Operational flexibility: A key factor in the development of biofuel technologies

Abstract

Research on biofuels has been focused on improving yield of the conversion process while reducing the capital cost. Currently, 88% of the US ethanol production capacity and 96% of the planned expansion of capacity utilizes a dry milling process, which has a higher ethanol yield and a lower capital cost per gallon capacity than a wet milling process. However, the fact that all the corn ethanol plants that were bankrupted or idled during the 2008 economy recession used dry milling processes while all the plants that used wet milling processes had survived suggests that the efficiency driven approach may be flawed. This paper compares the economic performances of a typical dry milling plant with those of a typical wet milling plant under scenarios when market conditions are favorable or unfavorable to the corn ethanol production. The results show that the wet milling plant exhibits better performance under both scenarios due to its operational flexibility (e.g. having starch, high fructose corn syrup, gluten meal, gluten feed, and corn oil in its product portfolio). It is argued that the development of biofuel technologies should take operational flexibility into consideration in order to absorb disruptions from unexpected feedstock supply and volatile market conditions.