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arks. NeWa. Octobff 2-t?. 7994.

POTENTML FEEDSTOCK SUPPLY and COSTS


for BIODD2SZL PRODUCTION

Richard G. Nelson Steve A. Howell J. Alan Weber


Kansas State University &iARc-IV University of Missouri
Manhattan. KS Eucym, KS Columbiq MO

AESTRACT

Without considering technology constraints, tallows and waste greases have definite
po;entiaI as feedstocks for the production ofbiodiesel in the United States. These
materials are less expensive than most oils produced from oilseed crops such as soybeans,
sunflowers, canoIa and rapeseed. At current crude petroleum prices, biodiesel derived
from any of these materials will be more expensive than diesel derived from petroleum,
Iiowever, when compared to other clean burning alternate fuels, recent data suggests
biodiesel blends produced from any of these feedstocks may be the lowest total cost
alternative fire1 in certain areas of the United Stares.

Eccnomic feasibility analyses were perfo,,l.


-ed to investigate the cost of producing
bicdiesel (S/gallon) subject to variances ir, fcedstock cost, by-product credit (glycerol and
meal) and capital costs. Cost of production ;ier gallon of esterified biodiese1 from
soybean, sunflower, tallow and yellow grease ranged from $0.96 to 33.39 subject to
feedstock and chemicaI costs, by-product credit and system capital cost.

1. INTRODUCTION

American consumers purchased over 47 bi!l’on I gallons of distillate tief in 1992 of which
on-highway diesel fue! use accoupted for over 45% of all sales (ETA, 1993). Diesel tie1
cu,Tently accounts for nearly 20% of this 1I ation’s transportation energy, (Davis and Strang,
1993). Table 1 presents a breakdown of the total number of gallons consumed as a
function of end-use (EIPL, 1993).

Wz, as a nation, impon nearly 50% of our petroleum which results in a negative trade
b&nce of approximately $50 billion per year. In addition there has been growing
cocctm over the economic, cncrgctic and environmental aspects related to the use of
f0;;il fuels as a fue! source in combustion engines.

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Tab!e 1. End-Use Ditillate Fuel Consumption Szttics, 1991

Fuel Conxunption % of Total


EnC-Use Category
( million @Ions )

On-HighW2y 21,375 45.23%


Residendal 7,291 15.43%
CoizmerciaJ 3.771 7.98%
Fa.lX 3,500 7.41%
Raiiroad 3,173 6.71%
IntiStrial 2,312 4.59%
Vesel Bunkering 2,219 4.70%
OfXighway 1,758 3.72%
M.C~ 653 1.38%
Oii Company 664 1.40%
E!exic Utiliry 541 1.14%
Ax other 6 0.01%

T’GTAL 47,263 100.00%

Biodiesel, a diesel fuel substitute that can be produced from vegetable oils, fars and waste
cooking oils, has been demonstrated in unmodified diesel engines and has shown a
rezuction in the exhaust emissions of hydrocarbons, particulate matter, smoke, carbon
monoxide and sulfk. Use of agricultur~ly derived fuels and/or use of waste by-products
ficm the food industry has potential to ease our dependence upon imponed petroleum and
at the same time provide a means of alleviating some of the economic and environmental
csixens we face.

2. OBJI3XTWZS

The major objective of this study was to evaluate the feasibility of producing biodiesel
from soybeans, sunflowers, edible and inedible tallow and yellow grease. Specific
objectives were to:

I. Assess the resource available for each biodiesel feedstock in terms of production
and consumption as well as location of generation to determine potential biodiesel
production from each feedstock.

2. Evaluate the economic feasibility of producing biodiesel subject to cost sensitivities


of feedstock and chemical price, by-product credit and capital cams.
3. R.ESOURCE ASSESS3IENT and PO’iINTlAL BIODIXSEL PRODUCTION

T:;e firs.1 objective of this study was to assessthe production, consumption and location of
generation of selected biodiesel feedstocks. Potential biodiesel quantities from production
are detailed be!ow for each biodiesei feedsTock.

