Economic analysis of biofuel production from Switchgrass (Panicum virgatum) and Sweet Sorghum (Sorghum bicolor) in the United States

Abstract

Excessive use of fossil fuels to meet everyday energy demands has led to adverse environmental impacts like global warming and high dependence on foreign oil. Development of cellulosic feedstocks provides energy security and also reduces the burden on food crops like corn and sugarcane used for ethanol production. This thesis uses cost-benefit analysis to ascertain the profitability of producing cellulosic ethanol from Switchgrass and Sweet Sorghum Bagasse. First, breakeven price of producing Switchgrass and Sweet Sorghum is calculated to obtain a raw material (feedstock) cost for ethanol production. Next, net present value (NPV) and minimum ethanol selling price (MESP) for Switchgrass and Sweet sorghum are calculated. Lastly, risk analysis is performed and its impacts on NPV are calculated for two farmer categories. The results show that ethanol production from Switchgrass and Sweet Sorghum is commercially feasible and generates a Net Present Value (NPV) of $39.54 million for Switchgrass and $96.76 million for Sweet Sorghum at an ethanol selling price of $2.17 per gallon. At NPV zero the MESP for Switchgrass and Sweet Sorghum is estimated to be $2.10 and $1.96 per gallon respectively. The risk analysis results revealed that there is a 9.5 percent probability that the NPV for a risk-averse Switchgrass farmer will be less than zero. On the other hand, the probability of the NPV being less than zero is 67.4 percent. The overall analysis indicates that ethanol production from Switchgrass and Sweet Sorghum is a promising option. Reduction in feedstock prices, optimization of the conversion process and additional revenues from by-products can make cellulosic ethanol more competitive with current gasoline prices.