Economics of Ethanol and Biodiesel Allan Gray Dept. of Ag. Economics Purdue University.
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Economics of Ethanol and Biodiesel Allan Gray Dept. of Ag. Economics Purdue University
Basics of Ethanol Ethanol is an oxygenate used to help gasoline burn cleaner MTBE is the primary alternative oxygenate used today but is being phased out in many states 3.0 billion gallons of ethanol are added to gasoline today to normally create a 10% Ethanol blend (other blends are possible)
Corn Use and Availability Best Technology: 1 bushel grain converts to 2.7 gallons ethanol 30 MGY plant uses 11.1 million bushels per year Over 30,000 bushels used each day If Ethanol were used in 10% of all US auto fuel it would take approximately 50% of current corn production 5.5 Billion Gallons would require 21% of U.S. Corn and we currently use about 11/12%
Corn Prices Corn for Ethanol is at least 50% of production costs when corn is $1.60/bu. And 70% of costs when corn is $3.20/bu. 30 MGY plant: each 25 cent increase in corn price increases expenses about $3 Million per year or $0.10/gallon
Biodiesel Basics Biodegradable, renewable energy created from vegetable and animal oils Runs in existing, unmodified diesel engines Just over 25 million gallons biodiesel production used to create B100, B20, B5, or B2 but is less than 1 percent of distillate fuel oil. Has a net energy ratio of 3.24 to 1
Soyoil Use and Availability Best Technology: 1 gallon of Soyoil Converts to 1 gallon of Soy Methyl Ester 10 MGY plant uses 6.8 million bushels of Soybeans per year If Biodiesel were used in 5% of all US distillate fuels it would take approximately 56% of current soybean production We currently use about 1% of soybean production
Soyoil Prices Soyoil is about 85% of production costs when soyoil is $22/cwt. 10 MGY plant: each 10% increase in soyoil price increases expenses about $1.6 Million per year or $0.17/gallon
B20 and Diesel Prices Estimates within the U.S.
Summary Ethanol and Biodiesel production/consumption continues to grow Fuel and feedstock prices drive ethanol and biodiesel prices Positive impacts on corn and soybean prices Sustainability is questionable because corn and soybean oil are primary input cost Plants will locate near cheapest feedstock supplies Subsidies are key for these industries