what you’ll see now
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What You’ll See Now
A Fully Functioning, but Version 1 of the Model
FuelMarketplaceConversion
R&DConversion
Facilities
Investment
FeedstockProduction
FeedstockCost
VehicleDynamics
Land Use
2
Escalated Capital Cost
AttractivenessTo Build
RequiredRate of Return
LearningCurve Logic
Plant AdditionLogic
Marketplace Corn EtOH Price
MarketplaceFuel Market
R&D Applied Fundamentals
R&D: Piloting
Expected PlantPerformance
R&DYield
CostGrowth
EffortRatio
EquityROI
Potential EtOHDemand fromFuel Usage
PrevailingValue
IndustrialCapacity Detail
PlantPipeline
Capacity &Ave. Yield
Total Biomass Production& Residue Collection
CapitalCost
Ave Yield On-line #In D&S#In Start-up#On-line
Plant Additions
Conversion Yield
Output Capacity
Cost ofCapital & Taxes
EffortRatio &CostGrowth
R&DYield
IncreaseIn Ag Output
OperatingExperience
Output Capacity
Output Capacity
& AveYield
EtOHPrice
Corn EtOHPrice
Cost ofCapital & Taxes
Output Capacity
Corn EtOHCapacity
Detail
Attractiveness
Ave On-line Yield #On-line
LearningCurve Logic
Detail
Detail
Detail
Detail
Detail Detail
Detail
Detail
Detail
Detail
Detail
Detail
Feedstock Price
Corn Price
Corn Price
END
Detail
3
Fundamental R&DMaximum Required Effort
$500MM
Investment Profile & Initial LoadMM$/year
Maximum MatureTechnology Yield
R & D Yield
R & D Capital Cost Growth Factor
Effort Ratio = Accumulated R&D InvestmentMax Required Effort
As the effort is increased (with appropriate dampeners and dissipation) the R&D yield (gal/ton) is increased on a curve from 50% to 100% of maximum.
Effectiveness of spending is influenced by $/yr
Similarly the Capital Cost Growth is Lowered as a result of increased effort
Intro Return Forward
Maximum EffectiveAnnual Spending
Fundamental R
&D
- 1
4
Fundamental R&DMaximum Required Effort
$500MM
Investment Profile & Initial LoadMM$/year
Maximum MatureTechnology Yield
R & D Yield
R & D Capital Cost Growth Factor
Effort Ratio = Accumulated R&D InvestmentMax Required Effort
As the effort is increased (with appropriate dampeners and dissipation) the R&D yield (gal/ton) is increased on a curve from 50% to 100% of maximum.Yield = Factor x Max Yield PossibleEffectiveness of spending is influenced by $/yr
Similarly the Capital Cost Growth is Lowered as a result of increased effort
Return Forward
Maximum EffectiveAnnual Spending
R&D InvestmentMax Effort Req
YieldFactor
Fundamental R
&D
- 2
5
Fundamental R&DMaximum Required Effort
$500MM
Investment Profile & Initial LoadMM$/year
Maximum MatureTechnology Yield
R & D Yield
R & D Capital Cost Growth Factor
Effort Ratio = Accumulated R&D InvestmentMax Required Effort
As the effort is increased (with appropriate dampeners and dissipation) the R&D yield (gal/ton) is increased on a curve from 50% to 100% of maximum.
