Methods and micro economy of biodiesel production

Table of contents

Acknowledgement

List of Figures

Abbreviation

1 Motive and the purpose of the work
1.1 Scope and approach of the scientific work
1.2 Quality assurance of the literature sources

2 Climate changes and climate protection
2.1 Fossil fuel
2.2 Summary

3 Renewable energy
3.1 Biofuel
3.2 Biodiesel
3.3 Vegetable oil
3.4 Bioethanol
3.5 Biofuel in the future
3.6 Summary of the comparison of Biofuel
3.7 Summary and Outlook on biofuels

4 Renewable Raw Materials

5 Framework of Existing Legislation
5.1 Update Tax Issue in Germany with regard to B100
5.2 Update Blending of Diesel with Biodiesel

6 Technical description
6.1 Bio diesel plant
6.2 Biodiesel production process
6.3 Mechanical pressing
6.4 Extraction
6.5 Transesterification
6.6 Total process

7 The Case “Biodiesel Plant XYZ”

8 Market Overview

9 Economic calculation
9.1 Investment
9.2 Plant specifications and capacities
9.3 Price development
9.4 By-products
9.5 Price development in generals

10 Cost structure of the biodiesel production
10.1 Key Financials
10.2 Profit and Loss Statement
10.3 Return Sheet
10.4 Cash Flow Statement
10.5 Stress tests
10.6 Summary for biodiesel plant in Germany

11 Slovakia
11.1 Agriculture key facts for Germany
11.2 Agriculture key facts for Slovakia
11.3 Estimation of biodiesel production in Slovakia
11.4 Summary oil fruits in Slovakia

12 Miscellaneous data on green market and biofuel
12.1 Life Cycle Assessment of Biodiesel
12.2 Glycerol
12.3 Strategy for the green -business and -facilities
12.4 Use of biofuel power plants for the real estate
12.5 Potential use of energy for power plants in Slovakia

A Technical setup of a biodiesel plant

B Investment Mathematic
B.1 Origins of the investment
B.2 Static methods
B.3 Dynamic methods (Finance-mathematical methods)

List of literature

Acknowledgement

First of all I want to thank my dissertation tutor, Prof. Ing. Dušan Bakoš, DrSc. to be willing to take this work into his faculty, where the tasks mostly are of economic matters. His excellent and wide experiences working in interdisciplinary fields did help me to cover this area from chemistry via nutrition to micro economy and management.

I also received optimal help and support from the Management Institute Prof. Ing. Koloman Ivanička, PhD. His wide view of interdisciplinary work was of big help to end this work.

A great thanks to M.A. Filiz Khan (working at Alstom Switzerland Ltd) who supported me with her excellent English knowledge. Here perfect proofreading was a big help for me during my time at Alstom Switzerland Ltd. in Baden.

A special thanks to my wife Dipl.-Kauffrau (technisch orientiert) Gry Sveberg Kleinschmidt, supporting me during this period and her superb proofreading. Especially the end reading of the final version was of outstanding help.

List of Figures

Figure 1: Metric tons of CO2/Year 2006 [IEA 2008]

Figure 2: Map Energy Indicators, CO2 Emissions 2005 [IEA 2008]

Figure 3: Renewable energy sources [BMU 2006]

Figure 4: CO2 - Emission source in Germany in 2008 [UBA 2008]

Figure 5: Biofuels consumption in Germany, 2007 [FNR 01]

Figure 6: Comparison of Biofuel

Figure 7: Development of the biofuel quota

Figure 8: Climate protection quote for biofuels as of 2015

Figure 9: Energy tax for B100 as a pure fuel

Figure 10: Energy tax for vegetable oil fuel

Figure 11: Updated energy tax for B100 as a pure fuel

Figure 12: An example of a layout for a biodiesel plant

Figure 13: Legend for Figure 12

Figure 14: Transesterification of vegetable oil into FAME

Figure 15: Hum reaction equation [Kaltschmitt/Hartmann]

Figure 16: Simplistic assembly-line pattern of production of bio diesel

Figure 17: Biodiesel plants capacity in Germany (1) [FNR 19]

Figure 18: Biodiesel plants capacity in Germany (2) [FNR 19]

Figure 19: Sales of Biodiesel in Germany [VDB 01], [FNR 01]

Figure 20: Crude Oil prises in US-$/barrel (03/07-07/10) [UFOP]

Figure 21: Price at petrol pump in ct/l incl. VAT (01/05-07/10) [UFOP]

Figure 22: Investment in €

Figure 23: Plant specifications

Figure 24: Plant capacities

Figure 25: Price development for RME at petrol pump [UFOP], [IWR]

Figure 26: Wholesaler price of Biodiesel, €/t net [UFOP]

Figure 27: Price development of coarse colza meal 2002-2006

Figure 28: Average price of coarse colza meal 2005-20010 [UFOP]

Figure 29: Price development of pharmaceutical Glycerine

Figure 30: Forecast price of pharmaceutical Glycerine [IFO]

Figure 31: Average price development of Rapeseed €/t [UFOP]

Figure 32: Production factor planning of A&O materials

Figure 33: Average cost structures of the production in %

Figure 34: Turnover and EBITDA 2010-2020 in € million

Figure 35: Profit and Loss Statement 2010 - 2020

Figure 36: Return Sheet 2009 - 2020

Figure 37: Cash Flow Statement 2009 - 2020

Figure 38: Calculation of the Biodiesel pump price (net)

Figure 39: Increase of RME wholesaler price in €/t with 3% inflation

Figure 40: Turnover and EBITDA 2010 - 2020 in € million, ST1

Figure 41: Turnover and EBITDA 2010 - 2020 in € million, ST2

Figure 42: Turnover and EBITDA 2010 - 2020 in € million, ST3

Figure 43: Turnover and EBITDA 2010 - 2020 in € million, ST4

Figure 44: Turnover and EBITDA 2010 - 2020 in € million, ST5

Figure 45: Comparison of the different setups of the calculation

Figure 46: The area of Slovakia [STUBA 2010 AO]

