Commercial biodiesel production in South Africa : a preliminary economic feasibility study
Date
2007-03
Authors
Nolte, Mirco
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch : University of Stellenbosch
Abstract
Biodiesel, a fatty acid alkyl ester, derived from the transesterfication of vegetable oil, is
considered a renewable fuel that can be used as a replacement for fossil diesel. The urgency
for biofuel production in South Africa is motivated by the vulnerability of crude oil prices,
high unemployment, climate change concerns and the need for the growing economy to use
its resources in a sustainable manner.
The technical feasibility of biodiesel production has been proven and this study investigates
its preliminary economic feasibility in South Africa by looking at the market, financial and
agricultural feasibility of commercial biodiesel production.
ENGLISH ABSTRACT: Biodiesel, a fatty acid alkyl ester, derived from the transesterfication of vegetable oil, is considered a renewable fuel that can be used as a replacement for fossil diesel. The urgency for biofuel production in South Africa is motivated by the vulnerability of crude oil prices,high unemployment, climate change concerns and the need for the growing economy to use its resources in a sustainable manner. The technical feasibility of biodiesel production has been proven and this study investigates its preliminary economic feasibility in South Africa by looking at the market, financial and agricultural feasibility of commercial biodiesel production. The market feasibility. The potential market size for biodiesel in South Africa is about 1 billion litres if it is to replace 10% of its diesel consumption by 2010. However, governmental legislation and policies are needed to create a predictable and growing market for biodiesel in South Africa. These policies or regulations could be in the form of subsidising feedstock for biodiesel production, subsidising the biodiesel itself, using government purchasing power, mandatory blending legislation, tax incentives or price compensation agreements. The financial feasibility. Calculations to asses the financial feasibility of commercial biodiesel production are based on a 2500 kg/h (22.5 million litres/annum) containerized plant. This size is based on findings of Amigun & von Blottnitz (2005) that the optimum biodiesel plant size in South Africa ranges between 1500 and 3000 kg/h. Two types of plants were considered, namely a seed extraction biodiesel production (SEBP) plant using locally produced oilseeds as feedstock and a crude oil biodiesel production (COBP) plant using imported crude vegetable oil as feedstock. The capital investment for a SEBP plant ranges between R110 and R145 million while a COBP plant would require a capital investment of about R45 to R50 million. These amounts include a working capital of about R35 million due to money that is fixed in a 3 month stock supply.Feedstock and raw material contribute to about 80% of the manufacturing cost while transport costs are the second biggest contributor. These results point to the fact that the plant location is very important in order to minimize production costs. Thus, commercial biodiesel production should not be centralized, but should rather happen through greater number of relatively small plants located in oilseed producing regions. (South Africa would require about 46 plants each producing 2500 kg/h to produce 10% of its diesel by 2010). The sensitivity analyses showed that the manufacturing costs of a SEBP plant are very sensitive to changes in oilseed and oilcake prices while the manufacturing costs of a COBP plant are very sensitive to a change in crude vegetable oil price. The fluctuating nature of the agricultural commodity prices makes biodiesel manufacturing costs predictable. Soybean biodiesel costs are the most sensitive to price changes while sunflower biodiesel costs are the least affected. An increase in glycerol price would decrease the manufacturing costs of biodiesel by about 12 cents/litre for every R1000/ton increase in price. Glycerol prices are currently too low to consider in the calculations due to a global oversupply as a result of biodiesel production. The break even price of biodiesel is calculated by adding R1.01/litre fuel tax to the manufacturing cost, which means that biodiesel produced from oilseeds (except canola) will not be able to compete with the current price of fossil diesel (30 August 2006) without subsidies or legislation. The agricultural feasibility. Producing 10% of South Africa’s diesel using oilseeds would require a major production increase.Biodiesel production will also increase the local oilcake supply which means South Africa will change from being a net-importer of oilcake (730 thousand tons/year) to a net-exporter of oilcake (1.7 million tons/year). Land availability for such a production increase is not a problem which means that the agricultural resources and potential market are available to produce and absorb 10% of the countries diesel in the form of biodiesel. However, at the moment the commercial production of biodiesel does not seem financially feasible without any government imposed legislation or subsidies.