Effectiveness of spending is influenced by $/yr
Similarly the Capital Cost Growth is Lowered as a result of increased effort
Cap Cost Growth is multiplier onCap Cost
Return Forward
Maximum EffectiveAnnual Spending
Impact on Capital Cost Growth Factor of Effort
0
0.5
1
1.5
2
2.5
0 0.2 0.4 0.6 0.8 1
Effort Ratio
Cap
ital C
ost G
row
th
Fact
or
Fundamental R
&D
- 3
6
Illustration of Impact on Yield and Capital Cost Growth of Research Spending
Capital Cost GrowthFactor is Reduced
R&D Yield is Increased
Track 1 reaches its expectedMaximum of 50 gal/ton
Track 2 continues to increase toward its Maximum of 105 gal/ton
R&D Spending increases in 2Research Tracks to a MaximumOf $500MM
END Return
Fundamental R
&D
- 4
Cumulative Fundamental R&D Spending
0
100
200
300
400
500
600
2004 2005 2006 2007 2008 2009 2010 2011 2012
$MM
Track 1 Track 2
0
0.5
1
1.5
2
2004 2005 2006 2007 2008 2009 2010 2011 2012Year
Cos
t Gro
wth
Fac
tor
0
20
40
60
80
100
Yiel
d (g
al/to
n)
Track 1 Track 2 Track 1 Track 2
7END Return
Actual STELLA Module Flowsheet
Fundamental R
&D
- 5
8
Pilot R&DMaximum Required Effort
$250MM
Investment Profile & Initial LoadMM$/year
R & D Yield
R&D Capital Cost Growth Factor
Pilot EffortRatio
•Build on the R&D Yield and Capital Cost Growth Accomplished in Fundamental R&D
•Utilize similar logic of funding drives improvements, but can be dampened and dissipated
Result is:R&D Yield after PilotingR&D Capital Cost Growth Factor after Piloting
R & D Yield
R&D Capital Cost Growth Factor
Intro Return Forward
Pilot R
&D
- 6
9
Pilot R&DMaximum Required Effort
$250MM
Investment Profile & Initial LoadMM$/year
R & D Yield
R&D Capital Cost Growth Factor
Pilot EffortRatio
Pilot Effort Ratio = Acc Pilot R&D InvestmentMax Required Effort
• Convert the Pilot Effort Ratio into an “S” type learning curve.• Piloting will reduce Capital Cost Growth by a maximum of 0.785 from 2.04 - 1.61 to 1.6 – 1.26 based on “S” ratio
Cap Cost Growth = Cap Cost Growth-R&D x [1 – (0.215 x “S” ratio)]
R & D Yield
R&D Capital Cost Growth Factor
Return Forward
Pilot R
&D
- 7
10
Pilot R&DMaximum Required Effort
$250MM
Investment Profile & Initial LoadMM$/year
R & D Yield
R&D Capital Cost Growth Factor
Pilot EffortRatio
Pilot Effort Ratio = Acc Pilot R&D InvestmentMax Required Effort
• Piloting enables Yield to approach Fundamental R&D Yield• Without Piloting - R&D Yield is 50% of Fund R&D Yield• Yield Reduction is minimized by Pilot Effort – “S” Ratio
•R&D Yield = R&D Yield x Impact of Pilot Effort
R & D Yield
R&D Capital Cost Growth Factor
END Return
Pilot R
&D
- 8
11END Return
Actual STELLA Module Flowsheet
Pilot R
&D
- 9
12
Calculating Escalated Capital CostCo-LocationReductions
Total Plant Investment& Fraction Debt Financing
AccumulatedOperatingExperience
Pilot Effort Ratio &R&D Capital Cost Growth Factor
EscalatedCapital Cost
Determine the “Real” Capital Cost for Demo, Pioneer and Full-scale Facilities
Utilize experience at previous scale (e.g., pilot for Demo),R&D Capital Cost Growth and total industry size
Allow reductions in capital cost for co-location of Demo plants with existing corn mills
EtOH OutputCapacity
Debt InvestorMultiplier
Intro Return Forward
Calculating E
scalated Capital C
ost - 1
13Accumulated years ofExperience at Pioneer Scale
CapGrowthFull Scale
Years Growth
Pilot Effort Ratio
Ratio Growth
CapGrowthDemo
Calculating Escalated Capital CostCo-LocationReductions
Total Plant Investment& Fraction Debt Financing
AccumulatedOperatingExperience
