Industrial and Management Systems Engineering


Date of this Version

Summer 7-24-2012


Mahsa Khoshnoud, 2012. Quantity and capacity expansion decisions for ethanol in Nebraska and a medium sized plant", Masters Thesis, Industrial Engineering and Management Systems Department, University of Nebraska Lincoln.


A THESIS Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Master of Science, Major: Industrial and Management Systems Engineering, Under the Supervision of Professor Fred Choobineh. Lincoln, Nebraska: August, 2012

Copyright (c) 2012 Mahsa Khoshnoud


Corn-based ethanol is the leader of sustainable sources of energy in the United States due to the abundance of corn and the popularity of ethanol-gasoline mixes. Over the past decade, ethanol production has risen from 1.5 million gallons in 1999 to 13 million gallons in 2011. This increase in production requires expansion of ethanol plants. Since Nebraska is the second highest producer of ethanol, we focus our research on the expansion of ethanol plants in Nebraska.

The aim of this study is to develop an optimization model for capital investments in ethanol in Nebraska and a medium sized ethanol plant with 100 million gallons capacity in 2011. The model is developed for a firm in Nebraska and uses a planning horizon of five years. The problem is formulated as a dynamic programming model and solved using spread sheets. The data used are gathered from published papers, USDA reports, official Nebraska government website and Renewable Fuel Association reports (RFA). We find that the best strategy for a medium sized plant with capacity of 100 million gallons is to expand the capacity by 50 million gallons in the first year and reject the decision to expand in the following years up to 2016. The best expansion for ethanol in Nebraska is 200, 100 and 100 million gallon for 2012, 2013 and 2014 respectively and no expansion in 2015 and 2016. A scenario analysis is used to illuminate the decision space for different scenarios of profit margin and ethanol demand fluctuations.

Adviser: Fred Choobineh