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Prof. V.V. Ratna
Faculty (Strategic Management)
Prateek Shrivastav (cft07-104)
JAIPURIA INSTITUTE OF MANAGEMENT, LUCKNOW
Biofuels can be broadly defined as solid, liquid, or gas fuel derived from recently dead biological material. This distinguishes it from fossil fuels, which are derived from long dead biological material. Biofuel can be theoretically produced from any (biological) carbon source, though the most common by far is photosynthetic plants. Various plants and plant-derived materials are used for Biofuels manufacture. Biofuels are used globally, most commonly to power vehicles and cooking stoves. Biofuel industries are expanding in Europe, Asia and the Americas. Biofuels offer the possibility of producing energy without a net increase of carbon into the atmosphere, because the plants used in to produce the fuel have removed CO2 from the atmosphere, unlike fossil fuels which return carbon which was stored beneath the surface for millions of years into the air. Therefore, Biofuels is in theory more nearly carbon neutral and less likely to increase atmospheric concentrations of greenhouse gases. (However, doubts have been raised as to whether this benefit can be achieved in practice, see below). The use of Biofuels also reduces dependence on petroleum and enhances energy security. There are two common strategies of producing Biofuels. One is to grow crops high in sugar (sugar cane, sugar beet, and sweet sorghum) or starch (corn/maize), and then use yeast fermentation to produce ethyl alcohol (ethanol). The second is to grow plants that contain high amounts of vegetable oil, such as oil palm, soybean, algae, or jatropha. When these oils are heated, their viscosity is reduced, and they can be burned directly in a diesel engine, or they can be chemically processed to produce fuels such as biodiesel. Wood and its byproducts can also be converted into Biofuels such as wood gas, methanol or ethanol fuel. It is also possible to make cellulosic ethanol from non-edible plant parts, but this can be difficult to accomplish economically. Biofuels are discussed as having significant roles in a variety of international issues, including: mitigation of carbon emissions levels and oil prices, the "food vs. fuel" debate, deforestation and soil erosion, impact on water resources, and energy balance and efficiency. Biodiesel refers to a non-petroleum-based diesel fuel consisting of short chain alkyl (methyl or ethyl) esters, made by transesterification of vegetable oil, which can be used (alone, or blended with
conventional petrodiesel) in unmodified diesel-engine vehicles. Biodiesel is distinguished from the straight vegetable oil (SVO) (sometimes referred to as "waste vegetable oil", "WVO", "used vegetable oil", "UVO", "pure plant oil", "PPO") used (alone, or blended) as fuels in some converted diesel vehicles. "Biodiesel" is standardized as mono-alkyl ester and other kinds of diesel-grade fuels of biological origin are not included. Blends of biodiesel and conventional hydrocarbon-based diesel are products most commonly distributed for use in the retail diesel fuel marketplace. Much of the world uses a system known as the "B" factor to state the amount of biodiesel in any fuel mix: fuel containing 20% biodiesel is labeled B20, while pure biodiesel is referred to as B100. It is common to see B99, since 1% petrodiesel is sufficiently toxic to retard mold. Blends of 20 percent biodiesel with 80 percent petroleum diesel (B20) can generally be used in unmodified diesel engines. Biodiesel can also be used in its pure form (B100), but may require certain engine modifications to avoid maintenance and performance problems. Blending B100 with petrol diesel may be accomplished by:
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Mixing in tanks at manufacturing point prior to delivery to tanker truck Splash mixing in the tanker truck (adding specific percentages of Biodiesel and Petrol Diesel) In-line mixing, two components arrive at tanker truck simultaneously.
Biodiesel Industry Structure
The Biodiesel industry is still young and relatively small, so as it grows to a larger scale and when an infrastructure is developed, the costs of producing and marketing biodiesel may decline. New cost-saving technologies will likely be developed to help producers use energy more efficiently, increase conversion yields and convert cheaper feed stocks into high-quality biodiesel. However, in the longer term, the biggest challenge may be the ability of the feedstock supply to keep up with growing demand. The supply of soybeans, rapeseeds and other feed stocks available for biodiesel production will be limited by competition from other uses and land constraints. As such the key to the future of Biodiesel is finding inexpensive feed stocks that can be grown by farmers on marginal agricultural land, and Jatropha is one of many plants that hold a great deal of promise. Jatropha proves to be a promising Bio Fuel plantation and could emerge as a major alternative to Diesel thus reducing our dependence
on Oil imports and saving the precious Foreign Exchange besides providing the much needed Energy Security. Jatropha oil displacing conventional fossil fuel makes the project fully eligible as a CDM project, i.e. recipient of CO2 credits.
