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Dry-Grind Ethanol Production: Economic Sensitivity. Douglas G. Tiffany Research Fellow University of Minnesota. Today’s Discussion. Work arose from “Factors Associated with Success of Fuel Ethanol Producers” written w/ Vernon Eidman Funding: USDA Rural Development

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dry grind ethanol production economic sensitivity

Dry-Grind Ethanol Production: Economic Sensitivity

Douglas G. Tiffany

Research Fellow

University of Minnesota

today s discussion
Today’s 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
dry grind technology
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
ethanol dry grind
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
project goals methods
Project Goals & Methods
  • Goal: Describe and Quantify Factors of Success in Dry-Grind Ethanol Production
  • Steps in Research
    • Conduct Interviews of Plant Personnel & Bankers—to Learn Factor Inputs, etc.
    • Develop Spreadsheets to Measure Plant Profits
    • Interpret Results
    • Advise Farmers/Investors, Bankers Policymakers
dry grind revenue categories 5 yr
Dry Grind Revenue Categories (5 yr.)*
  • Ethanol Sales 80%
  • DDGS Sales 19%
  • CO2 1%
  • MN Subsidy -0-
  • Total 100%
five key factors baseline levels
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
model predicts addl value of higher total fermentables in corn
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.
factors of lesser importance their baseline conditions
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-
conclusions sensitivities
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--- @$1.15--- profits of $.15/ bu.,

@$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
plant manager observations technical
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
research topics derive more revenue or cut costs of stillage
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
technology changes pending
Technology Changes Pending
  • Quick-Germ Technology– uses more enzymes, depends on favorable sale of corn oil (Univ. of Illinois)
  • Quick-Fiber Technology—offers opportunity for greater through-put, but altered DDGS product characteristics ( Univ. of Illinois)
  • Continuous vs. Batch Fermentation with stripping of ethanol--- USDA, ARS
  • Pervaporation—use of membranes to filter ethanol from broth (USDA, ARS)
conclusions dry mill production
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.
contact information
Contact Information
  • dtiffany@dept.agecon.umn.edu

(612) 625-6715

  • Spreadsheet:http://www.agmrc.org/energy/info/

ethanolsuccess.xls

  • Original paper:

www.apec.umn.edu/staff/dtiffany/

staffpaperp03-7.pdf