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Title: A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers

Abstract

In this work, a novel risk analysis methodology is presented to evaluate the economic performance of a biorefinery given the volatility in the market price of the final product and the variability in the biomass delivered cost. In addition, potential economic incentives for participating biomass producers are quantified for different farm participation rates. The Monte Carlo simulation model, IBSAL-MC, is used to estimate the biomass delivered cost distribution, and a modified risk heat map is used to visualize the expected return on investment (ROI) for various combinations of the market price of the final product and the biomass delivered cost. The developed methodology is applied to an under-construction cellulosic sugar facility located in Sarnia, southwestern Ontario. Four farm participation rates of 20% (base-case scenario), 30%, 40% and 50% are studied. Additionally, the results show that the expected annual ROI for the base-case scenario is estimated to be 1.3%. As the farm participation rate increases, the expected annual ROI increases from 1.3% at 20% farm participation rate to 3.4%, 4.6% and 5.1% at 30%, 40% and 50% rates, respectively. At high sugar market prices ($375–$525/tonne), the overall expected annual ROI increases to 9.5%, 11.4%, 12.6% and 13.0% in 20%, 30%, 40%more » and 50% farm participation rates, respectively. In this case, the economic incentives to share with biomass producers are estimated to be $14.10/dry tonne (dt), $15.77/dt and $16.33/dt by increasing the farm participation rate from 20% to 30%, 40% and 50%, respectively.« less

Authors:
 [1];  [1];  [2]; ORCiD logo [3];  [4];  [1]
  1. Univ. of British Columbia, Vancouver, BC (Canada). Chemical and Biological Engineering Department
  2. Chemical and Biological Engineering Department, University of British Columbia, Vancouver BC Canada
  3. Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States). Environmental Sciences Division
  4. Univ. of British Columbia, Vancouver, BC (Canada). Department of Forest Resources Management, Forest Sciences Centre
Publication Date:
Research Org.:
Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE), Bioenergy Technologies Office (EE-3B)
OSTI Identifier:
1474653
Alternate Identifier(s):
OSTI ID: 1421293
Grant/Contract Number:  
AC05-00OR22725; 4000142499-00
Resource Type:
Journal Article: Accepted Manuscript
Journal Name:
Biofuels, Bioproducts & Biorefining
Additional Journal Information:
Journal Volume: 12; Journal Issue: 3; Journal ID: ISSN 1932-104X
Publisher:
Wiley
Country of Publication:
United States
Language:
English
Subject:
09 BIOMASS FUELS; 29 ENERGY PLANNING, POLICY, AND ECONOMY; corn stover; cellulosic sugar; return on investment; risk heat map; IBSAL-MC; farm participation rate

Citation Formats

Wang, Yu, Ebadian, Mahmood, Sokhansanj, Shahab, Webb, Erin, Zerriffi, Hisham, and Lau, Anthony. A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers. United States: N. p., 2018. Web. doi:10.1002/bbb.1862.
Wang, Yu, Ebadian, Mahmood, Sokhansanj, Shahab, Webb, Erin, Zerriffi, Hisham, & Lau, Anthony. A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers. United States. doi:10.1002/bbb.1862.
Wang, Yu, Ebadian, Mahmood, Sokhansanj, Shahab, Webb, Erin, Zerriffi, Hisham, and Lau, Anthony. Thu . "A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers". United States. doi:10.1002/bbb.1862.
@article{osti_1474653,
title = {A novel risk analysis methodology to evaluate the economic performance of a biorefinery and to quantify the economic incentives for participating biomass producers},
author = {Wang, Yu and Ebadian, Mahmood and Sokhansanj, Shahab and Webb, Erin and Zerriffi, Hisham and Lau, Anthony},
abstractNote = {In this work, a novel risk analysis methodology is presented to evaluate the economic performance of a biorefinery given the volatility in the market price of the final product and the variability in the biomass delivered cost. In addition, potential economic incentives for participating biomass producers are quantified for different farm participation rates. The Monte Carlo simulation model, IBSAL-MC, is used to estimate the biomass delivered cost distribution, and a modified risk heat map is used to visualize the expected return on investment (ROI) for various combinations of the market price of the final product and the biomass delivered cost. The developed methodology is applied to an under-construction cellulosic sugar facility located in Sarnia, southwestern Ontario. Four farm participation rates of 20% (base-case scenario), 30%, 40% and 50% are studied. Additionally, the results show that the expected annual ROI for the base-case scenario is estimated to be 1.3%. As the farm participation rate increases, the expected annual ROI increases from 1.3% at 20% farm participation rate to 3.4%, 4.6% and 5.1% at 30%, 40% and 50% rates, respectively. At high sugar market prices ($375–$525/tonne), the overall expected annual ROI increases to 9.5%, 11.4%, 12.6% and 13.0% in 20%, 30%, 40% and 50% farm participation rates, respectively. In this case, the economic incentives to share with biomass producers are estimated to be $14.10/dry tonne (dt), $15.77/dt and $16.33/dt by increasing the farm participation rate from 20% to 30%, 40% and 50%, respectively.},
doi = {10.1002/bbb.1862},
journal = {Biofuels, Bioproducts & Biorefining},
number = 3,
volume = 12,
place = {United States},
year = {Thu Feb 15 00:00:00 EST 2018},
month = {Thu Feb 15 00:00:00 EST 2018}
}

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