(773a) Biorefinery Location and Technology Selection Through Supply Chain Optimization

The current U.S. biofuel industry is dominated by ethanol (mainly produced from corn grain starch) and biodiesel (mainly produced from soybean oil and recycled cooking oils), but cellulosic biofuels (based on non-food resources such as agricultural waste, grasses and woody crops) are predicted to play a large role in the future. The U.S. EPA predicts that 8.7 million gallons of cellulosic biofuel will be produced this year, while government Renewable Fuel Standard (RFS2) mandates require the use of 16 billion gallons of cellulosic biofuel in motor-vehicle fuel by 2022. The expansion of the cellulosic biofuel industry to meet these mandates will impose significant logistical challenges at each stage of the biofuel supply chain (biomass production, harvesting, storage, processing and transportation, and biofuel distribution).

Supply chain optimization (SCO) can be applied to mitigate the risks associated with biomass logistics, and to determine efficient biomass-to-biofuel supply chain configurations. For these reasons, biofuel SCO has become an area of active research (e.g., see the review in [1]). This study differs from previous literature by (i) focusing on facility profitability through the inclusion of detailed taxation and capital depreciation, (ii) considering multiple competing biomass processing technologies producing a range of biofuels, (iii) including existing biofuel facilities, (iv) studying a large multi-state region, and (v) including each RFS2 fuel classification (renewable fuel, advanced biofuel and cellulosic biofuel) to analyze competition for shared feedstocks.

Specifically, this study proposes a mixed integer linear program to solve the SCO problem of locating and sizing biomass processing facilities in the Midwestern United States (a 12-state region) to meet the RFS2 biofuel mandates for 2015. A set of seven biomass processing technologies, each expected to be commercialized in the near-term, are considered for construction in the region. Existing corn ethanol facilities are included, and compete for biomass resources. The spatial distribution and farmgate cost of eight types of biomass is accessed from a recently updated U.S. Department of Energy database [2]. A detailed cash flow analysis that includes capital depreciation and taxation is embedded into the model formulation to give insights into the minimum biofuel selling price for each installed facility. Equilibrium market cost for each of the RFS2 fuel classifications, which is directly related to the Renewable Identification Number market price, is determined through sensitivity analysis of the delivered biofuel price.

[1] An, H.; Wilhelm, W. E.; Searcy, S.W. Biomass Bioenergy 2011, 35, 3763–3774.

[2] U.S. Department of Energy, U.S. Billion-Ton Update: Biomass Supply for a Bioenergy and Bioproducts Industry, 2011.