Figure 47: LCA basic scenario for RME [IFEU 2003]

Figure 48: Advantage for RME/Advantage for diesel fuel [IFEU 2003]

Figure 49: Example of a setup for a power plant [MAN 2010]

Figure 50: Schema 1 (Transesterification)

Figure 51: Schema 2 (Transesterification)

Figure 52: Tank farm capacities

Figure 53: Personnel list

Figure 54: Dimension balance

Figure 55: Numerical example of a static investment

Figure 56: Average cost schedule in a rationalisation investment

Figure 57: Average costs schedule in an expansion investment

Figure 58 Average costs schedule in several expansion investments

Figure 59: Proceed and total expenses schedule with ext. investments

Figure 60: Recovery factors (discounting factors)

Figure 61: Recovery factors (annuity factors)

Figure 62: Correlation between NPV – adequate target rate (P %)

Figure 63: Example of Internal Rate of Return (IRR)

Abbreviation

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1 Motive and the purpose of the work

In the last years an increased discussion around bio fuel has been recognised. The motivations for more intense focus on this sector have been for different reasons. This start with the decoupling the dependency of crude oil and what mean more independent form other countries. The most of the countries what a dependency exist are superior numbers of countries what not have the same political view, society forms and the same understand of human rights. This will in the future be a political and economical challenge when the combination of demand of crude oil is bigger than the production. The political impact from the countries of supplies on our policy will rise and this will have major consequences. The same is for the economical system. Our economical system is also depending on the constantly delivering of the demand amount of crude oil at all time and also for a reasonable price. This has direct impact in our competition delivering of product on the world marked and therefore also for the gross income of the state. This will on the other hand have impact in our society as we know it and the consequence are surly not positive.

Due to the rising focus on the clime changes and the discussion about the CO2 and the impact of CO2 for the clime collapse have also forced to take this issue more serious about the CO2 balance of bio fuel as a partly solution of the normal fuel.

The positive decoupling of the crude oil in regards of independency of the supplier countries is that the supply chain will stay in the domestic sales or in the European Union (EU), especially for the agricultural sector.

All this emissions have lead to the political will and positive currents, legislation and the purposes of the EU, coupled with tax relief and in addition as above indicated extremely rising crude oil prices at the world market, it is to anticipate that the producing of regenerative and ecological goods like bio fuel had and will for the next years have an above average growth.

1.1 Scope and approach of the scientific work

The goal of this study is an interdisciplinary scientific work. Main focus is on business economics, but on the base of existing technology to produce bio diesel fuel.

The subject should for the bio diesel fuel plant follow the economic efficiency as well as economically and technically aspects. At the moment there are none published data or support for investors or companies, who wants to aim this market strategically.

This contribution explains the most important parameters for a management decision of a investing into a bio diesel fuel plant and penetrating this market or not.

Main focus of this work will be the Germany market and laws. With some changes this work can also be used for other countries. The main changes will be the specially the domestic laws, market prises, logistic and marketing.

The first phase of this study will start with the fundamentals of the bio fuels and tangential themes. This is to get a general over view over this sector.

The second phase of this work will be to go through a project development- /business- plan on an example of a bio diesel fuel plant. Here will fundamental emissions about the stockpile, logistic, production and products, the market and over finance mathematical parameter calculate the outcome of a bio diesel plant (cut off for market information is calendar week 26 in July 2010).

The third part of this work is different scenarios that will be discussed and the probable outcome. Also stress analyse on the financial part of the business plan will be to analyse the outcome of the stress test. As an end a summary about the result will be made and outlook for the bio diesel market and for the bio fuel market.

Part four will be a rough estimation about the Slovakian potential in oil fruit production and also the estimation of biodiesel production. More exactly investigation can be done in other scientific works such as bachelor or master diploma works.

For the fifth part we will have a look into miscellaneous data in the green market and biofuel. Life Cycle Assessment gives a setup how to check if example biofuel real are CO2 neutral in a life cycle view. Also a bit into tangential issue like by-products of glycerol we will have a short look into. Some strategy view of green business about what will be important to consider when business plan, planning or development in this segment will be looked into. At the end of the fifth part we will make a rough calculation of the potential use of energy of power plants in Slovakia. This also shows that bio fuel can be used for power and not just for transportation.

In appendix A, a technical setup of a biodiesel plant is added to show in a very brief way how in praxis a biodiesel plant is pre-engineered and in the last appendix B we will explain about finance mathematic to finalize this work.

The study will reinforces and supported through all part of the work with literature research.

1.2 Quality assurance of the literature sources

Some literature sources have been retrieved from the Internet home pages. Due to the fact that the quality of the source is difficult to check on the Internet, this is normally not a proper way of getting secured, good quality information. Therefore, all information from the home pages is retrieved from secured well-known providers, such as governmental home pages or officially incorporated or registered societies. The download date of the retrieved information is registered in the list of literature sources.

E-books are to be treated as normal books. Due to the fact that an increasing amount of books is distributed electronically, the quality will be the same as normal hard copy books. Whenever E-books are downloaded, the URL will be listed in the literature index, entailing which sources the documents were downloaded from.

2 Climate changes and climate protection

Due to the development of the industrialisation and the world population, the demand for raw resources and energy has rapidly increased during the last 200 years. Particularly the supply of fossil energy sources strongly increased. The growing global climate problem has correlated to fossil energy carrier in parallel to the increasing standard of living. Firstly, the negative impact on the sulphur and nitric oxide, volatile hydrocarbon and carbon monoxide through air, water and soil and secondly the high emission of carbon dioxide (CO2), originating from the use of fossil energy sources, can contribute to global climate changes [Heinloth 2003].

The first signs of oncoming climate changes, released by the greenhouse effect on our planet are already recognizable. A few examples can be listed as follows:

- stronger precipitation in the regions of Canada and Northern Europe,
- sinking rainwater in the regions of Africa,
- more frequent cyclones, rising sea temperatures,
- evanescent mountain glaciers and melting ice in the Arctic and Greenland [Petermann 2006].

