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Growth and Direction of the Biodiesel Industry in the United States, The

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  • Nick D. Paulson
  • Roger G. Ginder

Abstract

The biodiesel industry in the United States has realized significant growth over the past decade through large increases in annual production and production capacity and a transition from smaller batch plants to larger-scale continuous producers. The larger, continuous-flow plants provide operating cost advantages over the smaller batch plants through their ability to capture co-products and reuse certain components in the production process. This paper uses a simple capital budgeting model developed by the authors along with production data supplied by industry sources to estimate production costs, return-on-investment levels, and break-even conditions for two common plant sizes (30 and 60 million gallon annual capacities) over a range of biodiesel and feedstock price levels. The analysis shows that the larger plant realizes returns to scale in both labor and capital costs, enabling the larger plant to pay up to $0.015 more per pound for the feedstock to achieve equivalent return levels as the smaller plant under the same conditions. The paper contributes to the growing literature on the biodiesel industry by using the most current conversion rates for the production technology and current price levels to estimate biodiesel production costs and potential plant performance, providing a useful follow-up to previous studies.

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File URL: http://www.card.iastate.edu/publications/DBS/PDFFiles/07wp448.pdf
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Bibliographic Info

Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 07-wp448.

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Date of creation: May 2007
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Handle: RePEc:ias:cpaper:07-wp448

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Related research

Keywords: biodiesel; biofuels; feedstock; production costs; return on investment.;

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References

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  1. Vanwechel, Tamara & Gustafson, Cole R. & Leistritz, F. Larry, 2003. "Economic Feasibility Of Biodiesel Production In North Dakota," 2003 Annual meeting, July 27-30, Montreal, Canada 21928, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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Cited by:
  1. Baker, Mindy L. & Hayes, Dermot J. & Babcock, Bruce A., 2008. "Crop-Based Biofuel Production under Acreage Constraints and Uncertainty," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6352, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Outlaw, Joe L. & Burnquist, Heloisa L. & Ribera, Luis A., 2007. "Bioenergy--Agricultural Issues and Outlook," 2007 NAAMIC Workshop IV: Contemporary Drivers of Integration 163901, North American Agrifood Market Integration Consortium (NAAMIC).
  3. Carriquiry, Miguel A. & Du, Xiaodong & Timilsina, Govinda R., 2011. "Second generation biofuels: Economics and policies," Energy Policy, Elsevier, vol. 39(7), pages 4222-4234, July.
  4. Van Thang Duong & Yan Li & Ekaterina Nowak & Peer M. Schenk, 2012. "Microalgae Isolation and Selection for Prospective Biodiesel Production," Energies, MDPI, Open Access Journal, vol. 5(6), pages 1835-1849, June.

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