| Scope and method of study. The purpose of this study was to develop a comprehensive and interdisciplinary framework for determining the economic viability of investment in agricultural processing. The potential of the gasification-bioconversion process as a method for producing ethanol from lignocellulosic biomass was examined, using Oklahoma as a case study. To simultaneously account for the time value of investment funds and the discrete nature of the plant location and plant size decisions, a mixed integer mathematical programming formulation was augmented with an investment decision rule. Specifically, the model determined combinations of plant locations, plant sizes, feedstock combinations, biomass production options (fertility levels, etc), biomass harvest and transportation options (vertically integrated or atomistic), and biomass storage options that maximize industry net present worth. Incorporated also is the tradeoff among harvesting over extended periods, storing harvested biomass in the field and/or storing biomass at the plant.; Findings and conclusions. If the price of ethanol is {dollar}1.25 per gallon and the other base assumptions hold, three 100 million gallon per year plants would be located in Oklahoma, with a net present worth of US {dollar}553,614,554. These earnings would drop by about 11 percent if the price of fossil fuel increases enough to render ethanol competitive without subsidies. In general, given the assumptions of the base model, an ethanol industry would be justified if the unsubsidized market price of ethanol is at least {dollar}0.78. The results also indicate that introduction of switchgrass as a potential feedstock would double the number of plants and more than double the profitability of the industry. Further research needs to focus on determining reliable estimates of the ethanol yield rate. Although the gasification-bioconversion process can theoretically produce in excess of 100 gallons of ethanol per ton of biomass, such yields are yet to be verified at industrial level. Other parameters that need to be carefully determined include plant costs and transportation costs. Changes in land costs do not seem to have much effect. The harvest structure optimally selected by the model also seems to suggest that vertical linkages will be crucial in sustaining such an industry. |
