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Abstract
This study examines the financial feasibility of producing ethanol biofuel from sugar beets in
central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel
from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15
billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model
was calibrated with irrigated sugar beet data from central North Dakota to determine economic
feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol
plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses,
account for more than 70% of total production expenses. The estimated breakeven ethanol price
for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven
prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater
ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the
most important factors that affect investment success is the price of ethanol. At an ethanol price
of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present
value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the
10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and
utilities have a relatively minor effect on investment viability. This study examines the financial feasibility of producing ethanol biofuel from sugar beets in
central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel
from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15
billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model
was calibrated with irrigated sugar beet data from central North Dakota to determine economic
feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol
plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses,
account for more than 70% of total production expenses. The estimated breakeven ethanol price
for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven
prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater
ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the
most important factors that affect investment success is the price of ethanol. At an ethanol price
of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present
value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the
10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and
utilities have a relatively minor effect on investment viability.