In India biodiesel is mainly prepared from the plant called “Jatropha”. Jatropha is a drought-resistant perennial, growing well in marginal/poor soil. It is easy to establish, grows relatively quickly and lives, producing seeds for 50 years. Jatropha the wonder plant produces seeds with an oil content of 37%. The oil can be combusted as fuel without being refined. It burns with clear smoke-free flame, tested successfully as fuel for simple diesel engine. The by-products are press cake a good organic fertilizer, oil contains also insecticide. It is found to be growing in many parts of the country, rugged in nature and can survive with minimum inputs and easy to propagate. Medically it is used for diseases like cancer, piles, snakebite, paralysis, dropsy etc. The process of converting vegetable oil into biodiesel fuel is called Transesterification and is luckily less complex then it sounds. Chemically, Transesterification means taking a triglyceride molecule, or a complex fatty acid, neutralizing the free fatty acids, removing the glycerin, and creating an alcohol ester. This is accomplished by mixing methanol with sodium hydroxide to make sodium methoxide. This liquid is then mixed into the vegetable oil. After the mixture has settled, Glycerin is left on the bottom and methyl esters, or biodiesel is left on top and is washed and filtered. The final product Bio Diesel fuel, when used directly in a Diesel Engine will burn up to 75% cleaner then mineral oil Diesel fuel. The technology is mature and proven Presently, the indigenously designed bio-fuel plant for 250 lt./day is in operation. We have to design and develop bio-fuel plants of 3 to 10 tones per day capacity for installation in different parts of the country. Effective marketing chain needs to be planned for enabling farmers to reap the benefits directly. Bio-fuel mission will provide technological and employment generation focuses for the rural sector. Use of eleven million hectares of wasteland for Jetropha cultivation can lead to generation of minimum twelve million jobs Jatropha grows wild in many areas of India and even thrives on infertile soil. A good crop can be obtained with little effort. Depending
on soil quality and rainfall, oil can be extracted from the jatropha nuts after two to five years. The annual nut yield ranges from 0.5 to 12 tons. The kernels consist of oil to about 60 percent; this can be transformed into biodiesel fuel through etherification.
Cost Benefits Scenario:
Cost benefits scenario will depend on various factors such as seed yield, area of Production, its gestation period, and raw oil yield during various stages of bio-diesel production-plantation, extraction, and transesterification. An integrated Jatropha Biodiesel Project has three stages:
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The first stage of the production process of bio-diesel from the seeds of Jatropha is the plantation stage. Extraction stage of bio-diesel production The final stage of bio-diesel production is the transesterification stage in which raw oil is transesterified to bio-diesel.
The combination of three stages of bio-diesel production and the role of each player in these stages have to be objectively defined as they can affect the economics of bio-diesel production. Therefore, we have carried out Economic analysis considering all above three stages as separate entities. Plant Tissue Culture, also called micropropagation, is a practice used to propagate plants under sterile conditions, often to produce clones of a plant. different techniques in plant tissue culture may offer certain advantages over traditional methods of propagation. Plant tissue culture relies on the fact that many plant cells have the ability to regenerate a whole plant (totipotency). Single cells, plant cells without cell walls (protoplasts), pieces of leaves, or (less commonly) roots can often be used to generate a new plant on culture media given the required nutrients and plant hormones. The cost of Bio Diesel is largely dependent on the choice of feedstock and the size of the production facility. If Jatropha feedstock is used, the fuel will cost depending on the country approximately US $ 0,40 per liter plus tax when applicable.
