Evaluating the Economics of Incorporating Preprocessing Facilities in the Biomass Supply Logistics with an Application in East Tennessee

Transcription

1 Evaluating the Economics of Incorporating Preprocessing Facilities in the Biomass Supply Logistics with an Application in East Tennessee A Final Report Submitted to The Southeastern Sun Grant Center Submitted by Dr. Tun-Hsiang Edward Yu Dr. James A. Larson Dr. Burton C. English Dr. Seong-Hoon Cho Department of Agricultural and Resource Economics University of Tennessee Knoxville, TN, Project Period, February 2010 March 2011 June 8, 2011 This project was funded by a grant from the Southeastern Sun Grant Center with funds provided by the United States Department of Transportation, Research and Innovative Technology Administration.

2 ABSTRACT This study evaluates the potential value of including preprocessing in the biomass feedstock supply chain for a potential commercial-scale switchgrass ethanol plant in East Tennessee. Applying a high-resolution geo-spatial industrial siting model, the total delivered cost of switchgrass handled using conventional hay methods is compared with logistic systems using two different potential preprocessing technologies: 1) stretch wrap balers and 2) pellet mills. Results indicate that feedstock densification through a stretch-wrap baling technology reduced total delivered costs of switchgrass for a large-scale biorefinery when compared with conventional hay methods. Total delivered cost of a switchgrass logistic system by adding this feedstock densification technology and harvesting using a chopper with a cutter-header can reduce costs by about 22% to 26% when compared to various conventional logistic systems using hay harvest equipment for a 15-million-gallon-per-year biorefinery. These results also apply to a refinery with 25 and 50 million gallon capacity. The savings in feedstock logistic costs contributed by this preprocessing technology could result in a reduction in ethanol production costs by $0.16/gallon to $0.19/gallon. Moreover, the Biomass Crop Assistance Program provision can potentially save about 12% to 14% of the establishment and logistics cost over a ten-year planning horizon for a biorefinery. ACKNOWLEDGEMENTS The authors would like to thank José Falconi and Wes Whitehead at TLA Bale Tech LLC for providing technical information of the stretch-wrap baler technology. We also appreciate the comments and information for the pellet mill from Dr. Samuel Jackson and Mladen Grbovic at Genera Biomass LLC. Comments offered by Professor Daniel De La Torre Ugarte at University of Tennessee were helpful in improving the modeling procedure. Research assistance of Bradly Wilson, Monica Gao, Jamey Menard, Dan Mooney and Jie Chen is also appreciated. Support for this research was provided in part by a grant from the Southeastern Sun Grant Center with funds provided by the U.S. Department of Transportation Research and Innovative Technology Administration (DTOS59-07-G-00050). [ii]

3 TABLE OF CONTENTS ABSTRACT... ii ACKNOWLEDGEMENTS... ii TABLE OF CONTENTS... iii LIST OF FIGURES... iv LIST OF TABLES... iv EXECUTIVE SUMMARY... v RESEARCH PROBLEM... 1 ANALYTICAL APPROACH... 3 METHODS AND DATA... 4 ANALYSIS RESULTS AND DISUCSSION mgy biorefinery mgy biorefineries mgy biorefineries Scenario I: Expanded industrial park base for facilities and available transportation mode Scenario II: All switchgrass feedstock is preprocessed Scenario III: Cost Savings Contributed by the BCAP Program CONCLUSIONS REFERENCES [iii]

4 LIST OF FIGURES Figure 1 Study region in East Tennessee... 6 Figure 2 Evaluated biomass feedstock logistic system... 8 Figure 3 Location of a 15-mgy switchgrass biorefinery and associated feedstock area Figure 4 Location of a 15-mgy switchgrass biorefinery, stretch-wrap balers and associated feedstock area Figure 5 Location of a 25-mgy switchgrass biorefinery and associated feedstock area Figure 6 Location of a 25-mgy switchgrass biorefinery, stretch-wrap balers, and associated feedstock area Figure 7 Location of a 50-mgy switchgrass biorefinery and feedstock draw area Figure 8 Location of a 50-mgy switchgrass biorefinery, stretch-wrap balers, and feedstock draw area Figure 9 Total delivered cost savings of the stretch-wrap baling technology with single-pass harvest over the conventional hay methods Figure 10 Expanded area of available industrial parks for preprocessing facilities Figure 11 Location of a 50-mgy switchgrass biorefinery, stretch-wrap balers, and associated feedstock area at expanded area of available industrial parks for preprocessing Figure 12 Location of a 25-mgy switchgrass biorefinery, stretch-wrap balers, and associated feedstock area when all switchgrass are preprocessed Figure 13 BCAP program s contribution to feedstock establishment and logistics costs LIST OF TABLES Table 1. Delivered Costs of Switchgrass for a 15-mgy Biorefinery Table 2. Delivered Costs of Switchgrass for a 25-mgy Biorefinery Table 3. Delivered Costs of Switchgrass for a 50-mgy Biorefinery Table 4. Delivered Cost of Two Cases under the Preprocessing Systems for a 25-mgy Biorefinery [iv]