A. Edible. Inedible Tallow and Yellow Crease


Edible tallow s:atistics are taken from the United States Department of Agriculture -
Economic Research Service (USDA-ERS) Oil Crops, Siruation and Odook Report
(1994) and data concerning inedible tallow was obtained from United States Department
oi Commerce, Bureau of the Census M20K Reports (USDOC. 1992). Table 2 presents
data concerning edible and inedible tallow, and waste grease.

b*:ost edible tailow is used as baking and frying fats, margarine and other edible products
and inedible tallow is mainly used as an arkA feed supplemenr (62.4%) with minor uses
as fatty acid feedstock (22.4%). soaps and Iubricants. Yellow grease is defined as a
mixture of the waste oils and fats processed from waste grease discarded by Food service
cperations and a majority of yeilow grease is currently used as an added fat source for
animal feeds (64%), as a feedstock for industrial fatty acids (4%) or as ‘a dilutent for
higher grade inedible products (7%) with the remainder being exposed.

The majority of the nation’s tallow is generated in Nebraska, Kansas, Texas, Colorado,
Iowa, Wisconsin, Illinois, Wisconsin and Minnesota. While biodiesel derived from edible
tallow production could prove significant in certain areas, its higher value as a food
sqplement would probably preclude its use. Biodiesel derived from inedible tallow and
greases has the si@Zicant potential in cercaio locations such as large cities (yellow grease)
and possibly rural locations which are in c!ose proximity to large cattle slaughtering
ticiliries (inedible tallow).

E. Sovbean Oil
Sovbean oil statistics are derived from the USDA-ERS Oii Crops, Situation and Outlook
Rzporr (1994) and are also given in Table 2. Soybeans represent the most abundant and
agonomically adapted oilseed in the U.S. Soybeans are usually processed into two
products; oil and meal and, on average, a bushel wiil yield 11.8 and 47.5 pounds of oil and
meal, respectively. Soybean meal has become the standard of livestock protein markers
z;.d the oil is used in many edible food products such as cooking oil, as well as for a
vtiety of industrial uses such as biodiesel.

Location of soybean supply can be analyzed from the standpoint of origination of


production or from location of soybean oil processing. Soybeans are processed mainly in
ihe regions where Ihey arc produced to minimize COSIS associated with transport and
t;lerefore, soybean crush location is highly correlated with the top soybem producing
states. In 1993, Illinois, Iowa, Indiana, Ohio, Minnesota and Mksouri represented states
with over 100 million bushe!s of production. Locating biodiesel production facilities in
these processing areas may offer sighiScai;i economic advantages.

6i

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Table 2. Ptoduclion, Consumption and F-‘olcnlial EJiodiesel Supply frorm~ 5 Feedslocks

1992 1991 1990 1989 1988 1987 1986

Edible Tallow
Iota1 produdion (million pounds) -I,450 1,515 1,202 1,193 1,201 1,300 1,278
consumption 1,100 1,183 938 876 981 1,184 1,244
Biadiesel from lolal production 188 196 155 154 155 160 165
(million gallons)

Inedible Tallow
and Waste Greases
lolal produclion (million pounds)
imdlble tallow dna 3,603 3,631 3,767 4,037 4,116 3,679
Qreases dna 2,167 2,007 1,928 1,794 1,921 1,719
consumption dna 2,993 3,222 3,219 3,087 3,130 3,041
Biodicsel from tolal production 747 730 737 755 782 699
(million gallons)

SunfIowerOil
total production (million pounds) 757 937 550 475 517
consumption 249 321 198 178 125
Biodiesel from total produdion 99 122 72 62 67
(million gallons)

Soybean Oil
lofal produclion (million pounds) 13,778 14,345 13,408 13,004 11,737 12.974 12,783
consurnptior~ 13,053 12,245 12,164 12,083 10,591 10,930 10,833
@lodIesel h-am lolnl productlon 1,813 1,888 1,764 1,711 1,544 1,707 1,682
(mlllion gallons)
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C. Sunflower Oil
The National Sunflower Association (1994j provided data concerning ~urdower oil
procluction, consumption and excessinventory (table 2). The majority of sunflowers
harvested as weil as production of oilseed in the United States cOmes from the states of
North and South Dakota, Minnesota and Kansas. Sunflower oil is currently used as a
coc’king or saIad oil a&or for use in margtine. U. S. sunffower seed crushing facilities
are located in the mid to upperMidwest due to their proximity to, historical production
areas and easy access to major tmport modes. Also, sunflower meal is used as a cattle
feed supplement and proximity to a major end-user plays a major role in plant location.

