This report provides a status of the markets and technology development involved in growing a domestic bioenergy economy as it existed at the end of calendar year 2013. It compiles and integrates information to provide a snapshot of the current state and historical trends influencing the development of bioenergy markets. This information is intended for policy-makers as well as technology developers and investors tracking bioenergy developments. It also highlights some of the key energy and regulatory drivers of bioenergy markets.
This paper examines the possibilities of breaking into the cellulosic ethanol market in south Louisiana via strategic feedstock choices and the leveraging of the area’s competitive advantages. A small plant strategy is devised whereby the first-mover problem might be solved, and several scenarios are tested using Net Present Value analysis.
This paper introduces a spatial bioeconomic model for study of potential cellulosic biomass supply at regional scale. By modeling the profitability of alternative crop production practices, it captures the opportunity cost of replacing current crops by cellulosic biomass crops. The model draws upon biophysical crop input-output coefficients, price and cost data, and spatial transportation costs in the context of profit maximization theory. Yields are simulated using temperature, precipitation and soil quality data with various commercial crops and potential new cellulosic biomass crops. Three types of alternative crop management scenarios are simulated by varying crop rotation, fertilization and tillage. The cost of transporting biomass to a specific demand location is obtained using road distances and bulk shipping costs from geographic information systems. The spatial mathematical programming model predicts the supply of biomass and implied environmental consequences for a landscape managed by representative, profit maximizing farmers. The model was applied and validated for simulation of cellulosic biomass supply in a 9-county region of southern Michigan. Results for 74 cropping systems simulated across 39 sub-watersheds show that crop residues are the first types of biomass to be supplied. Corn stover and wheat straw supply start at $21/Mg and $27/Mg delivered prices. Perennial bioenergy crops become profitable to produce when the delivered biomass price reaches $46/Mg for switchgrass, $118/Mg for grass mixes and $154/Mg for Miscanthus giganteus. The predicted effect of the USDA Biomass Conversion Assistance Program is to sharply reduce the minimum biomass price at which miscanthus would become profitable to supply. Compared to conventional crop production practices in the area, the EPIC-simulated environmental outcomes with crop residue removal include increased greenhouse gas emissions and reduced water quality through increased nutrient loss. By contrast, perennial cellulosic biomass crops reduced greenhouse gas emissions and improved water quality compared to current commercial cropping systems.
Ethanol use in the U.S. rose sharply in recent years due to public policy and a spike in petroleum prices, and remains high. Public support for ethanol includes mandated minimum levels of use nationwide. However, rather little is known about consumer demand for ethanol and much less about demand by type of blend and ethanol source. We used trial survey data and conjoint analysis to overcome the lack of historical data on consumers’ preferences for ethanol blend fuels. Preliminary findings based on responses from vehicle drivers in Missouri suggest that price is the primary factor behind fuel preferences. The disclosure of ethanol originated from woody feedstocks had a significant effect on preferences ceteris paribus. Ethanol blends of 20 percent had a negatively non-significant statistical effect compared to no-ethanol fuels or those with a 10 percent content. These findings will be tested using different models expanded to a nationwide pool of motor vehicle drivers.
In this study we use data envelopment analysis to decompose the overall economic efficiency of a sample of ethanol plants into three subcomponents: technical efficiency, allocative efficiency and a new component we call marketing efficiency. The relative importance of these sources of efficiency is of particular interest given the recent history of bankruptcies, plant closings and ownership change in the industry. Results reveal that observed production units are very efficient from a technical point of view as suggested by a standard deviation of 1% in technical efficiency. However, our results also show that bigger plants tend to be more economically efficient than others. The conventional methodology would have identified this difference as coming from allocative sources, i.e. bigger plants were correct in anticipating better relative prices and built more capacity accordingly. However introduction of a new concept we call marketing efficiency reveals that bigger production units obtain better relative prices (through marketing contracts) than smaller production units rather than anticipating prices more accurately. This might be a potential reason underlying the recent wave of mergers and acquisitions in the industry.
Events external to agriculture have set in motion the conditions for structural change in the marketing of corn in the U.S. These included a rapid increase in the price of crude oil from $40 per barrel to over $100 caused by hurricanes, geopolitical events, an increased global demand for energy from countries like China and India, and in December 2007, the U.S. raising the renewable fuel standards. The results of this research show that there could be significant changes in the historical utilization and marketing of corn in the U.S. The change in movement patterns provides one source of visible evidence that a structural change is underway.
The Federal Trade Commision performs a market concentration analysis of the ethanol production industry to determine whether there is sufficient competition among industry participants to avoid price-setting and other anticompetitive behaviour.The FTC must report its findings to Congress and to the
Administrator of the Environmental Protection Agency. This link presents the FTC’s
concentration analysis of ethanol production up to year 2009.