Different Considerations With Ethanol Production Costs

With all the news about ethanol and other alternative fuels being a cheaper way to run our cars these days, a strong future consideration should be given to ethanol production costs. In a business model, production costs are always considered to obtain the end price; and if production costs increase, the final price must also increase. The base material to produce ethanol has been a subject of many news items. What has not been talked about are the costs associated with ethanol production.

A List of Ethanol Production Costs

As with any type of production, there are associated items that must be taken into consideration. Beyond the cost of the base material, there is first the cost to create that material. Ethanol production costs associated with corn and sugarcane are higher than other forms of ethanol production because of the need for fertilizers, seed, land use, harvesting, diesel fuel or natural gas consumption during transport or refining.

When considering ethanol production costs for starch crops such as corn or sugarcane, account must also be given to the cost of the land and labor taken away from food production and livestock feed which use the same base material. And as with food crop production, ethanol production costs are adversely affected by weather conditions and market spikes and dips. If too much of the base material is produced, or used, ethanol production costs will change to reflect this thus causing a change in market price and profitability.

There is also the cost of refining the base material into ethanol. With smaller facilities and producers, ethanol production costs will be higher than with multiple unit producers and larger conglomerates. These larger producers can spread the ethanol production costs across a wider area, and can weather most situations if one particular plant should have problems. Also in consideration is the ethanol production efficiency that each producer has.

Varied Methods Affect Ethanol Production Costs

Outside of using starch based crops for material, various business models are being tested with other forms of biomass that create different ethanol production costs. Such items as wood, brewers waste, switchgrass and others have much lower production costs because they are not part of the overall food chain. Other types of ethanol have higher production costs associated with them. One of these is the creation of biodiesel. The majority of this fuels production cost is in vegetable oil seed procurement, transport and storage; along with the oil extraction process this accounts for up to 75% of the production cost.