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Biofuel Economics

Biofuel Economics. Sustainable Energy Options UAU212F Group 3. Birgir Örn Smárason Elín Ósk Reynisdóttir. Introduction to Biofuel economics. Promise as a substitute for fossil fuels Costs of biofuels are highly dependent on feedstock, process, land and labour costs,

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Biofuel Economics

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  1. Biofuel Economics Sustainable Energy Options UAU212F Group 3 Birgir Örn Smárason Elín Ósk Reynisdóttir

  2. 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).

  3. 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

  4. Biofuel production cost • 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 F Production cost projections. Estimates reflect global averages (IEA, 2011).

  5. Methane • Produced by Sorpa • Domestic production • Forreign currency usage is saved • Domestic jobs

  6. 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

  7. 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).

  8. Biodiesel from rapeseed • The cost for growing one hectare of rapeseed is the following in Icelandic kronas:

  9. Biodiesel from rapeseed • The income for growing one hectare of rapeseeds in Icelandic kronas is the following:

  10. Bioenergy from micro-algae

  11. 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

  12. 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

  13. 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%.

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