The effects of site selection, opportunity costs and transportation costs on bioethanol production

Abstract

Abstract Policy and legislative initiatives, along with volatility in agricultural commodity prices, have encouraged farmers to consider alternative crops, such as potential advanced biomass feedstock for bioenergy, including energy beets. This paper employs an integrated biophysical, economic and transportation GIS-based model to examine the production of beet-bioethanol from five sites in North Dakota. The study finds that beet-bioethanol could provide net benefits to farmers and ethanol producers in the state, under current market conditions, but only if the bioethanol plant site is carefully selected. Specifically, a 75 million litre plant could produce a profit at capacity offering a beet price of $33/t at an ethanol price of $0.40/L at one of five analyzed sites. Policy initiatives that increase the price of ethanol could make production attractive at all of the investigated sites. Both increased agricultural opportunity costs and decreased transportation costs move feedstock production away from the plant site to higher quality lands. This result implies that, in some cases, to pursue biomass production on marginal lands, policy initiatives would need to increase transportation costs, lower agricultural commodity prices, or increase biomass prices. Therefore, assumptions about land quality should be carefully considered in biomass and bioenergy policy.