Ethanol Distribution, Dispensing, and Use: Analysis of a Portion of the Biomass-to-Biofuels Supply Chain Using System Dynamics

The Energy Independence and Security Act of 2007 targets use of 36 billion gallons of biofuels per year by 2022. Achieving this may require substantial changes to current transportation fuel systems for distribution, dispensing, and use in vehicles. The U.S. Department of Energy and the National Renewable Energy Laboratory designed a system dynamics approach to help focus government action by determining what supply chain changes would have the greatest potential to accelerate biofuels deployment. The National Renewable Energy Laboratory developed the Biomass Scenario Model, a system dynamics model which represents the primary system effects and dependencies in the biomass-to-biofuels supply chain. The model provides a framework for developing scenarios and conducting biofuels policy analysis. This paper focuses on the downstream portion of the supply chain–represented in the distribution logistics, dispensing station, and fuel utilization, and vehicle modules of the Biomass Scenario Model. This model initially focused on ethanol, but has since been expanded to include other biofuels. Some portions of this system are represented dynamically with major interactions and feedbacks, especially those related to a dispensing station owner’s decision whether to offer ethanol fuel and a consumer’s choice whether to purchase that fuel. Other portions of the system are modeled with little or no dynamics; the vehicle choices of consumers are represented as discrete scenarios. This paper explores conditions needed to sustain an ethanol fuel market and identifies implications of these findings for program and policy goals. A large, economically sustainable ethanol fuel market (or other biofuel market) requires low end-user fuel price relative to gasoline and sufficient producer payment, which are difficult to achieve simultaneously. Other requirements (different for ethanol vs. other biofuel markets) include the need for infrastructure for distribution and dispensing and widespread use of high ethanol blends in flexible-fuel vehicles.