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Biofuel Economics. Intensive Program in Biorenewables Ames, Iowa June 9, 2009 Chad Hart Assistant Professor/Grain Markets Specialist [email protected] 515-294-9911. World GDP Growth. Source: IMF, Global Insight, FAPRI. GDP Growth by Market. Source: IMF, Global Insight, FAPRI. - PowerPoint PPT Presentation
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Department of Economics
Biofuel Economics
Intensive Program in BiorenewablesAmes, Iowa
June 9, 2009
Chad HartAssistant Professor/Grain Markets Specialist
Department of Economics
World GDP Growth
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
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20
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20
14
20
15
20
16
20
17
20
18
% C
ha
ng
e fro
m P
revi
ou
s Y
ea
r
Source: IMF, Global Insight, FAPRI
Department of Economics
GDP Growth by Market
Source: IMF, Global Insight, FAPRI
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
% C
ha
ng
e fro
m P
revi
ou
s Y
ea
r
Developed Developing
Department of Economics
GDP Growth by Country
Source: IMF, Global Insight, FAPRI
-10.0
-5.0
0.0
5.0
10.0
15.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
% C
ha
ng
e fro
m P
revi
ou
s Y
ea
r
European Union Japan United States China India Argentina Brazil
Department of Economics
Oil Prices
Source: IMF, Global Insight, FAPRI
0
10
20
30
40
50
60
70
80
90
100
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
$ p
er
Ba
rre
l
Department of Economics
Ethanol Prices
Source: FAPRI
1.00
1.50
2.00
2.50
3.00
$ p
er
Ga
llon
Anhydrous Ethanol Price, Brazil Ethanol, FOB Omaha
Department of Economics
Ethanol Imports
Source: FAPRI
0
1,000
2,000
3,000
4,000
5,000
6,000M
illio
n G
allo
ns
Canada China European Union India Japan South Korea United States ROW
Department of Economics
Biodiesel Exports
Source: FAPRI
0
200
400
600
800
1,000M
illio
n G
allo
ns
Argentina Brazil Indonesia Malaysia United States
Department of Economics
0
100
200
300
400
500
600
Mill
ion
Ga
llon
sArgentine Biodiesel Production
Source: FAPRI
Mostly soybean oil, biodiesel mandate (B5) starts in 2010
Department of Economics
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Mill
ion
Ga
llon
s
0
200
400
600
800
1,000
1,200
1,400
1,600
Mill
ion
Ga
llon
s
Ethanol Biodiesel
Brazilian Biofuel Production
Source: FAPRI
Continues to supply ethanol exports to the rest of the world
Mostly soybean oil, biodiesel mandate (B5) by 2010
Department of Economics
0
50
100
150
200
250
300
350
Mill
ion
Ga
llon
sCanadian Ethanol Production
Source: FAPRI
Roughly 70% corn, 30% wheat
Department of Economics
400
450
500
550
600
650
Mill
ion
Ga
llon
sChinese Ethanol Production
Source: FAPRI
Mostly corn-based
Department of Economics
EU Biofuel Production
Source: FAPRI
0
500
1,000
1,500
2,000
2,500
3,000
Mill
ion
Ga
llon
s
Ethanol Biodiesel
Roughly 75% rapeseed oil, 18% soybean oil, and 7% sunflower oil
Approximately 58% wheat, 16% corn, and 26% barley
Department of Economics
0
100
200
300
400
500
600
Mill
ion
Ga
llon
s
India - Ethanol Indonesia - Biodiesel
South Asia Biofuel Production
Source: FAPRI
Molasses is the major feedstock
Palm oil is the feedstock, consumption mandate started this year
Department of Economics
U.S. Biofuel Production
Source: FAPRI
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Mill
ion
Ga
llon
s
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mill
ion
Ga
llon
s
Ethanol Biodiesel
Just over 1 billion gallons of cellulosic by 2018
Roughly 60% soybean oil and 40% other fats and oils
Department of Economics
Spectrum of Biofuels
Source: NREL, 2006
Grain/Sugar EthanolBiodieselGreen Gasoline/DieselCellulosic EthanolButanolPyrolysis LiquidsSyngas Liquids
Most Mature
Least Mature
Department of Economics
0
5
10
15
20
25
30
35
40
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
202
2
Bill
ion G
allo
ns
Conventional Biofuels Cellulosic Biofuels
Biodiesel Additional Advanced Biofuels
Renewable Fuels Standard (RFS)
60% GHG Emission Reduction
50% GHG Emission Reduction
20% GHG Emission ReductionIf construction started after Dec. 2007
Department of Economics
Dept. of Energy Projections
Source: Energy Information Administration,Annual Energy Outlook 2009
