Issues in Feedstock Procurement, Regulation and Storage
ID: 3963

Abstract: Subbu Kumarappan

With the growth in cellulosic ethanol as a second generation biofuel, the pilot plants – funded by US-DOE, private companies and various US states (Ethanol RFA, 2008) – can provide insights on evolving biomass supply chains, required infrastructure, contracts and associated transactions and opportunity costs of various systems. The strategies adopted by these pilot plants in the establishment of supply chains can be useful in the design of future cellulosic ethanol industry (Gellerman, 2008). These insights are derived through an extensive study of 24 pilot plants, and how the technologies suit with the location and biomass composition. This article analyzes the questions such as ‘why a cellulosic ethanol pilot plant technology was located in a particular region (site specificity)?’ and ‘what role does the feedstock type (input specificity) and its opportunity costs could play in such a decision?’



The available feedstock composition surrounding the pilot plant would be evaluated to identify the density and variation of biomass distribution (e.g. annual vs. perennial; multiple farmers vs. single large feedstock supply cooperative). This in turn will affect the extent of transportation, storage to avoid seasonal shortfalls and associated costs. The synergies between the technology and ability to handle multiple feedstocks will also help us understand how the winner of the competing technologies (among enzymatic, thermochemical and combined bioprocessing technologies) would determine the biomass supply infrastructure.



To illustrate, the economic issues faced by a cellulosic ethanol plant located in Iowa depending on corn stover from individual farmers (as with Voyager Ethanol) would be entirely different from that of a plant that depends on municipal solid wastes from landfills in Florida (as with New Planet Energy). These differences can be hugely responsible for the success of a cellulosic ethanol plants and prospective financial investors should be aware of these important issues. This article is the one of the first that compares alternative technologies and supply chains in a comprehensive manner – deriving implications based on actual facts from the evolving industry. This study also tries to answer questions such as ‘should a state like Michigan that already has many types of biomass feedstocks, be spending its resources on developing newer biomass resources such as dedicated energy crops or concentrate on improving the harvesting of existing resources?’ The implications derived will focus on the long term economic, environmental and social sustainability of these alternative biomass supply systems.



The study also links the characteristics of feedstock suppliers (farmers or landfills) in the locale of the pilot plants and the current uses for their biomass that could ultimately affect the successful performance of the proposed cellulosic ethanol facilities. The importance of captive farming of biomass for biofuel production would be examined (OBC, 2008). Preliminary evidence suggests that the firm’s size is inversely related to vertically integrated captive plantations (Altman, et al, 2007); i.e. the captive plantations can be expected to be beneficial only for the smaller sized biomass plants. The experts feel that cellulosic ethanol industry would feature plants of size 50-60 million annual gallon capacity – The article analyzes whether these sizes are smaller (or larger) enough to command (or not) a captive plantation. The article’s implications will be compared with the theoretical expectations of institutional economics and transactions costs economics. Interestingly, since the biomass based cellulosic ethanol industry is new, evolving and different from many other agricultural industries, the results from this study might differ from the existing notions about size, scale economies, transactions costs and biomass supply chains.



References:

Altman, Ira J.; Klein, Peter G.; and Johnson, Thomas G. (2007) "Scale and Transaction Costs in the U.S. Biopower Industry," Journal of Agricultural & Food Industrial Organization: Vol. 5 : Iss. 1, Article 10. Available at: http://www.bepress.com/jafio/vol5/iss1/art10



Ethanol RFA (2008) “U.S. Cellulosic Ethanol Projects - Under Development and Construction,” Available at http://www.ethanolrfa.org/resource/cellulosic/documents/RFACellulosicPlantHandout.pdf



Gellerman (2008) “Ethanol’s Bumpy Ride – Interview with Jim Lane,“ Available at

http://www.loe.org/shows/segments.htm?programID=08-P13-00049&segmentID=3



OBC (2008) “Oklahoma set to plant first-ever 1,000 acre switchgrass field” Available at http://okbioenergycenter.org/noble-foundation-to-plant-1000-acres-of-switchgrass-in-the-oklahoma-panhandle/













Rasto Ivanic

When the lignocellulosic biofuels industry reaches maturity and multitude of biomass sources become economically viable, management of feedstock supplies will become increasingly important for success of individual enterprises. A manager of cellulosic ethanol plant will face a problem of maintaining production output of the plant at low cost while relying on a variety of feedstocks each available at different times of the year and at uncertain quantities. Therefore, one of the most strategic decisions a manager must make is to choose an optimal portfolio of biomass feedstocks to supply the plant over time. While some feedstocks (e.g., wood residue) are available for processing throughout the year, availability of others (agricultural residues, dedicated energy crops) is limited and their potential supply (yields) is uncertain. Moreover, feedstock pricing can vary by its type, production location, and time (from year to year), which creates another layer of complexity in manager’s decision. Therefore, a manager has to not only choose an optimal initial feedstock portfolio but also manage it dynamically over time considering factors such as harvest window, planting-to-harvest lead time, yield variability, and storage losses.

