ECONOMIC ASPECT OF BIOFUEL PRODUCTION - unifg.it · ECONOMIC ASPECT OF BIOFUEL PRODUCTION Bioethanol Important factors: • The number of chemicals that are produced in the ethanol

ECONOMIC ASPECT OF BIOFUEL PRODUCTIONECONOMIC ASPECT OF BIOFUEL PRODUCTION

Energy production from biomass in the EU

CONTENTCONTENT


Background about biofuels production

Introduction Economic Aspect

supply chain for biofuel

Economic aspect: Bioethanol & BiodieselBiogas

INTRODUCTIONINTRODUCTION


BACKGROUND ABOUT BIOFUELS PRODUCTION

INTRODUCTIONINTRODUCTION


BACKGROUND ABOUT BIOFUELS PRODUCTION

GENERATION FEEDSTOCK EXAMPLE

First generation biofuelsSugar, starch, vegetable

oils, or animal fatsBioalcohols, vegetable oil,

biodiesel, biosyngas, biogas

Second generation biofuels

Non food crops, wheat straw, corn, wood, solid

waste, energy crop

Bioalcohols, bio oil, biogydrogen, bio fisher tropsh diesel, wood

dieselThird generation

biofuelsAlgae Vegetable oil, biodiesel

Fourth generation biofuels

vegetable oil, biodiesel Biogasoline

Table 1. Classification of biofuels based on their production technologies

INTRODUCTIONINTRODUCTIONEVALUATION OF BIOFUELS




ENVIRONMENTALENVIRONMENTAL

Greenhouse gas reductionsReducing of air pollutionBiodegradabilityCarbon sequestration



ENERGY SECURITYENERGY SECURITY

Domestic TargetsSupply reliabilityReducing use of fossil fuelsRenewability



Sustainability Increased number of rural manufacturing

jobs Increased income taxes Agricultural development International competitiveness Reducing the dependency on imported

petroleum

ECONOMICSECONOMICS

INTRODUCTIONINTRODUCTIONECONOMIC ASPECT


Feedstock costinvestment costsfixed and variable costdistribution and retail costspolicies

ECONOMICSECONOMICS

INTRODUCTIONINTRODUCTIONTHE IMPACT OF FEEDSTOCK


Figure 1. Feedstock price development over the period 1996-2009

INTRODUCTIONINTRODUCTIONSUPPLY CHAIN FOR BIOFUEL




Feedstock Production: comprises the cultivation of biomass resources such as corn, crop residues, and woody residues used as raw material inputs for biofuels production.

Feedstock Logistics: consists of harvesting or collecting feedstock from the area of production, processing it for use in biorefineries, storing it between harvests, and delivering it to the plant gate.

Conversion: This is an industrial activity in which the raw biomass is converted into biofuel along with one or more co products.

Distribution and retailing of finished fuels: This involves distribution of finished fuel for blending with fossil fuels. In the case of electricity, this involves the transmission and distribution of electricity to demand centers.

Consumption of bioenergy: This refers to the ultimate end use in which the biofuel enters the fuel tank of a vehicle or provides electricity




Liquid Biofuels

• Bioethanol

• Biodiesel


Liquid BiofuelsBioethanol

• Feedstock costs

• Production costs

• Taxation

• Bioethanol vs. Convetional fuels

• Bioethanol in other countries

Biodiesel

• Feedstock costs

• Production costs

• Taxation

• Biodiesel vs. diesel

• Biodiesel in other countries


Bioethanol

2nd Generation of Biofuels• lignocellulosic materials

such as woody biomass and waste residues from forestry.

1st Generation of Biofuels• starch (cereal) crops,

such as corn, wheat, barley and rye

• sugar cropssuch as sugar cane, sugar beet and sweet sorghum.


Bioethanol production chainDepending on the biomass source the steps generally include:1. Storage2. Crushing and juice extraction3. Dilution4. Hydrolysis for starch and woody biomass5. Fermentation with yeast and enzyme6. CO2 storage and ethanol recapture7. Evaporation8. Distillation9. Waste water treatment10. Fuel Storage


BioethanolBioethanol Production from

lignocellulosic materials


Bioethanol

Limiting factors of the bioethanol industry:

• feedstock prices• bioethanol production costs• oil prices• taxation of energy products


Bioethanol

Feedstock Prices

(Techno-economic analysis of Bio-alcohol production in the EU of 2002)

Euro/1000 L Bioethanol


BioethanolProduction Costs

•The production cost for sugar beet takes advantage fromthe existing sugar and alcohol industry, so that the processing costs are the lowest.