5 EXECUTIVE SUMMARY The development of a viable biofuel industry that uses lignocellulosic biomass (LCB) feedstock has become one of the major focuses in the nation s renewable energy plan. The Renewable Fuel Standard in the Energy Independence and Security Act 2007 explicitly mandated a minimum of 16 billion gallons of cellulosic biofuels to be produced annually by However, the substantial harvest, storage, and transportation costs of bulky LCB feedstock have posted a significant challenge to the economic feasibility of a LCB biofuels industry. The Biomass Crop Assistance Program (BCAP) provision in the Food, Conservation and Energy Act of 2008 was designed to assist in the development of collection, harvest, storage, and transportation infrastructure for eligible LCB materials for use in conversion facilities. It is apparent that a costeffective supply chain of LCB feedstocks for biorefinery is crucial to developing a commercialscale cellulosic biofuels industry to meet the national goals. The objective of this study was to evaluate the costs of LCB feedstocks delivered to a potential commercial-scale biorefinery through alternative feedstock logistic systems. Specifically, the economic value of satellite preprocessing facilities in the feedstock supply chain for the biorefinery was analyzed because it is hypothesized that preprocessing facilities reduce the transportation and storage costs of LCB feedstock through densification of feedstocks and the reduction in storage dry matter losses when compared to traditional hay systems. However, the capital costs of preprocessing facilities could be significant. In addition, the impact of the BCAP payment on the total feedstock cost for various commercial-scale biorefineries was estimated. By applying a geo-spatial industrial siting model to a potential switchgrass-based biorefinery in East Tennessee, this study initially evaluated the baseline logistic system including various conventional hay logistic methods that transport feedstock from the field to the [v]

6 biorefinery without additional densification process. Based on the location of biorefinery determined in the baseline system, the preprocessing system containing alternative densification technologies was introduced in the logistic system. The two densification storage packaging technologies evaluated in this study are: 1) stretch-wrap balers and 2) pellet mills. Impacts on feedstock costs for alternative feedstock supply chain configurations were analyzed for biorefineries with annual ethanol production capacities of 15-, 25- and 50-million gallons per year. The study results are summarized as follows: Utilizing the stretch-wrap baling system and single-pass harvest using a chopper with a cutter-header can reduce the switchgrass logistics costs by 22% to 26% over various cases under the baseline system, which could result in a decrease in ethanol production costs by $0.16/gallon to $0.19/gallon. In the stretch-wrap baling system, the total feedstock cost savings rise with the annual production capacity of the biorefinery due to the larger volume of feedstock handled within the logistics system; however, the percentage gains from using the stretch-wrap baling system over the baseline system is relative constant with increasing biorefinery capacity. The potential for pellet mills to densify and prepare switchgrass for biofuel production appears to be limited if the pelletized feedstock is solely dedicated to be used the biofuel production. The substantial capital costs with the pellet mill system dominate the potential savings in storage and transportation. The pellet mill preprocessing system may be more cost competitive when used to process multiple feedstocks or serve markets, thus spreading fixed costs over more feedstock volume. [vi]

7 BCAP payments can reduce the net present value of total feedstock costs for the biorefinery over a 10-year planning horizon by about 12% to 14%. It is an important and timely issue to continuously explore additional options in harvest, storage, preprocessing and transportation in the LCB feedstock logistic system for enhancing the profitability of the industry. Particularly, exploring the economic values of combing various pretreatment and preprocessing procedures to generate a densified feedstock with constant quality will provide useful information of a stable feedstock supply chain to this industry. [vii]

8 RESEARCH PROBLEM Over the past decade, the U.S. government and other stakeholders have actively promoted the development of a biobased fuels, power, and products industrial sector to reduce dependence on imported fossil oils, mitigate greenhouse gases emissions, and enhance revenues of agricultural producers. Currently, a primary focus of the development of the biobased industry is to produce transportation fuels from lignocellulosic biomass (LCB) feedstocks such as perennial crops, crop residues, and forest residues. It is generally believed that the advantages of using LCB feedstock over traditional crops for biofuels production include the potential for increased quantities of feedstocks for biofuels production, improved soil quality, decreased life cycle greenhouse gas emissions, reduced demand for water resources, and minimized impacts on food and fiber markets (Carolan, Joshi and Dale 2007; English et al. 2006; Tilman et al. 2009). Notwithstanding the potential advantages of biofuels production, a number of technical barriers hinder the commercialization of a LCB-based biofuels industry (Biomass Research and Development Technical Advisory Committee 2007). Among those obstacles, the high costs of harvest, storage, and transportation of LCB feedstock is one of the major challenges to the economic viability of a LCB-based biofuels industry. The bulkiness of LCB feedstocks requires sizeable storage space. For example, maintaining a one year supply of switchgrass feedstock for a 50 million gallon per year (mpg) commercial biorefinery would require a 32-foot-high stack of 4 foot 4 foot 8 foot rectangular bales covering more than 100 acres of land (Brass 2011). In addition to the substantial storage space requirements, it will be challenging to harvest and transport LCB feedstock in large volumes using existing hay technologies. Also, there is the potential for dry matter losses to occur during outdoor storage of LCB feedstock; adversely [1]

