IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v37y2009i1p190-203.html
   My bibliography  Save this article

Understanding the reductions in US corn ethanol production costs: An experience curve approach

Author

Listed:
  • Hettinga, W.G.
  • Junginger, H.M.
  • Dekker, S.C.
  • Hoogwijk, M.
  • McAloon, A.J.
  • Hicks, K.B.

Abstract

The US is currently the world's largest ethanol producer. An increasing percentage is used as transportation fuel, but debates continue on its costs competitiveness and energy balance. In this study, technological development of ethanol production and resulting cost reductions are investigated by using the experience curve approach, scrutinizing costs of dry grind ethanol production over the timeframe 1980-2005. Cost reductions are differentiated between feedstock (corn) production and industrial (ethanol) processing. Corn production costs in the US have declined by 62% over 30 years, down to 100$2005/tonne in 2005, while corn production volumes almost doubled since 1975. A progress ratio (PR) of 0.55 is calculated indicating a 45% cost decline over each doubling in cumulative production. Higher corn yields and increasing farm sizes are the most important drivers behind this cost decline. Industrial processing costs of ethanol have declined by 45% since 1983, to below 130$2005/m3 in 2005 (excluding costs for corn and capital), equivalent to a PR of 0.87. Total ethanol production costs (including capital and net corn costs) have declined approximately 60% from 800$2005/m3 in the early 1980s, to 300$2005/m3 in 2005. Higher ethanol yields, lower energy use and the replacement of beverage alcohol-based production technologies have mostly contributed to this substantial cost decline. In addition, the average size of dry grind ethanol plants increased by 235% since 1990. For the future it is estimated that solely due to technological learning, production costs of ethanol may decline 28-44%, though this excludes effects of the current rising corn and fossil fuel costs. It is also concluded that experience curves are a valuable tool to describe both past and potential future cost reductions in US corn-based ethanol production.