•Two salient facts have to be underlined:-The most important share in the final cost calculations is attributable to the procurement costs of bio-mass. -The second salient fact is that the processing cost for straw is rather high.


Bioethanol

In the following table an estimated cost of bio-ethanol production is presented.

Production Costs


Bioethanol

Important factors:• The number of chemicals that are produced in the ethanol industry • Potentially even more in the 2nd generation bio-ethanol industry, serving a wide range of uses in the pharmaceuticals, cosmetics, beverages and medical sectors as well as for industrial uses. • The market potential for bioethanol is therefore not just limited to transport fuel or energy production but has potential to supply the existing chemicals industry

Production Costs


BioethanolTaxation

Bio-ethanol reduction costs are given according to the linear relationship:

Cost = 108 + 2.86*WP

where WP stands for wheat price.


Bioethanolvs. Conventional fuels• One of the biggest barriers to large-scaledevelopment of biofuels remains their higher economic costs compared to conventional fuels.Estimates show that bioethanol in the EU becomes competitive when the oil price reaches US$ 70 a barrel while in the US it becomes competitive at US$ 50 - 60 a barrel. For Brazil the threshold is much lower – between US$ 25 and US$ 30 a barrel.

•There are also differences depending on the feedstock used. •The current high oil prices mean that biofuels production have become competitive in some parts of the world.


Bioethanol

- Sugar cane ethanol in Brazil costs $0.30/lge free-on-board (FOB). Thiscost is competitive with that of gasoline at oil prices of $40-$50/bbl ($0.3-$0.4/lge). In other regions, costs can be more than $0.40- $0.50/lge, although potential exists for cost reduction.

- Ethanol from maize, sugar-beet and wheat cost around $0.6-$0.8/lge(excl. subsidies), potentially reducible to $0.4-$0.6/lge.

- Ligno-cellulosic ethanol currently costs around $1.0/lge at the pilot scale,assuming a basic feedstock price of $3.6/GJ for delivered straw (whereas cereals for ethanol production may cost $10-$20/GJ). The cost is projected to halve in the next decade with process improvement, scaling up of plants, low-cost waste feedstock and co-production of other by-products (bio-refineries).

Different countries


BioethanolDifferent countries

The production costs for firts-generation ethanol in Brazil, the United States and Europe.


Biodiesel

Different bio-diesel types:

•Esterificated oilsNon esterificated oilsWaste vegetable oil

The most common bio-diesel technology uses the so-called "transesterification" technique, a process that combines oils and fats with mono-alcohols in the presence of a base catalyst to form fatty acid esters (biodiesel).

Limiting factors:• feedstock prices• biodiesel production costs• oil prices• taxation of energy products.


Biodiesel

Flow diagram and mass balance of the production of biodiesel


BiodieselFeedstock prices

The following graph shows the biodiesel feedstock price development according to the report of the German Biomass Research Center in 2008.


BiodieselFeedstock prices

•Once a stage production is reached, costs tends to fall overtime due to technical progress.

•In order to consider bio-diesel as a real choice for farmers, the final price paid for non-food rape-seed must be the same as the food rape-seed price


BiodieselProduction costs

•The typical cost of a bio-diesel manufacturing plant may range, according to different sources, around 100 Keuro/1000 t/y.


BiodieselProduction costs

Two salient facts have to be underlined with respect to this cost structure:

• The large share in the final cost attributable to the procurement costs of biomass.

• The selling of by-products is a significant source of income that contributes to make the whole process competitive.


BiodieselTaxation

Partial or total exemptions on bio-fuels should be followed by an increase on the supply of raw material, and conditioned on a long term supplying commitment by farmers. As the development of technologies using cheaper raw materials increases, the total exemption could be unnecessary and should be modulated, depending on the economic results obtained.


Biodieselvs. Diesel

•It has been proved that at current production costs bio-diesel is not competitive against gas-oil.•Blends are a real opportunity for bio-diesel development, giving an appropriate income for farmers, competitive prices for final consumers and even providing a less polluting image to major oil companies.


BiodieselBiodiesel in different countries

IEA Energy Technology Essential of 2007

• Biodiesel from animal fat varies $0.4-$0.5/lde, biodiesel from vegetable oil is $0.6-$0.8/lde and biodiesel from BTL is more than $0.9/lde. • Biodiesel from animal fat is currently the cheapest option ($0.4-$0.5/lde) while traditional trans-esterification of vegetable oil is at present around $0.6-$0.8/lde. Cost reductions of $0.1-$0.3/lde are expected from economies of scale for new processes. The cost of BTL diesel from ligno-cellulose is more than $0.9/lde (feedstock $3.6/GJ), with a potential reduction to $0.7- $0.8/lde.


