Stochastic techno-economic analysis of alcohol-to-jet fuel production

Guolin Yao; Mark D Staples; Robert Malina; Wallace E Tyner

doi:10.1186/s13068-017-0702-7

Stochastic techno-economic analysis of alcohol-to-jet fuel production

Biotechnol Biofuels. 2017 Jan 19:10:18. doi: 10.1186/s13068-017-0702-7. eCollection 2017.

Authors

Guolin Yao¹, Mark D Staples², Robert Malina^{2

3}, Wallace E Tyner¹

Affiliations

¹ Department of Agricultural Economics, Purdue University, 403 West State Street, West Lafayette, IN 47907-2056 USA.
² Laboratory for Aviation and the Environment, Department of Aeronautics and Astronautics, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, MA 02139 USA.
³ Center for Environmental Sciences, Hasselt University, Martelarenlaan 42, 3500 Hasselt, Belgium.

Abstract

Background: Alcohol-to-jet (ATJ) is one of the technical feasible biofuel technologies. It produces jet fuel from sugary, starchy, and lignocellulosic biomass, such as sugarcane, corn grain, and switchgrass, via fermentation of sugars to ethanol or other alcohols. This study assesses the ATJ biofuel production pathway for these three biomass feedstocks, and advances existing techno-economic analyses of biofuels in three ways. First, we incorporate technical uncertainty for all by-products and co-products though statistical linkages between conversion efficiencies and input and output levels. Second, future price uncertainty is based on case-by-case time-series estimation, and a local sensitivity analysis is conducted with respect to each uncertain variable. Third, breakeven price distributions are developed to communicate the inherent uncertainty in breakeven price. This research also considers uncertainties in utility input requirements, fuel and by-product outputs, as well as price uncertainties for all major inputs, products, and co-products. All analyses are done from the perspective of a private firm.

Results: The stochastic dominance results of net present values (NPV) and breakeven price distributions show that sugarcane is the lowest cost feedstock over the entire range of uncertainty with the least risks, followed by corn grain and switchgrass, with the mean breakeven jet fuel prices being $0.96/L ($3.65/gal), $1.01/L ($3.84/gal), and $1.38/L ($5.21/gal), respectively. The variation of revenues from by-products in corn grain pathway can significantly impact its profitability. Sensitivity analyses show that technical uncertainty significantly impacts breakeven price and NPV distributions.

Conclusions: Technical uncertainty is critical in determining the economic performance of the ATJ fuel pathway. Technical uncertainty needs to be considered in future economic analyses. The variation of revenues from by-products plays a significant role in profitability. With the distribution of breakeven prices, potential investors can apply whatever risk preferences they like to determine an appropriate bid or breakeven price that matches their risk profile.

Keywords: Alcohol-to-jet; Aviation biofuel; Breakeven price distributions; Monte Carlo simulation; Stochastic dominance; Stochastic techno-economic analysis.