend,distribution,r,t

Q blend,retail,r,tQ blend,consumption,r,t

formattedcropY

blendbiofuelY

MATERIAL BALANCE IN REGION R, PERIOD TFA

RMDE

POT

BIO

REFI

NER

YST

ORA

GE/B

LEN

DIN

GTE

RMIN

ALPU

MP

≥

=

=

=

=

Q – quantity QIN – flows into storageQOUT – flows out of storage X – exports M – imports YA

B - yield of A per unit of B

=From regions R’

From petroleum sector

biofuelformattedY

Q co-product,refining,r,tproductcoformattedY

Q formatted,transport,r,t

BASECASE RESULTS: FEEDSTOCK SUPPLY

0

20

40

60

80

100

120

140

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

$/dr

y ton

Marginal costs_corn

D3

D4

ROC

0

20

40

60

80

100

120

140

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

$/dr

y ton

Marginal costs_perennials

D3

D4

ROC

0

20

40

60

80

100

120

140

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

$/dr

y ton

Marginal costs_stover

D3

D4

ROC

0

20

40

60

80

100

120

140

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

$/dr

y ton

Marginal costs_forest residues

D3

D4

ROC

UNIFORM LOGISTIC DESIGN as a way of reducing risk for biorefineries:a) by broadening feedstock base so that a given biorefinery will not be captive of local supply b) by offering a more homogeneous quality that minimizes process adjustment costs

LOGISTIC DESIGN

20092011

20132015

20172019

20212023

20252027

20290

50

100

150

200

250

SWITCHGRASS.TCHMFLX.ROC_CONVENTIONAL

vintage

mile

s

20092011

20132015

20172019

20212023

20252027

20290

50

100

150

200

250

SWITCHGRASS.TCHMFLX.ROC_PIONEER

vintage

mile

s

Optimal biorefinery size(Thermochemical. Rest of the country. 2020)

Conventional logistic design 2.25 million dry tons Pioneer logistic design 20 million dry tons