Economic Feasibility of Sugar Beet Biofuel Production in

Economic Feasibility of Sugar Beet Biofuel Production in North Dakota Thein Maung and Cole Gustafson North Dakota State University The Economics of Alternative Energy Resources and Globalization: The Road Ahead November 15 -17, 2009, Orlando, FL 1

Non-Food Sugarbeet Feedstock to Advanced Biofuels NDSU Green Vision Group “Architects For Rural Development” Heartland Renewable Energy (HRE) “Sugar Is The New Oil” 2

Project Goal § Develop sugar beet to biofuel industry across North Dakota with five irrigated production regions. § First biofuel non-food sugar beet processing plant to be built in 2012. § Provide local economic opportunity

Introduction § Energy Independence and Security Act (EISA) of 2007 defines three classes of biofuels: • Conventional biofuel – 20% GHG reduction • Advanced biofuel – 50% GHG reduction (Highlands Enviro. Fuels LLC conducted LCA of GHG emissions) • Cellulosic – 60% GHG reduction

Introduction § Sugar beets and sugarcane are uniquely qualified as advanced biofuels under EISA. § By 2022, about 15 billion gallons per year of advanced biofuels will be required

Introduction § North Dakota has great potential to expand irrigated sugar beet production, minimizing land competition with existing sugar beet food crops. § Because of their high sugar content, sugar beets can yield higher ethanol production per acre. § Growing sugar beet feedstock can reduce nitrogen requirements, water use and reduces CO₂ emissions

Literature § USDA (2006) o Examined the feasibility of ethanol production from sugar in the U. S. § Outlaw et al. (2007) o Analyzed the feasibility of integrating ethanol production into existing sugar mill that uses sugarcane juice § Yoder et al. (2009) o Investigated the potential development of an ethanol industry in Washington State using sugar beets

Technology Overview § The plant makes most of it’s own energy. § Stillage waste from fermentation process is spray-dried and burned to produce thermal and electrical energy supplying about 75% of the plant’s energy needs. § Patent has been successfully lab tested by HRE and now needs commercial scale test.

Spent Yeast Sugar Beets Dryer Slicing/Grinding Pressing/Juice Extraction Mola sses Recovered Yeast Wet Pulp Cooking and Sterilization Distillation Dehydration Denaturing Fuel Ethanol Storage Stillage Dryer Syrup Beet Pulp/Feed Stea m Fermentation Evapo ration Dryer Dried Powde r Boile r Ash/Fertilizer

Methodology § Divided into four sections: 1. Production assumptions 2. Balance sheet 3. Income statement 4. Cash flow financial statement

Production Assumptions Conversion Rate for Whole Beets (gal/ton) Conversion Rate for Beet Molasses (gal/ton) Sugar Beets Requirement (tons/yr) Beet Molasses Requirement (tons/yr) Electricity Requirement (Million k. Wh/yr) Thermal Energy Requirement Stillage Powder (Million BTU/yr) Natural Gas (Million BTU/yr) Base Prices for Beet Molasses ($/ton) Whole Beets ($/ton) Ethanol ($/gal) Electricity ($/k. Wh) Natural Gas ($/Million BTU) Co-products Yeast ($/ton) Fertilizer ($/ton) Beet Pulp ($/ton) Engineering and Construction Cost Development and Start-up Cost Total Capital Cost 20 MGY Plant 26. 50 77. 89 503, 144. 65 73, 363. 53 1. 10 450, 000. 00 150, 000. 00 $ $ $ 120. 00 42. 00 1. 71 0. 05 7. 35 $ $ $ 500. 00 79. 40 73. 18 32, 665, 280. 00 9, 955, 000. 00 42, 620, 280. 00

Results from Income Statement % of Total Revenue Cost $/Year $/Gallon 31, 330, 225 6, 324, 883 951, 529 1, 740, 056 1, 818, 182 42, 164, 875 1. 64 0. 33 0. 05 0. 09 0. 10 2. 21 27, 627, 970 4, 256, 393 1. 45 0. 22 81. 01% 12. 29% 2, 222, 588 34, 106, 951 0. 12 1. 79 6. 70% 100. 00% Interest, Income Tax, Depreciation and Amortization 2, 390, 895 0. 13 Net Profit 5, 667, 029 0. 30 Sale Revenue Ethanol Yeast Fertilizer Feed Producer Tax Credit Total Sale Revenue Production Costs Feedstock Costs Other Input Costs Administrative and Operating Costs Total Production Costs 74. 21% 14. 93% 2. 26% 4. 07% 4. 52% 100. 00%

Data and Distribution Assumptions Variable Mean Standard Deviation Distribution 156. 67 33. 25 Triangular 49. 00 9. 51 Triangular Prices for Beet Molasses ($/ton) Whole Beets ($/ton) Ethanol ($/gal) 1. 48 0. 49 Inverse Gauss Electricity ($/k. Wh) 0. 04 0. 01 Exponential Natural Gas ($/Million BTU) 6. 13 2. 04 Normal 516. 67 92. 04 Triangular Fertilizer ($/ton) 99. 80 37. 44 Triangular Beet Pulp ($/ton) 87. 73 15. 19 Triangular Co-products Yeast ($/ton)

Simulation Results

Simulation Results

Simulation Results 1. 5 0. 005 0. 004 0. 002 0. 001 0. 003 0. 002 0. 001 30 0. 003 0 0. 005 0. 004 750 700 650 600 550 500 450 400 30 Feed ($/ton) 130 -0. 001 120 200 180 Fertilizer ($/ton) 160 140 120 100 80 60 40 20 0 -0. 001 0 110 0 0. 001 100 30 0. 001 0. 002 90 0. 002 0. 003 80 0. 003 60 NPV (in Millions) 0. 005 Yeast ($/ton) 73. 2 0. 006 70 79. 4 0. 006 350 300 6. 0 5. 5 Ethanol Price ($/gal) 5. 0 4. 5 4. 0 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 -0. 001 0. 5 -0. 001 NPV (in Millions) 500. 006 NPV (in Millions) 0. 006

Simulation Results 50. 5 0. 005 0. 004 0 Beet Molasses ($/ton) 0. 05 0. 006 250 100 Sugar Beets ($/ton) 220 -0. 001 75 70 65 60 55 50 45 40 35 0 0 -0. 001 30 0. 001 190 0. 001 0. 002 160 0. 002 0. 003 130 0. 003 0 7. 35 0. 006 0. 005 0. 004 Electricity Price ($/k. Wh) 30 Natural Gas Price ($/MMBtu) 16 14 12 -0. 001 10 0. 09 0. 08 0. 07 0. 06 0. 05 0. 04 -0. 001 0 8 0 0. 001 6 30 0. 001 0. 002 4 0. 002 0. 003 0 NPV (in Millions) 0. 005 0. 04 NPV (in Millions) 180. 006 NPV (in Millions) 0. 006

Summary and Conclusions § One of the most important factors that affect the profitability of the investment is the price of ethanol. § Changes in prices of co-products have a relatively minor affect on the profitability of investment § The ethanol plant can tolerate the feedstock price increase to a certain level without having a critical impact on profits. 18

Additional Research and Study Needs § Commercial scale burn test of fermentation sediment material to be used for plant energy § Optimal design of feedstock supply chain § Environment lifecycle of the biofuel produced § Impacts on rural employment 19