POLYSYS was modified to allow the biomass feedstocks (dedicated energy crops, corn stover, wheat straw, wood residue) to compete with corn grain feedstock in the production of ethanol. Because ethanol demand is such a large user of agricultural feedstocks, changes in feedstock mix will affect the market price of feedstocks and, therefore, total ethanol costs. An iterative process is used to find the annual feedstock mix where the cost of producing ethanol from corn grain is equal to the cost of producing ethanol from biomass.
Figure 8 shows the process of balancing the feedstock quantities so as to arrive at an equivalent price of ethanol from either corn grain or biomass. In the first iteration, ethanol demand is filled with corn grain. The crop module then responds with a high corn price resulting from the increased level of corn demand. At this point, the price of ethanol made from corn grain is used to figure a corresponding price for biomass that would produce ethanol at the equivalent price. The corresponding price of biomass is derived by the following equation:
The extra cost of transporting biomass feedstocks from the farm gate to the production facilities is added to all biomass bioproduct conversion costs. The transportation cost is estimated at $8.85 per ton based on 2005 transportation cost estimates provided by Dager (2005) and assumes a one way maximum distance of 50 miles. The corresponding price of biomass is compared to the current iteration's price of biomass. If the corresponding price is higher than the iteration price, then it indicates that ethanol made from corn grain is more expensive than ethanol made from biomass. In this situation, the price of biomass is increased and the next iteration takes place. The higher biomass price will result in a positive supply response in the next iteration, thereby displacing some of the corn grain demand and lowering corn grain price. The iterations continue until the corresponding price of biomass is equal to current iteration biomass price. Once this is achieved and equivalent ethanol costs of production exist, the model has determined the optimal market level of feedstock quantities. But if biomass price can continue to drop below the corresponding corn price and still fill ethanol demand, it is allowed to do so. In
CORPRCbiomass = (Pcorn / TECHcorn + CONV corn CONVbiomass) TECHbiomass corn
is the corresponding price of biomass, is the price of corn grain, is gallons of ethanol per bushel of corn grain, is the conversion cost of corn grain to ethanol per gallon, is the conversion cost of biomass to ethanol per gallon, and is the gallons of ethanol per dry ton of biomass.
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