Pilot Effort Ratio &R&D Capital Cost Growth Factor
EscalatedCapital Cost
Determine the Debt Investor Capital Growth Factor forVarious scale-up
•Demo – 1 to 2 growth factor based on Pilot Effort Ratio•Pioneer – 1 to 2 growth factor based on Accumulated Operating Experience at the Demo Scale up to 1 yr
•Full Scale - 1 to 2 growth factor based on Accumulated Operating Experience at the Pioneer Scale up to 1 yr
All times the Debt Investor Multiplier
EtOH OutputCapacity
Debt InvestorMultiplier
Return Forward
Calculating E
scalated Capital C
ost - 2
14
Industrial CapacityBillions of Gal per yr
500MMGal/yr
Industry Experience Factor
Calculating Escalated Capital CostCo-LocationReductions
Total Plant Investment& Fraction Debt Financing
AccumulatedOperatingExperience
Pilot Effort Ratio &R&D Capital Cost Growth Factor
EscalatedCapital Cost
Finalize Capital Cost Growth Factor =
Industry Experience Factor (see graph) x
R&D Cost Growth Factor (~1.2 to 2) x Equity Frac +
Debt Investor Cost Growth (~1.25 to 2.5) x Debt Frac
IndExp x (R&DCapGrowth x Equity + DebtCapGrowth x Debt ) + 1 - IndExp
EtOH OutputCapacity
Debt InvestorCost Growth
Return Forward
Calculating E
scalated Capital C
ost - 3
15
Calculating Escalated Capital CostCo-LocationReductions
Total Plant Investment& Fraction Debt Financing
AccumulatedOperatingExperience
Pilot Effort Ratio &R&D Capital Cost Growth Factor
EscalatedCapital Cost
Escalated Capital Cost is then Cost Growth x User Input Capital Cost for each scale plant
Allowances for Capital Reduction for Demo (75% for 5MM gal/yr) and Pioneer (50% for 50MM gal/yr) for co-location or reduced “Greenfield”
EtOH OutputCapacity
Debt InvestorMultiplier
END Return
Calculating E
scalated Capital C
ost - 4
16
END Return
Actual STELLA Module Flowsheet
Calculating E
scalated Capital C
ost - 5
17
Calculating Required Rate of ReturnInvestor
Type
New IndustryRisk Factor
AccumulatedOperatingExperience
Pilot Effort Ratio
Equity RequiredRate of Return
Utilize Prior Scale Experience & Investor Type (Conservative to Aggressive)
Along with a Mature Industry Rate of Return and New Industry Risk Factor
To Determine the Required Rate of Return
EtOH OutputCapacity
EquityMature Rate of Return
Willingness toSkip from Demo to Full Scale
Debt Fraction &Debt Interest Rate
Net (with Debt) ReqRate of Return
Intro Return Forward
Calculating R
equired Rate of R
eturn - 6
18
Calculating Required Rate of ReturnInvestor
Type
New IndustryRisk Factor
AccumulatedOperatingExperience
Pilot Effort Ratio
Equity RequiredRate of Return
EtOH OutputCapacity
EquityMature Rate of Return
Willingness toSkip from Demo to Full Scale
Debt Fraction &Debt Interest Rate
Net (with Debt) ReqRate of Return
Prior Scale Experience Risk Factor (dependent on investor)• Use Pilot Effort Ratio for Demo• Use years of experience at Demo Scale for Pioneer
Scale• Use years of experience at Pioneer Scale for Full Scale• Or years of experience at demo for Full Scale if skipping • Pioneer
Return Forward
Risk forDemo
Pilot Effort Ratio
e.g. Aggressive Investor
Risk forPioneer
Years at DemoAccumulated Op Exp
e.g. Moderate Investor
Risk forFull Scale
Years at PioneerAccumulated Op Exp
e.g. Conservative Investor
Calculating R
equired Rate of R
eturn - 7
19
Calculating Required Rate of ReturnInvestor
Type
New IndustryRisk Factor
AccumulatedOperatingExperience
Pilot Effort Ratio
Equity RequiredRate of Return
Overall Industrial Experience Risk FactorUse Output Capacity & Investor Type for all Scales
EtOH OutputCapacity
