Biomass, Energy, and Jobs: Feasibility Study for an Eco-Industrial Park Anchored by an Ethanol Bio-Refinery Final Report This report was prepared under an award from the U.S. Department of Commerce Economic Development Administration Grant #07-69-06433 Submitted by Leonard Mitchell, Esq., Executive Director, and Deepak Bahl, Program Director USC Center for Economic Development Sol Price School of Public Policy University of Southern California 386 Von KleinSmid Center Los Angeles, CA 90089-0041 April 30, 2012 This publication was prepared by the USC Center for Economic Development. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration. Authors The final report on Biomass, Energy,and Jobs: Feasibility Study for an Eco-Industrial Park Anchored by an Ethanol Bio-Refinery has been prepared under the overall supervision and guidance of Leonard Mitchell, Executive Director and Deepak Bahl, Program Director, USC Center for Economic Development. The four graduate students who made a contribution to this report are: Dmitry Galkin, Daniel Inloes, Gabriele Noriega-Ward, and Yin Xie. In addition, Michael Fatigati, Consultant and Dion Jackson, Adjunct Faculty, USC Price School of Public Policy were instrumental in advising on strategic sections and shaping the final report. 2 Table of Contents Introduction ..................................................................................................................................... 7 Unemployment Issue ................................................................................................................... 8 Environmental Issue .................................................................................................................... 9 Forest Fire Issue ........................................................................................................................ 10 Exceptionality of Southern California....................................................................................... 11 Local Economic Development Efforts ...................................................................................... 12 The Value Proposition .................................................................................................................. 13 Opportunities and Challenges Overview ................................................................................... 15 Electricity Production ................................................................................................................ 16 Biomass to Liquids Production ................................................................................................. 17 The Corn Dry Mill..................................................................................................................... 19 Biochemical Hydrolysis ............................................................................................................ 20 Thermochemical Production ..................................................................................................... 21 Hybrid Bio/Thermo Technology ............................................................................................... 23 Comparison to Corn Dry Mill ................................................................................................... 23 Other Biofuel Technologies ...................................................................................................... 28 Assessment and Comparison of Biofuel Processes ................................................................... 28 Real World Technology Examples ............................................................................................... 29 Sacramento Ethanol and Power Cogeneration Plant (SEPCO) ................................................. 30 Gridley Ethanol Project ............................................................................................................. 31 Collins Pine Cogeneration Facility ........................................................................................... 32 BlueFire Ethanol ....................................................................................................................... 32 Inbicon ....................................................................................................................................... 33 Demonstration Scale Projects .................................................................................................... 33 Other Production Factors .............................................................................................................. 34 Resource Yields ......................................................................................................................... 34 Development Risk ..................................................................................................................... 35 E85, E15/E10, Flex Fuel Vehicles, and Background for the Ethanol Market .......................... 36 Supply, Demand, and Price of Ethanol ......................................................................................... 37 3 Policy-Related Supply ............................................................................................................... 37 Policy-Related Demand ............................................................................................................. 38 Market Supply ........................................................................................................................... 39 Market Demand ......................................................................................................................... 41 Resource Supply ........................................................................................................................ 42 Considerations for Cost ............................................................................................................. 43 Relative Fuel Efficiency, Implications for Cost, and Public Policy ............................................. 44 Current Pricing for Ethanol ....................................................................................................... 45 Cost of Construction and Production ............................................................................................ 46 Financial Feasibility Model ....................................................................................................... 46 Logistics and Co-location .......................................................................................................... 48 Scaling ....................................................................................................................................... 48 Construction .............................................................................................................................. 49 Production: Variable Costs ........................................................................................................ 52 Revenue ................................................................................................................................. 54 Policy Incentives ....................................................................................................................... 54 Cash Flow Analysis ...................................................................................................................... 56 Commercial-Scale Facility ........................................................................................................ 56 Demonstration-Scale Facility .................................................................................................... 58 Economic Impact Assessment ...................................................................................................... 59 Principles of the Economic Impact Assessment ....................................................................... 59 Economic and Fiscal Impacts of a Cellulosic Ethanol Production Facility .............................. 61 The Eco-Industrial Park: Collaboration Improving Feasibility and Sustainability ...................... 63 Economic and Environmental Benefits of Co-location ............................................................. 63 Partners in an Eco-Industrial Park ............................................................................................. 66 Biomass Resources ....................................................................................................................... 69 Wildfire Mitigation Efforts ....................................................................................................... 69 Biomass Resource Assessment ................................................................................................. 70 Forest Biomass Collection Process ........................................................................................... 71 MSW Biomass Collection Process ............................................................................................ 72 4 Carbon Emissions Reduction ........................................................................................................ 73 Proposing a Site ............................................................................................................................ 73 GIS Modeling ...........................................................................................................................