Biofuel Supply Chain Challenges and Analysis

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Biofuel Supply Chain Challenges and Analysis Sooduck Chung Michael Farrey 1 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 2 1

Growth in Ethanol Fuel Production Ethanol Production 1.8B gal (2001) 9.2B gal (2008) (520% ) 10,000 U.S. Ethanol Production 9,000 8,000 Million Gallons 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Year 3 Source: U.S. DoE, Alternative Fuels & Advanced Vehicle Center Biofuel Supply Chain Overview of Biofuel Supply Chain Feedstock Production Feedstock Logistics Biofuels Production Biofuels Distribution Biofuels Enduse Choosing which feedstock to grow Growing Feedstock Harvesting Storage Preprocessing Conversion of feedstock into biofuel Delivery to the mixing stations Blend with fossil fuels Serving end customers Delivery 4 2

Biofuel SC Challenges Feedstock Production Challenges reduction Sustainability New feedstock Improvement of yield Inexpensive cultivation techniques Environmental implication Net energy balance Behavioral inertia of farmers Cropland availability Improvement of yield 5 Biofuel SC Challenges Feedstock Logistics Challenges Stable Supply Design of network Preprocessing Seasonality of harvest Network of storage facilities Density-cost tradeoff Fluctuation of yield New delivery schemes Crop rotation 6 3

Biofuel SC Challenges Biofuel Production Challenges Conversion yield Co-products Benchmark Research enzymes and bacteria Biodegradable plastic from switchgrass Best practices of related industries Research thermal breakdown of materials High protein animal feed from corn Developing advanced catalysts 7 Biofuel SC Challenges Biofuel Distribution Challenges Geographical dislocation of supply and demand Supply Demand Demand Delivery Capacity 8 4

Biofuel SC Challenges Biofuel Enduse Challenges Meeting growing demand Forecast of future demand Increasing blend Chemical stability Assessment of impact of higher yield Possible corrosion 9 Diversity of Feedstock Ethanol Feedstock Virgin Grain Non-grain Corn Wheat Sorghum Sugarcane Sweet Potato Switchgrass Non-virgin (Recycled) Crop residue Wood residue Monosaccharide (Sugars) Fermentation Ethanol 10 5

Diversity of Feedstock Yield of biofuel from each feedstock 8000 7000 6000 5000 4000 3000 2000 1000 0 Ethanol Yield (L/ha) Source: Brown, L. Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble 11 Source for Switchgrass: Sokhansanj et al. (2009), Schmer et al. (2007) Switchgrass Ethanol SC Challenges Switchgrass Production Issues Dislocation of available cropland and cropland with high switchgrass yield Cropland available for switchgrass production Cropland with high switchgrass yield Kansas & Northern Missouri Source: U.S. Department of Agriculture 12 Source: Sungrant Bioweb 6

Analysis of Switchgrass Ethanol 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) No preprocessing Bale Bale Small Refinery Ground SG Loaf 13 Pellet 6 Combinations! Large Refinery Analysis of Switchgrass Ethanol Combined method: lowest transportation costs Within 22 miles grind switchgrass Over 22 miles pelletize switchgrass 22 Mi b Grinding Refinery Pelletizing 14 7

Analysis of Switchgrass Ethanol Supply Chain Stages Planting & Cultivation Harvest and Storage Details Current Technology Baling System Loafing System Grinding at Farm Grinding at Plant To Small Refinery (Capacity: 2000 Mg/day) 15 To Large Refinery (Capacity: 5000 Mg/day) Baled Ground Pelletized Baled Ground Pelletized Combined $0.413 $0.413 $0.413 $0.413 $0.413 $0.413 $0.413 $0.236 $0.236 $0.174 $0.174 $0.174 $0.174 $0.174 $0.101 $0.101 $0.066 $0.101 $0.101 Pelletizing $0.179 $0.179 $0.061 Transport to Refinery $0.174 $0.108 $0.049 $0.196 $0.131 $0.060 $0.103 Subtotal (from cropland to refinery) $0.924 $0.796 $0.816 $0.946 $0.819 $0.827 $0.817 $240,000 Annual Savings!! Analysis of Switchgrass Ethanol Delivered cost of switchgrass ethanol To Small Refinery / Grounded To Large Refinery / Combined Subtotal (from cropland to refinery) $0.796 $0.818 to Produce Cellulosic Ethanol $2.200 $2.200 to Transport Ethanol (1500 Miles, from South Dakota to SFC or NYC) $0.837 $0.837 Total s $/ Gal $3.833 $3.854 Avg. U.S. gasoline price = $2.864 (all states) On average 23% of this price is taxes Switchgrass ethanol is not yet economically sustainable! 16 8

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 17 18 9

Biofuel SC Challenges Feedstock Production Challenges 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 19 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 20 10

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 21 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 22 11

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 23 12