EquityMature Rate of Return
Willingness toSkip from Demo to Full Scale
Debt Fraction &Debt Interest Rate
Net (with Debt) ReqRate of Return
Return Forward
IndustryExperienceRiskFactor
Calculating R
equired Rate of R
eturn - 8
Industrial EtOHCapacity
Conservative Investor
Moderate Investor
Aggressive Investor
20
Calculating Required Rate of ReturnInvestor
Type
New IndustryRisk Factor
AccumulatedOperatingExperience
Pilot Effort Ratio
Equity RequiredRate of Return
•New Industry Rate of Return (ROR) = Mature Rate (e.g., 10%) x New Industry Risk (e.g., 3) x Prior Scale Risk (2 for none, 1 for high exp)Range from 10 to 60%
•Final Equity Rate of Return = New Industry ROR x Industry Exp Risk (1 for none, 0 for high exp)+ (1 - Ind Exp Risk) x Mature ROR
Range from 60% with no industry experience & no scale experience down to 10%
EtOH OutputCapacity
EquityMature Rate of Return
Willingness toSkip from Demo to Full Scale
Debt Fraction &Debt Interest Rate
Net (with Debt) ReqRate of Return
Return Forward
Calculating R
equired Rate of R
eturn - 9Full Scale Required Return on Equity and
Risk Factors
010203040506070
2005 2010 2015 2020 2025
Ret
urn
on E
quity
0
0.5
1
1.5
2
2.5
Ris
k Fa
ctor
s
Rtn on Equity Prior Scale Risk Factor Industry Experience Factor
21
Calculating Required Rate of ReturnInvestor
Type
New IndustryRisk Factor
AccumulatedOperatingExperience
Pilot Effort Ratio
Equity RequiredRate of Return
EtOH OutputCapacity
EquityMature Rate of Return
Willingness toSkip from Demo to Full Scale
Debt Fraction &Debt Interest Rate
Net (with Debt) ReqRate of Return
Venture Capital Utilization for DemonstrationPilot Effort Ratio > 0.95Full Scale EtOH Production Price < Prevailing Gasoline PriceIndustry Output < 20 MM gal/yr
If the above Criteria is met then demonstration will be done with Venture Capital at 2% Hurdle Rate
END Return
Calculating R
equired Rate of R
eturn - 10
22END Return
Actual STELLA Module Flowsheet
Calculating R
equired Rate of R
eturn - 11
23
Calculating Cost of Capital and TaxesPlant Life
Equity Rateof Return
Annual LoanPayment
Utilize standard financial calculations to calculate:Capital Recovery FactorAnnual Return Before and After TaxesAnnual Loan Payment
All are combined in one term
Cost of Capital+Taxes+Loan / Gallon of Capacity
EscalatedCapital Cost
Time for Design, Const & Startup
Debt Fraction &Debt Interest Rate
Cost of CapitalAnd Taxes
Intro Return
EtOH OutputCapacity
Tax Rate
Forward
Calculating C
ost of Capital and Taxes - 12
24
Cost of Capital and Taxes
0
10
20
30
40
50
60
70
80
90
2005 2007 2009 2011 2013 2015 2017 2019
$/ga
l ins
talle
d vo
lum
e
Demo Pioneer Full Scale
Venture Capital Ends for Demodue to Industry Volume
Venture CapitalStarts for Demo
Example of Cost of Capital for Different Scale Plants over Time
End Return
Calculating C
ost of Capital and Taxes - 13
25END Return
Actual STELLA Module Flowsheet
Calculating C
ost of Capital and Taxes - 14
26
Calculating Expected Plant PerformanceMature Plant
Design Feed Rate
R&D Max Yield
Purpose is to Calculate the plant EtOH production capacity
Plants are designed on Feedstock Rates
Use Maximum of; Installed Yield or 90% of R&D Yield
Influenced by Overall Experience in the Industry (installed capacity) – “Learning Curve”
Net effect is a reduction in the capacity until 600MM gal have been installed
EtOH PlantCapacity
Intro Return
EtOH InstalledCapacity
Forward
AverageOnline Yield
Calculating E
xpected Plant P
erformance -1
27
Calculating Expected Plant PerformanceMature Plant
