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One of the fundamental concepts of economics is opportunity cost. The opportunity cost of a choice is the forgone benefit of the next best alternative. A common agricultural example arises when a landowner decides to farm or rent his or her cropland. If the land is farmed, rent no longer can be charged. That forgone rent is the opportunity cost of farming the land. Estimating the opportunity cost of a choice can be challenging. You have to identify major considerations and then value them. Many choices have nonfinancial dimensions that can be...
While North Dakota has tremendous natural gas resources in the form of associated gas,the infrastructure to collect natural gas and move it is not fully developed, as evidenced by the continued flaring of gas. However, this is expected to change soon and in a big way. One of the activities I’m regularly involved with is siting new facilities. It’s fun to pull down a map, push pins, draw lines and evaluate communities against prioritized criteria. Among the most critical criterion for siting new biorefineries and other bio-based processing fac...
I recently mentioned that consumers should begin watching the price of E85 and E10 as we enter a period where fuels with higher blends of ethanol could have a lower cost on an energy equivalent basis. Prices are now within a few cents at my regular gas station in Fargo, and there is at least one station in town where E85 is sold at a significant discount, which is more than enough for one to go out of his or her way to fuel a vehicle. How long this situation persists depends on a number of...
Today, natural gas is among the biggest issues in renewables because its low cost has disrupted global energy and manufacturing, including biofuels and bioproducts. While its price has made it a desirable fuel for heat and power generation and a feedstock to produce other chemicals and fuels, the impacts on biofuels and bioproducts have been good and bad. Let’s start with the bad. The relatively low cost of natural gas has obliterated the business plans of many renewable projects. Five years ago, many developers looked forward to c...
Last week, an industry colleague forwarded to me an article that criticized corn-based ethanol on a number of fronts. Among the article’s major criticisms was that corn-based ethanol uses more energy to produce than it delivers, a very powerful claim that resonates well, true or not. To investigate the issue, scientists often calculate a fuel’s energy return on energy invested, or EROI. The arithmetic is simple because it’s just energy output divided by energy input. However, the results can vary greatly depending on the data and assum...
