The economic feasibility of sugar beet biofuel production in central North Dakota

This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 21 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for 0.038 hm3y−1 (or 10 MGY (Million Gallon per Year) and 0.076 hm3y−1 (or 20 MGY) ethanol plants. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70 percent of total production expenses. The estimated breakeven ethanol price for the 0.076 hm3y−1 plant is $400 m−3 ($1.52 per gallon) and $450 m−3 ($1.71 per gallon) for the 0.038 hm3y−1 plant. Breakeven prices for feedstocks are also estimated and show that the 0.076 hm3y−1 plant can tolerate greater ethanol and feedstock price risks than the 0.038 hm3y−1 plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $484.21 m−3 ($1.84 per gallon), and assuming other factors remain unchanged, the estimated net present value (NPV) for the 0.076 hm3y−1 plant is $41.54 million. By comparison, the estimated NPV for the 0.038 hm3y−1 plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor effect on investment viability.

► Sugar beets and beet molasses costs account for more than 70 percent of total production expenses.
► The estimated breakeven ethanol prices for the 0.076 hm3y−1 and 0.038 hm3y−1ethanol plants are $400 m−3 and $450 m−3 respectively.
► The price of ethanol will be one of the most important factors for determining the future feasibility of a sugar-beet-based ethanol plant in North Dakota.
► Future investment decisions on a sugar-beet-based ethanol plant will likely depend on future crude oil prices.