Back to OurEnergyLibrary search




The Supply Risks and Resilience of Biofuels

The Supply Risks and Resilience of Biofuels

Full Title:  The Supply Risks and Resilience of Biofuels
Author(s):  Hamed Ghoddusi, Daniel Cross-Call, Jessika E. Trancik
Publisher(s):  Delft University of Technology
Publication Date: June 1, 2012
Full Text: Download Resource
Description (excerpt):

Biofuels have been evaluated based on their greenhouse gas emissions, costs, and potential scale of production. Here we argue that the resilience against supply risks should be considered in addition to these previously-proposed metrics for evaluating the scalability potential of transportation biofuels1. Biofuels rely on agricultural production as their key input, which is subject to various risks. A risky supply in conjunction with a highly inelastic demand for transportation fuels can cause price fluctuations, profit volatility, and quantitative shortages which imply negative consequences for biofuels firms, the biofuels industry, and consumers. Thus, it is an important issue both at the firm level as well as from a public policy point of view. We decompose biofuels feedstock risks into supply shocks (due to random events) and competing demand shocks (a function of demand for food crops which is partially unpredictable) and show that the historical yields and production of major crops used in the biofuels industry show a significant level of volatility. We compare first and second generation biofuels and then discuss various strategies for reducing the supply risks of biofuels.   We relate the resilience of the biofuels supply chain to scale, technological specifications, input and output market structure, and contractual setups. Our framework is applied to the case of biofuels; however, it provides general insights and analytical frameworks to analyze the scalability potential of other emerging technologies.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of OurEnergyPolicy.org, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

Sign up for our Press Release Distribution List

    Your Name (required)

    Your Email (required)

    Please sign me up to receive press releases from OurEnergyPolicy.org.