Challenges to Producer Ownership of Ethanol and Biodiesel Production Facilities

Abstract

This study examines the rapidly expanding biofuels industry and identifies challenges for producer-owned biofuel projects. The U.S. ethanol industry has been growing rapidly, and biodiesel production is poised for similar growth. Producer involvement is driven by the desire to add value to farm commodities and the impact of biofuel projects on local grain prices. Local state and federal incentives have also stimulated producer interest. The long-run profitability of biofuel projects is driven by feedstock availability, access to market centers for biofuels, access to markets for coproducts, and utility costs and availability. The rapidly increasing size and scale of ethanol and biodiesel plants make it difficult for producers to fund these projects. Additionally, the development and adoption of new non-grain biofuel technologies may negate some comparative advantages of producers, such as feedstock cost and availability. The geographic expansion of biofuel projects into grain deficit regions will also create additional challenges.

Locational Choices of the Ethanol Industry in the Midwest Corn Belt

“…The cost and availability of energy for plant operation are also important inputs for ethanol firms, the expectation being that firms will seek out low-cost energy supplies ( Schmenner, Huber, and Cook (1987) Capps, Fuller, and Nichols (1998) Lopez and Henderson (1989) Leistritz (1992) Woodward (1992) Barkley and McNamara (1994) Vesecky and Lins (1995) Henderson and McNamara (1997) Henderson Holcomb, 2006). The availability of abundant water supplies for processing ethanol and for use in the cooking and cooling stages of production is also cited as a significant consideration (Higgins, Richardson, & Outlaw, 2008;Zeman, 2006).…”

“…Infrastructure is the set of public and private facilities that support industry activities (Henderson & McNamara, 1997). Important infrastructure factors for the ethanol industry include access to highway and rail lines, access to natural gas pipelines, and the electric power grid (Clean Fuels Development Coalition & The Nebraska Ethanol Board, 2006;Dhuyvetter et al, 2005;Kenkel & Holcomb, 2006). The availability of inexpensive tracts of land of sufficient size to build an ethanol plant (and to support possible future expansion) is also included in the category of infrastructure (Clean Fuels Development Coalition & The Nebraska Ethanol Board, 2006).…”

Should We Invest in Biofuels?

“…Like US bullet trains, cellulosic ethanol will always be the technology of the future. Even with government incentives and regulations, cellulosic-based ethanol has major economic and technical hurdles to overcome before it can be competitive with corn-based ethanol (Carolan, Joshi, and Dale, 2007;Kenkel and Holcomb, 2006;Miranowski, 2007;Young, 2009). Large biorefineries are probably necessary to achieve process economies for cellulosic-based ethanol refining (Ginder, 2007).…”

Biorefinery site selection using a stepwise biogeophysical and social analysis approach

“…Many facility siting studies have examined the impact of biogeophysical variables on site 99 selection in the ethanol industry. Major siting factors were found to include: feedstock 100 availability, access to biofuel and coproduct markets, utility costs and availability, government 101 incentives, and absence of operating ethanol plants [18][19][20]. Additionally, access to multi-modal 102 transportation, product markets, and producer credit can provide a comparative advantage in 103 attracting ethanol plants [20].…”

“…Major siting factors were found to include: feedstock 100 availability, access to biofuel and coproduct markets, utility costs and availability, government 101 incentives, and absence of operating ethanol plants [18][19][20]. Additionally, access to multi-modal 102 transportation, product markets, and producer credit can provide a comparative advantage in 103 attracting ethanol plants [20]. Facility siting analyses using the aforementioned siting criteria 104 have been performed using a combination of geographic information system (GIS) software and/ 105 or optimization routines to identify ideal locations for biorefinery siting [3,[21][22][23][24].…”