1. Economic Analysis of Alternative Lignocelluloses Sources for Ethanol Production Agriculture as a Producer and Consumer of Energy Conference Washington, DC June 24, 2004 David P. Anderson, Joe L. Outlaw, Brian K. Herbst, Steven L. Klose, and Mark Holtzapple

2. Outline of Presentation Overview Processes Methodology Results Lignocellulose

3. Overview Began as Ethanol Feasibility Research in Texas –Corn, sorghum, obvious feedstock issues Branched Out Into Broader Biomass Definitions Broader Definitions of Outputs –Chemical industry much like petroleum industry Need for Economic Analysis of Alternatives

4. Processes Grain Ethanol –Standard dry grind plant Lignocellulosic Ethanol –Whole plant, many potential sources –Tree trimmings, etc –Based on work by Mark Holtzapple –Pilot plant in operation today

5. Methodology Simulation Modeling –Risk analysis Probability of Outcomes Capital Budgets Stochastic Variables –Input and output prices MVE Distribution –Reflects historical distribution of prices –Maintains historical correlation of variables

6. Assumptions 30 MMGY Production Plant 93 Gal. Per Ton of Feedstock 3 Levels of Investment: $20, $40, $60 Mil. Feedstock Conversion Rate Held Constant –Assumed no increased efficiency

7. Comparison of Lignocellulosic and Grain Ethanol Variable Costs LignocellulosesFeed Grain Lime/Denaturant0.0480.037 Inhibitor/Enzymes0.0110.055 Hydrogen/Chemicals0.0530.028 Natural Gas0.0270.152 Electricity0.0260.042 Steam/Maint. Materials0.0490.037 Cooling Water/ Misc. Costs0.0600.028 Labor0.0420.092 Administrative Cost0.0150.046 Total variable cost/gal (excluding feedstock)0.3310.517 * Feedstock costs are $0.53 for lignocellulose and $0.79 for grain.

8. Comparing the Net Cash Income for the 30 MMGY Lignocelluloses Plant and the 30 MMGY Feed Grain Plant

9. Comparing the Ending Cash for the 30 MMGY Lignocellulose Plant and the 30 MMGY Feed Grain Plant

10. Comparing the Real Net Worth for the 30 MMGY Lignocelluloses Plant and the 30 MMGY Feed Grain Plant

11. Conclusions Lignocellulosic Plant Has: –Higher NCI, EC, RNW –Reduced probability of negative outcomes More Potential for Lignocellulosic Production Highlights Importance of Risk Analysis