Biodiesel prodution from sunflower will have to compete with the export seed and crude
oil market which may place a higher value on the see&oil versus its use as a biodiesel
feedstock and, in addition, costs associated with processing and refining average TWOand
one-half times the seed cost which s&ificantiy increases the cost of the oil as it applies to
the transesterification process (biodiesel fee&rock cost). This increase may make
bicdiesel derived f;om sunflowers cost prohibitive.

D. Minor Oilseeds
Acres harvested for canola and rapeseed (rGerred to as minor oilseeds) for the period of
1991 to 1993 ranged from 127,000 to 187,WO for canola and 6,100 to 15,600 for
ra?eseed Yield per acre averaged 1,335 pounds for canola and 1,243 pounds for rapeseed
(LSDA-ERS Oil Crops, Situation and Oudook Report, 1994). Biodiesel production from
cl;rrenr canola and rapeseed producrion levels would have averaged only 11 and 0.71
rr2ilion gallons respectively. Therefore, biodiesel production from these feedstocks would
have minimal impact on replacing diesel Fideluse in most distillate fuel markets.

E. Idled Acreage
,& prices and ending inventories of oilseeds fluctuate, farmers will change their planting
ixentions based on potential profit. Therefore without the use of econometric modeling it
is difficult to predict the amount of soybean oil and other feedstocks that may be available .
fcr biodiesel production. Also, the true potential for biodiesel production till be
dqendenr on utilizing resources that are currently not in production. Every year
sipificant acreage is idled under government programs. In 1993, a total of nearly 50
trillion acres was not put into production through progxxns such as the Conservation
Reseme Program (CRP), O-92, or annual set-aside (ARP). Table 3 lists the total acreage
illed under these programs in 1993.

i;L?le 3. TOM Idled Acreage under ARP, CR? axl O-92 GovernmentPrograms in 1993

Covemment Progr3.m #ofacres

1393 - ARP 8.399,OOO


1393 - o-92 11,540,988
CXP, sign-ups I- 12 35,527,748

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From the above table, ifthe nearly 20 m&on acres of ARP and O-92 were to be used for
soybean production with an average yield of 35 bushels per acre, over 1.1 billion gallons
of biodiesel could be produced. However, it must be noted that the 16.3 million tons of
soybean meal produced could represent a surplus in the protein marker and would directly
irqsct whether the biodiesel produced would be economically feasible.

4. ECONOMIC FEASIBLID' of BIODZESEL PRODUCTION

Wle use of biodiesel may provide signifiat environmental advantages (pollutant


emissions) when compared to the combusrion of conventional fossil f%els, the use of
biodiesel will primarily be driven by its economic feasibility versus other conventional and
aiternative rransponation fuels. The total economic analysis picture concerning biodieseI
proAction from fats, oils and greases includes production, processing (extrusion or
rendering) and transenerification, Production and processing costs are usually included in
the feedstock cost as input to the transesteriZcation co3 analysis and are not presented as
a se?a.rare entity.

Trcnsesterification economics used in this study are based on the ANL Biomass Cost
Estimation Guide (Jaycor, 1987) which is presented in Table 4 for methyl talloware
production and contains both fixed and operating cost inputs. The transesterification unit
used in this analysis is based on technology advanced by DeSmet Corporation with capital
costs of SO.403 per gallon for a 30 million gallon per year unit and an estimated caplral
cost of $1 .OO per gallon for a 3 milhon gallon per year unit. This model predicts break-
even piice only, and does not inciude profit, taxes or transportation costs.

Cost sensitivity analyses were performed concerning the effect of feedstock and chemical
cost, by-product credit and unit size (gallons per year) on the production cost per gallon.
Costs per gallon ranged from a low of $0.96 per gallon at feedstock and chemical costs of
SO.13 pound and $0.40 per gallon respectively, a by-product credit of $0.50 per pound
and a capital cost of $0.403 per ester-iced gallon. Cost of production was a high of S3.39
per gallon when feedstock and chemical co sts were SO.35 per pound and $1.20 per gallon,
the by-product credit was $0.20 per pound and the capital cost was Sl.00 per esrerified
gallon. Feedstocks evaluated were soybean, sunflower, tallow and yellow grease.

