1. Biofuel Economics Birgir Örn Smárason Elín Ósk Reynisdóttir Sustainable Energy Options UAU212F Group 3

2. Introduction to Biofuel economics  Promise as a substitute for fossil fuels  Costs of biofuels are highly dependent on feedstock, process, land and labour costs, credits for byproducts, agricultural subsidies, food (sugar) and oil market. Biofuel roadmap. Biofuel supply grows rapidly and reaches 32 EJ in 2050 (IEA, 2011).

3. Economic Benefits  Renewable feedstocks  Carbon emissions can be offset by their feedstocks carbon uptake  Biofuels can be produced domestically Economic Costs  Biofuel feedstocks include many crops that would otherwise be used for human consumption  Land use patterns may change, resulting in GHG emissions  Biofuel production and processing practices can release GHGs  The quantity of food brought to market might decrease  Water quality could suffer

4. Biofuel production cost F Production cost projections. Estimates reflect global averages (IEA, 2011).  USD 2 to 48/GJ for liquid and gaseous biofuels  US cents 3.5 to 25/kWh (USD 10 to 50/GJ) for electricity or CHP systems larger than about 2 MW,  USD 2 to 77/GJ for domestic or district heating systems with feedstock costs in the range of USD 0 to 20/GJ

5. Methane  Produced by Sorpa  Domestic production  Forreign currency usage is saved  Domestic jobs

6. Benefits of using methane for the customer  Assumptions: Biofuel car in use for 15 years Travel distance per year is 16.000 km Fuel usage per 100 km is 10l  According to Sorpa the fuel savings are 0,556 Euros per liter if bio-methane is used  That gives the total savings in fuel cost for a car 13.333 Euros or 2.100.000 Icelandic kronas

7. Macroeconomic benefits in using Methane  According to Sorpa the foreign currency savings in Iceland are 10.000 Euros per car.  There off due to Icelandic bio-methane 8.200 Euros (given that 30% of retail price for petroleum is cost in foreign currency).  And there off due to CO2-eq. Savings 1.800 Euros (Given CO2-eq. Savings = 33 Euros/Tkg).

8. Biodiesel from rapeseed  The cost for growing one hectare of rapeseed is the following in Icelandic kronas: Tillage, seeding and fertilizing30.000 Fertilizers70.000 Seeds 7-10 kg10.000 Threshing20.000 Other costs20.000 Total cost150.000

9. Biodiesel from rapeseed  The income for growing one hectare of rapeseeds in Icelandic kronas is the following: Middlings, 2 tons150.000 Vegetable oil, for example 100kg100.000 Biodiesel, for example 900kg150.000 Straws50.000 Glycerol, recycled through a distillation25.000 Other income25.000 Total income500.000

10. Bioenergy from micro-algae

11. Example from Iceland – Biodiesel factory  Example of a biodiesel factory in northern Iceland, making biodiesel from rapeseed  The total investment cost for the biodiesel plant in norther Iceland is estimated to be 31.5 million ISK or 251.000 USD

12. Example from Iceland – Biodiesel factory  Financial cost - Working capital is 90,000 USD in 2010 and 2013 but 80,000 USD in 2014 and 10,000 in 2017  Total financing is 538,000 USD

13. Example from Iceland – Biodiesel factory  Revenue Price of biodiesel. 79.1 ISK/L or about 0.643 USD/L. Price of Animal Meal: (Rapeseed Meal): 60 ISK/kg or about 0.48 USD/kg. Price of Glycerin: 14.7 ISK/kg or about 0.12 USD/kg.  The author concluded that the project was on the boarder of being fesible. With a minus 24,000 USD NPV of equity and a 14% IRR of equity. Despite a negative NPV and an IRR of equity under MARR, which is 15%, the sensitivity analysis finds that only a 10% higher price for the byproduct of rapeseed meal will result in 22% IRR of equity instead of 14%.