Financial viability of biofuel and biochar production from forest biomass in the face of market price volatility and uncertainty. (15th November 2018)

• Record Type: Journal Article
• Authors: Campbell, Robert M.; Anderson, Nathaniel M.; Daugaard, Daren E.; Naughton, Helen T.
• Is Part Of: Applied energy. Volume 230(2018)
• Page Start: 330
• Page End: 343
• Publication Date: 2018-11-15
• Subjects: Financial analysis -- Techno-economic analysis -- Biofuel -- Biochar -- Pyrolysis; Power (Mechanics) -- Periodicals; Energy conservation -- Periodicals; Energy conversion -- Periodicals; 621.042
• DOI: 10.1016/j.apenergy.2018.08.085
• Languages: English
• ISSNs: 0306-2619

Abstract

Highlights: Uncertainty in market prices drives financial outcomes. Monte Carlo simulation allows uncertainty to be quantified. Biochar-only production offers a potentially profitable venture. Biofuel-biochar coproduction requires RINs to achieve financial success. Abstract: A comparative techno-economic analysis of two different thermochemical biomass conversion pathways was conducted to examine the effects of fuel price and other variables on project financial performance. Monte Carlo simulation was used to quantify the effects of uncertainty and volatility of ten critical variables: biofuel, biochar and feedstock prices, discount rate, capital investment, labor cost, loan terms, feedstock drying, and biofuel and biochar conversion rates. Market prices for biofuel and biochar have the largest impact on net present value (NPV) of any variable considered, due in part to the high levels of uncertainty associated with future prices of both. Across the ranges of input values for these variables in simulation analysis, hearth-based pyrolysis biochar production had the highest likelihood of profitability with a mean NPV of $41.5 million and only 20% of outcomes resulting in a net loss, while 68% of outcomes for auger-based biochar-biofuel coproduction represented a financial loss, including a mean NPV of -$24.2 million. However, when additional revenue from Renewable Identification Numbers (RINs) credits generated by biofuel production is considered, financial outcomes of biochar-biofuel coproduction improve to 50% likelihood of experiencing a net loss. Findings of the very strong impact of market prices on financial outcomes, relative to other important technical and economic variables, can inform effective targeting of future renewable energy policy, as well as the design of future techno-economic analyses, which do not currently focus on the effect of market prices on profitability.