U.S. ethanol demand has been steadily increasing following passage of Renewable Fuel Standard (RFS) and the Energy Independence and Security Act of 2007 (EISA). Most domestic ethanol production utilizes corn grain as feedstock. As production continues to rise, industry demand for corn has increased substantially resulting in higher corn prices. Rising corn prices are encouraging current and potential ethanol producers to seek alternative feedstocks, especially cellulosic sources. EISA defines three classes of biofuels, conventional, advanced, and cellulosic.  These classes are differentiated based on potential reduction of greenhouse gas (GHG) emissions of 20, 50, and 60 percent respectively. 

Advanced biofuels have received scant attention, primarily because feedstock supplies are narrow.  Two crops that uniquely qualify as “advanced biofuels” under EISA are sugar beets and sugar cane.  Advanced biofuel production of 15 billion gallons per year will be required by 2022, creating a niche market opportunity.  In 2008, North Dakota and Minnesota account for about 55 percent of total sugar beet production in the nation.

Several studies have assessed the economic feasibility of producing sugar-based ethanol. Outlaw et al. (2007) analyzed the feasibility of integrating ethanol production into the existing sugar cane mill that uses sugarcane juice as the feedstock for ethanol production. They based their work on an annual Monte Carlo simulation financial model. The model was simulated for 10 years for a 40 MGY (million gallons per year) ethanol plant. They found that existing sugar mills could be retrofitted to produce ethanol and could almost always generate positive annual returns. An overall net present value (NPV) was found to be positive in their study.

 USDA (2006) assessed the feasibility of ethanol production from sugar in the U.S.  The study made use of a variety of published data to estimate the cost of producing ethanol from sugarcane, molasses and sugar beet. The study found that it is economically feasible to make ethanol from molasses and that producing ethanol from sugar beets and sugarcane can become profitable only with spot market prices for ethanol close to $4 per gallon.

Yoder et al. (2009) investigated the potential development of an ethanol industry in Washington State utilizing sugar beets as a feedstock. Their model was based on a 20 MGY plant utilizing not only sugar beets, but beet pulp in a hydrolysis process to produce ethanol. Results from their study did not offer positive prospects for the development of a sugar-beet ethanol industry in Washington State primarily due to the high costs of sugar beet production and high costs of transportation to a sugar beet processing plant. They pointed out that Washington State simply does not have a comparative advantage in producing fuel ethanol using sugar beets.

Maung and Gustafson (2010) recently examined the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota.  They created stochastic simulation financial model of a sugar beet biofuel processing plant and calibrated it with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results find that the estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.81 per gallon for the 10MGY plant.

References:

Maung, T. and C. Gustafson. 2010 “The Economic Feasibility of Energy Sugar Beet Biofuel Production in Central North Dakota” Staff Paper, Dept. of Agribusiness and Applied Economics, North Dakota State University, Fargo, forthcoming.

Outlaw, J. L., L. A. Ribera, J. W. Richardson, J. Silva, H. Bryant, and L. K. Steven. 2007. “Economics of Sugar-Based Ethanol Production and Related Policy Issues.” Journal of Agricultural and Applied Economics. 39:357-63.

U.S. Department of Agriculture (USDA). 2006. “The Economic Feasibility of Ethanol Production from Sugar in the United States.” Available at:  http://www.usda.gov/oce/reports/ energy/EthanolSugarFeasibilityReport3.pdf.

Yoder, J., D. Young, K. Painter, J. Chen, J. Davenport, and S. Galinato. 2009. “Potential for a Sugar Beet Ethanol Industry in Washington State.” Available at:  http://agr.wa.gov/ AboutWSDA/ Docs/Ethanol%20from%20WA%20Sugar%20Beets%20WSU%20Study % 20March2009.pdf.

Author:

Cole Gustafson, North Dakota State University