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An Introduction to Economics of Bio-Fuels in Alabama: Capacity, Cost, Yield, Efficiency and Impact M. Keivan Deravi & Carel Ligeon October 24, 2006. Introduction. With only 5% of the world’s population and 2% of the world’s reserves of oil, the U.S. consumes 25% of the world’s oil.
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An Introduction to Economics of Bio-Fuels in Alabama:Capacity, Cost, Yield, Efficiency and ImpactM. Keivan Deravi & Carel LigeonOctober 24, 2006
- Can switchgrass be the answer to our search for “green gold”?
- Yield = 5 dry tons/acre/year
- Cellulose-to-ethanol conversion efficiency of 1:50 gallons (currently achievable)
- BTU equivalency between ethanol and fossil-based gasoline of 0.67
- (137 x 109) ÷ (1 x 5 x 50 x 0.67) = 830 million acres
- If we are serious about the task at hand, we have to innovate, conserve, sacrifice and change not only the production of alternative fuel but also our consumption of energy.
- The grain required to fill a 25-gallon SUV gas tank with ethanol could feed one person for a year.
- A typical city of 100,000 people using biomass from sustainable forests for electricity would require 770 square miles of forest (10 times the area of Washington, D.C.)
- Switchgrass is native to Alabama
- It can be grown on marginal land
- It grows well with relatively moderate inputs
- It can effectively protect soil against erosion
- The time of year in which switchgrass is planted affects the production costs through seeds used, the success rate of the seeding and the need to reseed.
- The type of machinery used for the seeding (airflow, drill and no-till drill)
- Opportunity cost of the land (or land charge)
- Note: transportation cost is a major concern especially for distances exceeding 50-75 miles
•A. Establishment costs (annualized basis)
• B. Operation costs
• C. Reseeding costs
• D. Harvesting costs
• Total cost (farm gate) =
• Farm income (ton/acre/year) =
• Farm profit (ton/acre/year) =
- (1 ton → 50 gallons of ethanol → at $2 per gallon → $100)
- Transportation cost $10
- Profit margin $10