Design Feed Rate
R&D Max Yield
Purpose is to Calculate the plant EtOH production capacity
Plants are designed on Feedstock Rates
Maximum of Installed Yield or 90% of R&D Yield
Influenced by Overall Experience in the Industry (installed capacity) – “Learning Curve”
Yield is constrained until 600MM gal have been installed
EtOH PlantCapacity
Return
EtOH InstalledCapacity
Industry CapacityBillions of Gallons
ExperienceImpact on% Capacity
600MMGallons/y
Forward
AverageOnline Yield
Calculating E
xpected Plant P
erformance -2
28
Calculating Expected Plant PerformanceMature Plant
Design Feed Rate
R&D Max Yield
Purpose is to Calculate the plant EtOH production capacity
Plants are designed on Feedstock Rates
Maximum of Installed Yield or 90% of R&D Yield
Influenced by Overall Experience in the Industry (installed capacity) – “Learning Curve”
Yield is constrained until 600MM gal have been installed
EtOH PlantCapacity
END Return
EtOH InstalledCapacity
AverageOnline Yield
Example - Single Plant - Full Scale Plant CapacityMax Capacity: 350 d/y x 105 gal/t x 5000 t/d = 183.8 MM gal/y
020406080
100120140160180200
2005 2010 2015 2020
MM
gal
/yea
r
Calculating E
xpected Plant P
erformance -3
Theoretical – No PlantConstruction - Uneconomical
29
END Return
Actual STELLA Module Flowsheet
Calculating E
xpected Plant P
erformance -4
30
Marketplace – Fuel Market
Various OilPrice Projections
Oil to GasolineConversion
Utilizing various future oil price projections (AEO & User)
Convert the price of oil into a price of gasolineGasoline Price ($/gal) = Oil Price x 1.175 + 0.187
At low volumes, EtOH has a enhanced value because of its properties (e.g., octane, as an oxygenate, etc.)Prevailing Price ($/gal) = Gasoline Price x EtOH Relative Value
GasolinePrice
Intro Return
EtOH OutputCapacity
Gasoline FixedCosts
EtOH to GasolineValue Ratio
PrevailingPrice
Forward
Marketplace – Fuel M
arket -9
31
Marketplace – Fuel Market
Various OilPrice Projections
Oil to GasolineConversion
Utilizing various future oil price projections (AEO & User)
Convert the price of oil into a price of gasolineGasoline Price ($/gal) = Oil Price x 1.175 + 0.187
At low volumes, EtOH has a enhanced value for octane, as an oxygenate, etc.Prevailing Price ($/gal) = Gasoline Price x EtOH Relative Value
GasolinePrice
Return
EtOH OutputCapacity
Gasoline FixedCosts
EtOH to GasolineValue Ratio
PrevailingPrice
Projected Oil Prices
$0
$20
$40
$60
$80
$100
$120
$140
2000 2010 2020 2030 2040 2050
Oil
Pric
e $/
bbl
AEO 2006 RefAEO 2006 HighAEO 2005 RefVery HighUSER
Forward
Marketplace – Fuel M
arket -10
32
Marketplace – Fuel Market
Various OilPrice Projections
Oil to GasolineConversion
Utilizing various future oil price projections (AEO & User)
Convert the price of oil into a price of gasolineGasoline Price ($/gal) = Oil Price x 1.175 + 0.187
At low volumes, EtOH has a enhanced value for octane, as an oxygenate, etc.Prevailing Price ($/gal) = Gasoline Price x EtOH Relative Value
GasolinePrice
END Return
EtOH OutputCapacity
Gasoline FixedCosts
EtOH to GasolineValue Ratio
PrevailingPrice
Ethanol Value Relative to Gasoline
11.21.41.61.8
22.2
0 2 4 6 8
Volume of Ethanol Sold, billion Gal/yr
Valu
e of
EtO
H/Va
lue
of G
asol
ine
Marketplace – Fuel M
arket -11
33END Return
Actual STELLA Module Flowsheet
Marketplace – Fuel M
arket -12
34
Marketplace – Corn Ethanol Price
Corn Price
Corn EthanolPlant Life
Corn EtOH price is calculated based on specified capital, operating, and corn, and DDG costs minus the subsidy.
