Socioeconomía

 

Technical and economical analysis of a combined biogas-ethanol-biodiesel plant in Central Chile

 

Análisis técnico y económico de una planta combinada de biogas-etanol-biodiésel en el Centro de Chile

 

José F. Reyes-Aroca^*, Cristian A. Vidaurre-Parra

 

¹ Departamento de Mecanización y Energía, Facultad de Ingeniería Agrícola, Universidad de Concepción. Vicente Méndez 595, casilla 537. Chillán, Chile. (jreyes@udec.cl) (cvidaurr@udec.cl). *Author for correspondence.

 

Received: September, 2012.
Approved: July, 2013.

 

Abstract

The economic feasibility and the technical consistency of a system to produce biofuels were analyzed in Central Chile in the year 2010. In this study, the biodiesel, ethanol, and biogas platforms were integrated to assess the internal rate of return (IRR) and net present value (NPV) indexes. The analysis included the influence of the type of alcohol used in the manufacture of biodiesel (ethanol versus methanol), the effect of the relative size of the platform of ethanol with respect to biodiesel, and the impact of the value of main agricultural feedstocks. The study used combinations of plant sizes of10 000-20 000 m³ y ^—1 for ethanol, and 20 00040 000 m³ y ^—1 for biodiesel, and in all the cases the biogas platform was projected with a generating capacity of 1 MW of electricity. The mass and energy flows were obtained through the balance of mass and energy of the integrated system. All cases studied showed that the impact of the price of grain was greater for ethanol than for biodiesel. According to the economic approach based on the NPV, the system presents negative economical indexes. Sensitivity analysis showed that for production of biodiesel with both methanol and ethanol the monetary flows are negative. There was a minimal change in NPV values with different interest rates of 10, 12 and 15 %. The analysis showed that no capital increase is generated as a result of the project, for any of the three scenarios.

Key words: biofuels, fuel cost, NPV (net present value), mass-energy balance.

 

Resumen

La viabilidad económica y la consistencia técnica de un sistema para la producción de biocombustibles se analizaron en Chile Central en el año 2010. En este estudio, las plataformas del biodiésel, etanol y biogás se integraron para evaluar los índices de la tasa interna de retorno (TIR) y el valor actual neto (VAN). El análisis incluyó la influencia del tipo de alcohol utilizado en la fabricación de biodiésel (etanol versus metanol), el efecto del tamaño relativo de la plataforma de etanol con respecto al biodiésel, y el impacto del valor de las principales materias primas agrícolas. El estudio usó combinaciones de tamaño de las plantas de 10 000 a 20 000 m³ año ^—1 para etanol y 20 000 a 40 000 m³ año ^—1 para biodiésel, y en todos los casos la plataforma de biogás se proyectó con una capacidad de generación de 1 MW de electricidad. Los flujos de masa y energía se obtuvieron a través del balance de masa y energía del sistema integrado. Todos los casos estudiados mostraron que el impacto del precio del grano fue mayor para etanol que para biodiésel. De acuerdo con el enfoque económico basado en el VAN, el sistema presenta índices económicos negativos. El análisis de sensibilidad mostró que para la producción de biodiésel con metanol y etanol, los flujos monetarios son negativos. Hubo un cambio mínimo en los valores de VAN con diferentes tasas de interés de 10, 12 y 15 %. El análisis mostró que no se genera aumento de capital como resultado del proyecto, para ninguno de los tres escenarios.

Palabras clave: biocombustibles, costo del combustible, VAN (valor actual neto), balance masa-energía.

 

INTRODUCTION

Global warming, the environmental pollution and the search of new energetic sources, are issues of discussion in every international panel. In Chile this topic has a high strategic meaning, due to its general relationship with the national economy, and specifically for the agricultural sector. In Chile 98 % of the energy used is imported; and 33 % of natural gas and 13 % of coal are produced in the country, while renewable energies account for 0.1 %. The high dependence on non-renewable sources, where about 47 % of the energy consumed is from petroleum and natural gas mainly imported (PROGEA, 2008), makes the country highly sensitive to price fluctuations and shortages in the supply. Therefore, a state policy for diversification and energy security, using sustainable renewable resources is a must. For the agricultural sector, this issue involves developing a clean and environmentally sustainable agriculture, which may supply energy and optimize the utilization of land resources.

