Analyzing the Trade-Offs between Meeting Biorefinery Production Capacity and Feedstock Supply Cost: A Chance Constrained Approach

Lixia H. Lambert, Eric DeVuyst, Burton English and Rodney Holcomb
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Lixia H. Lambert: Department of Agricultural Economics, Oklahoma State University; Stillwater, OK 74078, USA

Energies, 2021, vol. 14, issue 16, 1-13

Abstract: Commercial-scale switchgrass production for cellulosic biofuel remains absent in U.S. A well-recognized difficulty is the steady provision of high-quality feedstock to biorefineries. Switchgrass yield is random due to weather and growing conditions, with low yields during establishment years. Meeting biorefinery production capacity requirements 100% of the time or at any other frequency requires contracting sufficient amount of agricultural land areas to produce feedstock. Using chance-constrained programming, the trade-offs between the degree of certainty that refinery demand for feedstock and the cost of contracting production acreage is assessed. Varying the certainty from 60% to 95%, we find the costs of production, logistics and transportation ranged from 27% to 96% of the cost of 100% certainty. Investors and managers need to consider the cost of certainty of biomass acquisition when contracting for production acreage.

Keywords: biofuel; switchgrass ( Panicum virgatum L.); uncertainty; risk; chance constrained programming (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
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