Design of a Small Scale
Biodiesel Production System
Jeffrey Anderson
Jessica Caceres
Ali Khazaei
Jedidiah Shirey
Sponsor: Dr. Terry Thompson
of North Point Farm
2
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need
Statements
• Design Alternatives
• Design Methodology
• Simulation and
Results
• Recommendations
• Project Management
Figure 1: Corn field in Northern VA (photo credit: activerain.com)
3
Area of Interest
• Spotsylvania and Stafford
Counties in Virginia
(“Fredericksburg, VA area”)
• Farm data for these two
counties from the 2007 U.S.
Department of Agriculture
Agricultural Census:
 72,000 acres of farmland
 592 farms ranging from 1 to
2000+ acres
 Average cropland on farm:
75 acres
Figure 2: Map of the Fredericksburg, VA Area. Source:
Google maps
4
Decreasing Net Income
• The average net income of
the farms is negative.
• Nearly 58% deficit
increase between 2002
and 2007.
GAP
• 1997 was the last year
farmers, on average, saw a
positive net income.
*Note: Net income = total sales,
government payments, and other farmrelated income less total farm expenses.
*Inflation Adjusted to 2007 dollars
Figure 3: Net Cash Farm Income of Operations Average per Farm
5
Farm Production Expenses
• 164% increase: $23,990
to $63,500 per farm
between 1997 and 2007
• Oil Price dependent
categories account for
21% of total production
expense:
▫ “fertilizers, lime, and soil
conditioners”
 122% increase
▫ “gasoline, fuels, and oils”
 137% increase
Gap (230%
Increase)
1997-Last year farmers made a profit
in Fredericksburg
Figure 4: Diesel Prices Central Atlantic Region (Inflation Adjusted)
Source: United States Energy Information Administration
*Note: All dollars are inflation
adjusted to 2007 dollars.
6
Biodiesel
• A biofuel made from living or recently living organisms
such as vegetable oils, animal fats, or algae.
• Benefits:
• Can be used in existing diesel engines.
• More environmentally friendly – life-cycle reduction in carbon emissions.
• Studies have shown a 41% (Univ. of Minnesota) - 78% (US Dept. of Energy) life-cycle
reduction in carbon emissions compared to petro-diesel.
• Net Energy Ratio (NER) = Units of energy OUT/Units of energy IN
• USDA sponsored studies have shown a 3.2 – 5.54 Net Energy Ratio for soybean based
biodiesel production.
• U.S. production of oil and gas: NER of ~15; 3 – 5 times that of biodiesel.
• U.S. Biodiesel Production
• In 2012, 969 million gallons were produced according to the U.S. Energy
Information Agency (EIA) – 7200% increase since 2002.
• In 2011, U.S. demand for diesel fuel rose to approximately 62 billion
gallons; 62 times that of biodiesel production.
7
Lifecycle Biodiesel Production Process
Start
Legend
Select Biodiesel
Acreage
Clean the Oil
Select Crop
Titrate Oil
Methanol
Catalyst (KOH)
Methoxide
Storage
Prepare Land
Crop
Alternative
Blend Oil and
Methoxide
(Transesterification)
Sell Glycerin
Plant Crop
Oil Press
Functionality
Biodiesel
Processor
Functionality
Drain Glycerin
Maintain
Crop
Sell Biodiesel
Wash the
Biodiesel
Use Biodiesel
Verify Standard
D6751 is met
Sell Meal
Harvest Crop
Potential
Income
Extract Oil
from Crop
Figure 5: Lifecycle Biodiesel Production Process Flow Chart
8
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
9
Primary Stakeholder
Main Objectives
Farmer
Make money by selling new product
Secondary
Stakeholders
Main Objectives
Neighboring
Farmers
•Invest their money in their community by
purchasing their fuel from a local biodiesel
producer.
•Minimizing risks and hazardous spills
increases biodiesel production expenses.
•Earn a salary by helping with the
production process of biodiesel
•Providing training and safety gear
increases production cost.
•Workers handling products incorrectly
can cause injury, loss of life, property
damage, or environmental contamination.
•Purchase crops for their consumption at a
stable price
•Reducing the amount of crops produced
could cause in increase in crop price
•Promote alternative fuels
•Achieve energy independence
•Reduce carbon emissions
•Regulate biodiesel production
•Creating a safe environment according to
regulations increases production cost.
•Following ASTM standard D6751
increases production cost
Farm Workers
Food Consumers
Government
Tensions
10
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
11
Problem Statement
• A lack of net profit and increasing fuel prices
threaten the long term sustainability of farms
located in Fredericksburg, VA.
• Farmers rely heavily on petrochemical
diesel, which has increased in price by nearly
230% since 1997, the last year that farmers in
the Fredericksburg area of Virginia had a net
profit.