In Chile, it is predictable that a policy in biofuels would have different impacts on the economy. First, a change in agriculture from food production to food production and energy products; then there should be an increased demand for agricultural products which contribute to better prices, and also an increase in food production along with its associated agricultural waste that could be converted into biofuels (Acevedo, 2006). In these areas bioethanol, biodiesel and biogas could represent a viable and beneficial alternative to some national agricultural activities.

Bioethanol is alcohol produced from the fermentation of sugar or starch from crops such as corn (Zea mays), sugar cane (Saccharum officinarum), sugar beet (Beta vulgaris), potatoes (Solanum tuberoso) and wheat (Triticum aestivum). Currently it is used in transportation vehicles, mixed with gasoline at different percentages (E5, E10 and blends in the USA and blends equal or higher than E85 in Brazil, Sweden and Spain). While it is possible to produce ethanol from various materials of vegetable origin, the basic procedure is much the same by using other crops feedstock. The biggest difference is in the grain milling process and alternatives are dry milling and wet milling. Both require virtually the same design of industrial plant, and involve similar production processes. The dry milling process has more energy and economic cost associated, since it includes drying the milling waste to generate a product to market as DDGS (dry distiller grain stillage). Wet milling requires that the byproduct generated goes quickly to final destination, since the presence of moisture causes rapid decomposition, and creates many logistical problems.

The technologies for producing ethanol using raw materials rich in starch, such as corn and wheat, are economically feasible and successfully implemented by the Chilean agriculture (McMillan, 1997; McAloon et al,. 2000; Shapouri and Gallagher, 2005; Dale and Tyner, 2006). The production of biodiesel oil can be obtained from different plants grown in the country, such as sunflower (Helianthus annuus) and rapeseed (Brassica napus). However, unlike the production of ethanol, for biodiesel there are three processes of production: transesterification with alkaline catalysis, transesterification with acid catalysis, and oil conversion into fatty acids and then to biodiesel. Worlwide, installed biodiesel plants use the first process, due to its high rate of return (about 98 % conversion of oil into biodiesel), minimal side effects, short reaction time and conversion to biodiesel with no intermediate compounds, and no special materials are required for the infrastructure of the plant. Technologies to produce biodiesel from rapeseed, that exist worldwide, indicate some interesting feasibility conclusions which can be applied to the production of biodiesel in Chile (Van Dyne and Raymer, 1992; Knothe, 2001; Meher et al., 2006). Additionally, there is proven technology globally and economically feasible that allows processing organic material through anaerobic processes to produce biogas, with methane content suitable for power generation (Nallathambi, 1997; Mata-Alvarez et al., 2000; Chynoweth et al., 2001). Biogas is a fuel that is generated naturally or artificially by the digestion or degradation of organic matter, through the action of anaerobic microorganisms. Biogas is composed primarily of methane (CH4), 50 % to 70 %, carbon dioxide (CO₂), 30 % to 40 %, and other marginal gases, below 1 %. The greater or lesser proportion of these elements, depend on the type of organic matter and how is generated. Within the available resources that are considered, there is waste coming from biomass production or human activities, slurry from dairy, cattle, swine and poultry, slaughterhouse waste, agro industrial waste, waste of the wine industry, residential and industrial waste, sewage treatment plants and garbage dumps.

The main purpose of this research was the economic analysis of an integrated system of production of biofuels, using indicators of net present value (NPV) and internal rate of return (IRR) of the productive facility. There will be an assessment of the private profitability, involving the analysis of the influence of specific types of alcohol as input in the production of biodiesel, ethanol or methanol, the effect of the relative size of the productive platform of ethanol with respect to the size of the biodiesel platform, the impact of the cost of agricultural inputs, maize and rapseed and the consumer price of petrol and diesel. International prices were used in the analysis, because Chile is one of the most open economies in the world, and every internal economic activity has to be compared internationally in terms of costs to check their economic feasibility; which, to produce biofuels has to be permanently assessed locally, as there is a constant change in prices of the agricultural feedstocks and fossil fuels. One Chilean study in that direction was carried out by Ortega et al. (2007), to evaluate the economical feasibility to elaborate biodiesel and bioethanol from typical local crops.

