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Biofuel Supply Chain Challenges and Analysis

Sooduck ChungMichael Farrey

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Objectives of Research

Identify current biofuel supply chain challenges. Ethanol can only be sustainable if it is cost competitive

Performed cost analysis of ethanol production using switchgrass Performed deep dive into supply chain issues specific to

switchgrass

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Growth in Ethanol Fuel Production

Ethanol Production 1.8B gal (2001) → 9.2B gal (2008) (520% ↑)

Source: U.S. DoE, Alternative Fuels & Advanced Vehicle Center33

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2001 2002 2003 2004 2005 2006 2007 2008

Million

Gallon

s

Year

U.S. Ethanol Production

Biofuel Supply Chain

Overview of Biofuel Supply Chain

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Feedstock Production

Feedstock Logistics

Biofuels Production

Biofuels Distribution

Biofuels Enduse

•Choosing which feedstock to grow

•Growing Feedstock

•Harvesting

•Storage

•Preprocessing

•Delivery

•Conversion of feedstock into biofuel

•Delivery to the mixing stations

•Blend with fossil fuels

•Serving end customers

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Biofuel SC Challenges

Feedstock Production Challenges

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Cost reduction Sustainability New feedstock

Improvement of yield

Inexpensive cultivation techniques

Environmental implication

Net energy balance

Behavioralinertia of farmers

Croplandavailability

Improvement of yield

Biofuel SC Challenges

Feedstock Logistics Challenges

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Stable Supply Design of network Preprocessing

Seasonality of harvest

Fluctuation ofyield

Crop rotation

Network of storage facilities

New delivery schemes

Density-cost tradeoff

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Biofuel SC Challenges

Biofuel Production Challenges

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Conversion yield Co-products Benchmark

Researchenzymes and

bacteria

Developing advanced catalysts

Biodegradable plastic from switchgrass

Best practices of related industries

High protein animal feed from corn

Research thermal breakdown of

materials

Biofuel SC Challenges

Biofuel Distribution Challenges Geographical dislocation of supply and demand

Delivery Capacity

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Supply

DemandDemand

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Biofuel SC Challenges

Biofuel Enduse Challenges

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Meeting growing demand

Forecast offuture demand

Assessment of impact of

higher yield

Increasing blend

Chemical stability

Possible corrosion

Diversity of Feedstock

Ethanol Feedstock

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Virgin

GrainCornWheatSorghum

Non-grainSugarcaneSweet PotatoSwitchgrass

Non-virgin (Recycled)

Crop residueWood residue

Ethanol

Monosaccharide (Sugars)

Fermentation

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Diversity of Feedstock

Yield of biofuel from each feedstock

Source for Switchgrass: Sokhansanj et al. (2009), Schmer et al. (2007)1111

010002000300040005000600070008000

Ethanol Yield (L/ha)

Source: Brown, L. Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble

Switchgrass Ethanol SC Challenges

Switchgrass Production Issues Dislocation of available cropland and cropland with high

switchgrass yield

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• Cropland available for switchgrass production • Cropland with high switchgrass yield

Kansas & Northern Missouri

Source: Sungrant BiowebSource: U.S. Department of Agriculture

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Cost Analysis of Switchgrass Ethanol

Cost analysis of harvesting and preprocessing options Combinations of preprocessing and plant size

Preprocessing: Bailing (No preprocessing), Grinding, Pelletizing Plant Size: Small (2000 Mg/day), Large (5000 Mg/day)

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Bale Bale

Loaf

Ground SG

Pellet

Small Refinery

No preprocessing

Large Refinery6 Combinations!

Cost Analysis of Switchgrass Ethanol

Combined method: lowest transportation costs Within 22 miles

→ grind switchgrass

Over 22 miles

→ pelletize switchgrass

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b

Refinery

22 Mi

Grinding

Pelletizing

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Cost Analysis of Switchgrass Ethanol

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To Small Refinery (Capacity: 2000 Mg/day)

To Large Refinery (Capacity: 5000 Mg/day)

Baled Ground Pelletized Baled Ground Pelletized Combined

Supply Chain Stages

DetailsCost/Gallon

Cost/Gallon

Cost/Gallon

Cost/Gallon

Cost/Gallon

Cost/Gallon

Cost/Gallon

Planting & Cultivation

CurrentTechnology

$0.413 $0.413 $0.413 $0.413 $0.413 $0.413 $0.413

Harvest and Storage

Baling System

$0.236 $0.236

Loafing System

$0.174 $0.174 $0.174 $0.174 $0.174

Grinding at Farm

$0.101 $0.101 $0.066

Grinding at Plant

$0.101 $0.101

Pelletizing $0.179 $0.179 $0.061Transport to Refinery $0.174 $0.108 $0.049 $0.196 $0.131 $0.060 $0.103Subtotal (from cropland to refinery)

$0.924 $0.796 $0.816 $0.946 $0.819 $0.827 $0.817

$240,000 Annual Savings!!

Cost Analysis of Switchgrass Ethanol

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To Small Refinery / Grounded

To Large Refinery / Combined

Subtotal (from cropland to refinery) $0.796 $0.818

Cost to Produce Cellulosic Ethanol $2.200 $2.200

Cost to Transport Ethanol (1500 Miles, from South Dakota to SFC or NYC)

$0.837 $0.837

Total Costs $/ Gal $3.833 $3.854

Delivered cost of switchgrass ethanol

Avg. U.S. gasoline price = $2.864 (all states) On average 23% of this price is taxes

→ Switchgrass ethanol is not yet economically sustainable!

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Conclusion

Most urgent supply chain issues Biofuel cost

Still requires government subsidy

Farmers’ resistance to new feedstocks Must be solved to improve cost competitiveness

Delivery capacity Shortage of delivery capacity would increase landed cost of biofuel

Tradeoff High yield cropland ↔ Land cost

Feedstock density ↔ Low cost

Size of refinery ↔ Shipping cost to refinery

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Biofuel SC Challenges

Feedstock Production Challenges Cost reduction

Improvement of yield

Sustainability Assessment of environmental implication and net carbon reduction Net energy balance Improvements in farming techniques to increase yield

Adoption of new feedstocks Behavioral inertia of farmers Cropland availability

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Biofuel SC Challenges

Biofuel Production Challenges Increasing conversion yield

How to reduce 'recalcitrance' (In the case of cellulosic ethanol) Improving understanding of thermal breakdown of materials Improving knowledge of microbes and enzymes

Development of valuable co-products e.g. Biodegradable plastic from switchgrass

Leverage best practices of related industries Petroleum refining, chemical manufacturing, and bioengineering

2020

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Biofuel SC Challenges

Feedstock Logistics Challenges Stable feedstock supply

Seasonality of feedstock harvest & Quality degradation over time Annual fluctuation of yield Crop rotation

Design of logistics network Number of storage facilities & their network Inventing new ways of delivery

Preprocessing Tradeoff of feedstock density vs. cost

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Biofuel SC Challenges

Biofuel Distribution Challenges Geographical dislocation of supply and demand

Biofuels are currently refined near crop location, typically rural, then shipped to where the demand is

Delivery Capacity Not enough ethanol rail cars and hazmat drivers. Not enough blending stations and transportation capacity Possibility of using pipeline to deliver ethanol

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Biofuel SC Challenges

Biofuel Enduse Challenges Matching supply and demand

Adoption of E85 compatible engines will require much more ethanol and capacity to transport ethanol compared to today

Increasing biofuel blend Chemical stability during transportation Possible corrosion

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