9 affecting the quantity and quality of biomass, hence, increasing feedstock costs for the biorefinery (Larson and English 2009). Due to lack of a commercialized LCB biofuels industry, the Environment Protection Agency (EPA) has revised downward the LCB biofuels mandate in the Energy Independence and Security Act in 2007 from 100 mgy to 6.5 mgy in 2010 and 250 mgy to 6.6 mgy for It is apparent that the development of a sustainable LCB feedstock supply chain is a key to the development of an economically viable LCB biofuels industry. Therefore, the objective of this study is to evaluate the costs of LCB feedstocks delivered to a commercial-scale biorefinery for alternative feedstock logistic system configurations. Specifically, the potential benefits of satellite preprocessing facilities in the feedstock supply chain are analyzed in this research. Researchers have proposed the development of satellite LCB preprocessing facilities that would be a part of the supply chain feeding into a biorefinery as a way to address storage dry matter losses, high transportation costs, and other potential logistical issues with using hay harvest and storage technologies (Carolan, Joshi, and Dale 2007). The preprocessing facility may conduct processing activities such as cleaning, separating and sorting, chopping, grinding, mixing/blending, moisture control, densification, and packaging of feedstock before it is placed into storage or transported to the biorefinery. Two research questions are analyzed in this project. First, will including a preprocessing function to densify LCB feedstock reduce delivered feedstock cost to a biorefinery? It is generally believed that preprocessing can reduce transportation and storage cost through densification of LCB feedstocks and improve storage dry matter losses when compared to the harvest systems utilizing conventional hay equipment. However, the added capital and operating costs of including a preprocessing function in the feedstock supply chain may potentially offset [2]

10 the cost savings in transportation and storage of LCB feedstock. Sokhansanj and Turhollow (2004) found that cubing of corn stover increased feedstock density and reduced transportation and storage costs; however, the delivered cost of corn stover cubes to a biorefinery was higher than for corn stover baled with conventional harvest equipment (including final grinding costs) because of the increased capital equipment and operation costs of cubing. Second, will adding a preprocessing function in the feedstock logistic system create more cost savings for a larger biorefinery than a smaller biorefinery? The larger amount of feedstock required for a bigger biorefinery may enhance the benefits of a preprocessing function in the supply chain and generate more cost savings over the conventional hay system when compared to a smaller biorefinery with a smaller annual feedstock requirement. ANALYTICAL APPROACH To address the two aforementioned research questions, this project extends the analysis by Larson et al. (2010b) to evaluate alternative LCB feedstock supply chain configurations for a potential commercial-scale biorefinery in East Tennessee. Alternative feedstock supply chain configurations are modeled using a high-resolution geo-spatial industrial siting model. The annual quantity of LCB feedstock demanded is determined by the size of biorefinery in the model. Planted area for feedstock is based on the annual feedstock requirement by the biorefinery. Two potential logistic systems with and without a preprocessing function for the production of switchgrass were modeled in the analysis. The first system uses conventional hay equipment for the harvest, storage, and transportation of feedstock (hereafter referred to as baseline system). The baseline system was initially developed by Wang (2009) and includes alternative conventional hay logistics options for LCB feedstock. LCB feedstock is harvested between November and February, stored, and delivered to the biorefinery throughout the year. [3]

11 The GIS model determines the optimal location of the biorefinery and the feedstock collection area, and harvest and storage schedule. Feedstock transportation is determined by minimizing the total delivered costs for a potential commercial-scale biorefinery. The second logistic system uses a preprocessing function at a satellite facility to densify feedstock after harvest, prepare the feedstock for storage, store the feedstock on-site, and deliver the feedstock throughout the year (hereafter referred to as preprocessing system). For this analysis, the optimal locations of the satellite preprocessing facilities are determined by minimizing total delivered costs assuming that the optimal biorefinery site determined in the baseline is the location of the biorefinery. This serves as the starting point for the optimization. The GIS model determines the feedstock collection area and the schedule of harvest and storage. The potential value of preprocessing in a feedstock supply chain is determined by comparing feedstock delivered costs in the preprocessing system with the baseline system. If total feedstock cost for the preprocessing system is lower than the baseline, it suggests that preprocessing can potentially enhance the profit of the commercial-scale biorefinery. However, if the preprocessing system does not produce lower feedstock costs, then the potential benefit of additional feedstock densification process is limited. Also, total feedstock cost for different size commercial-scale biorefineries is estimated and compared to see if the cost savings increase along with the size of biorefinery. METHODS AND DATA The analytical engine of this study is a high-resolution geo-spatial industrial siting model, the Biofuels Facility Location Analysis Modeling Endeavor (BioFLAME), developed by the Department of Agricultural and Resource Economics, The University of Tennessee (Wilson, 2009). BioFLAME was initially designed to assess potential LCB feedstock production in a [4]

12 region and identify optimal locations for biorefinery that minimize costs (feedstock procurement and transportation) while satisfying industrial requirements accommodating detailed road networks, industrial parks, transmission lines, and other geo-spatial layers. The model uses remote sensing data to analyze feedstock availability at the sub-county level. Also, the street level network analysis is applied to estimate transportation costs of LCB feedstock from the field to facility. The hauling distance from the field to the biorefinery is calculated as the distance between center point of the pixel in which feedstock is produced and the center point of the pixel where the biorefinery is located. A hierarchy, (1) primary/major roads, (2) secondary roads, (3) local and rural roads, and (4) other roads, based on the speed limits of each type of roads is used when generating the routes between points to locate the most accessible routes. In this study, BioFLAME is modified to include evaluation of preprocessing function in the feedstock supply chain by adding information about capital and operation costs of alternative preprocessing technologies for feedstock densification. The transportation cost of raw feedstock between the field and preprocessing facilities and that of densified feedstock between preprocessing facilities and the biorefinery are also incorporated. Thus, the total delivered costs of the baseline and preprocessing systems can be compared. An alternative transport mode using railroad networks is also added in the model. In this study, the potential locations of biorefinery and preprocessing facilities are assumed to be in 164 candidate industrial parks in East Tennessee with access to transportation infrastructure (see Figure 1). It is also assumed that the driving distance from the field to the biorefinery is limited to no more than 50 miles, while the maximum distance between the field and preprocessing facilities is 35 miles. [5]