Suggested Citation

  • Hettinga, W.G. & Junginger, H.M. & Dekker, S.C. & Hoogwijk, M. & McAloon, A.J. & Hicks, K.B., 2009. "Understanding the reductions in US corn ethanol production costs: An experience curve approach," Energy Policy, Elsevier, vol. 37(1), pages 190-203, January.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:1:p:190-203
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(08)00399-6
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael LeBlanc & Anthony Prato, 1983. "Ethanol Production from Grain in the United States: Agricultural Impacts and Economic Feasibility," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 31(2), pages 223-232, July.
    2. Foreman, Linda F., 2001. "Characteristics and Production Costs of U.S. Corn Farms," Statistical Bulletin 262285, United States Department of Agriculture, Economic Research Service.
    3. Fruin, Jerry E. & Halbach, Daniel Walter, 1986. "The Economics Of Ethanol Production And Its Impact On The Minnesota Farm Economy," Staff Papers 14190, University of Minnesota, Department of Applied Economics.
    4. Hohmann, Neil & Rendleman, C. Matthew, 1993. "Emerging Technologies in Ethanol Production," Agricultural Information Bulletins 309679, United States Department of Agriculture, Economic Research Service.
    5. Tiffany, Douglas G. & Eidman, Vernon R., 2003. "Factors Associated With Success Of Fuel Ethanol Producers," Staff Papers 14155, University of Minnesota, Department of Applied Economics.
    6. Kane, Sally M. & Reilly, John M., 1989. "Economics of Ethanol Production in the United States," Agricultural Economic Reports 308070, United States Department of Agriculture, Economic Research Service.
    7. Shapouri, Hosein & Duffield, James A. & Graboski, Michael S., 1995. "Estimating the Net Energy Balance of Corn Ethanol," Agricultural Economic Reports 34005, United States Department of Agriculture, Economic Research Service.
    8. Grubler, Arnulf & Nakicenovic, Nebojsa & Victor, David G., 1999. "Dynamics of energy technologies and global change," Energy Policy, Elsevier, vol. 27(5), pages 247-280, May.
    9. Leath, Mack N. & Meyer, Lynn H. & Hill, Lowell D., 1982. "U.S. Corn Industry," Agricultural Economic Reports 305461, United States Department of Agriculture, Economic Research Service.
    10. Meekhof, Ronald & Gill, Mohinder & Tyner, Wallace, 1980. "Gasohol: Prospects and Implications," Agricultural Economic Reports 307886, United States Department of Agriculture, Economic Research Service.
    11. Foreman, Linda F., 2006. "Characteristics and Production Costs of U.S. Corn Farms, 2001," Economic Information Bulletin 7205, United States Department of Agriculture, Economic Research Service.
    12. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
    13. Shapouri, Hosein & Duffield, James A. & Wang, Michael Q., 2002. "The Energy Balance of Corn Ethanol: An Update," Agricultural Economic Reports 34075, United States Department of Agriculture, Economic Research Service.
    14. Marland, G. & Turhollow, A.F., 1991. "CO2 emissions from the production and combustion of fuel ethanol from corn," Energy, Elsevier, vol. 16(11), pages 1307-1316.
    15. Gavett, Earle E. & Grinnell, Gerald E. & Smith, Nancy L., 1986. "Fuel Ethanol and Agriculture: An Economic Assessment," Agricultural Economic Reports 308014, United States Department of Agriculture, Economic Research Service.
    16. Rendleman, C. Matthew & Shapouri, Hosein, 2007. "New Technologies in Ethanol Production," Agricultural Economic Reports 308483, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lavigne, Amanda & Powers, Susan E., 2007. "Evaluating fuel ethanol feedstocks from energy policy perspectives: A comparative energy assessment of corn and corn stover," Energy Policy, Elsevier, vol. 35(11), pages 5918-5930, November.
    2. Eaves, James & Eaves, Stephen, 2007. "Renewable corn-ethanol and energy security," Energy Policy, Elsevier, vol. 35(11), pages 5958-5963, November.
    3. Méjean, Aurélie & Hope, Chris, 2008. "Modelling the costs of non-conventional oil: A case study of Canadian bitumen," Energy Policy, Elsevier, vol. 36(11), pages 4205-4216, November.
    4. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
    5. Ali, Mir B., 2002. "Characteristics and Production Costs of U.S. Wheat Farms," Statistical Bulletin 262280, United States Department of Agriculture, Economic Research Service.
    6. Chen, Huayi & Ma, Tieju, 2021. "Technology adoption and carbon emissions with dynamic trading among heterogeneous agents," Energy Economics, Elsevier, vol. 99(C).
    7. R. Lal, 2007. "Carbon Management in Agricultural Soils," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(2), pages 303-322, February.
    8. Ali, Mir B., 2004. "Characteristics and Production Costs of U.S. Sugarbeet Farms," Statistical Bulletin 262276, United States Department of Agriculture, Economic Research Service.
    9. Rout, Ullash K. & Fahl, Ulrich & Remme, Uwe & Blesl, Markus & Voß, Alfred, 2009. "Endogenous implementation of technology gap in energy optimization models--a systematic analysis within TIMES G5 model," Energy Policy, Elsevier, vol. 37(7), pages 2814-2830, July.
    10. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, vol. 60(C), pages 27-40.
    11. Ross D. Heiman & Hikaru Hanawa Peterson, 2008. "Determinants of Premiums Received by Organic Field Crop Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 729-749.
    12. Malça, João & Freire, Fausto, 2006. "Renewability and life-cycle energy efficiency of bioethanol and bio-ethyl tertiary butyl ether (bioETBE): Assessing the implications of allocation," Energy, Elsevier, vol. 31(15), pages 3362-3380.
    13. Prasad, Ravita D. & Bansal, R.C. & Raturi, Atul, 2014. "Multi-faceted energy planning: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 686-699.
    14. Jean-François Mercure, 2015. "An age structured demographic theory of technological change," Journal of Evolutionary Economics, Springer, vol. 25(4), pages 787-820, September.
    15. Yu, C.F. & van Sark, W.G.J.H.M. & Alsema, E.A., 2011. "Unraveling the photovoltaic technology learning curve by incorporation of input price changes and scale effects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(1), pages 324-337, January.
    16. Mercure, J.-F. & Pollitt, H. & Chewpreecha, U. & Salas, P. & Foley, A.M. & Holden, P.B. & Edwards, N.R., 2014. "The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector," Energy Policy, Elsevier, vol. 73(C), pages 686-700.
    17. Fthenakis, Vasilis & Kim, Hyung Chul, 2009. "Land use and electricity generation: A life-cycle analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(6-7), pages 1465-1474, August.
    18. Doering, Otto C., III, 2004. "U.S. Ethanol Policy: Is It the Best Energy Alternative?," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 5, pages 1-8, December.
    19. Handayani, Kamia & Krozer, Yoram & Filatova, Tatiana, 2019. "From fossil fuels to renewables: An analysis of long-term scenarios considering technological learning," Energy Policy, Elsevier, vol. 127(C), pages 134-146.
    20. Schoots, K. & Kramer, G.J. & van der Zwaan, B.C.C., 2010. "Technology learning for fuel cells: An assessment of past and potential cost reductions," Energy Policy, Elsevier, vol. 38(6), pages 2887-2897, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:37:y:2009:i:1:p:190-203. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.