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Options analysis for long-term capacity design and operation of a lignocellulosic biomass refinery
Affiliation:1. Department of Chemical Engineering, Louisiana State University, United States;2. Department of Renewable Natural Resources, Louisiana State University, United States;1. Clearinghouse for Military Family Readiness, The Pennsylvania State University, 402 Marion Place, University Park, PA 16802, USA;2. School of Social and Behavioral Health Sciences, Oregon State University, 410 Waldo Hall, Corvallis, OR 97330, USA;3. Department of Agricultural Economics, Sociology and Education, The Pennsylvania State University, 107 Ferguson Bldg, University Park, PA 16802, USA;1. Department for Health Services Research, University of Bremen, Bremen, Germany;2. School of Management, Massey University, Auckland, New Zealand;3. Department of Population Medicine, Harvard Medical School and Harvard Pilgrim Health Care Institute, Boston, MA, USA;4. School of Pharmacy, University of Auckland, Auckland, New Zealand;1. Institute of Biochemical Engineering, Technische Universität Braunschweig, Germany;2. Center of Pharmaceutical Engineering, Technische Universität Braunschweig, Germany;3. Micronit GmbH, Dortmund, Germany;4. Process and Systems Engineering Center (PROSYS), Department of Chemical and Biochemical Engineering, Technical University of Denmark, Denmark;1. Département de microbiologie et d’infectiologie, Faculté de médecine et des sciences de la santé, Université de Sherbrooke, Sherbrooke, QC J1E 4K8, Canada
Abstract:The growth of the lignocellulosic fuels has been hindered by technological and market uncertainty. This paper optimizes strategic investment decisions by prospective biobased fuel and chemical enterprises. A real options-based stochastic integer programming model is developed in this paper. We model a hypothetical, vertically integrated lignocellulosic enterprise that produces cellulosic ethanol and biosuccinic acid. Uncertainty is represented in bioproduct demands and prices. Strategic options including investment in research and development, investments in a flexible production platform and deferral of project investment are modeled. A hypothetical market model is also developed to correlate crude oil prices with the evolution of bioproduct markets. The discounted value of equity free cash flows is optimized. The optimal results include multiple capacity design plans based on the long term evolution of bioproduct markets. Monte Carlo simulations are also conducted to quantify the risk adjusted NPV's and returns on investment for the optimal capacity design trajectories.
Keywords:Real options  Stochastic integer programming  Multi-product biorefineries  Uncertainty  Lignocellulosic biomass
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