According to the Stern Review Report on the Economics of Climate Change, the annual costs used to cover global climate damages currently are about 200 billion American dollars [Stern 2007].

The majority of the climatologists agree that there is a connection between global climate changes and increasing greenhouse gases in the special CO2 in the atmosphere. Since the beginning of the industrial age in the nineteenth century, the CO2 content has increased in the atmosphere by about 30 percent [Petermann 2006]. According to the international energy agency (IEA), the CO2 emissions have increased worldwide since 1973 from annually 15.7 billion tons up to 28.0 billion tons in 2006. The United States of America (USA) and China have caused approximately 42 percent of the worldwide CO2 emissions (see Figure 1, page 6).

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Figure 1: Metric tons of CO2/Year 2006 [IEA 2008]

The industrialized states in Kyoto (Japan) met in 1992 to agree on the reduction of the greenhouse gas emissions, in order to reach a global reduction of the greenhouse gas and thereby counteracting against the threatening climate change. In 1997, the signatories of the climate convention held a conference and decided in an agreement to reduce the emissions of greenhouse gases by an average of 5 percent until 2012 compared to the year 1990. According to the agreement, Germany has to reduce at least 8 percent of its greenhouse gas emissions until 2013 [UN 1998].

In addition, the member states of the European Union within the scope of the third energy conference in March 2007 have decided to reduce the greenhouse gas emissions towards the emission in 1990 for about at least 20 percent until 2020. The portion of renewable energy in the primary energy consumption should be raised by about 20 percent until 2020 [BR 2007].

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Figure 2: Map Energy Indicators, CO2 Emissions 2005 [IEA 2008]

An essential contribution to the reduction of CO2 emissions can occur through the development, supply and use of non-fossil energy sources. Beside the nuclear energy is this regenerative energy [Heinloth 2003]. Regenerative energy makes the supply of energy with low emissions possible.

2.1 Fossil fuel

In the middle of the 19th century the first commercial oil spring was opened by drillings in Pennsylvania, USA. Thereupon fossil oil became available in larger quantities used for lubricant and for lamp fuel. With the development of the combustion engine by the German engineer Nicolaus August Otto in the 1870s, a new form originated in the use of oil as fuel [Heinberg 2005]

Today crude oil performs a portion of approximately 37 percent of the global energy consumption. It is used for the production of heat and power for modern chemical products and fuels. Oil is used to approximately 70 percent in traffic, in waterways and in the air. Therefore, due to the high consumption of fossil fuel, the awareness about the oil reserves must be increased [Petermann 2006].

Basically one differentiates between reserves and resources. Reserves are known as crude oil reserves, which are confirmed by drillings and are economically surely feasible with today's technology. Resources are crude oil reserves, which cannot be extracted using today's technology or are not yet economically justifiable. Therefore speculative crude oil wells can also be meant [Rebhan 2002].

Around 3.9 billion tons yearly are currently extracted worldwide from conventional crude oil (1 EJ = 23.9 million tons crude oil). The global consumption figures nearly correspond to those of the production [BGR 2007]. About one third of the total production takes places "Offshore", namely overseas [Heinloth 2003]. In 2006, approximately 598 million tons of crude oil was used in EU-25 (25 member states of the EU) and approximately 608 million tons of crude oil was used in EU-27 (included Romania and Bulgaria). In Germany, it was about 121 million tons [EC 2008].

According to the “Bundesanstalt für Geowissenschaften und Rohstoffe” about 75.6 percent of the conventional crude oil is extracted in countries of the Far East, the CIS (Commonwealth of Independent States), Africa and in North America. 43.8 percent of the conventional oil will be produced by the Organization of the Petroleum Exporting Countries (OPEC-13) [BGR 2007]. The OPEC states possess nearly 80 percent of the global oil reserve. Western Europe disposes of approximately 2 percent of the global world reserve, Russia more than 6 percent. There are other deposits in North America and South America and some republics of the Commonwealth of Independent States (CIS) [Petermann 2006].

In 2007, the conventional world-oil reserves amounted to approx. 163.3 billion tons and the resources to about 82 billion tons [BGR 2007]. Oil reserves are granted for at least 40 years of constant consumption after dividing the world-oil reserves by the annual use. Nevertheless, due to the increasing demand for oil by countries such as China and India, the reduction of the oil reserves will be accelerated [Petermann 2006]. For the future oil demand an annual increase of approx. 1.3 percent is forecasted [BGR 2007]. Geologists make an assumption based on the fact that already 90 percent of all oil beds have been found.

Oil extraction will become more cost-intensive in the future. Costly offshore production plays an increasingly important role for the oil companies [Petermann 2006]. Beside modern production methods for the conventional oil production, increasing oil prices become profitable due to the lack of new expensive processes in the field of non-conventional oil production.

The oil companies have already increased the production of non-conventional crude oil such as oil sand and oil slate. As an example we can take the oil groups Shell and ExxonMobil, which are investing in the oil production in Canada using oil sand [Petermann 2006]. The reserves in non-conventional crude oil are estimated to approx. 41 percent of the reserves in conventional crude oil [BGR 2007].

2.2 Summary

If we take all key points of the above chapters into consideration, we can conclude the following:

Contribution to global climate changes:

- Development of the industrialisation
- Development of the world population
- Rapidly increasing demand for resources
- Rapidly increasing demand for energy
- Supply of fossil energy sources strongly increased
- Development of the living standards
- Increase of sulphur and nitric oxide
- Volatile hydrocarbon and carbon monoxide through air, water and soil
- The high emission of carbon dioxide (CO2), originating from the use of fossil energy sources

Signs of the climate changes as examples:

- Stronger precipitation in the regions of Canada and Northern Europe
- Sinking rainwater in the regions of Africa
- More frequent cyclones
- Rising sea temperatures
- Evanescent mountain glaciers and melting ice in the Arctic and Greenland

Estimated annual costs used to cover global climate damages:

- 200 billion American dollars

The majority of the climatologists agree on the following:

“there is a connection between global climate changes and increasing greenhouse gases in the special CO2 in the atmosphere”

