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The commercial performance of cellulosic ethanol supply-chains in Europe.

Slade R, Bauen A, Shah N - Biotechnol Biofuels (2009)

Bottom Line: These benefits will only be realised if lignocellulosic ethanol production can compete on price with conventional fossil fuels and if it can be produced commercially at scale.For the supply-chains described here, and with the cost and market parameters selected, selling ethanol as a low percentage blend with gasoline will maximise ethanol revenues and minimise the need for subsidies.It follows, therefore, that the market for low percentage blends should be saturated before markets for high percentage blends.

View Article: PubMed Central - HTML - PubMed

Affiliation: Imperial Centre for Energy Policy and Technology, Centre for Environmental Policy, Imperial College London, South Kensington Campus, London SW7 2AZ, UK. raphael.slade@imperial.ac.uk

ABSTRACT

Background: The production of fuel-grade ethanol from lignocellulosic biomass resources has the potential to increase biofuel production capacity whilst minimising the negative environmental impacts. These benefits will only be realised if lignocellulosic ethanol production can compete on price with conventional fossil fuels and if it can be produced commercially at scale. This paper focuses on lignocellulosic ethanol production in Europe. The hypothesis is that the eventual cost of production will be determined not only by the performance of the conversion process but by the performance of the entire supply-chain from feedstock production to consumption. To test this, a model for supply-chain cost comparison is developed, the components of representative ethanol supply-chains are described, the factors that are most important in determining the cost and profitability of ethanol production are identified, and a detailed sensitivity analysis is conducted.

Results: The most important cost determinants are the cost of feedstocks, primarily determined by location and existing markets, and the value obtained for ethanol, primarily determined by the oil price and policy incentives. Both of these factors are highly uncertain. The best performing chains (ethanol produced from softwood and sold as a low percentage blend with gasoline) could ultimately be cost competitive with gasoline without requiring subsidy, but production from straw would generally be less competitive.

Conclusion: Supply-chain design will play a critical role in determining commercial viability. The importance of feedstock supply highlights the need for location-specific assessments of feedstock availability and price. Similarly, the role of subsidies and policy incentives in creating and sustaining the ethanol market highlights the importance of political engagement and the need to include political risks in investment appraisal. For the supply-chains described here, and with the cost and market parameters selected, selling ethanol as a low percentage blend with gasoline will maximise ethanol revenues and minimise the need for subsidies. It follows, therefore, that the market for low percentage blends should be saturated before markets for high percentage blends.

No MeSH data available.


Variation in levelised cost with cumulative annual production and finance scenarios. The example shown is for a softwood enzymatic hydrolysis plant, excluding pentose fermentation, and assuming a mid price feedstock (US$74 odt-1).
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Figure 7: Variation in levelised cost with cumulative annual production and finance scenarios. The example shown is for a softwood enzymatic hydrolysis plant, excluding pentose fermentation, and assuming a mid price feedstock (US$74 odt-1).

Mentions: Figure 7 shows the variation in the levelised cost of ethanol with increasing cumulative capacity. The successive introduction of seven plants is shown, each with a capacity of 25 odt hour-1 and assuming the PR and finance scenarios described above. Again, the results shown are for the softwood enzymatic chain, but similar relationships were observed for the other supply-chain configurations. In this case, cost reductions attributable to learning effects are around 2% to 3%, but the change in cost attributable to moving from first-plant to Nth plant finance scenarios is around 20%, nearly an order of magnitude greater. The progress ratios considered here may, perhaps, be considered conservative; nevertheless, it is apparent that the benefit of obtaining favourable finance terms has the potential to dwarf the benefit obtained from small reductions in capital cost.


The commercial performance of cellulosic ethanol supply-chains in Europe.

Slade R, Bauen A, Shah N - Biotechnol Biofuels (2009)

Variation in levelised cost with cumulative annual production and finance scenarios. The example shown is for a softwood enzymatic hydrolysis plant, excluding pentose fermentation, and assuming a mid price feedstock (US$74 odt-1).
© Copyright Policy - open-access
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC2654549&req=5

Figure 7: Variation in levelised cost with cumulative annual production and finance scenarios. The example shown is for a softwood enzymatic hydrolysis plant, excluding pentose fermentation, and assuming a mid price feedstock (US$74 odt-1).
Mentions: Figure 7 shows the variation in the levelised cost of ethanol with increasing cumulative capacity. The successive introduction of seven plants is shown, each with a capacity of 25 odt hour-1 and assuming the PR and finance scenarios described above. Again, the results shown are for the softwood enzymatic chain, but similar relationships were observed for the other supply-chain configurations. In this case, cost reductions attributable to learning effects are around 2% to 3%, but the change in cost attributable to moving from first-plant to Nth plant finance scenarios is around 20%, nearly an order of magnitude greater. The progress ratios considered here may, perhaps, be considered conservative; nevertheless, it is apparent that the benefit of obtaining favourable finance terms has the potential to dwarf the benefit obtained from small reductions in capital cost.

Bottom Line: These benefits will only be realised if lignocellulosic ethanol production can compete on price with conventional fossil fuels and if it can be produced commercially at scale.For the supply-chains described here, and with the cost and market parameters selected, selling ethanol as a low percentage blend with gasoline will maximise ethanol revenues and minimise the need for subsidies.It follows, therefore, that the market for low percentage blends should be saturated before markets for high percentage blends.

View Article: PubMed Central - HTML - PubMed

Affiliation: Imperial Centre for Energy Policy and Technology, Centre for Environmental Policy, Imperial College London, South Kensington Campus, London SW7 2AZ, UK. raphael.slade@imperial.ac.uk

ABSTRACT

Background: The production of fuel-grade ethanol from lignocellulosic biomass resources has the potential to increase biofuel production capacity whilst minimising the negative environmental impacts. These benefits will only be realised if lignocellulosic ethanol production can compete on price with conventional fossil fuels and if it can be produced commercially at scale. This paper focuses on lignocellulosic ethanol production in Europe. The hypothesis is that the eventual cost of production will be determined not only by the performance of the conversion process but by the performance of the entire supply-chain from feedstock production to consumption. To test this, a model for supply-chain cost comparison is developed, the components of representative ethanol supply-chains are described, the factors that are most important in determining the cost and profitability of ethanol production are identified, and a detailed sensitivity analysis is conducted.

Results: The most important cost determinants are the cost of feedstocks, primarily determined by location and existing markets, and the value obtained for ethanol, primarily determined by the oil price and policy incentives. Both of these factors are highly uncertain. The best performing chains (ethanol produced from softwood and sold as a low percentage blend with gasoline) could ultimately be cost competitive with gasoline without requiring subsidy, but production from straw would generally be less competitive.

Conclusion: Supply-chain design will play a critical role in determining commercial viability. The importance of feedstock supply highlights the need for location-specific assessments of feedstock availability and price. Similarly, the role of subsidies and policy incentives in creating and sustaining the ethanol market highlights the importance of political engagement and the need to include political risks in investment appraisal. For the supply-chains described here, and with the cost and market parameters selected, selling ethanol as a low percentage blend with gasoline will maximise ethanol revenues and minimise the need for subsidies. It follows, therefore, that the market for low percentage blends should be saturated before markets for high percentage blends.

No MeSH data available.