13 Figure 1 Study region in East Tennessee Switchgrass is considered as a strong potential energy crop for biofuel production in the U.S. given that it is a native perennial grass. In addition, it has high biomass yields and has reliable productivity on poor soils, lower demand for fertilizer than field crops such as corn, higher water use efficiency than other crops, and high tolerance of a wide range of environmental conditions (McLaughlin and Kszos 2005; Wright 2007). It is particularly ideal for establishment on marginal soils where pasture and cropland is common in the semi-humid and humid environments of the Southeastern region of United States. As a result, switchgrass is selected in this study. There are a total of 13 counties included in the study area given their geographical connection with the pilot-scale cellulosic ethanol plant currently operating in Monroe County, Tennessee. Those counties are divided into five square-mile hexagons based on remote sensing [6]

14 data. Federal lands in the region are excluded from the analysis. To determine the potential area for switchgrass, the breakeven price of switchgrass is generated to compare with the revenue of current activities associated with traditional crops, mainly hay, corn, soybeans and wheat, in each hexagon. Given that the revenue from hay production is usually lower than other field crops and hay is required for cow-calf production, it is assumed that conversion of hay area to switchgrass production cannot exceed 50% of the available area in hay production. In addition, the yield of switchgrass in each hexagon is adjusted in line with associated soil types. Figure 2 illustrates the two feedstock logistic systems (the baseline and the preprocessing) evaluated in this study for assessing the economic values of preprocessing facilities. For both systems, three annual ethanol production capacities of biorefinery are considered in this project, including 15-mgy, 25-mgy and 50-mgy, to compare the potential differences in the economic benefits of preprocessing facilities under different biorefinery sizes. Applying a conversion rate of 76 gallons of ethanol per dry ton (Wang et al. 1999), annual demand for switchgrass is about 197,500, 329,000 and 658,000 dry tons (dt) of switchgrass, respectively, to meet the operation needs of the biorefinery. The harvest window for switchgrass is assumed between November 1 and March 1. Based on East Tennessee weather conditions, a total of 53 days would be suitable for harvest operations during the four-month period and this translates into 325 hours available for harvest (Larson et al. 2010b). The baseline system (the left half of Figure 2) uses two conventional hay baling methods, large round and large rectangular bales, to package switchgrass at harvest for storage and transportation to the biorefinery. The operations assumed in the baseline logistics of switchgrass between the field and the biorefinery are: 1) harvesting of switchgrass in the field using mowing, raking, and baling operations; 2) moving bales to edge of the field for either storage or loading [7]

15 and transport to the biorefinery; 3) storing bales; 4) loading bales for transport to the biorefinery; 5) transporting bales to the biorefinery; and 6) handling the bales at the plant. It is assume that the biorefinery can process both round and rectangular bales. The three potential conventional hay logistic systems evaluated are: 1) all large round bales, 2) all large rectangular bales, and 3) a combination of both bales types. annual tonnage required by biorefinery Field Harvest Methods Large Round Bale Large Square Bale Chopped Switchgrass Pre-storage (switchgrass) storage Pre-Processing Facility Stretch-wrap Baler Pellet Mill Storage (intermediates) Biorefinery Size: varied according to demand Figure 2 Evaluated biomass feedstock logistic system [8]

16 For the preprocessing system (the right half of Figure 2), switchgrass is chopped in the field and moved to the preprocessing facility where it is densified and packaged for storage. The operations assumed in the preprocessing logistics of switchgrass between the field and the biorefinery are: 1) harvesting of switchgrass in the field using either a multiple pass mowing, raking, and chopping operation or a single pass chopping operation using a cutter-header; 2) transporting chopped switchgrass to the preprocessing facility or biorefinery; 3) densifing and packaging of switchgrass; 4) moving packaged switchgrass to storage; 5) storing of packaged switchgrass; 6) loading packaged switchgrass for transport to the biorefinery; and 7) transporting packaged switchgrass to the biorefinery. The two preprocessing technologies considered in this analysis are: 1) a stretch-wrap baler and 2) a pellet mill. It is assumed that, in both baseline and preprocessing systems, one-third of harvested switchgrass is directly brought to biorefinery during the harvest season for ethanol production; saving potential storage or preprocessing costs, while the remaining two-thirds of switchgrass harvested is put into storage or is preprocessed and stored. Storage costs of switchgrass includes the protection materials needed for storing bales on field, and the equipment and labor used for applying those materials and stacking bales. In the baseline system, two options of top cover for bales are considered: covered by plastic tarp and uncovered. In addition, two surface protection methods for bales are evaluated: 1) well-drained ground and 2) wooden pallets. Differences in labor, equipment, and material costs for storage of round bales and rectangular bales are taken into account in this study. The total storage cost for different bale types vary based on the treatments of top cover and surface protection methods. Dry matter losses for storage periods of up to 365 days for the conventional hay systems is estimated using Mitscherlich-Baule functional [9]

