Case Study: Purdue University achieves clearer aviation-biofuel investment risk assessment with Palisade @RISK

Will Aviation Biofuels Fly? @RISK Helps Assess Two Different Government Policies

Purdue University used Palisade’s @RISK to evaluate whether building an aviation biofuel plant could be economically viable and to compare two government incentive options (reverse auction vs. capital subsidy). The core challenge was high production cost and substantial uncertainty across key drivers—crude oil price, feedstock availability and cost, conversion yields and costs, environmental impacts, and government policy—that deter private investment.

Using Palisade’s @RISK, the Purdue team ran a DCF model with PERT distributions for capital cost, feedstock cost, yield and hydrogen cost and projected fuel-price scenarios to produce breakeven and risk metrics. They found breakeven prices of about $0.88/L (no fuel-price trend) and $0.79/L (increasing trend), showed NPV turns positive at 10‑year reverse‑auction contracts, and demonstrated that reverse auctions reduce investor risk far more than capital subsidies (probability of loss falling by nearly 40% to about 23% with a 15‑year reverse auction), giving policymakers a quantifiable, data‑driven basis for preferring reverse auctions.

Purdue University

Wallace Tyner

Purdue University