Biodiesel is a renewable fuel produced from vegetable or animal oils and fats. It is made by the transesterification of these feedstocks, typically with methanol. The reaction is catalyzed by a base such as sodium hydroxide (NaOH). The main products are a methyl ester, which is referred to as biodiesel, and glycerol, which has a variety of other uses (see Figure 4.5). If ethanol is used instead of methanol, the product is an ethyl ester; methanol has been preferred because it is cheaper than ethanol. Biodiesel has about 93 percent of the energy content per gallon of oil-based diesel fuel and has a cetane number between 50 and 60, with 55 being typical.

Cost of Biodiesel

Driven by the feedstock cost, which is about 80 percent of a plant’s operating cost, the cost of biodiesel has been significantly higher than the cost of conventional diesel. Operating costs (excluding feedstock costs) are $0.40 to $0.45 per gallon. The variable cost (operating + feedstock, excluding capital) of producing biodiesel has been in the range of $2.50-$2.80 per gallon for the last decade, with soybean oil around $2.00 per gallon (Hofman, 2003). This cost is for the use of methanol for esterification; if bio-based ethanol were used, the cost would be higher, but net CO2 emissions would be reduced. The largest cost component in this is for the feedstock, which for soybean oil has been around $2.00 per gallon of biodiesel. Increasing grain prices have increased the cost of soybean oil also. Yellow grease (used cooking oil) is about $1.00 per gallon but is limited in volume. Outlays to cover capital and other fixed costs and returns to investors are likely to be more than $0.20 per gallon, bringing the total cost of biodiesel to around $3.00 per gallon for traditionally priced soybean oil (Hofman, 2003). Wholesale diesel fuel during this period was about $1.80 per gallon, which means that biodiesel was not competitive. However, biodiesel from yellow grease was cost competitive. In 2007, soybean oil rose to $3.00 per gallon, and the cost of biodiesel was about $3.50 per gallon, whereas the cost of conventional diesel was about

FIGURE 4.5 Transesterification of vegetable oils.

$2.10 per gallon. In spring 2008, soybean oil rose to about $4.20 per gallon (Brasher, 2008). The current viability of the industry depends on government incentives, which are about $1.00 per gallon (Brasher, 2008), and programs.

Production of Biodiesel

U.S. production grew from about 500,000 gallons per year (33 barrels per day [bbl/d]) in 1999, to 2 million gallons per year in 2000, to 250 million gallons per year in 2006, and 450 million gallons per year in 2007 (Brasher, 2008). This compares with 690 million gallons per year in Germany and about 200 million in France in 2006. For most of the period up to 2006 in the United States, the utilization rate of installed capacity was less than 25 percent. In 2006, 250 million gallons were produced from an installed capacity of about 580 million gallons per year (about 45 percent capacity utilization [Hofman, 2003]). In Europe, the industry has grown rapidly, with capacity expanding in step with demand. The United States is also in the process of building massive additional capacity, with 57 plants under construction or in the planning stages as of January 2008 (Brasher, 2008). Further, South America and Asia are building excess capacity in expectation of large export markets (Weirauch, 2006). Countries in these regions are studying new plants such as jatropha, which can be grown in areas unsuitable to traditional crops.

To produce 1 billion gallons of biodiesel from soybean oil would require about 690 million bushels of soybeans, 22 percent of our recent annual soybean crop of about 3.1 billion bushels per year. As with corn ethanol, an expansion in soybean oil use for biodiesel beyond perhaps 35 percent of our soybean production is likely to cause significant economic ripples through food and agricultural markets. If we are to go beyond the level of 1.5 billion gallons of biodiesel per year, we will most likely need to depend substantially on imports. Yellow grease availability will limit biodiesel production from this material to about 100 million gallons per year (Radich, 2004). In the case of biodiesel, current technology is relatively straightforward and well proven. Because of the simplicity of the process, there is not much to be gained in terms of economies of scale or process optimization. Forward projections are fairly linear and depend on the availability of animal and vegetable oils. The major issue is cost. The other option involves producing diesel fuel via biomass gasification, pyrolysis, or Fischer-Tropsch synthesis. This is considered in “Gasification Routes to Biofuels” below in this chapter.

Biodiesel has the advantages that it has good requisite diesel fuel properties (excluding low-temperature properties) and can be blended into the fuel supply, where desired, to utilize the existing infrastructure. Because production is simpler and less energy intensive than for corn ethanol, the use of biodiesel, on an energy-equivalent basis, can reduce CO2 emissions per gallon by about 10 to 50 percent, depending

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