17 forms and data from Larson et al. (2010a). In this study, the level of dry matter losses in the sixth month of storage is used as the proxy of the average dry matter losses over the whole year. For the preprocessing system, the storage of packaged feedstock is at the site of preprocessing facility. The stretch-wrap baling technology was originally developed in Europe for processing garbage and is introduced in the U.S. for agricultural products. The technology can create a 3,000-lb (or 1.5-dry ton; about twice the density of a conventional large round bale) condensed bale of switchgrass about the same dimensions as a conventional large round bale and the production throughput is about 45 tons per hour. The condensed bale is enclosed in a mesh net that is two to three times stronger than agricultural bale netting and multiple layers of a proprietary high tensile strength film that contracts around the bale to force out any air and seal the bale. To assure the flows of the preprocessing operation, it is assumed that the preprocessing facility consists of a building to house the stretch-wrap baler, covered storage for a two-day supply of chopped switchgrass from producer fields, and sufficient land for on-site storage of preprocessed bales. The balers are assumed to be dedicated for switchgrass densification during harvest season and are not rented for other uses in other months. The pellet mill examined in this study has an annual capacity of 100,000 dt. The preprocessing facility is dedicated to switchgrass pellets during harvest window but is used for other purposes in the off-season. The annualized capital cost, operation costs, and storage and handling cost are included. The size of switchgrass pellet is around 0.25 inches diameter with the biomass density of pounds per cube feet. The data for traditional crop prices used in the BioFLAME model was for the 2010 crop year (NASS/USDA 2011). Budgets for the equipment, materials, energy, and labor used for the establishment, annual maintenance, harvest, storage, and transportation of switchgrass were from [10]

18 budgets produced by The University of Tennessee Department of Agricultural and Resource Economics (Gerloff 2008; Mooney et al. 2009; Wang 2009; Larson et al. 2010). The yield data of switchgrass in each hexagon and the production costs of other traditional crops were obtained from the POLYSYS model (English et al. 2006). ANALYSIS To establish a least cost baseline and alternative preprocessing system, eight cases are evaluated (four for the baseline and four for the preprocessing system) to explore the potential savings from adjusting various components in the switchgrass logistic system. To establish a least cost baseline, the following four cases are examined: Case B1: One-third of switchgrass is harvested as round bales and delivered directly to biorefinery during November-February harvest season; the other two-thirds is harvested as round bales and stored using tarps and pallets at the edge of the field for use during off-season. Case B2: One-third of switchgrass is harvested as rectangular bales and delivered directly to biorefinery during November-February harvest season; the other two-thirds is harvested as rectangular bales and stored using tarps and pallets at the edge of the field for use during off-season. Case B3: One-third of switchgrass is harvested as rectangular bales and delivered directly to biorefinery during November-February harvest season; the other two-thirds is harvested as round bales and stored using tarps and pallets at the edge of the field for use during off-season. Case B4: One-third of switchgrass is harvested as rectangular bales and delivered directly to biorefinery during November-February harvest season; the other two-thirds is [11]

19 harvested as round bales and stored without tarps and pallets at the edge of the field for use during off-season. Cases B1 and B2 represent the sole large round bale system and sole large rectangular bale system, respectively. Large round bales are designed to shed water and can prevent dry matter losses more effectively than large rectangular bales when stored outdoors (Cundiff and Grisso 2008; Larson et al. 2010a). However, large rectangular bales may have harvest, handling, and storage economies over large round bales (Thorsell et al. 2004; English et al. 2008). Hence, a combination of those two methods (using rectangular bales for direct delivered of feedstock during harvest window and using round bales for stored feedstock for off-season supply) in Cases 3 and 4 may strengthen the cost advantages of both methods. The difference between Case 3 and 4 is the storage protection on the round bales. Based on the location of the biorefinery in the optimal case in the baseline system, four additional cases are considered in the preprocessing system: Case P1: One-third of switchgrass is harvested using the multiple-pass (mowing, raking and chopping) harvest operation and is delivered directly to the biorefinery during harvest season; the other two-thirds is also harvested using the multiple-pass harvest and is delivered to the stretch-wrap balers for densification and packaging with mesh and plastic wrap for storage. Case P2: One-third of switchgrass is harvested with a single-pass harvest using a chopper with a cutter-header and delivered directly to the biorefinery during harvest season; the other two-thirds is also harvested using a single-pass harvest operation and is delivered to stretch-wrap balers for densification and packaging with mesh and plastic wrap for storage. [12]

20 Case P3: One-third of switchgrass is harvested using the multiple-pass (mowing, raking and chopping) operations and is delivered directly to the biorefinery during harvest season; the other two-thirds is also harvested using the multiple-pass harvest operation and is delivered to the pellet mills for densification and storage. Case P4: One-third of switchgrass is harvested with a single-pass operation using a cutter-header and delivered directly to the biorefinery during harvest season; the other two-thirds is also harvested using a single-pass harvest operation and is delivered to pellet mills for densification and storage. The first two cases in the preprocessing system utilize the stretch-wrap baling technology, while the other two cases examine the costs of pellet mill for switchgrass densification. In addition, sensitivity analyses based on different assumptions about the industrial park base and transportation mode (truck versus rail) were also evaluated. Furthermore, potential costs savings produced by the Biomass Crop Assistance Program (BCAP) program to the logistic system by the capacity of biorefinery is also illustrated. RESULTS AND DISUCSSION The results for the baseline and preprocessing systems by annual capacity of biorefinery are presented in this section. Three sensitivity analyses, including expanded industrial park base for preprocessing facilities, feedstock delivery arrangement, and impact of BCAP provision, were also conducted and discussed. 15-mgy biorefinery The delivered costs of switchgrass for the baseline and preprocessing systems for a biorefinery with an annual capacity of 15 mgy are summarized in Table 1. For the four potential baseline cases, the total annual cost for 197,368 dt of switchgrass delivered to a biorefinery ranges from [13]

