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.