DISTRIBUTION
There is a risk that a project that made good financial sense at the feasibility stage may become untenable when other projects move into development in the same market, thereby potentially decreasing the projected throughput volumes.
decade-plus record of rapid expansion and continuing federal pressure to bolster energy independence through legislative mandates for alternative energy including biofuels, one might ask why more distribution projects are not coming on line. The answer partially lies in the inherent, or at times perceived, risks that an investor must endure during the period of time that is required for permitting and project development. A major concern for potential investors is identifying the right market. Generally, there is a perception that each market has a fixed amount of demand for ethanol distribution infrastructure. Therefore, most believe that each market can absorb only so many viable ethanol distribution projects. There is a risk that a project that made good financial sense at the feasibility stage may become untenable when other projects move into development in the same market, thereby potentially decreasing the projected throughput volumes. However, there is also an upside to this situation. With increased ethanol distribution infrastructure in a market, there is the potential for increased acceptance and use of ethanol in that market. Due to the increased efficiency of receiving ethanol, petroleum companies would have an increased incentive for discretionary blending of ethanol. There is also the possibility of increased blending proportions of ethanol into gasoline, which would increase ethanol demand. Another set of risks is based on several unknowns in the future of ethanol. There is the inherent risk of cellulosic ethanol plants
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ETHANOL PRODUCER MAGAZINE JUNE 2008