 

MATERIALS AND METHODS

General considerations

Actual technological concepts associated to production of biogas through organic waste from agriculture, production of ethanol with corn and other grains, and production of biodiesel from rapeseed, were applied. These commercial technologies currently in use allow proposing a possible conceptual plant design, consisting of three productive lines or processing platforms, with a production capacity according to the possibilities of supplying inputs in the area of influence of the bioenergetic complex (Figure 1). Based on the possible configurations for the processes and plant sizes, economic parameters for the private economic evaluation of the project were used to measure the effect of each of the technical options investigated, in the profitability of the project. The economic variables NPV and IRR were assessed for each combination of technical design parameters of the complex. Data of production, investment and operation costs and prices of different items under study were collected from literature, for each fuel of the platforms (biogas, bioethanol and biodiesel). Among different feasible production processes, dry-milling was selected for ethanol, and transesterification of the rapeseed oil with an alkaline catalyst was selected for biodiesel production. The definition of these processes is crucial because there are technological differences with respect to alternative processes, which can cause considerable amounts of investment and operational costs.

Ethanol

The main inputs required in ethanol production by type of feedstock are approximate averages, but, closely represent the magnitude of the main inputs required per L of ethanol produced. With regard to input costs to produce 1 L of ethanol, the prices were reported by several national producers and distributors (Table 1). Additionally, the prices of grains for ethanol were those of July 2008 reported by ODEPA (2008), whose value was US$ 276.8 t^—1. With respect to the corn yield, the proposed figure was 12 000 kg ha^—1, value that is achievable under a contract farming system in Chile (Ortega et al., 2007). The conversion factor for the acquisition of ethanol was set at 0.4 L kg^—1 of maize entering the plant (CATA, 2007). In order to quantify the income, DDGS was valued at US$ 116 t^—1 and liquid CO₂ had a price of US$ 6 t^—1. The costs data associated with the construction of the plant were from studies in Europe and USA. This data allowed estimating the capital investment for different plant sizes (Figure 2). Besides, the economic analysis includes the fact that ethanol is tax free according to Chilean tax policies for biofuels. The sale price of 1 L of ethanol was set by adding 20 % of profit to the cost to produce it.

Biodiesel

Input costs to produce biodiesel in terms of services, maintenance, supplies and administrative were based on data collected from feasibility studies (Haas et al., 2006). Feedstock inputs and unit prices to produce 1 L of biodiesel were considered in the cost assessment, according to the figures supplied by several producers and distributors (Table 2). The sale price of rapeseed was data obtained from trade publications (Van Gerpen et al., 2005 and Van Kasteren and Nisworo, 2007), of some detailed studies of plants producing biodiesel. With respect to the cost of installation of a biodiesel plant, as there is no experience in Chile, this information was obtained from international sources, mainly USA and Europe (Howell, 2005), to fit a curve of cost versus plant (Figure 3). Rapeseed prices for the economic evaluation were based on data reported by Iglesias (2009). The prices for rapeseed fluctuated between Ch$ 350 t ^—1 and Ch$ 365 t ^—1. Considering the production process as the one of transesterification of rapeseed oil using base catalyst, typical yields of biodiesel, glycerin and dry cake per ton of grain were used (Table 3). The final price at which the biodiesel can be traded was obtained through the sum of costs to produce 1 L plus 20 % profit.