BiodieselBiodiesel in different countries

IEA Energy Technology Essential of 2007

• In the US, fuel distributors are required to increase the annualvolume of biofuels up to nearly 30 bnl by 2012 with the targets for “renewable and alternative fuels” raised in 2007 to 140 bnl by 2017. Targets and mandates also exist in non OECD countries (e.g., Brasil, China).

ECONOMIC ASPECT FOR BIOFUELS PRODUCTIONECONOMIC ASPECT FOR BIOFUELS PRODUCTION

Biogas production Biogas production

Organic Matter

Biogas: Mainly 60-70%CH4

Digestato

ECONOMIC ASPECT: BIOGASECONOMIC ASPECT: BIOGAS


Biogas production in 2010

36%

12%

52%

landfill urban waste co-digestion plant





INITIAL INVESTMENT € 42 MILLION

CAPACITY 550 MW

AREA 20 ha


POTENTIAL INPUT PRICE kW/h

250 kW RAW FOOD € 0,750

500 kW RAW FOOD € 0,735

250 kW LANDFILLS € 0,450

500 kW LANDFILLS € 0,435


• Measure n. 6/92 of the Comitato Interministeriale dei Prezzi (CIP) has encouraged the production and the use of biogas;

•In 1999, Enel paid 290 ₤/kWh to producers that yielded the full potential;

•From 2002, with Green Certificates, you must enter in the grid electricity from renewable sources equal to 2.35% of the total input;

• if you sell electricity with Green Certificates, are obtained 12-13 € cents per kWh



We will examine a herd of cattle composed by 300 units

Expected production of methane 300 m³/day

Expected production of biogas 525 m³/day

Electricity production 900 kWh/day

Heat production 210 kWh/day

5% of electricity is used for operation of the plant;

is used only 70% of the electricity;

the remaining 30% is spent for heating the reactor

Methane volume 73 m³/day

Electricity production sold 855 kWh/day

Useful thermal production 735 kWh/day


PRICESENERGY CONSUMED BY THE COMPANY

0,18 € / kWh93000 kWh

ENERGY SOLD 0,08 € / kWh197700 kWh

GREEN CERTIFICATES 0,225 € / kWhMETHANE PRICE 1 € / m³

REVENUES

REVENUE FOR THE ENERGY CONSUMED BY THE COMPANY IN A YEAR

93000 kWh * 0,18 € / kWh = 16740 €

REVENUE FOR THE ENERGY SOLD IN A YEAR

197700 kWh * 0,08 € / kWh = 15816 €

REVENUE FOR THE SEVINGS OF METHANE IN A YEAR

5000 m³ * 1 €/ m³ = 5000 €


The initial investment was € 400,000 and was funded with an amortization of 15 years.

The annual payments are about € 40,000 per year.

The profit is € 42,000.

POLICY TARGETPOLICY TARGET


Biofuels has increased substantially in the EU. (quadruplicated to 2.4 million tonnes in 2004) (EurObserv’ER, 2005)

Targets for the share of bio-fuels. The Member States are free to choose a strategy to achieve these targets, i.e. use of biofuels in pure form (in fleets), in blends with fossil fuels, or a combination of the two.


Biodiesel Vs BioethanolBiodiesel Vs Bioethanol

. .


Another way to produce biodiesel, is through micro-algae cultivation.

This way of production is still in experimental level, but the scenarios

and research on the field are quite promising and establish an

alternative production pathway for the future.

The economic analysis for biogas, it was derived, especially for the

farmers, that the production and the sale resulting by biogas, represents

an excellent investment useful for management to earn constant cash

flow to be used for current manage on the company. Farms, which

already receive incentives for their business, may receive other about

renewable energy.

.


.

There is a high expenditure of fossil fuels to create biofuels, from

transportation of feedstocks (i.e., corn) and the fossil fuels that are used

in the energy intensive process of creating nitrogen fertilizer, pesticides,

and powered irrigation. A full long-term ethical analysis would require

the impacts over generations of crops, generations of farming

communities, ecosystem survival and impact on any moral agent to be

considered-

.


MARIAROSARIA

UNIVERSITY FOGGIA

ROBERTO RANA

EPROBIO COURSE

THANKS VERY MUCHTHANKS VERY MUCH

ECONOMIC ASPECT OF BIOFUEL PRODUCTION - unifg.it · ECONOMIC ASPECT OF BIOFUEL PRODUCTION Bioethanol Important factors: • The number of chemicals that are produced in the ethanol

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