Economics at your fingertips  

The Economic Feasibility of Energy Sugar Beet Biofuel Production in Central North Dakota

Thein Maung and Cole Gustafson

No 61235, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor affect on investment viability.

Keywords: Agricultural Finance; Resource /Energy Economics and Policy (search for similar items in EconPapers)
Pages: 27
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.22004/ag.econ.61235

Access Statistics for this paper

More papers in 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().

Page updated 2020-04-05
Handle: RePEc:ags:aaea10:61235