AFRIKAANSE OPSOMMING: Biodiesel, ‘n hernubare brandstof wat uit groente olie vervaardig word, is ‘n moontlike plaasvervanger vir petroleum diesel. Biodiesel vervaardiging in Suid Afrika word aangespoor deur hoë kru olie pryse, hoë werkloosheid syfers, toenemende bewustheid van klimaatveranderings en druk op ‘n groeiende ekonomie om sy bronne volhoubaar te gebruik. Die vervaardiging van biodiesel is relatief maklik en hierdie studie is ‘n voorlopige ondersoek in die ekonomiese lewensvatbaarheid van komersiële biodiesel produksie in Suid Afrika deur te kyk na die mark, finansiële en landbou lewensvatbaarheid daarvan. Die mark lewensvatbaarheid. Die potensiële grote vir ‘n biodiesel mark in Suid Afrika is omtrent 1 miljard liter indien dit 10% van sy petroleum diesel teen 2010 wil vervang, maar wetgewing sal nodig wees om ‘n voorspelbare en groeiende mark te skep. Hierdie wetgewing kan in die vorm van subsidies vir boere of biodiesel produsente wees, gebruik maak van regerings koopkrag, verpligtende inmeng maatreëls, belasting voordele of prys vergoeding ooreenkomste. Die finansiële lewensvatbaarheid. Berekeninge om die finansiële lewensvatbaarheid te bepaal is op ‘n 2500 kg/uur (22.5 miljard liter/jaar) gedoen. Hierdie aanleg grote is gebaseer op inligting verkry deur Amigun & von Blottnitz (2005) wat sê dat die optimale grote biodiesel aanleg in Suid Afrika tussen 1500 en 3000 kg/uur is. Daar is na twee tipe aanlegte gekyk, naamlik na ‘n saad ekstraksie biodiesel vervaardigings (SEBP) aanleg wat plaaslike oliesade as voer materiaal gebruik en ‘n kru olie biodiesel vervaardigings (COBP) aanleg wat ingevoerde groente olie as voer materiaal gebruik. 'n SEBP aanleg het ‘n kapitale belegging van tussen R100 en R145 miljoen nodig terwyl ‘n COBP aanleg slegs tussen R45 en R50 miljoen nodig het. Hierdie bydrae sluit werkende kapitaal van omtrent R35 miljoen in wat vas is in 3 maande se voer materiaal kostes. Die onderstaande tabel wys die vervaardigings kostes vir albei tipe aanlegte en verskillende voer materiale. Omtrent 80% van die kostes is voer materiaal terwyl vervoerkostes die tweede hoogste bydraer is. Hierdie resultaat wys na die feit dat die aanleg ligging ‘n baie belangrike rol speel om vervaardigins kostes te minimeer. Dus word die stelling gemaak dat kommersiële biodiesel vervaardiging nie in ‘n paar sentrale aanlegte moet plaasvind nie, maar eerder in ‘n klomp verspreide relatief kleiner aanlegte moet plaasvind. Hierdie kleiner aanlegte sal in die oliesaad produserende streke versprei moet wees. (Suid Afrika sal omtrent 46 aanlegte nodig hê wat elk 2500 kg/uur produseer om 10% van sy diesel teen 2010 te kan vervaardig). Die sensitiwiteits analise het gewys dat die kostes van ‘n SEBP aanleg baie sensitief vir veranderings in oliesaad en oliekoek pryse is. Die kostes van ‘n COBP aanleg is baie sensitief vir veranderinge in groente olie pryse. Wisselvallige landbou pryse maak die kostes van biodiesel baie wisselvallig en onvoorspelbaar. Sojaboon biodiesel kostes is die sensitiefste vir prys veranderings terwyl sonneblom saad die minste geaffekteer word deur sulke prys veranderings. Vir elke R1000/ton wat die glyserol prys styg sal die vervaardigings kostes van biodiesel met 12 sent/liter daal. Die glyserol prys is op die oomblik te laag om in ag te neem weens ‘n oormaat glyserol in die wêreld mark as gevolg van biodiesel produksie. Die gelykbreek prys van biodiesel word uitgewerk deur R1.01/liter brandstof belasting by die vervaardigings kostes by te tel. Op die oomblik (30 Augustus 2006) kan biodiesel van oliesade (behalwe kanola) nie met die petroleum diesel prys meeding nie sonder enige subsidies of wetgewing. Die landbou lewensvatbaarheid. Die landbou implikasies om 10% van die land se diesel uit oliesade te vervaardig word in die onderstaande tabel uiteengesit. Hierdie resultate is gebaseer op die feit dat al drie oliesade gebruik word vir biodiesel vervaardiging en dat die oppervlak verhouding van die drie oliesade konstant bly soos die produksie vermeerder. Biodiesel vervaardiging sal ook die plaaslike oliekoek produksie vermeerder sodat Suid Afrika sal verander van ‘n netto-invoerder (730 duisend ton/jaar) tot ‘n netto-uitvoerder (1.7 miljoen ton/jaar) van oliekoek. Land beskikbaarheid vir so ‘n vermeerderde produksie is nie ‘n probleem nie wat beteken dat Suid Afrika wel die landbou bronne en potensiële mark het om 10% van sy diesel te vervaardig en te absorbeer in die vorm van biodiesel. Uit `n finansiële oogpunt lyk dit egter asof die kommersiële vervaardiging van biodiesel in Suid Afrika nie lewensvatbaar sal wees, sonder enige wetgewings of subsidies, nie.
