Transcript The Economics of biofuel production and use
The Economics of Biofuel Production and Use
Guy Hitchcock
Biofuel production
Cost elements of biofuel production Feedstock Conversion process
By product sales
Fuel distribution and retail
Conversion inputs
Liquid biofuel feedstocks
Biodiesel – oil bearing crops – – Rape seed, sunflower, soya oil, palm oil Waste vegetable oils Bioethanol – starch and sugar crops – Cereals, sugar beet, sugar cane All feedstocks are traded on the food commodity markets Typically feedstock accounts for 80-90% of biofuel cost
Rape seed, wheat and crude oil prices, 1997-2007
Biomethane feedstocks Commercial or domestic waste may provide a revenue for AD as a waste treatment option Agricultural manures are used in partnership with farmers, with digestate spread back to land Energy crops have a cost of lost food production
Second generation fuels
Wide range of input feedstocks – Woody biomass, waste, etc Generally lower cost feedstocks Non-food crops so less competition with food Can use whole crops so get better land use and energy balance
Conversion costs
Capital cost of conversion plant Operating cost of plant such as labour, energy costs and other input materials Revenue from by products – – – Biodiesel: crush cake, glycerine Wheat ethanol: distillers grains Biomethane: bio-fertilisers
Conversion estimates for biodiesel from rape seed
Conversion costs in €/litre Plant cap ex Plant op ex By-product income Total Small
0.425
SAC Large
0.227
0.265
0.160
0.184
0.043
IEA Concawe Small Large Large
0.046
0.076
0.145
0.20
0.05
-0.023
Conversion estimates for ethanol from wheat
Conversion costs in €/litre IEA Concawe BTG ITPS Plant Cap Ex Plant Op Ex By-product income Total Small
0.10
0.24
0.07
0.27
Large
0.06
0.22
0.07
0.072
0.148
0.084
0.21
0.136
0.28
0.15
0.13
0.012
0.210
0.114
0.108
Biomethane and 2 nd conversion costs generation Biomethane – – Less data on costs Swedish experience suggests 0.65-0.75 €/kg 2 nd generation – – Not yet commercially available Study estimates for cellulosic ethanol 0.16 to 0.26 €/litre
Fuel tax incentives
VAT fixed for all fuels Fuel duty – – – 100% reduction for all biofuel 100% reduction for a limited amount Partial reduction Obligations – UK RTFO provides revenue from tradable certificates
50 40 30 20 10 0 110 100 90 80 70 60 Diesel pump prices across Europe including duty and VAT
Tax and Duty Excluding Tax and Duty
Cost of RME VS EU diesel excluding taxes
Price of RME vs UK diesel including taxes
Cost of wheat ethanol vs EU gasoline excluding taxes
Price of wheat ethanol vs UK gasoline including taxes
Summary of production economics
Feedstock cost accounts for 80-90% of cost of liquid biofuels Feedstocks are traded on food markets and so affected by food demand Taxes are next biggest impact with duty reductions generally needed to make biofuels cost competitive
Biofuel use
Cost elements of biofuel use
Vehicle costs – – Capital cost of vehicles Additional maintenance and servicing costs Fuel costs – – Base cost of fuel Fuel consumption and mileage Taxes and financial incentives
Vehicle costs - 1
Biodiesel – – No additional capital Possible additional service costs • Additional fuel filter changes • Possible shorter service intervals Bioethanol – – – €0-1,500 additional capital for FFV Conversion kits approx €500 No additional servicing costs
Ford Focus FFV
Vehicle costs 2
Biomethane capital costs – – – cars and vans: €2,500 - €5,000 dual-fuel diesel heavy duty vehicles: €25,000 - €40,000 spark ignition heavy duty vehicles: €35,000 €50,000 Biomethane servicing – possibly 0.01€/km more than diesel
Fuel costs
Fuel
Biodiesel Bioethanol
Fuel cost
Similar to diesel Similar to gasoline Biomethane bi-fuel or dedicated 30-50% less than diesel Biomethane – dual fuel 30-50% less than diesel
MPG
1-5% less than diesel 25% less than gasoline Same as gasoline, 15-20% less than diesel Similar to diesel
Taxes and financial incentives
Vehicle grants Company car tax reductions – as are available for example in the UK and Sweden Reduction on congestion charges or road tolls Reduced parking charges for biofuel cars
Full life costing
Capital cost of the vehicle, amortised over its life Fuel cost over the life of the vehicle accounting for fuel consumption and annual mileage Servicing and maintenance costs National and local incentives such as vehicle tax reductions, congestion charge reductions and parking benefits
Full life costing: EU average gasoline and diesel, biofuels with no duty
Full life costing: UK tax and duty rates for all fuels
Summary of use economics
– – – – Cost effectiveness of biofuel use depends on: – vehicle costs and how these are amortised over the life of the vehicle; service and maintenance costs; fuel costs and fuel consumption for the vehicle; vehicle mileages; national and local taxes and incentives These factors will vary from use to use, and between countries, regions and even cities.