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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," ISU General Staff Papers 200506010700001442, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200506010700001442
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    1. Frederick T. Moore, 1959. "Economies of Scale: Some Statistical Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(2), pages 232-245.
    2. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, September.
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