Coupling Greenhouse Gas Credits with Biofuel Production Cost in Determining Conversion Plant Size
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Biofuel plant size is one of the key variables in biofuel supply chain analysis as it plays a pivotal role in controlling the efficacy of both feedstock supply and feedstock-to-biofuel conversion. The unit production cost and greenhouse gas (GHG) balance of biofuels vary with plant size. We develop an analytical framework for integrating biofuel production costs and GHG balance derived from life-cycle analysis into supply chain optimization, followed by its application to ethanol production using forest biomass in the southern United States. We derive formulas for determining the optimal biofuel plant size and the corresponding feedstock supply radius based on the minimization of biofuel production costs less GHG benefits. Our results indicate that though biofuel plant size and feedstock supply radius should be augmented by considering GHG benefits, the GHG price will have a more significant impact on net biofuel production costs than on conversion plant size or feedstock supply radius. With a rise in the GHG price the net biofuel production cost tends to increase while the directions of change in plant size and feedstock supply radius are uncertain, depending upon the costs and GHG emissions of biomass transport and feedstock-to-fuel conversion. Combining GHG offset values with biofuel production costs enables us to more holistically examine the biofuel supply chain.