To solve the manager’s problem, we formulate it under a dynamic linear programming framework where the objective for the plant manager is to minimize the biomass feedstock cost subject to constraints while maintaining production output at predetermined level. To illustrate our case, we use a hypothetical cellulosic ethanol plant that can handle a variety of feedstocks, producing 200 million annual liters (53 million annual US gallons) of ethanol which requires approximately 600 thousand metric dry tons of biomass. The problem is framed over a period of 20 years, and the key constraints modeled include: availability of wood and agricultural residues at various cost points, availability of biomass from dedicated energy crops, yield pattern of energy crops over time, timing of harvest for agricultural residues and dedicated energy crops, and storage losses. The outputs of the model are the expected feedstock cost and optimal mix of feedstocks used by the cellulosic ethanol plant every year. We solve the dynamic linear programming model using GAMS software and DyLP algorithm.



The contribution of this paper is two-fold: 1) we demonstrate the impact of feedstock planning decisions on performance of a lignocellulosic refinery and resulting cost of biofuels. We show how feedstock mix evolves as a result of management decisions over time. 2) We specifically investigate the role of annual and perennial energy crops in optimal feedstock portfolio and describe strategies that manager should follow depending on the plant location.













Bruce Ferguson

Led by funding from the U.S. Department of Energy and U.S. Department of Agriculture, more than $100 million is now spent annually on plant research targeted at developing new crop feedstocks for renewable fuels. Enhanced crops will demonstrate traits such as low lignin content, high cellulose and hemicellulose content, greater biomass production efficiency for a range of inputs such as land area, water and fertilizer, and reduced post-harvest processing requirements, as well as standard agronomic traits such as herbicide resistance and insect deterrence. While attention is now being paid to integrating such enhanced crop feedstocks into biorefinery operations in ways that fully capture cost and yield efficiencies, relatively little has been done to address the enormous challenge of obtaining public and regulatory acceptance for bioengineered energy crops on a schedule that supports national production goals for cellulosic fuels. This presentation will detail the schedule challenge under current and proposed transgenic plant rules of USDA’s Animal and Plant Health Inspection Service (APHIS) and other regulatory agencies, estimate potential delays if the challenge is not addressed, and discuss alternative courses of action with respect to three types of dedicated energy crops: row crops (corn stover), perennial grasses (switchgrass) and trees (hybrid poplar).











Megan Marshall

In order to satisfy year-round feedstock demand for biorefineries, biomass storage will be a necessary and important step in sustainable feedstock supply. During storage, biomass dry matter losses may occur, resulting in fewer sugars for downstream conversion to fuels or chemicals and decreased feedstock value. These losses will depend on initial feedstock composition and storage conditions, such as moisture, temperature, and oxygen level. However, storage also presents an opportunity to achieve biological pretreatment of recalcitrant plant material, either by controlling storage conditions or by supplementing with microbial or enzyme additives during storage. Thus, the ease of biological conversion of stored biomass into fuels or chemicals may positively impact feedstock value.



To accurately assess feedstock value, these trade-offs of dry matter loss and downstream conversion must be quantified. The Biomass Conversion Laboratory at Penn State University has been conducting storage experiments on important lignocellulosic feedstocks, such as corn stover and switchgrass. Various storage parameters (time and method of feedstock harvest, feedstock moisture, temperature, and oxygen status) and biological treatments (enzymes and microbes with hemicellulose, cellulose, or lignin-degrading potential) have been tested. Dry matter losses during storage have been quantified and downstream processing on stored biomass is being performed.











Moderator: Ronald Lundquist, Fish & Richardson PC (United States)

Presenter 1: Site Specificity and Biomass Feedstock Procurement Strategies for Cellulosic Ethanol Plants
Subbu Kumarappan, Michigan State University, (United States)  []

Presenter 2: Choice of optimum feedstock portfolio for a cellulosic ethanol plant – A dynamic linear programming solution  
Rasto Ivanic, Mendel Biotechnology, Inc, (United States)  []

Presenter 3: Feedstock Regulation: On the Critical Path to Achieving Renewable Fuel Goals 
Bruce Ferguson, Edenspace Systems Corporation, (United States)  []

Presenter 4 (if necessary): The impact of biomass storage conditions on feedstock value 
Megan Marshall, Pennsylvania State University, (United States)  []

Panel Organizer:
Matthew Carr, Biotechnology Industry Organization, (United States)

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