Framework for Examining the Economic Feasibility of Small Scale Alcohol Plants

The feasibility of producing fuel alcohol from grain has received much attention from the Midwest and Plains States over the last few years. There has been interest in plants ranging from quite small on farm stills to very large, fuel-feed complexes costing many millions of dollars. As a result of this interest, several studies of the economic feasibility of large-scale fuel alcohol plants were conducted and published in the late 1970. More recently, a few studies of the economics of smaller-scale plants have been initiated, and some of the results are now beginning to appear in print (Hutchinson and Dobbs; Atwood and Fischer).Except for extension oriented materials, (e.g., Dobbs; Doering) however, there has as yet been little detailed analysis of the set of interrelated procurement, production, marketing, and financial organization factors which influence the economic feasibility of small-scale plants. The purpose of this Staff Paper is to specify the methodological components required for such an analysis. The methodology will be illustrated with preliminary data and analysis from research underway with South Dakota State University\u27s pilot fuel alcohol plant. Components of plant feasibility analysis which receive consideration are: 1.access to and cost of the feedstock input; 2. plant capital and operating costs; 3. utilization, transportation, and marketing of the plant\u27s fuel and animal feed products; and 4. organizational and financial considerations for a small-scale plant