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Plant Size: Capital Cost Relationships in the Dry Mill Ethanol Industry

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  • Gallagher, Paul W.
  • Brubaker, Heather
  • Shapouri, Hosein

Abstract

Estimates suggest that capital costs typically increase less than proportionately with plant capacity in the dry mill ethanol industry because the estimated power factor is 0.836. However, capital costs increase more rapidly for ethanol than for a typical processing enterprise, judging by the average 0.6 factor rule. Some estimates also suggest a phase of decreasing unit costs followed by a phase of increasing costs. Nonetheless dry mills could be somewhat larger than the current industry standard, unless other scarce factors limit capacity expansion. Despite the statistical significance of an average cost-size relationship, average capital cost for plant of a given size at a particular location is still highly variable due to costs associated with unique circumstances, possibly water availability, utility access and environmental compliance.

Suggested Citation

  • Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant Size: Capital Cost Relationships in the Dry Mill Ethanol Industry," Staff General Research Papers Archive 12306, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:12306
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    Cited by:

    1. Claypool, Joshua T. & Simmons, Christopher W., 2016. "Hybrid thermochemical/biological processing: The economic hurdles and opportunities for biofuel production from bio-oil," Renewable Energy, Elsevier, vol. 96(PA), pages 450-457.
    2. Kocoloski, Matt & Michael Griffin, W. & Scott Matthews, H., 2011. "Impacts of facility size and location decisions on ethanol production cost," Energy Policy, Elsevier, vol. 39(1), pages 47-56, January.
    3. Golecha, Rajdeep & Gan, Jianbang, 2016. "Effects of corn stover year-to-year supply variability and market structure on biomass utilization and cost," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 34-44.
    4. Paul Gallagher & Guenter Schamel & Hosein Shapouri & Heather Brubaker, 2006. "The international competitiveness of the U.S. corn-ethanol industry: A comparison with sugar-ethanol processing in Brazil," Agribusiness, John Wiley & Sons, Ltd., vol. 22(1), pages 109-134.
    5. repec:eee:rensus:v:75:y:2017:i:c:p:1035-1045 is not listed on IDEAS
    6. Sesmero, Juan P. & Perrin, Richard K. & Fulginiti, Lilyan E., 2012. "Technology, Markets, and Ethanol Plants Shutdown Price," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124915, Agricultural and Applied Economics Association.
    7. Paul W. Gallagher, 2009. "Roles for evolving markets, policies, and technology improvements in U.S. corn ethanol industry development," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Apr, pages 12-33.
    8. Juan P. Sesmero & Richard K. Perrin & Lilyan E. Fulginiti, 2016. "A Variable Cost Function for Corn Ethanol Plants in the Midwest," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 565-587, September.
    9. Gallagher, Paul W., 2009. "Roles for Evolving Markets, Policies, and Technology Improvements in U.S. Corn Ethanol Industry Development," ISU General Staff Papers 200901010800001495, Iowa State University, Department of Economics.
    10. Amigun, B. & Sigamoney, R. & von Blottnitz, H., 2008. "Commercialisation of biofuel industry in Africa: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(3), pages 690-711, April.
    11. Gallagher, Paul W., 2014. "The regional effects of a biomass fuel industry on US agriculture," Energy Policy, Elsevier, vol. 69(C), pages 598-609.
    12. Gallagher, Paul & Shapouri, Hosein & Brubaker, Heather, 2007. "Scale, Organization, and Profitability of Ethanol Processing," ISU General Staff Papers 200703010800001439, Iowa State University, Department of Economics.
    13. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2013. "Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation," NBER Working Papers 19636, National Bureau of Economic Research, Inc.
    14. Sanchez, Daniel L. & Callaway, Duncan S., 2016. "Optimal scale of carbon-negative energy facilities," Applied Energy, Elsevier, vol. 170(C), pages 437-444.
    15. Yi, Fujin & Lin, C.-Y. Cynthia & Thome, Karen, 2013. "An Analysis of the Effects of Government Subsidies and the Renewable Fuels Standard on the Fuel Ethanol Industry: A Structural Econometric Model," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150224, Agricultural and Applied Economics Association.
    16. Deverell, Rory & McDonnell, Kevin & Ward, Shane & Devlin, Ger, 2009. "An economic assessment of potential ethanol production pathways in Ireland," Energy Policy, Elsevier, vol. 37(10), pages 3993-4002, October.
    17. Szulczyk, Kenneth R. & McCarl, Bruce A. & Cornforth, Gerald, 2010. "Market penetration of ethanol," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(1), pages 394-403, January.
    18. Okudoh, Vincent & Trois, Cristina & Workneh, Tilahun & Schmidt, Stefan, 2014. "The potential of cassava biomass and applicable technologies for sustainable biogas production in South Africa: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 1035-1052.
    19. Lin, Jiefeng & Gaustad, Gabrielle & Trabold, Thomas A., 2013. "Profit and policy implications of producing biodiesel–ethanol–diesel fuel blends to specification," Applied Energy, Elsevier, vol. 104(C), pages 936-944.
    20. Marloes Caduff & Mark A.J. Huijbregts & Annette Koehler & Hans-Jörg Althaus & Stefanie Hellweg, 2014. "Scaling Relationships in Life Cycle Assessment," Journal of Industrial Ecology, Yale University, vol. 18(3), pages 393-406, May.

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