Fossil fuel:

- Today crude oil performs a portion of approximately 37 percent of the global energy consumption
- Oil is used to approximately 70 percent in traffic, in waterways and in the air
- Therefore, due to the high consumption of fossil fuel, the awareness about the oil reserves must be increased
- Around 3.9 billion tons yearly are currently extracted worldwide from conventional crude oil
- The global consumption figures nearly correspond to those of the production
- About 75.6 percent of the conventional crude oil is extracted in countries of the Far East, the CIS (Commonwealth of Independent States), Africa and in North America
- 43.8 percent of the conventional oil will be produced by the Organization of the Petroleum Exporting Countries (OPEC-13)
- The OPEC states possess nearly 80 percent of the global oil reserve
- Western Europe disposes of approximately 2 percent of the global world reserve
- Oil reserves are granted for at least 40 years of constant consumption after dividing the world-oil reserves by the annual use
- Due to the increasing demand for oil by countries such as China and India, the reduction of the oil reserves will be accelerated
- Geologists make an assumption based on the fact that already 90 percent of all oil beds have been found

3 Renewable energy

Regenerative energy discloses primary energy sources from the natural systems of the Earth, sun and moon. Energy streams are caused by releasing energy from the rays of the sun or from solar radiation, the planet gravity and planetary motion, as well as the released warmth stored in the Earth. On the base of energy streams, these energy donators can provide final energy or useful energy. In this case one can also speak of secondary energy. The result is an extensive offer of power production, which is shown in Figure 3, page 13. Secondary energy encloses heat, power and fuel [BMU 2006].

Regenerative energy shows the only reliable possibility to guarantee the energy supply of the earth with lasting effect and a low level of emission, as well as the execution taken from the Federal Ministry of environment, nature conservation and reactor security^[1] [BMU 2006]. On a global scale, around six fold of the whole energy consumption could already be covered by technically usable regenerative energy today [Puls 2006].

For states dependent on raw material or on energy like Germany, regenerative energy means more independence from energy used by fossil oil and natural gas [BMVEL 2005].

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Figure 3: Renewable energy sources [BMU 2006]

3.1 Biofuel

Biofuels are renewable energy sources derived from biomass. The source materials for biofuels are so-called renewable raw materials. These can be planted roughly everywhere. Therefore, there is less import dependence on suppliers for fossil energy sources [BMU 2006]. Beside technical changes in automobiles for the reduction of the fuel consumption and better exhaust gases, biofuels are the only option to substitute the fossil energy and to reduce the output of greenhouse gases, particularly CO2 [FNR 2006/236]. As illustrated in Figure 4 the portion of CO2 caused by automobiles in Germany is approx. 18 percent and therefore reveals a big potential in CO2-reduction.

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Figure 4: CO2 - Emission source in Germany in 2008 [UBA 2008]

Biofuels release only as much CO2 as the plant itself takes to grow. Therefore, biofuels are CO2 neutral. The CO2 balance of biofuels is considered more advantageous in comparison to fossil fuels, because mere factors like production or transport of raw materials or biofuels play a role in terms of causing CO2.

A range of liquid and gaseous bioenergy sources belongs to the biofuels [BMU 2006]. In the following chapter some well-chosen biofuels will be described in more detail. Apart from the described biofuels, there are other quite promising biogenic fuels. In order not to expand the frame of this work, only those contemporary fuels, which are most promising, will be depicted in detail.

3.2 Biodiesel

Biodiesel or Fatty Acid methyl Ester (FAME) belongs to the first generation of biofuels [BMU 2006]. Biodiesel is used as a fuel substitute for diesel engine vehicles. It is currently the best-known alternative fuel for the fossil diesel in Germany [BMU 2006]. In 2007, around 72 percent of the total biofuels in Germany was biodiesel.

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Figure 5: Biofuels consumption in Germany, 2007 [FNR 01]

In Germany, rapeseed oil normally is the source product for biodiesel; through chemical processing the end product is rape methyl ester. For the processing, the so-called transesterification, approx. 10 percent of methanol is needed [FNR 2006/236]. For the production of biodiesel, other vegetable oils can also be used such as sunflowers, Soya beam, and Palm and Jatropha oils as well as old fat from food and animal fat.

The annual yield of biodiesel in Germany is approximately 1,550 l / hectare.

About 0.91 litres of normal diesel can be substituted for 1 litre of biodiesel. Therefore biodiesel has about 10 percent lower energy portion per litre than normal diesel. The annual yield of biodiesel per hectare corresponds to 1,408 l of diesel [FNR 2006/236].

If we compare the CO2 balance of normal diesel and biodiesel, we find that – through the additional consumption by the use of biodiesel and CO2 neutrality of the biodiesel - the CO2 output was reduced by about 70 percent compared with normal diesel [Wörgetter o.a. 1999]. For example, a soot particle emission of biodiesel is approx. 30 percent and hydrocarbon emissions are about 90 percent lower than normal diesel [Geitmann 2004]. In comparison with normal diesel, no sulphur is released through the combustion of biodiesel. Biodiesel contains no benzene, no other aromatic constituents and is biodegradable [Puls 2006].

Biodiesel can be used in pure form in specially equipped engines. For standard diesel engines, a biodiesel portion of 7 percent in the normal diesel does not require any adaptation for the engine (see Chapter 5, Framework of Existing Legislation)

According to the association of German biodiesel manufacturer’s inc. society^[2], the biodiesel sales in Germany increased from approx. 0.10 million tons in 1998 to 2.88 million tons in the year of 2006 [VDB 01]. In 2007, the biodiesel portion already amounts to more than 5.4 percent of the primary fuel consumption in Germany [FNR 03].

The positive development of the biodiesel among others is a result of its low sales price. Through the tax exemption of biodiesel in pure form until August 2006, the price per litre in the same year was below the price range of normal diesel [UFOP 200611]. Since August 2006, a tax of 9 ct./l is imposed on biodiesel. From 2008 onwards, the tax will be increased yearly. Meanwhile some changes have been introduced during writing this work with the new German legislation (see Chapter 5, Framework of Existing Legislation)

3.3 Vegetable oil

Vegetable oil like biodiesel can be assigned to the first generation of biofuels. It can be used as a fuel substitute for diesel vehicles and can be added to diesel [FNR 05].