An “Attractiveness” based on the competing prices of EtOH and gasoline is calculated
The “Attractiveness” is used along with “Max growth Rate” to determine the corn EtOH growth and Total Capacity Corn EtOH production
Corn EtOH Price
Intro Return
Mature PlantReturn on Equity
New Plant Capital Cost,Operating Cost & Tax Rate
PrevailingPrice
ConversionYield
Maximum CornEtOH Growth Rate& Ultimate Capacity
DDG Price &Rate of Change
Corn EthanolSubsidy
EtOH Price(Cellulosic)
Corn EtOHCapacity
Forward
Marketplace – C
orn Ethanol P
rice -4
35
Marketplace – Corn Ethanol Price
Corn Price
Corn EthanolPlant Life
Corn EtOH Price• Plant Capital Cost (~1.30 $/gal) & ROI (10%)• Taxes (39%)• Operating Costs (35¢/gal)• DDG Price (29¢/gal EtOH decreasing with volume
0.006¢/MM gal)• EtOH yield per bushel (2.8 to 3.0 gal/bu)• EtOH Subsidy (50¢/gal until 2020)• Corn Price – dynamically calculated
Corn EtOH Price
Return
EtOH OutputCapacity
Mature PlantReturn on Equity
New Plant Capital Cost,Operating Cost & Tax Rate
PrevailingPrice
ConversionYield
Maximum CornEtOH Growth Rate& Ultimate Capacity
DDG Price &Rate of Change
Corn EthanolSubsidy
EtOH Price(Cellulosic)
Corn EtOHCapacity
PrevailingPrice
YieldGal/bu
Year
2010
2020
Forward
Marketplace – C
orn Ethanol P
rice -5
36
Marketplace – Corn Ethanol Price
Corn Price
Corn EthanolPlant Life
Corn EtOH “Attractiveness” drive Industry Growth• Function Related to the Ratio of Corn EtOH price to
lower of Cellulosic EtOH or Gasoline
•Ratio of 1 Attractiveness is 1•Ratio < 1 Attractiveness > 1
Corn EtOH Price
Return
EtOH OutputCapacity
Mature PlantReturn on Equity
New Plant Capital Cost,Operating Cost & Tax Rate
ConversionYield
Maximum CornEtOH Growth Rate& Ultimate Capacity
DDG Price &Rate of Change
Corn EthanolSubsidy
EtOH Price(Cellulosic)
Corn EtOHCapacity
PrevailingPrice
Corn EtOH PriceCellulosic EtOH or Gasoline
Corn EtOH PlantAttractiveness
Corn EtOH PriceCellulosic EtOH or Gasoline Price
Forward
Marketplace – C
orn Ethanol P
rice -6
37
Marketplace – Corn Ethanol Price
Corn Price
Corn EthanolPlant Life
Corn EtOH Capacity“Attractiveness” (1 to 2 scale) is converted into a frac
growth rateMax Growth Rate is set at 20%
Actual Growth Rate is FRAC x MAX Rate
As long as the Industry Capacity is less than the Maximum Allowable, set at 30 billion gal/yr MAX
Corn EtOH Price
END Return
EtOH OutputCapacity
Mature PlantReturn on Equity
New Plant Capital Cost,Operating Cost & Tax Rate
ConversionYield
Maximum CornEtOH Growth Rate& Ultimate Capacity
DDG Price &Rate of Change
Corn EthanolSubsidy
EtOH Price(Cellulosic)
Corn EtOHCapacity
PrevailingPrice
. Attractiveness .