12
Need Statement
• There is a need for a small-scale biodiesel production system
for farms located near Fredericksburg, VA.
• The design of our biodiesel generation system will take into
account the whole life-cycle process of biodiesel production,
from crop planting to the final biodiesel yield.
• Win-win for stakeholders:
▫ Farmers: Create a new product to sell and/or save money on fuel
costs
▫ Workers: Work in safe environment and earn a paycheck
▫ Neighboring Farmers: Potential access to locally produced
biodiesel – an investment in their community
▫ Food consumers: Loss of food supplies minimized
▫ Government: Further goal of energy independence
13
Scope
• System Components:
▫ Crop Alternative
▫ Vegetable Oil Press
▫ Biodiesel Processor
• Research indicates that vegetable oil press and
biodiesel press were comparable to each other and
interchangeable
• Focus on crop type used for vegetable oil source
▫ Enables optimization of crop acreage and biodiesel
output
14
System Component Selection
• Oil Press
▫ Manufacturer: Cropland
Biodiesel™
▫ Cost: $3925 + Freight Shipping
▫ Capacity: ~200 lbs/hour
Figure 6: 3 ton Oil Press
• Biodiesel Processor
▫ Manufacturer: All American
BioDiesel
▫ Cost: $2650 + Freight Shipping
▫ Capacity: 80 gallons/day
• These capacities were chosen
because of their ability to complete
the crop to biodiesel process in 6
days or less per acre devoted to
biodiesel production (assuming 8
hours of run time per day).
Figure 7: 80 gallon Biodiesel Processor
15
System Requirements
1.
The system shall be able to produce biodiesel that has a Net
Energy Ratio greater than 1.
2.
The system shall be able to produce biodiesel that conforms
to ASTM Standard D6751.
16
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
17
Design Alternatives
• Investigated approximately two dozen crop options
• Five crop alternatives selected based on regional
availability, cost, and productivity:
▫ Canola
▫ Corn
▫ Peanut
▫ Soybean
▫ Sunflower
• Best crop alternative will be determined through
Monte Carlo simulation
18
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
19
Simulation Objective
• The objective of our simulation is to determine:
▫ 1) Biodiesel yield and NER of each crop alternative
▫ 2) The Net Present Value (NPV) of each crop alternative at
the end of the system lifespan
• This will allow us to plot the utility versus the NPV of each
alternative and enable us to recommend the best crop
alternative.
• Two part simulation: Biodiesel Production Simulation and
Business Simulation
20
Primary Simulation Assumptions
• Lifespan of the machinery is 15 years
• Farmers have the proper equipment to plant,
harvest, and prepare crops
• Unlimited demand for biodiesel, glycerin, and
meal exists
• Farmers have the land capacity and knowledge to
perform crop rotations as appropriate
• No machinery recycling profit
21
Monte Carlo Simulation Design
Crop Yield
Crop Alternative
Vegetable Oil Yield
Biodiesel
Production
Simulation
Biodiesel Yield
Glycerin Yield
Meal Yield
10 Acres
15 Acres
20 Acres
Biodiesel Acreage
Net Energy Ratio
KEY
Random Variable
Output
Business
Simulation
Net Present Value
22
Biodiesel Production Design of
Experiment
23
Biodiesel Production Simulation
Random Variables
Canola
Corn
Peanut
Soybean
Sunflower
TRIA(1350, 3070,
3800) [3]
Beta(1412, 2646) [3]
UNIF(967, 1510) [3]
Crop Yield
Beta(1740, 2233) [1] Beta(2538, 7148) [2]
Vegetable
Oil
Percentage
Normal(.42, .0001) Normal(.04, .0001) Normal(.42, .0001) [4] Normal(.16, .0001) Normal(.43, .0001) [4]
[4]
[4]
[4]
Oil
Press
Efficiency
Lognormal(0.9, 0.92, 0.02) [4]
All distributions were fitted using the Kolmogorov-Smirnov (KS) test
1 - D. Starner, A. Hamama, H. Bhardwaj, “Prospects of canola as an alternative winter crop in Virginia”, 2002
2 - USDA Census of Agriculture, 2007 Census, Volume 1, Chapter 2: County Level Data
3 - USDA, National Agriculture Statistics Service, Crop Production
4 – Multiple sources
24
Net Energy Ratio Equation
•Variables with largest impact: Biodiesel yield per acre and diesel
usage per acre
Contributing source: Hoover, Scott; Energy Balance of a Grassroots Biodiesel Production Facility, 2005
