Optimal contracting structure between cellulosic biorefineries and farmers to reduce the impact of biomass supply variation: game theoretic analysis Academic Article uri icon

abstract

  • © 2016 Society of Chemical Industry and John Wiley & Sons, Ltd. There is considerable year-to-year variability in the supply of cellulosic biomass used in the production of cellulosic biofuels, yet strategies to mitigate these variations in biofuel development are not well understood. Biorefineries and farmers venturing into the cellulosic biofuel industry will require biomass supply and contracting strategies that can minimize the impact of these large variations. Some studies have proposed biomass pre-treatment and storage to address biomass supply variations. Other studies have used transportation modeling approaches to manage supply variations and select the optimal location of a cellulosic biorefinery. However, storage, pre-treatment, and similar engineering approaches lead to higher costs and have other limitations such as additional infrastructural requirements. There is a gap in understanding how contracting strategies between biorefineries and the biomass suppliers (farmers) can reduce the risks with biomass supply variations. In this study, the contracting structure between biorefineries and biomass suppliers is studied under different market structures for the US Corn Belt. A theoretical framework is then developed to use contracting strategies for mitigating the impact of biomass supply variations. First, the trade-offs between intricately linked components of biomass cost, such as biomass transport, biomass price (incentive) to suppliers, variation in biomass supply, biorefinery size, and alternative feedstock availability are examined. Next, an optimal contracting structure is developed between biorefineries and biomass suppliers using game theoretic analysis. Results show that both the impact of biomass supply variations and the overall biomass cost can be significantly reduced through the use of the optimal contracting strategy between biorefineries and suppliers.

author list (cited authors)

  • Golecha, R., & Gan, J.

citation count

  • 15

publication date

  • January 2016

publisher