BiofuelEconomics
Birgir Örn SmárasonElín Ósk Reynisdóttir
Sustainable Energy OptionsUAU212FGroup 3
Introduction to Biofuel economics
Promise as a substitute for fossil fuels
Costs of biofuels are highly dependent on feedstock, process, land and labour costs, credits for byproducts, agricultural subsidies, food (sugar) and oil market.
Biofuel roadmap. Biofuel supply grows rapidly and reaches 32 EJ in 2050 (IEA, 2011).
Economic Benefits
Renewable feedstocks
Carbon emissions can be offset by their feedstocks carbon uptake
Biofuels can be produced domestically
Economic Costs
Biofuel feedstocks include many crops that would otherwise be used for human consumption
Land use patterns may change, resulting in GHG emissions
Biofuel production and processing practices can release GHGs
The quantity of food brought to market might decrease
Water quality could suffer
Biofuel production cost
F Production cost projections. Estimates reflect global averages (IEA, 2011).
USD 2 to 48/GJ for liquid and gaseous biofuels
US cents 3.5 to 25/kWh (USD 10 to 50/GJ) for electricity or CHP systems larger than about 2 MW,
USD 2 to 77/GJ for domestic or district heating systems with feedstock costs in the range of USD 0 to 20/GJ
Methane
Produced by Sorpa Domestic production Forreign currency usage is saved Domestic jobs
Benefits of using methane for the customer
Assumptions: Biofuel car in use for 15 years Travel distance per year is 16.000 km Fuel usage per 100 km is 10l
According to Sorpa the fuel savings are 0,556 Euros per liter if bio-methane is used
That gives the total savings in fuel cost for a car 13.333 Euros or 2.100.000 Icelandic kronas
Macroeconomic benefits in using Methane
According to Sorpa the foreign currency savings in Iceland are 10.000 Euros per car.
There off due to Icelandic bio-methane 8.200 Euros (given that 30% of retail price for petroleum is cost in foreign currency).
And there off due to CO2-eq. Savings 1.800 Euros (Given CO2-eq. Savings = 33 Euros/Tkg).
Biodiesel from rapeseed
The cost for growing one hectare of rapeseed is the following in Icelandic kronas:
Tillage, seeding and fertilizing 30.000
Fertilizers 70.000
Seeds 7-10 kg 10.000
Threshing 20.000
Other costs 20.000
Total cost 150.000
Biodiesel from rapeseed
The income for growing one hectare of rapeseeds in Icelandic kronas is the following:
Middlings, 2 tons 150.000
Vegetable oil, for example 100kg 100.000
Biodiesel, for example 900kg 150.000
Straws 50.000
Glycerol, recycled through a distillation 25.000
Other income 25.000
Total income 500.000
Bioenergy from micro-algae
Example from Iceland – Biodiesel factory
Example of a biodiesel factory in northern Iceland, making biodiesel from rapeseed
The total investment cost for the biodiesel plant in norther Iceland is estimated to be 31.5 million ISK or 251.000 USD
Example from Iceland – Biodiesel factory
Financial cost - Working capital is 90,000 USD in 2010 and 2013 but 80,000 USD in 2014 and 10,000 in 2017
Total financing is 538,000 USD
Example from Iceland – Biodiesel factory
Revenue Price of biodiesel. 79.1 ISK/L or about 0.643 USD/L. Price of Animal Meal: (Rapeseed Meal): 60 ISK/kg or about 0.48 USD/kg. Price of Glycerin: 14.7 ISK/kg or about 0.12 USD/kg.
The author concluded that the project was on the boarder of being fesible. With a minus 24,000 USD NPV of equity and a 14% IRR of equity. Despite a negative NPV and an IRR of equity under MARR, which is 15%, the sensitivity analysis finds that only a 10% higher price for the byproduct of rapeseed meal will result in 22% IRR of equity instead of 14%.