21 $10.8 to $11.5 million. The mixed-bale system, rectangular bales delivered to the biorefinery during harvest and round bales stored using tarps and pallets and delivered to the biorefinery during the off-harvest (Case B3), is the most cost efficient logistics system. The logistic cost of the Case B3 is about $58/dt ($0.72/ gallon) for the 15-mgy biorefinery. By comparison, the cost differences among the four baseline cases on a dry ton basis were less than $3/dt. The map of the biorefinery location and the feedstock draw area for the optimal mixedbale case (Case B3) is presented in Figure 3. The location of the biorefinery is northwest Monroe County near the current location of the pilot-scale LCB ethanol plant operated jointly by DuPont Danisco LLC and Genera Energy LLC in the city of Vonore. The potential draw area for onethird of the annual feedstock requirement is within 12 miles of the biorefinery (green area in Figure 3), while the longest distance for securing the other two-thirds of the annual feedstock requirement is about 30 miles from the biorefinery (blue area in Figure 3). Switchgrass is primary established in Monroe County and two adjacent counties, Loudon and McMinn, to the northwest. The color index in the map indicates the amount of switchgrass produced in the hayland and cropland area in each hexagon (tons per hexagon). Nearly all of the projected feedstock draw area converted to switchgrass production is currently in hay production (i.e., 99%). The production of hay had the lowest opportunity cost relative to the other cropping alternatives in the potential feedstock draw area and thus was the first land area converted to switchgrass production in the model. [14]

22 Table 1. Delivered Costs of Switchgrass for a 15-mgy Biorefinery Baseline Case B1-15 Case B2-15 Case B3-15 Case B4-15 Round baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Rectangular baler - tarp.pallet Rectangular baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Round baler - no protection Total delivered cost $11,225,004 $11,453,408 $10,847,217 $11,054,539 Production, harvest and storage cost $9,110,218 $9,735,062 $8,853,780 $9,052,913 Transportation cost: field to biorefinery $2,114,786 $1,718,346 $1,993,437 $2,001,626 Total delivered cost ($/dt) $60 $61 $58 $59 Preprocessing Case P1-15 Case P2-15 Case P3-15 Case P4-15 Multiple-pass harvest - no preprocessing Multiple-pass harvest - stretch-wrap baler Single-pass harvest - no preprocessing Single-pass harvest - stretch-wrap baler Multiple-pass harvest - no preprocessing Multiple-pass harvest - pellet mill Single-pass harvest - no preprocessing Single-pass harvest - pellet mill Total delivered cost $9,512,494 $8,495,796 $18,657,958 $17,590,559 Production and harvest cost $5,457,200 $4,440,503 $5,731,493 $4,664,095 Preprocessing and storage cost $2,518,750 $2,518,750 $11,875,127 $11,875,127 Transportation cost $1,536,543 $1,536,543 $1,051,337 $1,051,337 Field to biorefinery & preprocessing $1,031,845 $1,031,845 $838,660 $838,660 Preprocessing facilities to biorefinery $504,699 $504,699 $212,677 $212,677 Total delivered cost ($/dt) $51 $45 $95 $89 [15]

23 Figure 3 Location of a 15-mgy switchgrass biorefinery and associated feedstock area For the preprocessing system, the use of the stretch-wrap baler technology to further densify feedstock relative to conventional bale technology and to package it for airtight storage to prevent dry matter losses resulted in substantial cost savings relative to the optimal baseline system. The total feedstock costs for 198,000 dt of switchgrass for the biorefinery is $8.9 million and $9.9 million ($48/dt to $53/dt), respectively, under the single-pass (chopping using a cutter header) and multiple-pass (mow-rake-chop) harvests. Thus, the single-pass harvest is projected to save about $5/dt over the multiple-pass harvest. In addition, the optimal stretch-wrap bale case in the preprocessing system (Case P2) outperforms the optimal mixed-bale baseline system (Case B3) in terms of production and harvest costs. The total transportation cost including shipment of chopped switchgrass from field to biorefinery and to preprocessing facilities, and shipment of preprocessed switchgrass between satellite facilities and biorefinery, is also lower than the transportation cost in the mixed-bale baseline (Case B3). Utilizing the single-pass harvest and [16]

24 stretch-wrap baler in the switchgrass logistic system for a 15-mgy biorefinery could save about $2.4 million over the optimal mixed-bale baseline system. This saving could lower ethanol production cost by $0.16 per gallon. By comparison, densification of feedstock using a pellet mill at a preprocessing facility is substantially more costly than conventional hay methods. The very large capital cost associated with pellet mills and operating costs, including energy, labor and maintenance, far outweigh the potential cost savings in storage and transportation. The average delivered feedstock cost for the optimal pellet mill preprocessing system ($89/dt for Case P4 in Table 1) is about double the cost for the optimal stretch baler preprocessing system ($45/dt for Case P1 in Table 1). Thus, the predicted high costs of delivered feedstock indicate limited potential for the pellet mill technology in a preprocessing system that is not used outside of the harvest window. The pellet mill preprocessing system may be more cost efficient when used to process multiple feedstocks or markets and thus spreading fixed costs over more feedstock tonnage. In other words, the use of the pellet mill would have to extend beyond the four month harvest period assume in this analysis to achieve reductions in costs with preprocessing. Figure 4 presents the location of the biorefinery, the two stretch-wrap baler units required to preprocess feedstock, and the feedstock draw areas for the biorefinery and preprocessing units. For a biorefinery with an annual capacity of 15 mgy, results indicate that the preprocessing facilities and biorefinery are located at the same hexagon to minimize transportation costs between preprocessing facilities and the biorefinery. For this analysis, the preprocessing facilities are assumed to be located two-miles from the biorefinery to generate transportation costs when those facilities are located in the same hexagon. The green hexagons are the area of switchgrass feedstock delivered directly to the biorefinery during the November-February harvest period. [17]

