An integrated supply chain: A large scale complementarity model for the biofuel markets

• Published in: Biomass & bioenergy 2016-03, Vol.86, p.88-104
• Main Authors: Najmi, Ali, Shakouri G., Hamed, Nazari, Sahar
• Format: Article
• Language: English
• Subjects: Biofuel supply chain; Decentralized supply chain; Infrastructure investment; Mixed complementarity problem (MCP)
• ISSN: 0961-9534; 1873-2909
• DOI: 10.1016/j.biombioe.2016.01.010

Sometimes, a new technology can have a significant impact on other technologies and existing processes. The planning and implementation of certain policies in order to adapt these new technologies with existing processes is essential. Advanced hydrocarbon (drop-in) biofuel production is an emerging technology that has the potential to influence the existing petroleum supply chain and thus change the equilibrium quantity and prices. This paper addresses a large scale multi-period complementarity model for an advanced hydrocarbon biofuel supply chain integrated with existing petroleum refineries. Market players include suppliers, convertors, deconstruction operators, storage operators, transportation operators and emission auctioneer as well as consumers. The model is multimodal combining multiple transportation modes, seasonal, and other data regarding the current situation of the market, and all the players are assumed to be perfectly competitive. This model simultaneously optimizes the supply chain design and finds the equilibrium quantity of feedstocks, crude oil and final products in the integrated supply chain. Although the main focus of this article is on the mathematical formulation, the numerical simulations for a real case study for Iran are illustrated. This demonstrates the effectiveness of the model in studying the effect of different scenarios on the current supply chain of crude oil based derivatives. •Drop-in biofuel production as an emerging technology will influence existing petroleum supply chain.•We model the impacts of drop-in biofuel technology on the current hydrocarbon supply chain.•The integrated model will change the equilibrium quantity and prices.