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Home » Algae/Other Aquatic Organisms/Seaweed, BioRefineries, Business News/Analysis, Feedstocks, Field/Orchard/Plantation Crops/Residues, Opinions

The Economics of Biofuels

Submitted by on January 13, 2011 – 10:40 amNo Comment

(Pacific Rim BioEnergy)  Note: This is an update from an earlier post. The earlier post outlined the concepts but did not have any specific details. This post utilizes current figures and displays the economic principals based on those current figures.

The projected future cost advantages of ethanol and bio-diesel could potentially save Canadian consumers $2.5 billion over the next 25 years (based on both federal and provincial RFS requirements) – if producers passed their cost savings on to consumers. (The projected cost of biodiesel for fuel producers will be less than the projected cost of diesel fuel over the next 25 years).

…In reality though this is not real life economic behaviour. Sellers will attempt to maximize profits and while competition for scarce affordable feedstock will eliminate excess profit. There is also a wide variety of different forms of bio-fuels, each with its own unique economic model that will play a roll in the real cost to consumers.

…Beef Tallow/Restaurant Oil: … The problem is that there is only a limited quantity of used restaurant oil, resulting in increased competitive demand for this feedstock, with each bio-diesel producer attempting to outbid other feedstock buyers. Open market competition results in rising prices and constricted volumes until profits are equivalent to that of petroleum fuel.

…Corn and soy bio-fuel is a co-product/by-product produced along with products such as corn starch, and corn meal among the many other uses of corn and soy.   …(W)hen wholesale petroleum prices approach the $.85/litre mark, natural economic pressures on how a harvest is utilized spark a food vs fuel debate.

…Algae has a very different economic model and growth curve. Traditionally algae growth was only verging on being economical in very restricted environments (Requiring large ponds, near large CO2 emitters in regions with lots of natural sunlight and consistently warm temperatures). Outside of the Australian outback, these optimal conditions have been very rare. With an intensive change in US government and private funding, over the last two years there has been some dramatic advances in our understanding of algae as a future energy alternative. The biggest barriers to commercialization revolve around the initial infrastructural cost required to produce the volumes necessary to gain positive cash flow.   READ MORE (includes charts and graphs)

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