FRAC ofMAX GrowthRate
Marketplace – C
orn Ethanol P
rice -7
38END Return
Actual STELLA Module Flowsheet
Marketplace – C
orn Ethanol P
rice -8
39
Industrial Capacity Detail
OnLine Yield
• Utilizing the number of Plant online and starting-up, their feed capacity, average online yield and utilization (startup are considered running at 50%)
•Industry Output in gallons is Calculated•Feedstock Requirements are Calculated
• If Feedstock Available is less than Plant Requirements
•EtOH is reduced to match Feedstock• Total EtOH is then the Sum of Corn EtOH and
Cellulosic EtOH
Industry EtOH OutputCellulosic and Total
END Return
Corn EtOHCapacity
Mature PlantFeedstock Demand
Plants Online& Starting up
Start-upUtilization Factor
Biomass (inc Residue)Production
Cellulosic EtOHCapacity
Cellulosic Feedstock Demand
Industrial Capacity D
etail -10
40END Return
Actual STELLA Module Flowsheet
Industrial Capacity D
etail -11
41
Plant Pipeline: Track Number of Plants & Yields
• Given the number of new plant starts demanded, the time for design & construction and time for start-up
•The number of plants (demo, Pioneer, Full Scale) in each phase (D&S, Start-up, Online) are determined
• Utilizing a Learning Curve Logic – On-line yield is increased
Accumulated YearsOf Operating Experience
END Return
ConversionYield
Start-up Time
Plants AdditionsSubsidized & Unsubsidized
Design & Construction Time
LearningCurve Logic
Average OnlineConversion Yield
Number of PlantsOnline, In Start-up, In Design
Plant P
ipeline: Track Num
ber of Plants &
Yields -5
42
END Return
Actual STELLA Module Flowsheet
Plant P
ipeline: Track Num
ber of Plants &
Yields -6
43
Plant Addition Logic
• Investment Attractiveness (1 to 2) is converted to a fraction (0 to 1)
• Market Attractiveness is a function of Current Capacity/Demand
• Attractiveness Frac & Market are used to adjust Max Growth Rate (25%)
• Smaller of Growth Rate x # Existing Plants or 30 becomes the number of new plants started per year
• As the industry grows to 1 billion gallons the need for Govt Subsidized Plants is eliminated
Intro Return
Investment Attractivenessw/o Cap. Subsidy
Max New PlantsPer Year
Max New PlantsSubsidized
MaximumGrowth Rate
PotentialEtOH Demand
Number of NewPlants to Build
Investment AttractivenessWith Cap. Subsidy
Total Plants inD&S, Start-up and OnlineTotal EtOH Output (Capacity)
Forward
Plant A
ddition Logic -20
44
Plant Addition Logic
END Return
Investment Attractivenessw/o Cap. Subsidy
Max New PlantsPer Year
Max New PlantsSubsidized
MaximumGrowth Rate
PotentialEtOH Demand
Number of NewPlants to Build
Investment AttractivenessWith Cap. Subsidy
Total Plants inD&S, Start-up and OnlineTotal EtOH Output (Capacity)
Investment Attractiveness
.InvestmentAttractivenessFraction
.MarketAttractiveness.
EtOH Capacity/EtOH Demand• Investment Attractiveness (1 to 2) is converted to
a fraction (0 to 1)• Market Attractiveness is a function of Current
Capacity/Demand• Attractiveness Frac & Market are used to adjust
Max Growth Rate (25%)• Smaller of Growth Rate x # Existing Plants or 30
becomes the number of new plants started per year
• As the industry grows to 1 billion gallons the need for Govt Subsidized Plants is eliminated
Plant A
ddition Logic -21
45END Return
Actual STELLA Module Flowsheet
Plant A
ddition Logic -22
46
Learning Curve
• The Rate of Doubling x Technology Gap x Progress Ratio (0.8) is an “S” type learning curve
• Technology Gap is [Max Yield – Online Yield]
• Learning Curve Logic is used to improve the online yield
Intro Return
Max Technology Yield
Progress Ratio
Learning Curve Logic
‘Online YieldImprovement’
Online Yield
Total Plants Online
Total EtOH Output (Capacity)
Forward
Learning Curve -7
47
Learning Curve
• The Rate of Doubling x Technology Gap x Progress Ratio (0.8) is an “S” type learning curve
• Technology Gap is [Max Yield – Online Yield]
• Learning Curve Logic is used to improve the online yield
END Return
Max Technology Yield
Progress Ratio
Learning Curve Logic
‘Online YieldImprovement’
Online Yield
Total Plants Online
Total EtOH Output (Capacity)
