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The Economic Feasibility of Sugarbeet Biofuel Production in Central North Dakota

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  • Maung, Thein A.
  • Gustafson, Cole R.

Abstract

This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor effect on investment viability. This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor effect on investment viability.

Suggested Citation

  • Maung, Thein A. & Gustafson, Cole R., 2010. "The Economic Feasibility of Sugarbeet Biofuel Production in Central North Dakota," Agribusiness & Applied Economics Report 95745, North Dakota State University, Department of Agribusiness and Applied Economics.
  • Handle: RePEc:ags:nddaae:95745
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    File URL: http://purl.umn.edu/95745
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    Cited by:

    1. Haankuku, Choolwe & Epplin, Francis M. & Kakani, Gopal V., 2015. "Energy Sugar Beets to Biofuel: Field to Fuel Production System and Cost Estimates," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196777, Southern Agricultural Economics Association.
    2. Sorda, Giovanni & Madlener, Reinhard, 2012. "Cost-Effectiveness of Lignocellulose Biorefineries and their Impact on the Deciduous Wood Markets in Germany," FCN Working Papers 8/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    3. De Laporte, Aaron & Ripplinger, David, 2016. "The effects of opportunity costs, supply chain logistics and carbon balances on advanced biofuel production," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235852, Agricultural and Applied Economics Association.
    4. Ripplinger, David & Saxowsky, David M. & Bangsund, Dean A., 2014. "Economic Feasibility of Irrigation Along the McClusky Canal in North Dakota: Farm-level Returns," Agribusiness & Applied Economics Report 196960, North Dakota State University, Department of Agribusiness and Applied Economics.

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    Keywords

    Agribusiness; Crop Production/Industries; Production Economics;

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