Conventional fossil fuels dominate the marketplace, and their prices are a direct competitor for drop-in biofuels. This paper examines the impact of fuel selling price uncertainty on investment risk in a fast pyrolysis derived biofuel production facility. Production cost specifications are gathered from previous research. Monte Carlo analysis is employed with uncertainty in fuel selling price, biomass cost, bio-oil yield, and hydrogen price parameters. Experiments reveal that fuel price has a large impact on investment risk. A reverse auction would shift risk from the private sector to the public sector and is shown to be more effective at encouraging private investment than capital subsidies for the same expected public cost. 1. Introduction This study is a technoeconomic analysis of the fast pyrolysis process. The main objective is to evaluate the effect of fuel price and technical uncertainty on the economic feasibility of biofuels created by catalytic fast pyrolysis using a circulating fluidized bed reactor. Previous studies have focused on creating reliable estimates of the initial capital and operating costs of a biorefinery. This study analyzes the effect of uncertainty in capital cost, hydrogen price, bio-oil yield, feedstock cost, and final product selling price on the appeal of project investment to a private investor. It directly evaluates the effect of two policy instruments—a reverse auction, which effectively fixes the price of the biofuel over the life of the project, and a capital subsidy. This research provides policy makers with information on how these policies could affect biofuel investment decisions. Supply of advanced biofuels is expected to be a growing part of future liquid supply. US government investment in renewable power and fuels was $36 billion in 2012 [1]. Total US investment in the clean energy sector was $268 billion in 2012, a 500% increase since 2004 [2]. Imported petroleum products as a percentage of US petroleum consumption have decreased from 60% to 40% between 2005 and 2012 [3]. Supply of advanced biofuels is expected to be a growing part of future liquid supply [4, 5]. Research and development of economically attractive alternative fuel sources are ongoing in many nations around the world. Catalytic fast pyrolysis is a process used to convert biomass to a bio-oil. This process is chosen for this study because of the relatively low cost per gallon [6–9]. Pyrolysis oil can be refined to diesel, gasoline, or jet fuel. Detailed descriptions of the fast pyrolysis process are available in the previous literature
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