 

Biogas

This study proposes a biogas platform with power capacity of 1 MW, based on a dairy facility generating biogas by anaerobic digestion of slurry plus silage and straw. For the purpose of the mass and energy balance, the mass contribution was assumed 33.3 % for each of those substrates, according to their availability. To calculate the cost of producing biogas and its equivalent electric energy in kWh, the model of Walla and Schneeberger (2008) was used. This model combine all the associated costs involved in the generation of 1 kWh for different sizes of power, measured in kW (Figure 4). It is assumed that the cost of transporting the substrates is negligible since they are generated near to the processing facilities. Costs of construction were based on the model generated by Walla and Schneeberger (2003) for plant capacities up to 350 kW (Figure 5). The surplus energy, or unused electricity from the biogas platform was valued at US$ 0.064 kWh ^—1. The calorific value of the biogas used to generate electricity was set at 38.93 MJm^—3.

A mass and energy balance was carried out considering the integrated operation of the three bio energy platforms, which was used to perform the economical simulation of the energy production system. The economical analysis of the plant was performed with respect to the type of alcohol used in the manufacture of biodiesel (ethanol versus methanol), and the relative size of the platform of ethanol with respect to biodiesel. The study assessed four combinations of plant sizes with capacities of 10 000-20 000 for ethanol, and 20 00040 000 m^—3 y ^—1 for biodiesel, and in all the cases the biogas platform was projected with a generating capacity of 1 MW of electricity, to assess their influence on the final cost per liter of bio fuel. Four scenarios were studied for the integrated system (Table 4). In order to find certain indicators of profitability that could demonstrate the viability of the project, a sensitivity analysis with respect to interest rates (10, 12 and 15 %) employing either methanol or ethanol was carried out. Average cost of grain was used in all cases. In the calculation of NPV and IRR the evaluation horizon was set at 12 years while the depreciation of the plant was estimated at 20 years. In addition, a theoretical maximum usage of the plant capacity was considered, which means all the personnel and equipment operating at maximum efficiency, using 100 % capacity of the plant.

 

RESULTS AND DISCUSSION

The final price of 1 L of ethanol and biodiesel, obtained from costs associated to different combinations of production capacity, indicated minor differences in the cost per liter of fuel (Table 5). These production costs for biodiesel and ethanol include the energy cost due to the electricity supplied by the biogas platform. With a variation of 15 % in the cost of corn for ethanol and rapeseed for biodiesel, the variation of the cost of each L at the biofuel plant output, generate a proportional increase or decrease in value for every kg of grain with magnitude of ±12 % for biodiesel and ±13 % for ethanol. Weston and Brigham (1984), Brealey and Myers (1985) and Belli (1996), acknowledge the difficulty of applying the criterion of the IRR for the lack of good properties of this indicator to define the feasibility of an inversion project. The economic analysis of the four cases for different interest rates and considering biodiesel production from methanol versus ethanol did not allow calculating the IRR (Figures 6 and 7).

Rocabert (2006) considers that a project is unfeasible if all cash flows are non positive. The NPV in such cases is always negative, its slope is always positive and there is no IRR. This study clearly reveals the characteristics listed above, where the slope of the NPV is always positive (Figures 6 and 7). Besides, the final price per L in the case of producing biodiesel from methanol versus ethanol, varied between 1 and 1.5 %. The values of NPV were all negatives and its differences ranged between 4.7 and 10 %. The analysis showed that there is no capital increase as a result of the project for any of the scenarios studied.

 

CONCLUSIONS

According to the economic criteria based on the net present value, the annual money flows of the plant generate losses. There were minor cost differences to produce biodiesel using methanol or ethanol as alcohol source. With either methanol or ethanol to produce biodiesel, the economic flows of the plant are negative, net present value is negative, it has positive slope when plotting against the interest rate, and it is not possible to calculate the internal rate of return. Nevertheless, the fuel combination with mayor contribution of biogas to the total fuel production generates less negative money flows. The investment cost of the plant is dependable of the fuel production capacity, being higher for the highest capacity production of the ethanol and biodiesel combination, at the same biogas production capacity. The impact of the price of grain on the final production cost of both ethanol and biodiesel turned out to be critical. This dependence is greater for ethanol than for biodiesel. It is clear that the implementation of a biofuel production facility which produce a combination of biodiesel, ethanol and biogas, does not show economical feasibility, mainly due to the high cost of producing ethanol and mainly biodiesel.

 

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