Research Proposal for the Agricultural Research Foundation Oregon Wheat Commission
Title:
Investigating the Economic Feasibility of Biofuel Production in Oregon William K. Jaeger, Dept. of Agricultural and Resource Economics, Oregon State University, Corvallis None No previous support
Investigator(s):
Cooperator(s): Funding History:
Abstract: The purpose of this research is to investigate the economic feasibility and potential for production of biofuels in Oregon. While ethanol and biodiesel production have been successfully developed elsewhere in the country, the potential to establish appropriate-scale ethanol or biodiesel production in Oregon is an open question. If ethanol were produced using wheat as a feedstock, Oregon wheat growers could benefit from the introduction of a viable ethanol plant. Biodiesel from canola might also represent opportunities for crops in some areas or in rotation with wheat. There are several specific factors that would affect the economic feasibility of biofuels production in Oregon. First, there are economies of scale in ethanol production facilities, and this makes the unit cost of ethanol production cheaper for very large production facilities such as those found in the Midwest. The same appears to be true for biodiesel crushing facilities. Given the levels of production of feedstock that one could reasonably expect in Oregon, such large scale operations could not operate at full capacity. A central question is whether smaller scale production facilities could produce ethanol or biodiesel at competitive unit costs. Answering this question would require assembling technical and economic data from a wide range of sources in order to estimate costs for different scales of operation. A second set of factors that would affect ethanol production involve the costs of production of feedstock in Oregon, given the agronomic (yields) and economic (costs of production) characteristics of the specific regions being evaluated. Third, the economic feasibility of producing biofuels in Oregon will depend on the market realities including alternative sources of feedstock. Costs of biofuels using local feedstock will need to be compared with the costs of imported feedstock and imported biofuels (e.g., from Canada or the Midwest).
Objective(s): The first objective of this study is to produce a set of estimates of the costs of producing biofuels in Oregon, and to compare these costs, and the components of those costs, with those for biofuels production in other relevant or comparable markets (e.g.,, the Midwest, Canada). The reporting of these results will include „sensitivity analysis‟ to identify which differences are most consequential in making production of biofuels in Oregon economically viable or nonviable. A detailed report of the economic analysis, the sources of information, and interpretation of the results will be provided, and presented to interested groups.
Procedures: The procedures for this study will include a review of literature and available studies and analysis for each component of the economic assessment. Extensive contacts will be made with industry representatives among growers and biofuels producers (e.g., local and distant producers, crushers, distillers). Some production and cost data will be drawn from Oregon State University‟s database of Agricultural Enterprise Budgets. Based on these technical and economic data, a spreadsheet model will be constructed to evaluate the costs of biofuels production in Oregon as a function of the different factors (scale of production, price of feedstock, etc.). Several models will be developed in this way to represent different locations in Oregon. The choice of the locations will be made in consultation with growers and other experts.
Timelines: The work will be spread out over the 12 months from July 2006 to June 2007. A final report will be filed by June 30th 2007.
Justification: Growers would benefit if the analysis identified economically feasible opportunities for biofuels production using local feedstock. In the case of results showing marginal economic feasibility, the analysis may be able to pinpoint obstacles to economic feasibility that could be overcome with, say, investments or infrastructure. Even if the analysis suggests very high economic hurdles to biofuels production, this result may contribute to a better allocation of funding and attention toward more promising opportunities. Results that offer encouragement for the production of biofuels in Oregon could hasten such investments and development of production facilities which would represent a source of demand for growers, as well as jobs, income and growth for local communities. This work would be beneficial to society by increasing our knowledge about one of the potential energy sources that we are likely to be relying on more in the
medium and long term. Given the resource limitations for fossil fuels, as well as their environmental effects and national security impacts, improving our understanding of the potential for alternative energy production is in society‟s interest both locally and nationally.
Budget:
PI Salary (1.5 months) OPE (43%) Travel Total
$12,291 5,285 750 $18,326
Relation to Other Research: My overall research efforts have frequently involved evaluation of the economics of a range of activities and actions both public and private. I have often looked both at the private profitability of activities as well as the social or public costs or effects. Most recently I am completing a study for a California group (Ore-Cal RC&D Area Council) to evaluate the economic feasibility of fuel cube production combining agricultural plastics (that are waste products from nursery crops) with western juniper chips to produce a energy source for local and regional industry. This study addresses some of the same economic questions involving alternative energy and economic viability in specific locations. Other analyses I have conducted have involved estimating the economic costs and feasibility, but not necessarily related to energy. For example, I did an analysis for a State-sponsored Working Group to evaluate the economics surrounding the conflict between aggregate mining and farming in the Willamette Valley. I have also estimated the economic impacts that would occur with changes in energy prices on the profitability of irrigated agriculture in the Upper Klamath Basin. I have no current and pending support for research on this or other topics. Last year I completed a 3-year EPA STAR grant on the economics of public finance, “Reappraisal of welfare and policy implications of environmental taxation.”
Signature Page
Title or Proposal: PI:
Investigating the Economic Feasibility of Biofuel Production in Oregon William K. Jaeger, OSU Funds requested: $18, 326
__________________________________________________________ PI Signature Date
__________________________________________________________ Department Head (AREc) Date
__________________________________________________________ OSU Research Office Date
Send electronic copies of your proposal to Dorothy.Beaton@orst.edu and tsimpson@oregonwheat.org. In addition, a hard copy with all required approval signatures must be sent to the Agricultural Research Foundation Office.