Abstract
Conventional fossil fuels dominate the marketplace, and their prices are a direct competitor for drop-in biofuels. This paper examines the impact of fuel selling price uncertainty on investment risk in a fast pyrolysis derived biofuel production facility. Production cost specifications are gathered from previous research. Monte Carlo analysis is employed with uncertainty in fuel selling price, biomass cost, bio-oil yield, and hydrogen price parameters. Experiments reveal that fuel price has a large impact on investment risk. A reverse auction would shift risk from the private sector to the public sector and is shown to be more effective at encouraging private investment than capital subsidies for the same expected public cost.
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