Date of Award
Master of Science (MS)
Wallace E. Tyner
Committee Member 1
Committee Member 2
Michael R. Langemeier
Greenhouse gas emissions have been a growing concern. The transportation sector contributes to one-third of GHG emissions in the United States from fossil fuel burning. The Renewable Fuel Standard set a requirement for 16 billion gallons (ethanol equivalent) of cellulosic biofuels to be used in the market. Aviation biofuels can help to meet both of these problems as well as improve U.S. energy security.
Investment in the biofuel industry carries a lot of risk. The biofuel industry is run by the private sector, but can be incentivized by government. Cellulosic biofuels carry even more risk than first generation biofuels, because conversion technology is more expensive. As a result, incentives are needed to reduce the risk for private investors. Government can implement policies to reduce the risk in investment in aviation biofuels. The issue is choosing which policy will provide the most reduction in risk, while providing a lowest cost to the government.
This analysis focuses on aviation biofuel production using fast pyrolysis from corn stover. Cost benefit analysis is used to calculate the net present value, internal rate of return, and benefit-cost ratio for a plant. We look at deterministic and stochastic cases. For the stochastic cases, this study uses @Risk, a Palisades Corporation software to determine the risk of investment in aviation biofuels. Uncertainty is added to fuel price and four technical variables: capital cost, final fuel yield, hydrogen cost, and feedstock cost. The fuel price can be steady or increasing at DOE projections. We look at the impact of three policies: reverse auction, competitive capital subsidy, and carbon tax. For the reverse auction and capital subsidy, we used contract lengths of 5, 10, and 15 years to see the impact a longer contract could have on probability of loss.
All three policies reduced risk in investment of aviation biofuels. A reverse auction reduced risk of investment the most. As the contract length increased, the probability of loss and coefficient of variation in net present value were reduced substantially. When fuel price increased stochastically and a contract length of 15 years was used, probability of loss was reduced to 9.9 percent.
Bittner, Amanda C., "Field To Flight: A Techno-Economic Analysis of Stover to Aviation Biofuels Supply Chain" (2014). Open Access Theses. 404.