Biofuel supply chain challenges and analysis

Abstract

Liquid fuels such as gasoline and diesel are traditionally derived from petroleum. Since petroleum has the potential to be exhausted, there is interest in large scale production of fuels from renewable sources. Currently, ethanol and bio diesel are liquid fuels that are mainly derived from field crops. This paper examines the supply chain challenges and issues that exist for bringing biofuel production up to scale. One major challenge that exists is how to transport the feedstock from a farm to a refinery in the most cost efficient manner. One way to improve transportation efficiency of feedstock is to increase the energy density of the feedstock. However, increasing the density of a feedstock comes with a cost. We use switchgrass as a case study and examine the tradeoff between higher transportation costs in transporting a less energy dense feedstock to processing a feedstock to increase its energy density. We show that creating ethanol from switchgrass in the United States is not competitive in price to gasoline without government subsidies, but as the supply chain matures, efficiencies gained will narrow the gap.