We refer to vegetable oil in the form of rape or similar non-drying vegetable oils as for example sunflower oil [Geitmann 2004]. The annual yield of vegetable oil is approx. 1,480 l / hectare.

0.96 litres of normal diesel can be substituted for 1 litre of rapeseed oil. The annual yield of vegetable oil per hectare corresponds to 1,420 l of diesel. The energy portion of rapeseed oil therefore roughly corresponds to that of normal diesel. The CO2 decrease induced by vegetable oil amounts to about 80 percent compared with normal diesel and it displays a better CO2 balance than biodiesel [FNR 05]. The combustion of vegetable oil does not release any sulphur and the pollutant emissions are kept low [Geitmann 2004].

Vegetable oil does not pose any threat to nature because of its quick biodegradability [FNR 06]. In comparison to biodiesel, retrofitting of the engine is basically necessary with vegetable oil. The costs for the retrofitting can amount up to 3,500 EUR [Geitmann 2004].

In 2007, approx. 838,000 tons of vegetable oil was used in Germany as a primary fuel. This corresponds to a quantity of approx. 1.4 percent of the total fuel consumption in Germany [FNR 07]. As with biodiesel, a clear increase is also to be recognised here.

The trend towards more alternative fuels is supported by the low price of vegetable oil (rape oil), from 0.75 to 1.05 EUR/l (marked price September/2008) [FNR 05]. Taxation for vegetable oil remains until the end of 2007. From 2008 onwards, the tax amount will be increased yearly [FNR 08].

In Germany, pure vegetable oil has been used up to now primarily in the heavy load traffic, for agriculture and construction machines. Vegetable oil is used only sparsely for normal cars [FNR 2006/236].

3.4 Bioethanol

Bioethanol serves as a substitute for petrol and belongs to the first generation of biofuels [Geitmann 2004]. Beside the use of bioethanol in the oil industry, synthetic Ethanol is used in the food- and chemical-technical industry. Approx. 66 percent of the total global bioethanol production is used as fuel [Schmitz 2003].

Bioethanol can be used as fuel in its pure form. So-called Flexible-Fuel-Vehicles (FFV `s) can consume up to 85 percent (E85) of bioethanol and the rest with normal petrol. Engines must meet special requirements in order to be able to use the E85 fuel. The modification of a normal petrol engine based on FFV technology is only possible with certain engines along with the implementation of special metals and alloys. Since 2005, such vehicles are also permitted in Germany [BDBE 01].

An increasing number of vehicle manufacturers are willing to offer their vehicles with FFV technology. Saab, Volvo and Ford are already actively involved with the implementation of the FFV technology in the German market. The installing of the filling station network for E85 in Germany has gradually developed since 2006. In Brazil, USA and Sweden the FFV technology has already been in use for several years [BDBE 01].

An admixture to normal petrol is also possible. In compliance with the European norm EN German Institute for Standardization 228 for petrol, bioethanol may be added up to 5 percent. The so-called E5 fuel can be used with every petrol engine without causing any changes in the engine. Normal combustion engines can take up to 10 percent bioethanol admixture [FNR 2006/236]. An admixture with biodiesel is also possible. In adapted diesel engines, a lowering of the soot particle emissions can be reached by the bioethanol admixture up to approx. 40 percent. In practice, such an admixture has not been applied yet [BDBE 01].

Furthermore, bioethanol can serve as a pre-product for the synthetic production of fuel components. Ethyl-Tertiary-Butyl-Ether (ETBE) is an example for this [Schmitz 2003]. ETBE is a combination with 47 percent of bioethanol and petrol. ETBE can be a substitute for the fossil antiknock Methyl-Tertiary-Butyl-Ether (MTBE). In this form, ETBE can be mixed into normal petrol up to 15 percent according to the regulation Norm DIN EN 228 [BDBE 01].

In 2007, bioethanol has reached a portion of 0.5 percent in the total primary fuel consumption in Germany. This corresponds to about 10 percent of the total biofuel consumption [FNR 03]. Due to the BioKraftQuG, this portion will increase further. Through the legal constraint of the BioKraftQuG since January 2007, a bioethanol -admixture quote of 1.2 percent is to be accomplished. Over the course of the following years, the quote should be increased to 0.8 percent on a yearly basis. The amount of the bioethanol -admixture quote should increase up to at least 3.6 percent by 2010 [BioKraftQuoG 200603].

If the FFV can assert itself in the market, the required amount of bioethanol will increase in addition to the increase caused by the BioKraftQuG. If Germany used the allowed 5 percent of bioethanol admixture, the demand would amount to approximately 1.3 million t per year without the E85 quantity [FNR 09]. However, these quantities would be much higher than the 700,000 tons of production capacity for bioethanol, which was forecasted in Germany for the year 2006. In 2005, about 226,000 tons of bioethanol were used as fuel in Germany [FNR 10]. The total petrol consumption amounts to approx. 21.3 million tons (53 million tons Fuel, 40.1% petrol) in Germany; at least 0.3 million tons of bioethanol as admixture quantity has to be used to fulfil the legal constraint of the BioKraftQuG from the year 2007. In 2007, 0.5 million tons of bioethanol was produced [FNR 03].

The market price of bioethanol was between 500 €/m3 and 650 €/m3 in Europe in 2008 [BDBE 02].

Bioethanol can be extracted from a range of different raw materials. Sugar-containing plants can be fermented directly. Sugarcane and sugar beets belong to the group of sugar-containing plants. Sugarcane is used particularly in Brazil for the production of bioethanol. In Germany, this raw material cannot be grown due to the unfavourable climate. The sugar beet serves as a sugar-containing bioethanol raw material.