25 Hexagons in red and blue represent the feedstock area preprocessed using the stretch-wrap baler technology. The feedstock draw area is similar to the mixed bale baseline system and feedstock is mostly drawn from hayland converted to switchgrass production. Figure 4 Location of a 15-mgy switchgrass biorefinery, stretch-wrap balers and associated feedstock area 25-mgy biorefineries Table 2 contains the projected annual total feedstock costs for biorefineries with 25-mgy annual capacities for the baseline and preprocessing systems. Consistent with the findings for the 15- mgy refinery, the mixed-bale system using tarps and pallets to protect round bales during storage (Case B3) is the least cost baseline system using traditional hay methods. In addition, the stretchwrap baling technology with the single-pass harvest remains the most cost efficient among all evaluated cases. Annual total delivered cost for about 329,000 dt of switchgrass to the 25-mgy [18]

26 Table 2. Delivered Costs of Switchgrass for a 25-mgy Biorefinery Baseline Case B1-25 Case B2-25 Case B3-25 Case B4-25 Round baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Rectangular baler - tarp.pallet Rectangular baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Round baler - no protection Total delivered cost $20,537,093 $20,800,279 $19,854,305 $20,175,348 Production, harvest and storage cost $16,094,471 $17,121,512 $15,644,577 $15,948,756 Transportation cost: field to biorefinery $4,442,622 $3,678,767 $4,209,728 $4,226,592 Total delivered cost ($/dt) $62 $63 $60 $61 Preprocessing Case P1-25 Case P2-25 Case P3-25 Case P4-25 Multiple-pass harvest - no preprocessing Multiple-pass harvest - stretch-wrap baler Single-pass harvest - no preprocessing Single-pass harvest - stretch-wrap baler Multiple-pass harvest - no preprocessing Multiple-pass harvest - pellet mill Single-pass harvest - no preprocessing Single-pass harvest - pellet mill Total delivered cost $17,209,478 $15,383,001 $31,026,606 $29,192,668 Production and harvest cost $9,615,166 $7,802,432 $9,574,130 $7,790,798 Preprocessing and storage cost $4,418,855 $4,418,855 $19,309,189 $19,309,189 Transportation cost $3,175,457 $3,161,715 $2,143,286 $2,092,682 Field to biorefinery & preprocessing $1,727,817 $1,673,488 $1,683,794 $1,597,569 Preprocessing facilities to biorefinery $1,447,640 $1,488,227 $459,492 $495,113 Total delivered cost ($/dt) $52 $47 $94 $89 [19]

27 biorefinery from the alternative baseline systems ranges from $19.8 million and $20.8 million ($60/dt to $63/dt). Results indicate that feedstock costs for the 25-mgy biorefinery on average are about 3$/dt more than that for the 15-mgy biorefinery because of the larger draw area and the longer average transportation distances for feedstock. Modification of the feedstock supply chain to substitute preprocessing for hay baling technologies reduced total annual feedstock costs to $15.4 and $17.2 million ($47/dt and $52/dt), respectively, for the single-pass and multiple-pass harvests. Results indicate that average annual feedstock costs are higher in the multiple-pass because of higher feedstock harvesting costs, larger feedstock draw area, and increased travel distances. As with the 15-mgy biorefinery, the pellet mill technology had much higher feedstock costs ($89/dt to $94/dt) and does not appear to be a feasible feedstock logistics system when used only during the harvest period. The location of the biorefinery for the optimal mixed-bale baseline case (Case B3) is in the same hexagon as the 15-mgy biorefinery (Figure 5). As expected, the feedstock draw area expands with the capacity of the biorefinery. Monroe, Loudon and McMinn Counties are still the primary counties supplying switchgrass with nearly 98% of the switchgrass area coming from land converted from hay production given pastureland is assumed to have a the lower opportunity cost. The location of the biorefinery and feedstock draw area for the optimal case using stretch-wrap baler and single-pass harvest operation (Case P2) is displayed in Figure 6 along with the four stretch-wrap balers deployed for switchgrass densification to meet the annual demand for 25-mgy biorefinery; however, only three units will operate near full capacity given the amount of feedstock to be preprocessed. The results indicate that one stretch-wrap baler is located in the same hexagon as the biorefinery and is operated at capacity. The other [20]

28 Figure 5 Location of a 25-mgy switchgrass biorefinery and associated feedstock area Figure 6 Location of a 25-mgy switchgrass biorefinery, stretch-wrap balers, and associated feedstock area [21]

29 preprocessing facilities are placed in McMinn County (the red star in Figure 6), the border of Monroe and Loudon Counties (the gold star in Figure 6), and Loudon County (the purple star in Figure 6). The stretch wrap balers in McMinn and Monroe/Loudon counties are used at 96% of capacity for the November-February harvest period. The fourth facility in Loudon County is operated at only 61% of capacity. A substantial portion of the area currently used for hay production in those counties is converted to switchgrass production. 50-mgy biorefineries The annual costs of supplying about 658,000 dt of switchgrass to a 50-mgy biorefinery using alternative feedstock logistic systems is estimated to vary from $42.7 to $44.4 million dollars ($65/dt to $68/dt) among the four conventional hay cases in the baseline system (see Table 3). Based on the biorefinery location determined in the optimal baseline case (Case B3), substituting stretch-wrap baler technology for traditional hay bale technology is expected to reduce the annual total feedstock cost to $31.8 and $35.4 million (Cases P1 and P2), respectively, for the single-pass and multi-pass harvests. The case using stretch-wrap baler and a single-pass harvest (Case P2) is again the minimum cost case among all evaluated systems that could reduce the ethanol production cost by $0.19/gallon, whereas capital-intensive pellet mill facilities are not cost competitive with other logistic systems. As the demand for feedstock increases with the larger plant size (50 mgy), the feedstock draw area extends along Interstate I-75, the major north-south transportation corridor in the region (Figure 7). In addition, the biorefinery location shifts to the border of Monroe and McMinn Counties as more switchgrass is projected to be produced south along the I-75 corridor. The feedstock draw area does not expand eastward when compared to the 15 mgy biorefinery draw area because of national forest and national park land (see Figure 1). As with the smaller [22]

