August 10, 2006

Ethanol Costs will Go Down

The chart, titled "Learning Curve - The Example of Brazilian Ethanol as a Base for Biofuels", prepared by BNDES, Brazil's federal development bank, shows how ethanol production costs decreased significantly between 1980 and 1998.

Another "inconvenient truth" for those who would deny the economic feasibility of ethanol is that, as our learning curve goes up, the cost of production will come down. That is the documented experience of Brazil as reported by our friend Henrique Oliveira of Ethablog in his article titled LEARNING CURVE: ETHANOL PRODUCTION COSTS DECREASE 75% IN 25 YEARS.

As the chart above shows, between 1980-1998 the price of production went down from nearly $700 to $200 per cubic meter. It is estimated to be 25% of the starting cost today with the trend continuing to go down. Part of the reason is that the rapidly rising consumption created an economy of scale. There were also improvements in technology, logistics, and infrastructure as the industry matured.

This happened without any expansion of the types of feedstock being used. It is expected that the development of cellulosic feedstock conversion technology will enable more plant matter (i.e., corn stover and agricultural waste) to be converted. It will also enable cheaper, uncultivated crops, forestry waste, and urban waste biomass to be used which will further depress the price of production.

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1 comment:

Henrique Oliveira said...

It is important to point out that J. Goldemberg, the author of the chart, was the dean (president) of USP (Universidade de Sao Paulo), Latin America's largest university, and a very respected scholar, internationally. Mr. Goldemberg's bio can be easily accessed with a Google search.