Starchy plants can also be used for the bioethanol production. In this case, firstly the strength of the grain body must be enzymatically converted into sugar in order to be usable in the next production process. A subsequent treatment of bioethanol is only possible with sugar [FNR 2006/236]. The most important starchy plants in Germany are wheat, potatoes, maize and peas [FNR 11].

Beside the varieties of grain wheat and Triticale (Triticale is a type of corn gained through hybridization of wheat and rye), the Rye, a very starchy plant, belongs to the cereal plants as well [Piorr 01].

Beside starchy- and sugar plants, bioethanol can also be extracted from cellulose-containing raw materials and waste products such as plant leftovers, straw or wood [Puls 2006]. On this occasion, modified enzymes are used genetic-technically to convert the cellulose of the plant into starch. Therefore an entire use of the plant is possible. Before bringing up the above-mentioned method, merely the use of the sugar-containing and starchy parts of the plant, the so-called fruit body, was possible [Puls 2006]. The milled grain, however, releases plant residues, the by-product 1 used for the fuel production, while same was useless before for the bioethanol production. This leads to higher bioethanol yields. However, currently no methods are ready on the market for the production of bioethanol based on cellulose-containing plants [BDBE 03].

During the distillation process, the so-called mash is produced. The substrate can be used for biogas plants. If the mash is pressed and dried out, the produced will become the by-product 2, the so-called Dried Distillers Grains with Solubles (DDGS), which can be used as animal food [FNR 12]. By-product 1, the so-called Bran, is a waste material and must be decontaminated.

The possible cultivation of agricultural surfaces and the production potential considerably raise a vast number of different raw materials for the bioethanol production. Nevertheless, not all raw materials are always usable with low costs [Henke a.o. 2003].

The bioethanol annual yield per hectare of grain is approx. 2,560 l / hectare. 1 litre of bioethanol substitutes 0.66 litres of normal petrol [FNR 13]. The lower energy portion of bioethanol in comparison to normal petrol therefore entails an additional consumption in bioethanol by approx. 35 percent compared with normal petrol. The annual bioethanol yield per hectare corresponds to 1,690 l of petrol.

The CO2 decrease of bioethanol compared with normal petrol amounts to approx. 30 to 70 percent [FNR 13]. The extent of the CO2 decrease by bioethanol depends above all on the origin of the process energy, on the use of the by-product (mash) and the used raw material or on production. Basically the CO2 balance of bioethanol, which is produced with regenerative energy, is better. If the required energy is produced by coal power stations, for instance, this will have a negative impact on the CO2 balance of bioethanol on the basis of fossil energy sources. In this case, the CO2 emissions can be considerably higher than in the production exclusively using fossil energy sources or regenerative energy. Furthermore, through the indirect or immediate combustion of the plant just as much CO2 emission can take place as the plant has taken up during her growth [Puls 2006].

Bioethanol has an advantage compared with normal petrol insofar as it is no danger for grounds and waters on account of its biological degradability [FNR 06].

3.5 Biofuel in the future

BtL

The biofuels of the future are also called the biofuels of the second generation. The aim of the development of these fuels and technique is going to be employed for many new raw materials. Another target is to use the total energy of the whole plant, i.e. of the fruiting body and the plant residues. Through cultivation of the agricultural surface, the energy efficiency per hectare can be increased and production costs can be reduced owing to higher efficiency of the techniques [Geitmann 2004].

Some techniques are based on the gasification of biomass. In this particular case, a synthesis gas is generated by a multistage thermo chemical transformation of the plant material [Puls 2006]. Through the Fischer-Tropsch Synthesis wood, straw or energy plants, what is transformed into gas can afterwards be converted into a liquid fuel. Besides, the whole energy of the plant or the biomass is used. The originating synthetic fuel is called biomass, - to - Liquid, BtL or Sunfuel [Geitmann 2004]. Until now this technology is still in the testing phase. Therefore, the ecological and economic aspects of the BtL use are not yet sufficiently balanceable [Geitmann 2004]. Basically, BtL is a very pure fuel with high energy content [Puls 2006].

The production of BtL fuel does not pose a threat to the environment. Used energy is mainly moved into the product and is not emitted into the air. Other emerging emissions, such as those emitted by the intensive gas cleaning, are eliminated during the production process to a great extent. At the end, only low emissions are left, such as nitrogen oxide and CO2. The CO2 resulting from this production is biogenic and therefore climate neutral [FNR 14]. Through BtL a decrease of the CO2 emissions of at least 90 percent can be reached compared with normal diesel [FNR 15].

One assumes that a yield of approx. 4,000 l BtL hectare per year with 4 - 6 million hectare results could lead to a production of 16 - 24 million of BtL fuel in Germany on a yearly basis. This volume could substitute the forecasted fuel consumption in Germany between 20 to 25 percent. Throughout Europe the potential is estimated at 40 percent of the total fuel demand [FNR 14].

Due to the high-energy efficiency of the raw materials, 1 l BtL fuel substitutes about 0.97 l of diesel [FNR 15].

Biomethane

Methane of biogas belongs to the second generation of biofuels like BTL. Biomethane can be used as a fuel substitute for fossil natural gas. An advantage of this fuel is that natural gas vehicles do not need to be adapted for the use of biomethane. The technology of the methane production of biogas is new and technically and economically still in development. For biomethane, raw materials can be energy plants, liquid manure and organic rest materials [FNR 16].

Biogas originates from the fermentation of these biomasses. Biogas contains approx. 55 percent of methane. Methane chemically corresponds to the fossil natural gas and can therefore be used as a fuel substitute. The separation of the methane from the other biogases is of vital importance for the biomethane production. The separation is carried out by implementing new methods, which are still in development. One possibility for the separation of the biogas methane is the low-temperature rectification. With this method, the components of biogas are disassembled at temperatures of at least minus 100 degrees Celsius resulting in the separation of methane [FNR 17].

Storage and transportation of biomethane is more extensive in comparison to the liquid biofuels mentioned so far. In contrast to liquid biofuels, more space is required for the biomethane storage due to its considerably lower energy density. Like natural gas, biomethane must also be stored in special pressure tanks, same as in natural gas vehicles [FNR 18].