ENGLISH ABSTRACT: Biodiesel, a fatty acid alkyl ester, derived from the transesterfication of vegetable oil, is considered a renewable fuel that can be used as a replacement for fossil diesel. The urgency for biofuel production in South Africa is motivated by the vulnerability of crude oil prices,high unemployment, climate change concerns and the need for the growing economy to use its resources in a sustainable manner. The technical feasibility of biodiesel production has been proven and this study investigates its preliminary economic feasibility in South Africa by looking at the market, financial and agricultural feasibility of commercial biodiesel production. The market feasibility. The potential market size for biodiesel in South Africa is about 1 billion litres if it is to replace 10% of its diesel consumption by 2010. However, governmental legislation and policies are needed to create a predictable and growing market for biodiesel in South Africa. These policies or regulations could be in the form of subsidising feedstock for biodiesel production, subsidising the biodiesel itself, using government purchasing power, mandatory blending legislation, tax incentives or price compensation agreements. The financial feasibility. Calculations to asses the financial feasibility of commercial biodiesel production are based on a 2500 kg/h (22.5 million litres/annum) containerized plant. This size is based on findings of Amigun & von Blottnitz (2005) that the optimum biodiesel plant size in South Africa ranges between 1500 and 3000 kg/h. Two types of plants were considered, namely a seed extraction biodiesel production (SEBP) plant using locally produced oilseeds as feedstock and a crude oil biodiesel production (COBP) plant using imported crude vegetable oil as feedstock. The capital investment for a SEBP plant ranges between R110 and R145 million while a COBP plant would require a capital investment of about R45 to R50 million. These amounts include a working capital of about R35 million due to money that is fixed in a 3 month stock supply.Feedstock and raw material contribute to about 80% of the manufacturing cost while transport costs are the second biggest contributor. These results point to the fact that the plant location is very important in order to minimize production costs. Thus, commercial biodiesel production should not be centralized, but should rather happen through greater number of relatively small plants located in oilseed producing regions. (South Africa would require about 46 plants each producing 2500 kg/h to produce 10% of its diesel by 2010). The sensitivity analyses showed that the manufacturing costs of a SEBP plant are very sensitive to changes in oilseed and oilcake prices while the manufacturing costs of a COBP plant are very sensitive to a change in crude vegetable oil price. The fluctuating nature of the agricultural commodity prices makes biodiesel manufacturing costs predictable. Soybean biodiesel costs are the most sensitive to price changes while sunflower biodiesel costs are the least affected. An increase in glycerol price would decrease the manufacturing costs of biodiesel by about 12 cents/litre for every R1000/ton increase in price. Glycerol prices are currently too low to consider in the calculations due to a global oversupply as a result of biodiesel production. The break even price of biodiesel is calculated by adding R1.01/litre fuel tax to the manufacturing cost, which means that biodiesel produced from oilseeds (except canola) will not be able to compete with the current price of fossil diesel (30 August 2006) without subsidies or legislation. The agricultural feasibility. Producing 10% of South Africa’s diesel using oilseeds would require a major production increase.Biodiesel production will also increase the local oilcake supply which means South Africa will change from being a net-importer of oilcake (730 thousand tons/year) to a net-exporter of oilcake (1.7 million tons/year). Land availability for such a production increase is not a problem which means that the agricultural resources and potential market are available to produce and absorb 10% of the countries diesel in the form of biodiesel. However, at the moment the commercial production of biodiesel does not seem financially feasible without any government imposed legislation or subsidies.
