Economic Feasibility of Sustainable High Oilseed-Based Biofuel Production: The Case for Biodiesel in North Carolina

We assess the economic feasibility of a 10 MMGY biodiesel plant using a Monte Carlo Cash Flow model programmed in Excel using @Risk, a simulation and risk analysis software. The model incorporates stochastic components to capture uncertainty in the analysis. The stochastic components are mainly variables that may exhibit risk, such as input prices, output prices, and expected revenues, and these are assigned probability distributions in the model. The model is programmed with three output variables: stream of revenues, profits/loss, and the resulting net present value (NPV) over ten year forecast period. Results from the cash flow analysis show that average expected revenues from the sale of biodiesel and co-products will be $48.5 million and total operating costs of $42.05 million per year. The economic feasibility of this biodiesel production plant is determined from the model calibration and sensitivity analysis. Using a discount rate of 7.5%, the simulated average NPV is $16.8 million and since this is positive, it indicates the project may be economically feasible subject to model assumptions. We find that the likelihood of the NPV greater than zero is 61% on average. Sensitivity and scenario analysis show that the NPV is most affected by fluctuations in biodiesel price, canola seed price, and the price of seed meal.