The pollutant emissions can be significantly reduced with biomethane compared with normal petrol and diesel. Nitric oxide and coal hydrogen emissions can be reduced up to 80 percent. Just the amount of CO2 emissions can be ejected as contained in the biomass. CO2-neutrality is therefore granted [FNR 18].

The annual yield of biomethane amounts to around 3,560 kg / hectare depending on the raw material. The energy efficiency per hectare is due to the fact that 1 kg of methane can replace about 1.4 l of petrol and this is substantial. The annual yields of biomethane therefore correspond to about 4,984 l / hectare of equivalent petrol fuel [FNR 16]. The biomethane has therefore the highest raw material efficiency per hectare in comparison to other biofuels. The fuel yield through the cultivation of agricultural surfaces and the total biofuel production in Germany using biomethane could be considerably increased.

3.6 Summary of the comparison of Biofuel

Biodiesel:

- The annual yield of biodiesel in Germany is 1,550 l / hectare.
- About 0.91 litres of normal diesel is equivalent to 1 litre of biodiesel.
- The annual yield of biodiesel per hectare corresponds to 1,408 l of diesel.

Vegetable oil:

- The annual yield of vegetable oil in Germany is. 1,480 l / hectare.
- 0.96 litres of normal diesel is equivalent to 1 litre of rapeseed oil.
- The annual yield of vegetable oil per hectare corresponds to 1,420 l of diesel.

Bioethanol:

- The bioethanol annual yield per hectare of grain is 2,560 l / hectare.
- 1 litre of bioethanol substitutes 0.66 litres of normal petrol.
- The annual yield of bioethanol per hectare corresponds to 1,690 l of petrol.

BtL:

- The BtL annual yield per hectare is 4,000 l BtL hectare.
- 1 litre of BtL substitutes 0.97 litres of diesel.
- The annual yield of bioethanol per hectare corresponds to 3,880 l of diesel.

Biomethane:

- The annual yield of biomethane amounts to around 3,560 kg / hectare depending on the raw material.
- 1 Kg of biomethane substitutes 1.4 litres of petrol.
- The annual yields of biomethane therefore correspond to about 4,984 l / hectare of equivalent petrol fuel.

illustration not visible in this excerpt

Figure 6: Comparison of Biofuel

3.7 Summary and Outlook on biofuels

Competition between diesel/petrol engines and fossil fuels will remain. Beside the legal support for biofuels, the purchasing behaviour of the customer plays an essential role with regard to the success or failure of biofuels. On the one hand, the customer has to consider acquisition costs, maintenance and fuel when purchasing a car. On the other hand, the performance of the fuels and the environmental awareness of the customers play a crucial role. However, it can be assumed that, after all, the costs are a determining factor [Puls 2006].

From an ecological point of view, biofuels - compared to fossil fuels - have the advantage of revealing clearly better environmental balances. Hence they win, particularly with regard to the present discussion about CO2. Ecologically seen, biofuels are therefore permanently sustainable as a system [Puls 2006].

On a macroeconomic level, the long-term supply of fuels plays a big role. On the one hand, stocks are limited in fossil energy sources like oil and natural gas. On the other hand, Germany is depending on the oil and natural gas producing countries. These countries are often located in crisis regions and can therefore be considered as problematic suppliers [Puls 2006]. The rising crude oil prices have to be taken into consideration as well [BMVEL 2005]. It is possible to reduce the dependence through the use of biofuels. This potential became clear in the present chapters.

From a macroeconomic point of view, costs required for changes in order to use the new energy sources also play an important role. The creation of infrastructures, for example filling station nets, is necessary. However, the biofuel quantity regulations gradually allow an increase of biofuels without changing the existing filling station infrastructure [Puls 2006].

Only biofuels, which are also efficient, will remain sustainable in the oil market. On the basis of limited cultivation of agricultural surfaces for renewable raw materials, it must be guaranteed that there is no alternative use of the renewable raw materials in other areas of the regenerative energy. A more favourable cost-value ratio is necessary for the sustainability of biofuels and for the sake of the economy [Puls 2006].

The trend towards renewable energy and away from fossil energy sources is clearly recognizable. It can be assumed that the biofuels market is set for stronger growth in the future.

Aid programmes of the latest past, like 6.25 percent quota of biofuel for Germany up to 2009, are a reason for this development [BioKraftQuoG 200604]. Even though fossil energy sources will keep playing an important role during the following years, fossil fuels are gradually substituted with alternative fuel quota. Biodiesel already substitutes a large part of the fossil diesel. The production of bioethanol will strongly rise during the following years. The use of natural gas vehicles will also increase. Natural gas is a fossil fuel; however, it is probably going to be substituted with biomethane in the long term. Therefore, the sustainability of the biofuel supply is guaranteed.

Like biodiesel, bioethanol is currently also valid as a feasible technically interim solution [Geitmann 2004]. The sustainability of fuels is guaranteed by the fact that - in the long term - the biofuels of the first generation are extended by the biofuels of the second generation. As an example BTL could be mentioned. This fuel could cover about 22 percent of today’s fuel consumption in Germany [DENA 01].

Due to the advancement of the technologies, operating costs for biofuels are going to decline. The Federal Ministry of consumer protection, food and agriculture (Bundesministerium für Verbraucherschutz, Ernährung und Landwirtschaft) is forecasting an improvement of the competitiveness for biofuels in the future [BMVEL 2005].

4 Renewable Raw Materials

With renewable raw materials it's a matter of agriculture and forestry generated products, which are supplied for a use in the non-food sector.

About 1.4 million ha of agricultural surface was used for renewable raw materials in Germany. This surface corresponds to approx. 12 percent of the agricultural surface of Germany [BMU 2006]. According to the Federal Ministry of Food, Agriculture and Consumer Protection^[3], about 12 million ha of agricultural surface and about 2 million ha for the cultivation of energy plants are available in Germany. This is approx. 17 percent of the total agricultural surface [BMVEL 2004].