25
Product Yield Equations
•Variables with largest impact: Crop yield per acre and oil content
Contributing source: Seth R. Fore, William Lazarus, Paul Porter, Nicholas Jordan, Economics of small-scale on-farm use of canola and
soybean for biodiesel and straight vegetable oil biofuels, Biomass and Bioenergy, Volume 35, Issue 1, January 2011, Pages 193-202
26
Business Simulation Design of
Experiment
27
Business Simulation Random
Variables
Canola
Corn
Peanut
Soybean
Crop
Price
1.6, 1.5) Norm(.25, .0016) [2] MinExtreme(9.7,1.8)
Gamma(1.7, .5, 6.3) [3] Weibull(2.1,
[1]
[1]
Meal
Price
Lognormal(203, 345,
130) [4]
Planting
Costs
205
Diesel
Price
Norm(255, 653) [9]
Norm(200, 400) [4]
Weibull(2.1, 1.6, 1.5)
[1]
Gamma(128, 39,2) Lognormal(33, 106, 39)
[4]
Triangular(204, 207,
Triangular(83, 147,
Logistic(602, 48) [6]
438) [5]
246) [7]
Triangular(3.73,4.28,4.29) [8]
All distributions were fitted using the Kolmogorov-Smirnov (KS) test
1 - farmdoc, University of Illinois, “US Price History”
2 - USDA, National Agriculture Statistics Service, Crop Production
3 - USDA, Economic Research Service, Wheat Tables: Acreage Production
4 – USDA, Agricultural Marketing Service, National Monthly Feedstuff Prices
5 – USDA, Economic Research Service, Historical Costs and Returns: Corn
6 – USDA, Economic Research Service, Historical Costs and Returns: Peanut
7 – USDA, Economic Research Service, Historical Costs and Returns: Soybean
8 – U.S. Energy Information Administration, Central Atlantic No 2 Diesel Retail Prices
9 – “By-Product Feed Pricing List”, University of Missouri Extension
Sunflower
[4]
191
28
Business Simulation Equations
• Net Present Value Equation
▫
I0 is the initial machinery costs, n is the length in years, t is the year, k is the discount factor, p is inflation
rate, and Ft is the balance of revenues and expenses.
• Net cash flow
Chemical expenses, dollars per acre
Crop costs, dollars per acre
Lost revenue cost, dollars per acre
Glycerin revenue, dollars per acre
Meal revenue, dollars per acre
State biodiesel incentives, dollars per acre
Biodiesel acreage on farm, acres
Biodiesel sales, dollars
Yearly maintenance costs, dollars
Derived from: “Economic simulation of biodiesel production: SIMB-E tool”; Lopes, Neto, and Martins
29
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
30
Simulation Implementation
• For the simulation, we used Oracle Crystal
Ball, an Excel add-in
• Why Crystal Ball?
• During research we found deterministic Excel
spreadsheets
• Crystal Ball allows us to create similar models
but with stochastic processes
• 50,000 iterations were run for each
simulation
• Farm Size: 75 acres
31
Results: Biodiesel Yield (Gallons/Acre)
Crop Type
Peanut
Canola
Sunflower
Soybean
Corn
Mean
136.5
102.5
62.5
35.5
19.4
Standard Deviation
26.1
8.7
8.2
7.7
6.3
Distribution
Beta
Beta
Beta
Beta
Lognormal
32
Results: NER and Cost per Gallon
Mean
Peanut
Canola
Average NER
4.1
3.4
3.1
1.8
0.8
P(NER>1.0)
1.0
1.0
1.0
1.0
0.2
Yes
Yes
Yes
Yes
No
Requirement
Met
Mean
Cost per
Gallon
Corn
Canola
-$14.65 $0.69
Sunflower Soybean Corn
Sunflower Soybean Peanut
$2.60
$3.26
$4.14
33
Data Analysis
• Fuel savings for biodiesel production acreage are accounted for
in the cost of production.
• Biodiesel yield from devoted acreage must exceed farm
requirements before biodiesel sales can begin.
• Inflow comes from meal, glycerin, and biodiesel sales.
Mean
Peanut
Canola
Acres
Needed (out
of 75 acres)
6
8
Sunflower Soybean
12
22
Corn
43
34
Results: Net Present Value
35
Results: Probability of NPV being > $0.00
Biodiesel
Acres
Corn
10 of 75
0.80
0.14
Biodiesel
Acres
Canola
Corn
15 of 75
0.90
0.86
Biodiesel
Acres
Canola
Corn
20 of 75
<1.0
0.89
Canola Sunflower Peanut Soybean
0.0
0.0
0.0
Sunflower Peanut Soybean
0.0
0.0
0.0
Sunflower Peanut Soybean
0.10
0.0
0.0
36
Net Present Value – 10 Acres
NPVs at 10/75 Biodiesel Acres
$20,000.00
$10,000.00
npv canola (10,2%)
$0.00
npv corn (10,2%)
-$10,000.00
npv peanut (10,2%)
-$20,000.00
npv soybean (10,2%)
npv sunflower (10,2%)
-$30,000.00
-$40,000.00
-$50,000.00
Year
Corn: Positive NPV by 2017 (within 5 years) with a 2% discount factor.
