Economy of Scale for Biomass Refineries: Bulk Densities, Transportation Cost, and Producer Incentives

Abstract

A Microsoft Excel facilitated SuperPro model was developed to analyze the economy of scale of biomass re-fineries. Economic analysis, using the model, showed that the unit ethanol production cost (UEPC) of fuel ethanol is af-fected by the bulk density of the feedstock, transportation cost coefficients, and producer incentives. The UEPC decreases as the feedstock bulk density increases. The UEPC is more sensitive to variable cost (VC) than fixed cost (FC), and incen-tives can attract more producers to participate in a contract program but will increase the UEPC. The bulk density and transportation cost coefficients have significant impacts on the optimal plant size of biorefineries. Producer incentives do not have an effect on the economy of scale for refineries since the optimal plant size is constant no matter how much in-centive is paid to farmers. Keywords. Bulk densities, Economy of scale, Producer incentives, Transportation cost, Unit ethanol production cost.