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

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  • Lixia H. Lambert

    (Department of Agricultural Economics, Oklahoma State University; Stillwater, OK 74078, USA)

  • Eric A. DeVuyst

    (Department of Agricultural Economics, Oklahoma State University; Stillwater, OK 74078, USA)

  • Burton C. English

    (Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, TN 37996, USA)

  • Rodney Holcomb

    (Department of Agricultural Economics and Food & Ag Products Center, Oklahoma State University, Stillwater, OK 74078, USA)

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.

Suggested Citation

  • Lixia H. Lambert & Eric A. DeVuyst & Burton C. English & Rodney Holcomb, 2021. "Analyzing the Trade-Offs between Meeting Biorefinery Production Capacity and Feedstock Supply Cost: A Chance Constrained Approach," Energies, MDPI, vol. 14(16), pages 1-13, August.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:16:p:4763-:d:609163
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