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Biofuels Seminar Joint Event with EnviroInnovate at the Birmingham City University Technology Innovation Centre 5th November 2008
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Economics of Biofuels
Production
November 2008
GRAHAM REDMAN
THE ANDERSONS CENTRE
BIOETHANOL VIABILITY
Wheat cost vs petrol cost at pump
0
5
10
15
20
25
30
35
40
45
50
Aug
-91
Aug
-93
Aug
-95
Aug
-97
Aug
-99
Aug
-01
Aug
-03
Aug
-05
Aug
-07
ppl petr
ol a
nd w
heat
equiv
ale
nt
Wheat Value to make 1l bioethanol
Ex Duty/Vat Petrol ppl
OSR Cost Vs Diesel at Pump
0
10
20
30
40
50
60
70
80
90
100
Jul-
98
Jul-
99
Jul-
00
Jul-
01
Jul-
02
Jul-
03
Jul-
04
Jul-
05
Jul-
06
Jul-
07
Jul-
08
pp
l die
sel an
d O
SR
eq
uiv
ale
nt
OSR Value to make 1L Biodiesel
Ex-Duty/VAT Diesel value at pump
BIODIESEL VIABILITY
0
10
20
30
40
50
60
70
802
0
30
40
50
60
70
80
90
100
11
0
Percentage of RTFO Target achieved
RT
FC
ppl
CHANGING VALUE OF RTFCs
Biodiesel Target Cost of Production
Incomes
Sale target = forecourt ex-tax = 50p/l
Meal c£120 = +24 ppl
Glycerine ~ + 1 ppl
Duty reduction = + 20 ppl
RTFO = + 0 ppl
Cost of OSR per l = – 65ppl
Processing costs less than 30 ppl pre April 2010
Usually 35-60p
COSTS OF MAKING BIODIESEL
• High capital setup (possible RDP assistance)
• Purchasing OSR, virgin oil, cooking fat,
• Opportunity cost of crushed oil
• Risks
• Management distraction
• Scale of production means rising
commitment
ADDING VALUE
• Single supplier or even own fleet
• Low carbon sales of primary goods
• Locally produced fuel?
• Ignore the co-products at your peril
Or:
• Grow combinable crops as before
• Benefit from an increase in buyers
• Sell to highest bidder
