A cost model for forest-based biofuel production and its application to optimal facility size determination

With continued concerns regarding the use of fossil fuels and energy security, there is increasing interest in biofuels. However, owing to worries over the use of agricultural feedstocks for biofuel, forest biomass as a feedstock has been investigated for some time and appears to be a promising alternative. Current corn-based ethanol facilities range in size from a few million to over 380 million liters (100 million gallons) per year with associated construction costs near $117 million for the latter sized capacity. On the other hand, the economics for forest biomass to biofuel facilities are different and there appears to be a lack of understanding about the cost optimal size for the processing facility and the associated investment. With this in mind, a mathematical model is developed to describe the total annual costs of a forest biomass to biofuel facility using the Upper Peninsula of Michigan as the case study area. The model includes terms associated with forest resource harvesting and collection, transportation, storage, and facility construction and operation costs. The model is used to establish a relationship for the optimal size of a production facility, that is, the facility size that provides the minimum unit cost. The effect of various factors on the optimal facility size and the associated biofuel unit cost are examined, especially transportation cost rate and equivalent yield. The results indicate these two factors do impact optimal size and unit cost.