Gven the current costs of petroleum and the oils and fats evaluated, it,does not appear
that biodizse1 wit1 be competitive with petroleum based diesel fuel on a price basis.
Rawever, a recent study conducted by Booz, Allen and Han&on (1994) shows that when
ccmpared to other altemacive fuels, biodiesel biends studied may be the lower cost
akemative fuel. This is due primarily to the ability of biodiesel to be used in an
ur,slodiried diesel engine and to be transponed and disrributed using existing
iiiiastrucrure.
Table 4. ,QJL Eiomass Cost Estimation Guide timple for Methyi Tallavla~e (30 million gallon/y~)

A. Total Capital Cost s12,1oo,oOa

B. 2eaI Annual Capid Cast 0.2 17 fixed charge SZ.625,700

c. operating c0sl.s S33,988,8SO


raw mztterial fe&Xac!x SO.13 per pound 529.172.000
methanol SO.55 per gallon S2.123,30-0
uh.lysr ~2.00 per pound S660,ooo
labor S240,OOO
overhad and fringe 50% of labor 5120,000
clecuicity 23.5 kW-h/l. 1 tons S176,250
5wm 1155 pounds/l.1 tons s907.500
ccmling water SO.30 per 1000 gallons S19,600
pro-as water so.50 per 1000 gallons 51,700
tie1 for oil heat SO.70 per gallon s205,500
mainfemncc 2% of capital cost s2:2.000
insurance 1% of Upitai c0St s121.000

D. Sales and .4dministntion 10 %ofB+C 53,651.455

E. Working Capital l/l:! of B+C+D 53347.167

F. Annualized Con of Working Capilal 12.5% ofE SAl8.396

By-Rcduct Credit S6.344.800

534,239,600

TOTAL COST per GALLON. break even Sl.14

i
w. CONCLUSIONS

Soybean oil is by far the most abundant feedstock for biodiesel in the United States with
abnost 14 biCon pounds produced each year which representsa potential of over 1.8
tillion gallons of biodiesel. At present, nearly al1 of the biodiesel produced in the United
States is made from soybean oi1. The use of beef tallows and waste frying oils have the
?xential of producing almost 900 miliio c gallons. These fats and greases are less
expensive than soybean oil, and could re?rssent an effective option to reduce the cost of
biodiesel as well as enending rhe supply &biodieseI.

SiodieseI break-men price, which does IX~. include profit, income or road taxes, or
;:ansport costs, ranged from SO.96 per ~~:lon
e under the best conditions to 53 -39 under rhe
worst. By far, the mosr important factor was fee&to& cod, Plant size and glycerin by
;roduct value were of secondary concerr, but are still significmf factors. Alcohol
feedstock costs were a minor comporxx.
~~ aount of petroleum based diesel fixl consumed in the United Stares is much greater
aan the potential afbiodiesel from existing vegetable oiis, tdlOWS and waste greases.
&bough the to.st ofbiodiesel is more expensive when compared to petroleum diesel, the
total costs ofbiodiesd blends may be the !owesr of,dI the akrnative fuels even under the
war;; cae biodie& price. These factors, combined with the cIeaner burning
cfiaraaefinics ofbiodjesel blends, suggest that biodiesel may best fit within defined areas
where the use of&aner burning alternate Fuels are required, or where the other benefits
ofbiodiese! are important.

6. Z-LD’ERENCES

Bocz, Al1e1-1
and Hamilton. 1994. Technical and Economic Assessmenl of Biodiesei for
Yehicular use. Presented to the National SoyDiesel Development Board, Jefferson City,
MC.

Davis, Stacy C. and Sonja G. Strang. 1993. Transportation Energy Data Book: Edition
13. Oak Ridge National Laboratory, Oak Ridge, ‘M.

Energy Information Administration. 1993 _ Fue I Oii and Kerosene Sales. U.S.
De?artrnent of Energy, Washington, D.C.

Jaycor. 1987. Review of Cost Estimates for Two Transesterificarion Processes.


M&an, VA.

Xxional Sunflower Association. 1993, KS. Sunflower Crop QzraIiry Report. Bismarck
h3.

kited States Department of Agriculture. i994. Economic Research Service Oil Crops,
Sli;lation and Outlook Report. OCS-40. Washington, D,C.

United States Depanment of Commerce, 1992. Bureau of the Census, M20K Reporrs.
Washington, D.C.