Profit allocation in collaborative bio-energy and bio-fuel supply chains

Forest-based biomass is an important renewable source for generating bio-energy and bio-fuels, while it has high feedstock costs and a complex supply chain. Therefore, many previous studies focused on optimizing forest-based biomass supply chains to improve its competitiveness. The main question after optimization is the allocation of benefits among supply chain entities. Allocation based on game theory methods can be useful and has been used on collaboration in transportation activities in forestry, but allocation of benefits to individual participants in forest-based biomass supply chains has not been done before. This thesis addresses this gap using concepts of game theory. A case involving three bio-product conversion plants (denoted as plant A,B,C) in British Columbia is studied, and collaboration among plants is defined as the exchange of sawmill residues. An optimization model is presented to determine biomass flow and technology type at each plant, with the goal of maximizing the net present value of the total profit. The results indicate the collaboration would generate $61 million, which is more profitable than plants operating individually. To distribute the total profit, a number of allocation methods are investigated, including the Shapley value, the nucleolus, proportional methods, methods based on separable and non-separable costs (ECM, ACAM, CGM), and the equal profit method (EPM). The comparison of methods reveals that the Shapley value, the nucleolus, ACAM, and CGM generate similar stable results in which plant A, B, and C could save 0.2%, 3.7%, and 620%, respectively, while EPM gives a different stable allocation, where the relative saving reduces to 7% for plant C, and increases to 0.4% and 7% for plant A and B. The relative saving obtained by plants is also investigated through revenue and cost break-down analysis, which shows plant A and C make the largest portion of profit by selling bio-fuel, and plant B is highly dependent on the sales of sawmill residues. Furthermore, a sensitivity analysis is conducted to evaluate the impact of changes in biomass availability, biomass costs, bio-product demand, bio-product prices, and discount rate. It is observed the profitability of collaboration is closely related to the market situation of bio-oil.Forestry, Faculty ofGraduat