Department of Economics
Currently Available Biomass
Source: NREL, 2005
Department of Economics
Biofuel ChallengesProduction costs
Conversion, ag. production, etc.Infrastructure barriers
Developing supply chain for biomassContinued development of biofuel
distribution systemGrowth in biofuel-compatible vehicles
Department of Economics
Biofuel ChallengesInvestment risks
Higher capital costs, emerging technology
Biomass production shiftsInducing farmers to produce new crops
Consumer understandingAbout the fuelsAbout the tradeoffs
Department of Economics
Progress on Cellulosic Costs
Source: NREL, 2007
Department of Economics
Comparing Costs, 150 Million Gallons Gasoline Equivalent, 2005 $
Source: Wright and Brown, Biofuels, Bioproducts, & Biorefining 1(2007):49-56
Plant Type Capital Costs Operating Costs
($ Million) ($/Gallon)
Grain 111 1.22
Cellulosic 756 1.76
Department of Economics
Infrastructure Costs
Source: DOE, Biomass Multi-Year Program Plan, March 2008
2007 Cost
($ per dry ton)
Harvest & Collection 18.40
Storage & Queuing 6.10
Preprocessing 7.80
Transportation & Handling 14.70
2017 Projected Cost
($ per dry ton)
10.60
3.70
6.20
12.30
Costs for Agricultural Straws and Switchgrass
Department of Economics
Infrastructure Costs
2007 Cost
($ per dry ton)
Harvest & Collection 29.50
Storage & Queuing 22.20
Preprocessing 16.40
Transportation & Handling 20.10
2017 Projected Cost
($ per dry ton)
10.60
8.60
7.80
14.70
Costs for Agricultural Stovers
Source: DOE, Biomass Multi-Year Program Plan, March 2008
Department of Economics
Conversion Costs
2005 Cost
($ per gallon)
Pretreatment 0.44
Enzymes 0.32
Fermentation 0.31
Distillation & Solids Recovery
0.18
(gallons/dry ton)
Ethanol Yield 65.3
Costs for Corn Stover, 2007 $2012 Projected Cost
($ per gallon)
0.25
0.10
0.10
0.15
(gallons/dry ton)
89.8
Source: DOE, Biomass Multi-Year Program Plan, March 2008
Department of Economics
Conversion Costs
2006 Cost
($ per gallon)
Feed Handling & Drying 0.18
Gasification 0.14
Synthesis Gas Clean-up 0.69
Fuel Synthesis 0.08
Product Purification 0.05
(gallons/dry ton)
Ethanol Yield 63.2
2012 Projected Cost
($ per gallon)
0.16
0.13
0.43
-0.03
0.05
(gallons/dry ton)
69.8
Costs for Hybrid Poplar, 2007 $
Source: DOE, Biomass Multi-Year Program Plan, March 2008
Department of Economics
Switchgrass in the Plains
Source: Schmer, Vogel, Mitchell, and Perrin, Proceedings of the National Academy of Sciences 105(2008):464-469
Found ethanol yields per acre comparable to corn grain ethanol
But indicated that switchgrass would likely be targeted to marginal land where row crop production is less profitable
Department of EconomicsSource: DOE
Department of EconomicsSource: DOE
Department of Economics
Competing for Acreage
Crop Net Return
($ per acre)
Wheat 110 – 140
Rice 390 – 510
Corn 300 – 380
Sorghum 60 – 80
Soybeans 240 – 320
Cotton 70 – 140
Source: FAPRI
Department of Economics
Estimated Costs for Iowa Switchgrass
Source: Duffy, “Estimated Costs for Production, Storage and Transportation of Switchgrass”
Department of Economics
Estimated Costs for Iowa Switchgrass
Source: Duffy, “Estimated Costs for Production, Storage and Transportation of Switchgrass”
Department of Economics
Hay Data & Cellulosic Yields
Source: USDA-NASS
Harvested Acres
Yield Price Revenue
(1,000 acres)
(tons/acre)
($/ton) ($/acre)
United States 61,056 2.4 117.04 283.88
Texas 5,064 2.1 111.40 238.01
Missouri 4,142 1.9 82.30 156.48
South Dakota 3,720 1.8 80.30 145.53
Oklahoma 3,038 1.8 90.30 155.87
Kansas 2,990 2.3 91.50 210.79
North Dakota 2,876 1.5 61.80 91.13
Nebraska 2,724 2.3 73.90 169.07
Needed Yield
@ $53/ton @ $35/ton
(tons/acre) (tons/acre)
5.4 8.1
4.5 6.8
3.0 4.5
2.7 4.2
2.9 4.5
4.0 6.0
1.7 2.6
3.2 4.8
Schmer et al. Yields = 2.3 to 5 tons/acre
Department of Economics
Thank you for your time!
Any questions?
My web site:http://www.econ.iastate.edu/faculty/hart/
Department of Economics
Competing for Acreage
Crop Net Return
($ per acre)
Wheat 110 – 140
Rice 390 – 510
Corn 300 – 380
Sorghum 60 – 80
Soybeans 240 – 320
Cotton 70 – 140
If new energy crop prices are $53/ton and costs are $200/acre, what does the new energy crop yield (tons/acre) have to be to induce farmers to shift production to the energy crop?
What if the price is $35/ton?