Biofuel economics: Production costs of advanced biofuels is similar to grain-ethanol

However, recent increases in grain prices mean that production costs are now similar for grain ethanol and second generation biofuels, according to a paper published in the first edition of Biofuels, Bioproducts & Biorefining.

The switch to second generation biofuels will reduce competition with grain for food and feed, and allow the utilization of materials like straw which would otherwise go to waste. The biorefineries will also be able to use lignocellulosic crops like poplar and switchgrass, which can be grown on land less suitable for farming than traditional row crops. These findings should be a boost to companies hoping to establish themselves in this emerging field.

Two researchers working at the Department of Mechanical Engineering at Iowa State University set out to compare the capital and operating costs of generating fuel from starch and cellulose-containing materials.

They showed that the capital costs for 150 million gallon gasoline equivalent capacity range from around $111 million for a conventional grain ethanol plant to $854 million for an advanced (Fischer Tropsch) plant. The difference in the final cost of the fuel, however, was less severe, being $1.74 for grain ethanol when corn costs $3.00 per bushel and $1.80 for cellulosic biofuel when biomass costs $50 per ton.

The authors compared biochemical and thermochemical approaches to biofuels. They showed that both have much higher capital costs than conventional grain ethanol plants, but that neither had a significant cost advantage over the other.

Comparing the costs of biofuels is complicated by the fact that most studies rarely employ the same bases for economic evaluations. Differences in assumed plant size, biomass costs, method of project financing, and even the year in which the analyses are performed can skew comparisons.

“Although the costs of production are comparable for grain ethanol and cellulosic biofuels, the much higher capital costs of the cellulosic plants will be an impediment to their commercialization,” says ISU graduate student Mark Wright, one of the paper’s authors.