10 October 2005

Basic Biodiesel Economics

In order for Canola derived biodiesel to be commercially viable we would like it to be the same price as fossil diesel. At the same time we have to acknowledge the value of Canola oil and meal as food products. Farmers should sell to whichever consumer that pays more. Hence the commercial price for Canola food products sets a lower bound for how expensive fossil fuels have to be before we can consider biodiesel as a viable alternative sans subsidies.

A list of Canola prices can be found here, denominated in Canadian dollars. To summarize since 2000:

Year

Crop Average

Canola Oil Price

(C$/ton)

Crop Average

Canola Meal Price

(C$/ton)

2000

568.84

156.27

2001

485.54

205.05

2002

633.10

222.80

2003

813.70

214.38

2004

811.16

240.76

2005

660.22

205.40

Mean

662.09

207.44

Standard Deviation

131.09

28.36


For the degummed oil, one metric ton is approximately 1000 L of diesel equivalent or 220 US gallons. Given an exchange rate of about C$0.85/US$, we can find that the basic input price for the oil should be around $C0.66/L or US$2.5/gallon. The cost to process vegetable oil into esters needs to be added to that to determine a final price for biodiesel. Without tax breaks for biodiesel it is not competitive with the fossil fuels. The price of crude will have to approximately double for biodiesel to be competitive.

The story for the meal to methane is slightly different. If we get 500 kg of methane gas from every 1000 kg of meal input, we'll get out about 28 GJ worth of gas. That works out to about US$6/mcf for natural gas which is about half the going rate in North America. If the bioreactor could be built sufficiently cheap this could end up being cost effective now. This is ignoring the inherent value in the remaining sludge as fertilizer.

How about Kyoto carbon credits you ask? Methane will produce about 2.75 tons of CO2 per ton burned. At US$35/ton(CO2) that's about a $50 carbon credit per ton of meal. Alternatively it's US$1.70/mcf. (Not sure why I'm pricing carbon credits in US dollars here...)

For methyl oleate ester you have 38 hydrogens, 19 carbons, and 2 oxygens per ~300 amu molecule. The fuel to CO2 multiplier is about the same as methane at 2.8. On a mass basis biodiesel as 87 % the energy content of fossil diesel. We can apply for a Kyoto credit of about US$85 per ton of Canola we transesterify into biodiesel. This works out to approximately US$0.40/gallon. So the Kyoto credits can make a substantial impact on the cost of biodiesel for those countries that have signed the treaty and are serious about implementing it. It might be useful here to also take a look at costs for other smog and acid rain pollutants which the USA does trade in.

These are some very rough calculations but they show about where the break even points are for biofuels. What's most interesting to me is that because natural (fossil) gas is so expensive biogas may be the most economically viable biofuel in North America at the moment. Surely there are cheaper sources of biomass available than high-protein canola meal. Since the gas situation isn't likely to improve soon investments in this area are plausible. Biodiesel, on the other hand, isn't ready for the big time quite yet.

9 comments:

Robert Schwartz said...

Wouldn't the better business model be to feed the meal to animals, sell the fattened animals to meat processors and use their manure as the feed stock for methane?

Robert McLeod said...

Probably. Cows in particular expel a lot of methane flatulence too which can be captured.

Robert Schwartz said...

"flatulence too which can be captured."

I am not sure I want to think about that.

Robert McLeod said...

The average dairy cow produces 114 kg of methane per year. Maybe we should try standing behind one with a lit bic lighter.

TFox said...

Here's a pre-Katrina post comparing off-the-shelf canola oil to diesel in canola rich Alberta. True, you're not paying road taxes on the food product, but it's also true that most biodiesel users start with waste vegetable oil, not the fancy fit-for-human-consumption stuff.

Anonymous said...

Rather than joke about dangerous thinks like ignitinng bovine methane emissions why not do something constructive? There is plenty of government money for developing arse pumps of all sorts. A solar panel, small compressor, tank, and battery are all that is needed to stop all of that energy from going to waste.

Let no fart go uncaptured!

KBaker said...

To Robert Mcleod: are you still involved in this stuff? If so, I would like to ask you a couple of questions. Please drop me a note at kbaker@wbfuels.com

Greg said...

I noticed some difference between the average prices you gave and the ones on the link you provided
I was wondering if there is a reason for this that I am unaware of. Example Canola meal 2005 average
Your's $205.40
Link's $167.44
Thanks Greg

Anonymous said...

Just to set you all straight here, Methane comes out the front end of cows, not the back. stand down the back end with your lighter by all means, but you will probably just get sprayed. The methanogenic bacteria live in the rumen, the first of the four compartments of the stomach. It is extremely difficult to capture the gas because it is very diluted.

If feedlotters had their way, there would be no methane production- it detracts from energy production for the animal.