Kenan Institute researchers are helping North Carolina plot a strategic path to a new biofuels industry and a sustainable energy future

North Carolina has set an ambitious goal of producing 10 percent of its own liquid fuels by 2017.

It is no small task. North Carolinians consume 5.6 billion gallons of petroleum-based liquid fuels each year to power their vehicles and equipment. None of it is produced locally.

“Developing a new industry that can produce 600 million gallons of liquid fuel annually in 10 years will require the collective talents and energy of many market players—from the farmers and foresters who produce the feedstocks to the policymakers who create the regulatory and incentive structure to the companies that convert North Carolina feedstocks into biofuels and distribute them to consumers,” says Mark Conlon, vice president of sector development for the Biofuels Center of North Carolina. Conlon is tasked with implementing North Carolina’s Strategic Plan for Biofuels Leadership.

The potential payoff is significant.

“There are many aspects that will benefit the North Carolina taxpayer,” Conlon says. “One, we’ll have an industry that doesn’t exist in North Carolina, so there will be new jobs, new revenue, new tax bases.”

Developing a sustainable market model

Key to achieving North Carolina’s biofuels goal is identifying the specific crops and biomass that offer the highest potential for creating a sustainable biofuels industry in North Carolina.

The Biofuels Center has turned to the Kenan Institute of Private Enterprise to develop the complex financial models the center will use to evaluate its options and decide where and how to deploy its business-development efforts.

“The state has a diverse agricultural economy,” says Conlon. “We are abundant in forest resources and can grow things like sugar beets, sweet sorghum, industrial sweet potatoes, all of which have potential as biofuels feedstocks. What needs to be understood is whether the potential is there for the landowner to make money and the feedstock to be converted to biofuels at a price that is competitive with petroleum-based fuels.”

The project has two main components. First is developing the financial models that allow Biofuels Center staff to plug in the myriad variables in the biofuels supply chain and production cycle that will affect the ultimate price of production. That will help them assess which options have the highest potential for creating a sustainable biofuels sector.

Next, the institute will assess the economic impact in job creation and income if the state achieves its production goal. That will help policymakers evaluate the potential return on any investments they choose to make.

Promoting economic growth

Among the potential returns are new production facilities and jobs for rural parts of North Carolina, many of which have suffered devastating economic declines from the demise of their traditional industries, particularly tobacco and textiles.

“Producing 600 million gallons of biofuels would require somewhere in the neighborhood of five to 10 very large plants, which would be located predominantly in rural communities because that is where the feedstocks are,” says Conlon.

That is of prime interest to Thomas Stith, economic development program director for the Kenan Institute, who heads the study team. Much of the work of Stith’s office focuses on finding ways to promote economic growth in eastern North Carolina.

“If we can develop a sustainable biofuels industry in North Carolina and help transform our state’s rural economies by building on each region’s agricultural and forestry assets,” says Stith, “it would clearly be a win-win for everyone—for the Biofuels Center and for our state.”

 

Entrepreneurship • Economic Development • Global Competitiveness

Frank Hawkins Kenan Institute of Private Enterprise
Kenan-Flagler Business SchoolThe University of North Carolina at Chapel Hill
Campus Box 3440, The Kenan Center, Chapel Hill, NC 27599-3440 USA
919/962-8201 • kenan_institute@unc.eduwww.kenaninstitute.unc.edu