Prepared for SEDC 2014 April 3-5, 2014 Chantilly, VA

1. Investigating Investment Priorities for Biofuel Production and the Influence of Regulations, Policies, and Emergent Conditions Prepared for SEDC 2014 April 3-5, 2014 Chantilly, VA Elizabeth B. Connelly1, Lisa C. Peterson2, Andres F. Clarens2, and James H. Lambert1 1Systems and Information Engineering, University of Virginia 2Civil and Environmental Engineering, University of Virginia

2. Agenda • Background & Motivation • Methods • Application • Results • Conclusions

3. Background & Motivation

4. Background Commercial Aviation Alternative Fuels Initiative (CAAFI) • Formed in 2006 to promote the development of alternative jet fuel • Coalition of airlines, aircraft and engine manufacturers, energy producers, researchers, international participants and U.S. government agencies

5. Background (cont.) Major concerns regarding aviation fuel: • Supply security • Affordability and price stability • Environmental impacts • Reduce GHG emissions • Avoid carbon tax

6. Background (cont.) Meets “do no harm” ground rules (Hendricks et al., 2011): • Does not compete with arable land food or feed production • Does not require freshwater resources • Does not cause deforestation or adverse social or environmental harm • Can be scaled to assure secure sustainable sufficient supply • Can be competitive with JP-8 or JetA-1 • Life cycle carbon reduction, >50% fossil CO2 reduction

7. Motivation “Biofuels lifecycle and sustainability research will provide better information to decision makers on the trade-offs and opportunitiesassociated with increased biofuels production.” -- Lisa Jackson EPA Administrator (2009)

8. Motivation (cont.) “The fundamental challenge facing the renewable jet fuel industry today is that there are simply no commercial quantities of renewable jet fuel available anywhere in the world…Because there is insufficient feedstock combined with an inadequate supply chain infrastructure” -- Dr. ChristophWeber CEO of JATRO

9. Biojet Fuel Supply Chain

10. Feedstocks Algae Agricultural Residues Energy Crops Municipal Solid Waste Forest Residues

11. Conversion Pathways

12. Investment Considerations • Feedstock availability and productivity • Biorefinery location • Processing technology tradeoffs • Overall economic feasibility

13. Methods

14. Methodology Background Montibeller and Franco (2010) on MCDA aiding strategic decisions • Addresses cognitive burden associated with evaluating a large set of interconnected strategic decisions

15. Methodology Background (cont.) Goodwin & Wright (2001) on scenario analysis • Addresses uncertainty yet avoids estimating subjective probabilities • Story telling via scenario planning is attractive to managers • Incorporates a variety of viewpoints about the future

16. Methodology Background (cont.) Belton and Stewart (2002) suggest integrating scenario analysis and MCDA • Biases from the heuristics employed by unaided decision makers are likely to be avoided • Transparency and flexibility can maximize the participation of decision makers from diverse backgrounds and encourage new perspectives • Formal decision process creates documented and defensible rationale for choosing a particular strategy

17. Methodology Background (cont.) Risk has been defined as… The measure of the probability and severity of adverse effects. W.W. Lowrance, On Acceptable Risk (1976) The effect of uncertainty on objectives. ISO 31000 (2009) The influence of scenarios on priorities. Lambert et al. (2013, 2012, 2011)

18. Methodology Background (cont.) Applications of integrated scenario analysis and multicriteria analysis: • Coastal infrastructure in Alaska (Karvetski et al., 2011a) • Electricity capacity expansion (Martinez et al., 2011) • Energy security in military installations (Karvetski et al., 2011b) • Transportation infrastructure assets (Thekdi and Lambert, 2013; Lambert et al., 2012; Schroeder & Lambert, 2011) • Facility energy investments (Karvetski & Lambert, 2012) • Radiological disaster preparedness (Parlak et al., 2012) • Business processes for a risk organization (Tenget al., 2012)

19. Methods • Decision aiding techniques • Multi-criteria decision analysis • Scenario planning • Objectives: • Develop criteria, initiatives, and scenarios of importance for developing a biojet fuel industry • Determine weights for importance • Use value function to rank the initiatives for each scenario • Determine which scenarios influence the prioritization of initiatives

20. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative influence of criteria Identify criteria for decision-making Assign relative influence of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios

21. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative influence of criteria • Sc= {c1,…, cm} represents the m criteria used for decision making • Sx= {x1,…, xn} represents the n investment alternatives being considered • Sec= {ec1,…,ecp} represents the p emergent conditions that are used for scenario building • Ss= {s1,…,sq} represents the q scenarios that address future uncertainties Identify criteria for decision-making Assign relative influence of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios

22. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative influence of criteria Weight each criterion in terms of influence for the as-planned scenario Normalize the weights: wi0’=wi0 /Σwi0 Identify criteria for decision-making Assign relative influence of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios

23. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative influence of criteria Define matrix A that contains scores xij indicating how well each initiative xi addresses each criterion cj Identify criteria for decision-making Assign relative influence of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios x1,1⋯ x1,n ⋮ ⋱ ⋮ xm,1 ⋯ xm,n A = 0 if initiative idoes not address criterion j 0.33 if initiative isomewhat addresses criterion j 0.67 if initiative iaddressescriterion j 1 if initiative istrongly addresses criterion j xij=

24. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative importance of criteria Reassess the relative influence of criteria under each scenario Identify criteria for decision-making Assign relative importance of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios 9 × wi0’ if the influence of criterion iincreases with scenario k 3 × wi0’ if the influence of criterion iincreases somewhat with scenario k 1 × wi0’ if the influence of criterion istays the same with scenario k 1/3 × wi0’ if the influence of criterion idecreases somewhat with scenario k 1/9 × wi0’ if the influence of criterion idecreases with scenario k wik =

25. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative importance of criteria Determine the rank order of initiatives using the value function v(xi) defined for each scenario sk where v(xi)k ∈[0,100]: v(xi)k = 100 x Σi=1,mwikxij= 100 x w1k ⋯ wmk Identify criteria for decision-making Assign relative importance of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios x1,i ⋮ xm,i

26. Identify emergent conditions Define scenarios as combination of conditions Methods (cont.) Identify investment initiatives Reassess relative importance of criteria • For each initiative, calculate the absolute value of the change in rank for each scenario compared to the baseline • Influential scenarios are characterized by: • Comparatively high average changes in rank • Most extreme changes in rank (positive or negative) Identify criteria for decision-making Assign relative importance of criteria Assess how well initiatives address criteria Determine rank order of initiatives Determine influential scenarios

27. Application

28. Criteria

29. Initiatives Initiatives span biojet fuel supply chain

30. Emergent Conditions Identify emergent conditions addressing: (1) markets, (2) policies, (3) technologies

31. Define scenarios as combinations of conditions Scenarios

32. Assessment of initiatives

33. Weighting criteria under scenarios Reassess relative influence of criteria Relative influence of criteria equal in baseline scenario wi’= α xwi

34. Results

37. Influential Scenarios

38. Conclusions

39. Accomplishments • Identified criteria by which stakeholders in the Commonwealth of Virginia can evaluate actions, decisions, and other initiatives to develop a regional biojet fuel industry • Identified thirty-seven initiatives for building a biojet fuel industry, considering six stages of the supply chain • Identified twenty-five emergent conditions of importance to farmers, fuel producers, airlines, airports, and travelers, among others • Constructed five future scenarios of concern to these stakeholders

40. Accomplishments (cont.) • Tested the priorities for the biofuel initiatives with scenario-based preferences for the five scenarios that are combinations of the emergent conditions • Identified of impactful scenarios for establishing a biofuel industry • Provided decision support for the DOAV and other stakeholders to preserve aviation operations in response to scenarios of emergent future conditions

41. Acknowledgments This material is based upon work supported by the National Science Foundation under Grant No. CBET – 1067563. This material is also based upon a project supported jointly by the Virginia Department of Aviation and the Virginia Center for Transportation Innovation and Research. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation, the Virginia Department of Aviation, or the Virginia Center for Transportation Innovation & Research.

42. Contact information: Elizabeth Connelly ec5vc@virginia.edu https://www.linkedin.com/in/elizabethconnelly Questions?