We develop a long-run cellulosic biofuel cost model that minimizes feedstock procurement and processing costs per gallon. The distinguishing feature of the model is that it accounts for the procurement tradeoff between the intensive margin (biomass producers' participation rate) and extensive margin (biomass capture region). To investigate the extent to which this procurement tradeoff affects processors' cost-minimizing decisions, we apply the model to switchgrass ethanol production in U.S. crop reporting districts. Results suggest that location characteristics will determine the extent to which processors can reduce their total procurement costs by offering a higher biomass price to increase participation near the plant and reduce transportation costs.
Available at: http://works.bepress.com/john-miranowski/22/
NOTICE: this is the author’s version of a work that was accepted for publication in Energy Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Economics, [58, 77-83, (2016)] DOI:10.1016/j.eneco.2016.06.020.