FEED STOCK PRODUCTION PER HECTARE & COST THEREOF FEEDSTOCK SOYA OIL RAPESEED OIL JATROPHA OIL PALM OIL Country USA Europe INDIA Malaysia Yield/hectare (kg) Rate per barrel(US$) 375 73 1000 78 3000 43 5000 46
A large number of us who form a part of the animal kingdom depend crucially on the energy from the photosynthesis in plants that is stored in the grains and seeds. Carbohydrates and fats (or oils) are the two forms used by plants to create a storehouse in their seed endosperms supposedly to take care of their young seedlings. While the carbohydrates in the seeds can be fermented to methane and then burnt in engines to generate electricity, oils can be directly used as fuel in diesel engines. Oils have an immediate use, as diesel engines are ubiquitous and are around us in large numbers. For strategic reasons, it is best to consider non-edible oilseeds from trees. How much oil can be obtained from trees? Plantations of cultivated trees like the oil palms can yield about five tons of oil per hectare per year. Pongamia, neem and mahua are three commonly found trees in most parts of India. According to available data, a mature plantation of about 100 trees would yield about 2.5 tons of oil every year. The promotion of the use of oils could also provide a poverty alleviation option in rural areas. Farmers can use vacant, waste and marginally used lands for growing such trees and benefit from the annual produce, which will add to their income. The demand for oils will remain large as long as the need for energy remains unsatisfied. With increased green cover, the environment will also benefit greatly.
Since diesel constitutes 50% of oil consumption mainly for transportation and other purposes, its demand is integrally related to economic growth and is seen as a growth inducing factor. The
estimated increase of demand for diesel from the 2001-02 level of 38.815 Million MT to 52.324 Million MT in 2006-07 and 66.099 Million MT shows a massive hike of hike if 34% to 70% respectively over 2001-02 level in physical terms which will lead to increase of crude oil import bill from US$ 13.3 Billion to over US$ 20 Billion. As emissions from automotive engines using diesel is a major source of air pollution in urban areas, enforcement of stricter emission norms has become a national priority. Bio-diesel has been accepted as clean alternative fuel all over world. Though Bio-diesel can be produced from soyabean, sunflower, source of edible oil, existing shortage of edible oil in the country and its price, would not make these crops viable for use as feed stock for production of Bio-diesel. Similarly the existing output of 5.253 Million MT of Tree borne oil seeds have been put to different uses and cannot contribute to organized production of Bio-diesel on account of a number of factors including scattered location, low yield and consequently low level of seed collection of 15-20% of total exploitable seeds. The rationale of taking up a major program for the production of Biodiesel in India for blending with diesel lines in the context of:
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Bio-diesel being superior fuel from the environmental point of view Use of Bio-diesel becomes compelling in view of the tightening of automotive vehicle emission standards and court interventions Addressing global concern relating to containing Carbon emissions for mitigation of climate change Providing nutrients to soil, by using oil cake as manure Reducing import of oil and consequentially reducing import and improving energy security Greening the country through Jetropha plantation; and Generation of gainful employment to the people.
Threats of new Entrants: The industry is still developing, and has huge potential to grow. So as it grows to a larger scale and when an infrastructure is developed, the costs of producing and marketing biodiesel may decline. New cost-saving technologies will likely be developed to help producers use energy more efficiently, increase conversion yields and convert cheaper feed stocks into high-quality biodiesel. There are no real new entrants in this sector, the sector is booming and the companies involved in this sector have a great opportunity to grow and develop. Threats of substitute products: Substitute to biodiesel can be alternative sources of energy like solar energy, wind energy. But these sources can be threats in the long run because initial cost of producing energy is too high, while producing biodiesel is comparatively too low. We can produce 1 barrel of biodiesel from jathropa at an initial cost of just $43. So threats from substitutes are too low.