• Due to:
• High corn meal yield drives down the cost/acre (mean meal
revenue = $505/acre).
• Negative lost profit budget line due to the savings from not
selling corn at a loss.
Soybean: Positive slope; would need 40 years without addition capitol
costs to yield a positive NPV.
37
Net Present Value – 15 Acres
NPVs at 15/75 Biodiesel Acres
$40,000.00
$30,000.00
$20,000.00
npv canola (15,2%)
$10,000.00
npv corn (15,2%)
npv peanut (15,2%)
$0.00
-$10,000.00
npv soybean (15,2%)
-$20,000.00
npv sunflower (15,2%)
-$30,000.00
-$40,000.00
-$50,000.00
Year
Corn: Positive NPV by 2015 (within 3 years) with a 2% discount factor.
Canola: Positive NPV by 2017 (within 5 years) with a 2% discount factor.
38
Net Present Value – 20 Acres
NPVs at 20/75 Biodiesel Acres
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
-$10,000.00
-$20,000.00
-$30,000.00
-$40,000.00
-$50,000.00
-$60,000.00
npv canola (20,2%)
npv corn (20,2%)
npv peanut (20,2%)
npv soybean (20,2%)
npv sunflower (20,2%)
Year
• Canola: Positive NPV mid 2014 (within 2 years) with a 2%
discount factor.
• Corn: Positive NPV by early 2014 (within 2 years) with a 2%
discount factor.
39
Sensitivity
• Peanut:
• If the selling price of biodiesel per gallon is raised to:
 $13.00, at 10 biodiesel acres
 $7.50, at 15 biodiesel acres
 $6.50, at 20 biodiesel acres
• Then peanut could achieve an average positive NPV in 15
years.
• Sunflower could attain an average positive NPV by increasing
biodiesel acres to approximately 45 of the 75 acres.
• Soybean could reach an average positive NPV in 15 years if the
farm size was raised to 125 acres, and all acreage was utilized for
biodiesel production.
40
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
41
Value Hierarchy
Choose Best
Crop Alternative
Biodiesel Yield
(gal/acre)
0.5
Planting Season
Length (days)
0.3
Production
Hazards
0.2
42
Utility Analysis
• Utility for 20 acres, 2% discount factor
Utility vs NPV: 10%, Mean, 90%
1.20
Best
Quadrant
1.00
0.80
Utility
Canola
0.60
Corn
Peanut
0.40
Soybean
Sunflower
0.20
0.00
-100000
-50000
0
50000
Net Present Value (dollars)
100000
150000
43
Recommendation
• We recommend Canola as the optimal crop alternative
▫
▫
▫
▫
Same hazard level as other alternatives
High biodiesel yield minimizes food supply impact
High NPV provides profit for farmer
When 20 of 75 acres are committed to biodiesel
production, Canola has a nearly 100% chance of being
profitable.
44
Agenda
•
•
•
•
•
•
•
•
Context Analysis
Stakeholder Analysis
Problem and Need Statements
Design Alternatives
Design Methodology
Simulation and Results
Recommendations
Project Management
45
Work Breakdown Structure
Figure 15: Work Breakdown Structure
46
Project Risk
Risk
Mitigation
Poster printing problem
Multiple poster revisions
submitted for review
Absent presenter at conference
All group member will become
well-versed in all aspects of the
project
47
Project Schedule
48
Project Schedule
49
Project Budget
• Hourly rate for each team member: $40
• Rate comparable with junior engineer rate
• Estimated number of hours to complete project:
~ 3000 hours
• Overhead rate: 2.1 times base rate: $84 per hour
• Total project cost: 3000 hours x 84 dollars/hour
• Total Project Cost ~ $250,000
50
Earned Value
Earned Value
Amount Spent (dollars)
300000.00
250000.00
200000.00
150000.00
Planned Value (PV)
Actual Cost (AC)
100000.00
Earned Value (EV)
50000.00
0.00
Figure 7: Earned Value
51
CPI and SPI
CPI and SPI
5
4.5
4
Ratio
3.5
3
2.5
CPI
2
SPI
1.5
1
0.5
0
September October November December January
Figure 8:CPI and SPI
February
March
April
Design of a Small Scale
Biodiesel Production System
Jeffrey Anderson
Jessica Caceres
Ali Khazaei
Jedidiah Shirey
Sponsor: Dr. Terry Thompson
of North Point Farm