30 Table 3. Delivered Costs of Switchgrass for a 50-mgy Biorefinery Baseline Case B1-50 Case B2-50 Case B3-50 Case B4-50 Round baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Rectangular baler - tarp.pallet Rectangular baler - no protection Round baler - tarp.pallet Rectangular baler - no protection Round baler - no protection Total delivered cost $44,206,229 $44,425,663 $42,757,591 $43,726,419 Production, harvest and storage cost $32,077,341 $34,277,861 $31,173,986 $31,970,927 Transportation cost: field to biorefinery $12,128,888 $10,147,802 $11,583,605 $11,755,492 Total delivered cost ($/dt) $67 $68 $65 $66 Preprocessing Case P1-50 Case P2-50 Case P3-50 Case P4-50 Multiple-pass harvest - no preprocessing Multiple-pass harvest - stretch-wrap baler Single-pass harvest - no preprocessing Single-pass harvest - stretch-wrap baler Multiple-pass harvest - no preprocessing Multiple-pass harvest - pellet mill Single-pass harvest - no preprocessing Single-pass harvest - pellet mill Total delivered cost $36,924,192 $33,383,955 $63,850,963 $60,282,057 Production and harvest cost $19,204,351 $15,684,212 $19,173,161 $15,600,375 Preprocessing and storage cost $8,837,770 $8,837,770 $38,618,378 $38,618,378 Transportation cost $8,882,071 $8,861,973 $6,063,304 $6,063,304 Field to biorefinery & preprocessing $4,039,331 $4,316,036 $3,965,725 $3,781,097 Preprocessing facilities to biorefinery $4,842,740 $4,545,937 $2,093,698 $2,282,207 Total delivered cost ($/dt) $56 $51 $97 $92 [23]

31 biorefinery plant sizes, most of the area converted to switchgrass is currently used for hay production. This analysis indicates that switchgrass feedstock for a 50-mgy biorefinery can be achieved within 50 miles of the optimal location of biorefinery in East Tennessee if up to 50% of the hay land can be converted for the biofuels feedstock production. Figure 7 Location of a 50-mgy switchgrass biorefinery and feedstock draw area Figure 8 shows the locations of the biorefinery and the stretch-wrap balers and outlines the feedstock draw area in the optimal case for a 50-mgy biorefinery. A total of seven stretchwrap balers are needed to process switchgrass for the biorefinery. As with the 25-mgy biorefinery scenario, one preprocessing baler is located in the same hexagon as the biorefinery. The other six units are in Blount, Bradley, Knox, Loudon, McMinn and Rhea Counties. The maximum distance between the preprocessing centers and the biorefinery is less than 40 miles. All seven preprocessing units are predicted to operate at close to capacity for the November- [24]

32 February harvest period. The draw area of switchgrass for those preprocessing facilities in each county is primarily converted from hayland. Figure 8 Location of a 50-mgy switchgrass biorefinery, stretch-wrap balers, and feedstock draw area Figure 9 summarize the projected savings in feedstock acquisition costs from the use of preprocessing for the 15-, 25-, and 50-mgy biorefinery sizes. Annual total feedstock costs are projected to be reduced by 22% to 26% over the baseline for a 15-mgy biorefinery. The percentage savings in annual feedstock costs is similar for the 25- and 50-mgy biorefinery sizes. However, the dollar savings between the optimal case in the baseline (mixed bale system using tarps and pallets to protect round bales during storage) and the optimal preprocessing case (single-pass harvest with a chopper and preprocess using a stretch-wrap baler) increase from about $2.4 million per year for the 15-mgy biorefinery to more than $9 million annually for the [25]

33 50-mgy biorefinery (see Tables 1 3). The saving in the logistic costs could result in a reduction in costs of ethanol production by $0.16/gallon to $0.19/gallon. 30% Case B1 Case B2 Case B3 Case B4 25% 20% 15% 10% 5% 0% 15-mgy 25-mgy 50-mgy Figure 9 Total delivered cost savings of the stretch-wrap baling technology with single-pass harvest over the conventional hay methods Scenario I: Expanded industrial park base for facilities and available transportation mode In previous analyses, the location of the biorefinery and the preprocessing facilities was constrained to industrial parks in the 13-county study region of East Tennessee (Figure 1). However, land for switchgrass production was not constrained to the 13-county region and potentially included land in other regions of Tennessee and surrounding states. Thus, sensitivity analysis was used to evaluate the potential of preprocessing facilities being located in more distant areas that are more suitable for switchgrass production and deliver densified feedstock to biorefinery by rail than truck. The scenario is used to evaluate the potential use of a more economical transportation mode to move densified switchgrass feedstock over longer distances. Thus, the potential area for preprocessing facilities is extended to 34 counties in East Tennessee [26]