Considering the increasing portion of biofuels in the total fuel market, additional renewable raw materials must be provided in the future for the production of biofuels. Nevertheless, the ground surface for agricultural cultivation regarding the production of renewable raw materials is limited in Germany. Agricultural cultivation surfaces are used primarily for the food production; they have a restricted availability as far as the production of renewable raw materials is concerned. Otherwise, the food production and food supply in Germany would be in danger [DENA 01]. Even if approx. 7 percent of the agricultural surfaces are out of use in Germany and could to some extent be used as agricultural cultivation surfaces for renewable raw materials, this potential would still be limited. In the long term, import of renewable raw materials and biofuels from abroad will be necessary.

Nevertheless, for a short to medium term, sufficient renewable raw materials from own country will exist depending on the raw material type to satisfy the demand [DENA 01].

Furthermore, the biofuels of the second generation increase the efficiency of biofuel yields from renewable raw materials [BMVEL 2004]. Germany’s decline in population and its resulting demand for food and fuel will release other agricultural cultivation surfaces in the course of the coming years [DENA 01]. If we assume that an increasing amount of cellulose-containing raw materials can be used for the biofuel production in the future, the usable biomass potential will grow considerably.

In this chapter, the most important energy plants are investigated thoroughly, due to their crucial impact of energy efficiency. The sugar beet is valid as the most important sugar supplier in Germany. The most important strength plants in Germany are the potato and winter wheat. The yield is dependent on a successful harvest. It can fluctuate. The fuel yield depends on the starch grain contents.

On the surface, the sugar beet achieves the highest performance in comparison to other energy plants in the temperate climate zones. Currently about 450,000 ha of agricultural surface are used for the sugar beet cultivation. In total, about 1.8 million ha is suitable for the sugar beet cultivation in Germany. The average sugar content of a sugar beet amounts to about 17 percent, the yield lies in average by approx. at 15 percent [Schmitz 2003].

The German agriculture has a considerable experience in the sugar beet cultivation and is in a position to achieve high yields. A high profit security can thereby be guaranteed. Due to the climate and cultivation-technical conditions in Germany, the sugar beet is an important option as a raw material for the bioethanol production [Schmitz 2003]. Production quotas, prize- and delivery regulations of sugar beets are controlled by market regulations. Primarily, the market does not determine the price [Schmitz 2003].

If we take a closer look at the strength plants, we can see that potato shows the biggest fuel yield ha. This is due to the fact that potato has a strength quantity of 15 to 21 percent and a high agricultural surface productivity of approx. 40 tons / ha. In Germany, potatoes are grown about 300,000 ha acres per year. This area corresponds to the maximum possible agricultural cultivation surface. The price of potatoes can underlie variations depending on demand and supply. Disadvantages of the potato use for bioethanol production are the limited use of the incidental mash, the big sewage quantity and the high raw material price [Schmitz 2003].

With about 7 million ha of agricultural surface, the biggest quantity of the German agricultural surface is used for the cultivation of grain. With about 3 million ha of agricultural surface, wheat is the most cultivated grain in Germany. The surface yield per ha of wheat have an average of 7.3 tons/ha. Wheat has the advantage of growing as a winter and summer crop. For the raw material use of wheat in the bioethanol production, a proper development of grain is substantial, to enable a high strength yield. Besides the cultivation intensity, type and cultivar of the wheat plays a big role for the yield.

Apart from wheat, Triticale has high strength quantities with a surface yield of 5.6 tons / ha [Schmitz 2003]. Triticale refers to a crossing between wheat and rye. It is modest and grows almost everywhere. Rye has the slightest strength quantity with 64.6 percent in comparison to the other three-grain types. The profit is not as good as with wheat and Triticale’s. If rye becomes a raw material for the bioethanol production, the used viscosity-lowering enzymes must be implemented in the production process. These enzymes should prevent a mucous obstruction in the conversation process. Furthermore, large amounts of steam are necessary for the drying processes. These conditions eventually lead to additional costs compared with wheat or Triticale [Schmitz 2003]. In Germany, rye is primarily used as bread cereals [Schmitz 2003].

In Germany, maize - as an energy plant - has not played any role up to now and its cultivation is possible to some extent only due to climate. Almost half of 360,000 ha maize cultivation surfaces are in South Germany. A fuel yield of 3,520 l / ha makes maize to an attractive raw material for the bioethanol production. In the USA and in the European countries, maize plants are already used to the bioethanol production. However, currently one cannot assume that maize can be cultivated in Germany for the bioethanol production. Already today, Germany’s demand for maize must be covered by import [Schmitz 2003].

For all renewable raw materials the yields per ha can deviate. The seed and the quality of the plant play a big role. The sugar and strength quantity of the plant also depends on the cultivation region, the climate and other factors.

The energy plant potential in Germany depends on several factors. On the one hand, there is a reduction of set-asides of cultivation surfaces for renewable raw materials. The surface yields are also an important factor in this context. On the other hand, the required cultivation surfaces for the production of food in the agriculture play a considerable role. In Germany, the necessary cultivation potential for energy plants depends on the import behaviour of energy and food plants [BMU 2006].

In the future, cellulose-containing raw materials like wood and straw will play a more important role. Only in Germany, about 11.1 million ha of forest, which can serve as a wood supplier, exist. A large part of the raw material wood is available in the form of waste wood and lumbers, which is not suited for other industries. Furthermore, large amounts of waste wood are derived from saw works and other wood-processing industries. Wood products, which have reached the end of their life span, are also partially usable as a raw material. In particular, paper and the flake board manufacturing industry can be counted as competitors to these raw materials for the biofuel industry [BMU 2006].

In Germany, a considerably small quantity of straw is available for the fuel industry. A large part of straw is required for animal husbandry and the preservation of the soil quality on the field. In addition, the biogas industry also has a big interest in the 20% straw quota for energetic use [BMU 2006].

[...]

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^[1] Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit

^[2] Verband Deutscher Biodieselhersteller e.V.

^[3] Bundesministerium für Verbraucherschutz, Ernährung und Landwirtschaft