The Economics of Biofuel Production and Use Guy Hitchcock.
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Transcript of The Economics of Biofuel Production and Use Guy Hitchcock.
![Page 1: The Economics of Biofuel Production and Use Guy Hitchcock.](https://reader034.fdocuments.in/reader034/viewer/2022051515/551442385503466d1a8b5874/html5/thumbnails/1.jpg)
The Economics of Biofuel Production and Use
Guy Hitchcock
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Biofuel production
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Conversion processFeedstock Fuel distribution
and retail
By product sales
Conversion inputs
Cost elements of biofuel production
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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
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Rape seed, wheat and crude oil prices, 1997-2007
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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
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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
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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
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Conversion estimates for biodiesel from rape seed
SAC IEA Concawe
Small Large Small Large Large
Plant cap ex 0.425 0.227 0.046
Plant op ex 0.076
By-product income
0.265 0.184 0.145
Total 0.160 0.043 0.20 0.05 -0.023
Conversion costs in €/litre
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Conversion estimates for ethanol from wheat
IEA Concawe BTG ITPS
Small LargePlant Cap Ex 0.10 0.06 0.072 0.28 0.012Plant Op Ex 0.24 0.22 0.148 0.210By-product income
0.07 0.07 0.084 0.15 0.114
Total 0.27 0.21 0.136 0.13 0.108
Conversion costs in €/litre
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Biomethane and 2nd generation conversion costs Biomethane
– Less data on costs– Swedish experience suggests 0.65-0.75
€/kg
2nd generation– Not yet commercially available– Study estimates for cellulosic ethanol
0.16 to 0.26 €/litre
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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
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Diesel pump prices across Europe including duty and VAT
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Tax and Duty
Excluding Tax and Duty
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Cost of RME VS EU diesel excluding taxes
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Price of RME vs UK diesel including taxes
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Cost of wheat ethanol vs EU gasoline excluding taxes
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Price of wheat ethanol vs UK gasoline including taxes
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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
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Biofuel use
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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
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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
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Ford Focus FFV
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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
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Fuel costs
Fuel Fuel cost MPG
Biodiesel Similar to diesel 1-5% less than diesel
Bioethanol Similar to gasoline 25% less than gasoline
Biomethane bi-fuel or dedicated
30-50% less than diesel
Same as gasoline,15-20% less than diesel
Biomethane – dual fuel
30-50% less than diesel
Similar to diesel
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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
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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
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Full life costing: EU average gasoline and diesel, biofuels with no duty
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Full life costing: UK tax and duty rates for all fuels
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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.