AFRIKAANSE OPSOMMING: Biodiesel, ‘n hernubare brandstof wat uit groente olie vervaardig word, is ‘n moontlike plaasvervanger vir petroleum diesel. Biodiesel vervaardiging in Suid Afrika word aangespoor deur hoë kru olie pryse, hoë werkloosheid syfers, toenemende bewustheid van klimaatveranderings en druk op ‘n groeiende ekonomie om sy bronne volhoubaar te gebruik. Die vervaardiging van biodiesel is relatief maklik en hierdie studie is ‘n voorlopige ondersoek in die ekonomiese lewensvatbaarheid van komersiële biodiesel produksie in Suid Afrika deur te kyk na die mark, finansiële en landbou lewensvatbaarheid daarvan. Die mark lewensvatbaarheid. Die potensiële grote vir ‘n biodiesel mark in Suid Afrika is omtrent 1 miljard liter indien dit 10% van sy petroleum diesel teen 2010 wil vervang, maar wetgewing sal nodig wees om ‘n voorspelbare en groeiende mark te skep. Hierdie wetgewing kan in die vorm van subsidies vir boere of biodiesel produsente wees, gebruik maak van regerings koopkrag, verpligtende inmeng maatreëls, belasting voordele of prys vergoeding ooreenkomste. Die finansiële lewensvatbaarheid. Berekeninge om die finansiële lewensvatbaarheid te bepaal is op ‘n 2500 kg/uur (22.5 miljard liter/jaar) gedoen. Hierdie aanleg grote is gebaseer op inligting verkry deur Amigun & von Blottnitz (2005) wat sê dat die optimale grote biodiesel aanleg in Suid Afrika tussen 1500 en 3000 kg/uur is. Daar is na twee tipe aanlegte gekyk, naamlik na ‘n saad ekstraksie biodiesel vervaardigings (SEBP) aanleg wat plaaslike oliesade as voer materiaal gebruik en ‘n kru olie biodiesel vervaardigings (COBP) aanleg wat ingevoerde groente olie as voer materiaal gebruik. 'n SEBP aanleg het ‘n kapitale belegging van tussen R100 en R145 miljoen nodig terwyl ‘n COBP aanleg slegs tussen R45 en R50 miljoen nodig het. Hierdie bydrae sluit werkende kapitaal van omtrent R35 miljoen in wat vas is in 3 maande se voer materiaal kostes. Die onderstaande tabel wys die vervaardigings kostes vir albei tipe aanlegte en verskillende voer materiale. Omtrent 80% van die kostes is voer materiaal terwyl vervoerkostes die tweede hoogste bydraer is. Hierdie resultaat wys na die feit dat die aanleg ligging ‘n baie belangrike rol speel om vervaardigins kostes te minimeer. Dus word die stelling gemaak dat kommersiële biodiesel vervaardiging nie in ‘n paar sentrale aanlegte moet plaasvind nie, maar eerder in ‘n klomp verspreide relatief kleiner aanlegte moet plaasvind. Hierdie kleiner aanlegte sal in die oliesaad produserende streke versprei moet wees. (Suid Afrika sal omtrent 46 aanlegte nodig hê wat elk 2500 kg/uur produseer om 10% van sy diesel teen 2010 te kan vervaardig). Die sensitiwiteits analise het gewys dat die kostes van ‘n SEBP aanleg baie sensitief vir veranderings in oliesaad en oliekoek pryse is. Die kostes van ‘n COBP aanleg is baie sensitief vir veranderinge in groente olie pryse. Wisselvallige landbou pryse maak die kostes van biodiesel baie wisselvallig en onvoorspelbaar. Sojaboon biodiesel kostes is die sensitiefste vir prys veranderings terwyl sonneblom saad die minste geaffekteer word deur sulke prys veranderings. Vir elke R1000/ton wat die glyserol prys styg sal die vervaardigings kostes van biodiesel met 12 sent/liter daal. Die glyserol prys is op die oomblik te laag om in ag te neem weens ‘n oormaat glyserol in die wêreld mark as gevolg van biodiesel produksie. Die gelykbreek prys van biodiesel word uitgewerk deur R1.01/liter brandstof belasting by die vervaardigings kostes by te tel. Op die oomblik (30 Augustus 2006) kan biodiesel van oliesade (behalwe kanola) nie met die petroleum diesel prys meeding nie sonder enige subsidies of wetgewing. Die landbou lewensvatbaarheid. Die landbou implikasies om 10% van die land se diesel uit oliesade te vervaardig word in die onderstaande tabel uiteengesit. Hierdie resultate is gebaseer op die feit dat al drie oliesade gebruik word vir biodiesel vervaardiging en dat die oppervlak verhouding van die drie oliesade konstant bly soos die produksie vermeerder. Biodiesel vervaardiging sal ook die plaaslike oliekoek produksie vermeerder sodat Suid Afrika sal verander van ‘n netto-invoerder (730 duisend ton/jaar) tot ‘n netto-uitvoerder (1.7 miljoen ton/jaar) van oliekoek. Land beskikbaarheid vir so ‘n vermeerderde produksie is nie ‘n probleem nie wat beteken dat Suid Afrika wel die landbou bronne en potensiële mark het om 10% van sy diesel te vervaardig en te absorbeer in die vorm van biodiesel. Uit `n finansiële oogpunt lyk dit egter asof die kommersiële vervaardiging van biodiesel in Suid Afrika nie lewensvatbaar sal wees, sonder enige wetgewings of subsidies, nie.
Description
Thesis (MScEng (Process Engineering))--University of Stellenbosch, 2007.
Keywords
Dissertations -- Process engineering, Theses -- Process engineering, Biodiesel fuels industry, Renewable energy sources, Diesel fuels industry -- Environmental aspects -- South Africa