DryGrind Ethanol Production: Economic Sensitivity

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Dry-Grind Ethanol Production Economic Sensitivity

• Douglas G. Tiffany
• Research Fellow
• University of Minnesota

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Todays Discussion

• Work arose from Factors Associated with Success
  of Fuel Ethanol Producers written w/ Vernon
  Eidman
• Funding USDA Rural Development
• MN Ag. Experiment Station
• 1) Briefly establish key factors in dry-grind
  ethanol production
• 2) Demonstrate economic sensitivity of this
  technology in this market

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Dry-Grind Technology

• Dry-Grind Plants-- now 67 of U.S.
  production--simpler process, lower capital costs,
  but refinements are occurring.
• Ethanol from corn has a positive energy balance.
  (1.34 1.51)
• USDA, Argonne Lab,
• Michigan State University, Ag. Canada

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Ethanol Dry-Grind

• Grind bushel of corn (56 lb.), add water, make
  mash, cook to kill bacteria, expose starch
• Add enzymes for flow to convert starch to sugar
• Introduce Yeasts in Batch Fermenters---- produce
  beer---- distill the ethanol
• Products
• ethanol (2.75 gal.) requires heat to distill
• DDGS- (18 lbs.) generally requires drying
• CO2-- ( 18 lbs. ) food grade
• 150 bushel corn yields 413 gallons of ethanol per
  acre, 2700 pounds of DDGS

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Project Goals Methods

• Goal Describe and Quantify Factors of Success
  in Dry-Grind Ethanol Production
• Steps in Research
• Conduct Interviews of Plant Personnel
  Bankersto Learn Factor Inputs, etc.
• Develop Spreadsheets to Measure Plant Profits
• Interpret Results
• Advise Farmers/Investors, Bankers Policymakers

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Dry Grind Revenue Categories (5 yr.)

• Ethanol Sales 80
• DDGS Sales 19
• CO2 1
• MN Subsidy -0-
• Total 100

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Five Key Factors Baseline Levels

• Corn Price---- 2.20 per bushel
• Ethanol Price---- 1.15 per gallon
• Nat. Gas Price----4.50 per dekatherm
• Ethanol Yield---- 2.75 gal.(anhyd)/bushel
• Capacity Factor of Nameplate----1.20

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Model Predicts Addl. Value of Higher Total
Fermentables in Corn

• Increase Total Fermentables by 4
• Equals 909,450 for typical dry-grind plant
• or .067 per bushel ground.
• Increase Total Fermentables by 6
• Equals 1,338,436 for typical dry-grind plant or
  .086 per bushel ground.

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Factors of Lesser Importance Their Baseline
Conditions

• Capital Costs ----------1.50/gallon denatured
• Percentage of Debt----60 of Cap. Cost
• Interest Rate------------7.0
• DDGS Price------------80.00 per Ton
• Electrical Price---------.06 per kWh
• Fed., State, or Local Subs/Incent.----0-

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Conclusions Sensitivities

• Favorable economics with low corn prices, high
  gasoline prices, low natural gas prices, low
  interest rates.
• Corn Price--- Zero profits above 2.43 per bu.
• Ethanol Price--- _at_1.15--- profits of .15/ bu.,
• _at_1.35--- profits of
  .56/ bu.
• Natural Gas Price rise to (6.85) from baseline
  levels of 4.50/ dekatherm wipes-out profits.
• Ethanol Yield per Bushel very important
• 2.75 gal./bu (typical today)
• 2.36 gal./bu--- wipes out profits

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Plant Manager Observations--Technical

• Improved Enzymes and Yeast in last two years
• Tolerance to Alcohol (13.5-now 19.7),
• Tolerance to Higher Temps (can tolerate 100
  degrees F. for 2-3 hours and still recover)
• Faster fermentation times - 45-50 hours possible
• 60-40 split in Yeast Propagation Strategies
• - 60 continuous yeast propagators
• - many batches in same tank antibiotics used
• - 40 batch yeast, make fresh batches from
  purchased yeast
• Expect to process most of fiber in corn kernel
  with improved cellulases in the future

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Research Topics Derive More Revenue or Cut Costs
of Stillage

• DDGS
• Improvement in DDGS Attributes
• Efforts to Brand and Standardize DDGS
• Educate Users, Develop Markets
• Development of Yeast Extract Products to Reduce
  Antibiotic Use in Livestock
• Utilization of Liquid Stillage or Syrup
• Utilization of DDGS as Biomass Fuel
• Better Storage, Utilization of Wet DDGS

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Technology Changes Pending

• Quick-Germ Technology uses more enzymes, depends
  on favorable sale of corn oil (Univ. of
  Illinois)
• Quick-Fiber Technologyoffers opportunity for
  greater through-put, but altered DDGS product
  characteristics ( Univ. of Illinois)
• Continuous vs. Batch Fermentation with stripping
  of ethanol--- USDA, ARS
• Pervaporationuse of membranes to filter ethanol
  from broth (USDA, ARS)

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Conclusions Dry-Mill Production

• Found Sensitivity of Dry Mill Ethanol Production
  to Various Factors Historical Volatility of
  Returns
• High Volume, often low margin business however,
  some times of excellent returns have been modeled
  and also reported
• Processing business demanding superior management
  of sensitive microbes, quality control
• Major efforts to conserve energy in operations
• Expect this technology to evolve and improve
  further until major improvements in
  ligno-cellulosic processes are able to make that
  technology more competitive.

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Contact Information

• dtiffany_at_dept.agecon.umn.edu
• [phone]
• Spreadsheet http//www.agmrc.org/energy/info/
• ethanolsuccess.xls
• Original paper
• www.apec.umn.edu/staff/dtiffany/
• staffpaperp03-7.pdf