The Business of Biofuels
To create a sustainable biofuels industry in North Carolina, value has to be created at each step from biomass to consumer commodity product. Without sound economics, there is no reason to take the risk to invest in this new industry. Because so much of what must be accomplished to establish biofuels in the state is new, the Biofuels Center developed a sophisticated financial modelling tool to help landowners, producers and distributors quantify the value, Return on Investment (ROI), and other key indicators.
The tool, called The Business of Biofuels, uses financial models using complex spreadsheets that allows the Biofuels Center to work with companies to quantify on a case-by-case basis the economic feasibility of a venture.
The Business of Biofuels has a module for farmers and landowners to calculate the ROI by examining the cost and profitability variables of crops in rotation over a period of several seasons to determine optimal growing and harvesting schedules and measure them against each other.
The modelling tool enables the Center to assist producers to calculate the implications of changes in price to biomass supplies including variables such as distance to the facility, transportation variables, RINs and others. The Business of Biofuels can also assist companies determine whether assumptions in their business plan are sound or whether further due diligence is required to properly assess profitability were the facility to be constructed.
The Center is able to help filling station owners run a cost/benefit analysis on putting in new blender pump infrastructure taking into account a range of factors.
Economic Impact Assessment
Because The Business of Biofuels comprehensively examines profitability along the entire biofuels value chain, the tool enabled the Biofuels Center to conservatively and accurately conduct an economic impact analysis on a 600 MGY statewide biofuels sector.
The development of the economic modelling tools was done by the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill using agronomic data and information supplied by North Carolina State University. The teams, under the direction of the Biofuels Center’s Sector Development team, gathered and evaluated available data on biomass relevant to North Carolina. To assess the promise of biofuels in North Carolina, consistent with North Carolina’s Strategic Plan for Biofuels Leadership, the teams also conducted a realistic economic impact analysis based on 600 million gallons of biofuels per year grown and produced within our state. The Business of Biofuels confirmed that the state’s strategic goal of 600 million gallons of biofuels a year is not only feasible and sustainable, but will also create thousands of new jobs, boost agriculture and forestry, and add close to a billion dollars in new revenue annually.
The Executive Summary of the economic impact study, also called The Business of Biofuels, can be downloaded from Resources.
Using the Modelling Tools
The modelling tools are complex and to obtain useful results require assistance from Biofuels Center staff. For more information about The Business of Biofuels, or to schedule time with Center Sector Development staff, please contact the Biofuels Center.
Funding for The Business of Biofuels
The project, initially funded as the Strategic Crops Initiative, received support from Golden LEAF.