Optimization models for biorefinery supply chain network design under uncertainty

Abstract

<p>Biofuel industry has attracted much attention due to its potential to reduce dependency on fossil fuels and contribute to the renewable energy. The high levels of uncertainty in feedstock yield, market prices, production costs, and many other parameters are among the major challenges in this industry. This challenge has created an ongoing interest on studies considering different aspects of uncertainty in investment decisions of the biofuel industry. This study aims to determine the optimal design of supply chain for biofuel refineries in order to maximize annual profit considering uncertainties in fuel market price, feedstock yield, and logistic costs. In order to deal with the stochastic nature of parameters in the biofuel supply chain, we develop two-stage stochastic programming models in which Conditional Value at Risk (CVaR) is utilized as a risk measure to control the amount of shortage in demand zones. Two different approaches including the expected value and CVaR of the profit are considered as the objective function. We apply these models and compare the results for a case study of the biomass supply chain network in the state of Iowa to demonstrate the applicability and efficiency of the presented models.</p>