Impact of Learning Curve
0
2
4
6
8
10
12
14
16
2000 2010 2020 2030 2040 2050 2060
Cum
mul
ativ
e D
oubl
ings
0
20
40
60
80
100
120
Yiel
d G
ap o
r Yie
ld
Impr
ovem
ent
Cummulative # Doublings Impact on Plant Yield Plant Yield Gap to Max
Learning Curve -8
48
END Return
Actual STELLA Module Flowsheet
Learning Curve -9
49
Investment Attractiveness
• Calculate the cost of Cellulosic Production, including return on investment
• If there is an RFS – Compare to Corn EtOH Price otherwise compare to Gasoline Price
• Convert ratio of prices to “Attractiveness Factor”
• For Govt Capital Subsidy – Appropriately lower the Capital Requirement according to the levels of money available
Intro Return
Cost of Production &By-Product Credits
Subsidies on EtOH Production
AttractivenessTo Build“Factor”
Cost of Capital & Taxes
Conversion Yield
Corn EtOH Price
Forward
Gasoline Price
Feedstock Price
GovernmentCapital Subsidies
Investment A
ttractiveness -15
50
Investment Attractiveness
• Calculate the cost of Cellulosic Production, including return on investment
• If there is an RFS – Compare to Corn EtOH Price otherwise compare to Gasoline Price
• Convert ratio of prices to “Attractiveness Factor”
• For Govt Capital Subsidy – Appropriately lower the Capital Requirement according to the levels of money available
Return
Cost of Production &By-Product Credits
Subsidies on EtOH Production
AttractivenessTo Build“Factor”
Cost of Capital & Taxes
Conversion Yield
Corn EtOH Price
Forward
Gasoline Price
Feedstock Price
GovernmentCapital Subsidies
Cellulose EtOH PriceCorn EtOH Price
“Attractiveness”.
“Attractiveness”.
Cellulose EtOH PriceGasoline Price
Investment A
ttractiveness -16
51
Investment Attractiveness
• Calculate the cost of Cellulosic Production, including return on investment
• If there is an RFS – Compare to Corn EtOH Price otherwise compare to Gasoline Price
• Convert ratio of prices to “Attractiveness Factor”
• For Govt Capital Subsidy – Appropriately lower the Capital Requirement according to the levels of money available
END Return
Cost of Production &By-Product Credits
Subsidies on EtOH Production
AttractivenessTo Build“Factor”
Cost of Capital & Taxes
Conversion Yield
Corn EtOH Price
Gasoline Price
Feedstock Price
GovernmentCapital Subsidies
Government Capital Subsidies
Plant Size
Max per Project millions
Max % per Project
Total Pool millions
Demonstration $ 20 50% $ 200
Pioneer $ 40 30% $ 300
Full Scale $ 50 20% $ 400
Investment A
ttractiveness -17
52
Actual STELLA Module Flowsheet
Return Forward
Investment A
ttractiveness -18
53
Actual STELLA Module Flowsheet
END Return
Investment A
ttractiveness -19
54
Corn Price
Corn EtOHCapacity
Max YieldIncrease (bu/yr)
• Corn Production is calculated as the Yield x Acres• Yield increases at 1%/year up to a cap of 25% over
2006 value of 160 bu/acre• Demand for Whole corn is based on a continued
increase in demand of 0.8%/year• Demand for corn from Corn Ethanol is calculated from
the Corn Ethanol Plant Capacity and Plant Yields• Corn Price is determined from a relationship of price to
Corn Supply over Demand
Intro Return
Corn EtOHYield (gal/bu)
Rate of IncreaseIn Corn Demand
Initial CornYield (bu/acre)
Corn Acres
Initial Demand for Corn
AgricultureYield Increase
Corn Price
Forward
Corn P
rice -1
55
Corn Price
Corn EtOHCapacity
Max YieldIncrease (bu/yr)
• Corn Price is determined from a relationship of price to Corn Supply over Demand
Return
Corn EtOHYield (gal/bu)
Rate of IncreaseIn Corn Demand
Initial CornYield (bu/acre)
Corn Acres
Initial Demand for Corn
AgricultureYield Increase
Corn Price
Corn P
rice -2
Corn Demand for Other UsesCorn Production – Corn for EtOHCorn Price = f
Corn Demand for Other UsesCorn Production – Corn for EtOH
Corn PriceAdder $/bu
56
Corn P
rice -3Actual STELLA
Module Flowsheet
END Return
After the Break, “The rest of the Story ...”
A Fully Function, but Version 1 of the Model
FuelMarketplaceConversion
R&DConversion
Facilities
Investment
FeedstockProduction
FeedstockCost
VehicleDynamics
Land Use
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