(573c) Economic and Environmental Assessment of Wheat-to-Ethanol Supply Chain in the UK

Renewable energy, especially biofuels, is seen as a viable replacement for depleting fossil fuels with many country strategies adopted retrospectively. Along with the advances in the first, second and third generation biofuel production, economic and environmental performances of respective supply chains, including type of supply chains and distribution networks, are apparent. Driven by exemplary cases from Brazil and USA which account for nearly 80% of global biofuels production ^[1], UK has proposed a string of policies encouraging biofuel production. As a result, two feed wheat-to-ethanol plants are already in operation with several others under construction or in the process of planning. Other than bioethanol, these plants will are also planned to fill in gaps in production of dried distilled grains (DDGS) for animals.

In this paper, we analyse the UK bioethanol production policy using supply chain network model proposed by Yu et al., 2012, which include economic and environmental factors along the entire supply chain, from suppliers to customers. Economic gains are balanced against taxation and subsidies. Distributed supply chain model is proposed with Geographic Information System (GIS) data used to identify biomass supply and biofuel demand locations based on the respective agricultural and population densities. Geographical grid is coupled with candidate point approach for feedstock and fuel storages and plant locations, as well as respective capacities along with the technologies. Green House Gas (GHG) effects are analysed by calculating carbon-equivalents and concomitant costs and financial incentives. The proposed supply chain model also accounts for transportation availability and modes, seasonality and biomass decomposition rates. It is then solved as mixed integer problem (MIP).

The biofuel supply chain model was then verified using the two existing feed wheat-to-ethanol plants operating in the UK, i.e. Vivergo plant and Ensus plant. Encouraged by the results, further analysis was conducted for the Vireol plant which is under construction. The results show that for the cost of the feed wheat in UK of £150 to £200 per tonne, there is no profit generated for all three considered bioethanol plants. The profit variation for Ensus plant is more sensitive to the feed wheat cost fluctuations than Vivergo and Vireol plants. By considering the energy density of bioethanol, the production cost of the Vivergo plant is the highest among all three plants. Because of a strong correlation between the UK petrol price and the WTI crude oil price and with current WTI crude oil price of $95 to $100 per barrel, the cost price of the produced bioethanol has to be at least £0.40 to £0.50 per litre to successfully compete with fossil fuel production. This is unlikely without the subsidies from the government.

In conclusion, the usage of feed wheat-to-ethanol plant in UK is still at its pre-mature stage. The production cost of these plants are still not competitive enough with the fossil fuel, taking into account the energy density and without government subsidies. At the same time, the profit from these plants is also affected greatly by the feed wheat cost price in UK. However, as the supply chain and the technology mature, the gap between fossil fuel and biofuel costs can be narrowed.

References

[1] World Energy Council., 2010. Biofuels: Policies, Standards and Technologies, pg. 8