| Summary: | First generation ethanol production has experienced rapid expansion but is now at a crossroads facing impending industry transformation. While Saskatchewan’s ethanol industry has benefited from demand and policy instruments that have guided substantial growth in recent years, changing policy and market dynamics present new challenges which are compelling the industry to adjust. This thesis examines three factors that are suspected to influence ethanol plant locational decisions. The development of an agent-based simulation model in this thesis will ascertain how transportation networks, market synergies, and subsidization influence location stability for an ethanol plant. The long term interaction of these factors is unknown, therefore do tradeoffs exist between these factors or is it conditional for all to be present?
Modeling factors that affect location stability through an agent-based approach creates a dynamic framework to understand how location attributes impact an ethanol agent’s longevity. It was found that location stability is affected by an ethanol agent’s distance to both primary transportation networks as well as product markets. Surprisingly, distance to DDGS (dried distillers grain with solubles) markets, a low value by-product of ethanol production, has a profound effect on location stability.
Policy instruments and industry subsidization are considered key ethanol development drivers and the surge in ethanol industry growth brought hopes of rural revitalization. In Saskatchewan, policy was developed to support small ethanol plants, those 25 Mmly (million litres per year) or smaller, aimed at increasing farmer investment and alternative markets for wheat. Measuring the effect of subsidization on location stability was fundamental to understanding how a post subsidized ethanol industry may look. The research found that subsidization of Saskatchewan’s ethanol industry dramatically affected economies of scale and location decisions, which left ethanol agents unable to compete in an increasingly competitive ethanol industry.
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