Ethanol Plant Construct. Costs Are On the Rise

Rising feedstock prices and skyrocketing labor and construction costs are causing some Ethanol plant developers to rethink their construction plans, according to a study by Industrial Info Resources (www.industrialinfo.com).

The study says while just five years ago an ethanol plant could be built for around $1.30 to $1.40 per gallon of capacity — around $130 to $140 million in capital costs for a 100 million gallon per year plant — today’s plants are running in the range $2.00 to $2.30 per gallon of capacity, meaning the same 100 million gallon per year plant built five years ago for $140 million will now cost upwards of $230 million to build. Industrial Info says the rising cost is primarily due to limited worker availability, the rising costs of construction material and production equipment, and high corn prices. Most analysts believe the cost of corn will stabilize to around $3.50 per bushel next year, making ethanol plant development a more attractive decision.

Industrial Info says the ethanol industry boom is also affecting the rise in construction costs. Over the last year and a half, the industry has experienced unprecedented growth, and currently more than 80 plants are under construction in the United States. Labor costs are swinging upwards as well, as builders pay a premium for laborers just to get bodies onsite to move construction forward.

According to Industrial Info, Investor interest in ethanol production has also declined in recent months, leading to slowing new plant development. Start-up companies must raise around 40 to 60 percent equity in their projects before finding a lender for the remaining balance. Money lenders are approaching ethanol investment very cautiously with escalating corn process and drops in ethanol prices.

To download Industrial Info’s wall map detailing the North American Ethanol market, click here ($295).