Bargaining power of Buyers: There are not much buyers of biodiesel, so they have very little opportunity to negotiate on the price factor. In other words we can say that buyers have less bargaining power. There are no such threats from buyers in this regards. Bargaining power of Suppliers: The main raw material used in the production of biodiesel is the jathropa plant. This plant’s fruit is used in the production of biodiesel. The main suppliers are the farmers engaged in the production of jathropa. Since less farmers are engaged in the production, so they have high power in their hand to bargain. Rivalry among existing players: As it has been already explained that many few firms are engaged in the production of the biodiesel, each company has equal opportunity to grow and develop. Companies engaged in the production of biodiesel are: • • • • • Aditya Sheel Biotech Co. Ltd. National Oilseed and Vegetable Oil Development Board (NOVOD) Lubrizol India Pvt. Ltd. Gujarat Oleochem Hindustan Biodiesel limited
Strengths: Production of biodiesel contributes to independence of energy supply. 98% of the energy used in the transport sector comes from fossil fuels. Oil reserves are estimated to be limited at 50 years. Biodiesel is contributing to the diversification of sources and technologies benefiting to the EU economy. Mitigating climate change: Biodiesel reduces GHG emissions (3071%). GHG emissions are leading to irreversible damages to the ecosphere affecting the environment, economic development, food security and livelihood. In EU, transport is responsible for about 21% of all GHG emissions, it is also the only sector which experienced an increase of 24% of GHG between 1990-2003. Biodiesel contributes to rural development: EU farmers would find new market opportunities thus participating to the objectives of increasing GDP, employment , social welfare and diversification of the rural economy Rising prices of crude oil and finiteness of resources ensures economic viability of biodiesel. Biodiesel, with bioethanol, are the only large scale substitute available for diesel and petrol in transport. Biodiesel prices are not fluctuating on uncertainties like armed conflicts/ shortage in supply Weakness: Feedstock production (i.e. Rapeseed oil) needs land and requires significant amounts of inputs like fossil fuel based fertilizers and pesticides. An inappropriate use of pesticides and fertilizers may lead to negative effects for the environment (water) GHG reduction potential may be neutralized if land use change occurs (converting land with high carbon stock for Biofuels production) Price of vegetable oil may be rising because of higher demand and increase prices of Biodiesel production. Vegetable based feedstock yields may be fluctuating subject to adverse weather.
Biodiesel may attract water molecules from atmospheric moisture or condensations Biodiesel emits more NOx emissions compared to diesel fuel Opportunities: Biodiesel production can be done in accordance with sustainability principles and without endangering food supply. This will be made possible notably by raising the EU oilseeds production. Currently amounting to 23 Mo tons, the EU oilseeds production is expected to reach 35 Mo tones by 2015-2020. The possible contradiction between fuel and food production will be more easily solved by developing new and non-edible feedstock varieties (jatropha). The full potential of biodiesel pathway using waste as a feedstock should be further developed (used cooking oils, tallow) to increase biomass availability. Competition with food application is often largely overstated: less that 4% of palm oil imported in the EU is used for biodiesel production. The largest part of future biodiesel demand, even in the perspective of the 2020 target can be produced mainly from raw material originating from the EU. There is indeed an important potential in terms of surfaces and yields for oilseeds, especially in the new Member states. It will thus strengthen the impact of the 10% target. Biodiesel production development will improve the EUs elf-sufficiency in terms of vegetable proteins. The EU has currently a deficit in protein meals for animal feed. The development of biodiesel production in the EU has already increased the availability of oilseeds meals by 3 Mo tones since 2002. The further development of the production should provide an additional 8 Mo tones by 2015-2020, thus increasing the EU self-sufficiency ratio from 20% to 30%. Threats: The problem of competition with food application risk remaining a major issue and impact on the industry’s image.
Land availability and feedstock production can impinge on the development of biodiesel production. The suppression of mandatory set-aside for cereals will increase competition for land use. The lack of preparedness for high blends, both from the side of the car-manufacturing industry and the public, could be an obstacle for reaching ambitious targets. There is also a lack of awareness-raising measures (communication and media campaign) in favor of biodiesel towards the public.
As a substitute for fast depleting fossil fuel. Bio diesel had come to stay. In future, it should also serve to reduce and maintain the price of automobile fuel. The under exploited and un exploited vegetable oils are good sources of Biofuels. Our country is endowed with many such plants. Research is being carried out now to convert vegetable oils into biodiesel through biotechnological processes using biodiesel. With a concentrated and coordinated effort. Wide use of bio diesel in our country is going to be a reality in the days to come. A national mission on Bio-Diesel has already been proposed by the committee comprising six micro missions covering all aspects of plantation, procurement of seed, extraction of oil, transesterification, blending & trade, and research and development. Diesel forms nearly 40% of the energy consumed in the form of hydrocarbon fuels, and its demand is estimated at 40 million tons. Therefore blending becomes the important National Issue which apart from giving the dividends , it saves the country's exchequer. India has vast stretches of degraded land, mostly in areas with adverse agroclimatic conditions, where species of Jatropha , Mahua etc can be grown easily. Even 30 million hectares planted for bio- diesel can completely replace the current use of biofuels. The production of Bio fuels will also boost the rural economy which will bring more enthusiasm in more than one billion lives in the area.