Economic Feasibility of Sugar Beet Biofuel Production in North Dakota

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1 Economic Feasibility of Sugar Beet Biofuel Production in North Dakota Thein Maung and Cole Gustafson North Dakota State University The Economics of Alternative Energy Resources and Globalization: The Road Ahead November 15-17, 29, Orlando, FL 1

2 Non-Food Sugarbeet Feedstock to Advanced Biofuels NDSU Green Vision Group Architects For Rural Development Heartland Renewable Energy (HRE) Sugar Is The New Oil 2

3 Project Goal Develop sugar beet to biofuel industry across North Dakota with five irrigated production regions. First biofuel non-food sugar beet processing plant to be built in 212. Provide local economic opportunity

4 Introduction Energy Independence and Security Act (EISA) of 27 defines three classes of biofuels: Conventional biofuel 2% GHG reduction Advanced biofuel 5% GHG reduction (Highlands EnviroFuels LLC conducted LCA of GHG emissions) Cellulosic 6% GHG reduction

5 Introduction Sugar beets and sugarcane are uniquely qualified as advanced biofuels under EISA. By 222, about 15 billion gallons per year of advanced biofuels will be required

6 Introduction North Dakota has great potential to expand irrigated sugar beet production, minimizing land competition with existing sugar beet food crops. Because of their high sugar content, sugar beets can yield higher ethanol production per acre. Growing sugar beet feedstock can reduce nitrogen requirements, water use and reduces CO₂ emissions

7 Literature USDA (26) o Examined the feasibility of ethanol production from sugar in the U.S. Outlaw et al. (27) o Analyzed the feasibility of integrating ethanol production into existing sugar mill that uses sugarcane juice Yoder et al. (29) o Investigated the potential development of an ethanol industry in Washington State using sugar beets

8 Technology Overview The plant makes most of it s own energy. Stillage waste from fermentation process is spray-dried and burned to produce thermal and electrical energy supplying about 75% of the plant s energy needs. Patent has been successfully lab tested by HRE and now needs commercial scale test.

9 Spent Yeast Sugar Beets Dryer Slicing/Grinding Recovered Yeast Mola sses Pressing/Juice Extraction Cooking and Sterilization Wet Pulp Dryer Stea m Boile r Beet Pulp/Feed Ash/Fertilizer Fermentation Distillation Dehydration Denaturing Fuel Ethanol Storage Stillage Evapo ration Syrup Dryer Dried Powde r

10 Methodology Divided into four sections: 1. Production assumptions 2. Balance sheet 3. Income statement 4. Cash flow financial statement

11 Production Assumptions 2 MGY Plant Conversion Rate for Whole Beets (gal/ton) 26.5 Conversion Rate for Beet Molasses (gal/ton) Sugar Beets Requirement (tons/yr) 53, Beet Molasses Requirement (tons/yr) 73, Electricity Requirement (Million kwh/yr) 1.1 Thermal Energy Requirement Stillage Powder (Million BTU/yr) 45,. Natural Gas (Million BTU/yr) 15,. Base Prices for Beet Molasses ($/ton) $ 12. Whole Beets ($/ton) $ 42. Ethanol ($/gal) $ 1.71 Electricity ($/kwh) $.5 Natural Gas ($/Million BTU) $ 7.35 Co-products Yeast ($/ton) $ 5. Fertilizer ($/ton) $ 79.4 Beet Pulp ($/ton) $ Engineering and Construction Cost $ 32,665,28. Development and Start-up Cost $ 9,955,. Total Capital Cost $ 42,62,28.

12 Results from Income Statement $/Year $/Gallon % of Total Revenue % of Total Cost Sale Revenue Ethanol 31,33, % Yeast 6,324, % Fertilizer 951, % Feed 1,74, % Producer Tax Credit 1,818, % Total Sale Revenue 42,164, % Production Costs Feedstock Costs 27,627, % Other Input Costs 4,256, % Administrative and Operating Costs 2,222, % Total Production Costs 34,16, % Interest, Income Tax, Depreciation and Amortization 2,39, Net Profit 5,667,29.3

13 Data and Distribution Assumptions Variable Mean Standard Deviation Distribution Prices for Beet Molasses ($/ton) Triangular Whole Beets ($/ton) Triangular Ethanol ($/gal) Inverse Gauss Electricity ($/kwh).4.1 Exponential Natural Gas ($/Million BTU) Normal Co-products Yeast ($/ton) Triangular Fertilizer ($/ton) Triangular Beet Pulp ($/ton) Triangular

14 Simulation Results

15 Simulation Results

16 NPV (in Millions) NPV (in Millions) NPV (in Millions) NPV (in Millions) Simulation Results Ethanol Price ($/gal) Yeast ($/ton) Fertilizer ($/ton) Feed ($/ton)

17 NPV (in Millions) NPV (in Millions) NPV (in Millions) NPV (in Millions) Simulation Results Sugar Beets ($/ton) Beet Molasses ($/ton) Electricity Price ($/kwh) Natural Gas Price ($/MMBtu)

18 Summary and Conclusions One of the most important factors that affect the profitability of the investment is the price of ethanol. Changes in prices of co-products have a relatively minor affect on the profitability of investment The ethanol plant can tolerate the feedstock price increase to a certain level without having a critical impact on profits. 18

19 Additional Research and Study Needs Commercial scale burn test of fermentation sediment material to be used for plant energy Optimal design of feedstock supply chain Environment lifecycle of the biofuel produced Impacts on rural employment 19