design of a small scale biodiesel production...
TRANSCRIPT
Design of a Small Scale
Biodiesel Production System
Jeffrey Anderson
Jessica Caceres
Ali Khazaei
Jedidiah Shirey
Sponsor: Dr. Terry Thompson of North Point Farm
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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Agenda
Figure 1: Corn field in Northern VA (photo credit: activerain.com)
• 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
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Area of Interest
Figure 2: Map of the Fredericksburg, VA Area. Source:
Google maps
• The average net income of the farms is negative.
• Nearly 58% deficit increase between 2002 and 2007.
• 1997 was the last year farmers, on average, saw a positive net income.
*Note: Net income = total sales, government payments, and other farm-related income less total farm expenses.
*Inflation Adjusted to 2007 dollars
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Decreasing Net Income
Figure 3: Net Cash Farm Income of Operations Average per Farm
GAP
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Farm Production Expenses
Gap (230%
Increase)
Source: United States Energy Information Administration
1997-Last year farmers made a profit
in Fredericksburg
Figure 4: Diesel Prices Central Atlantic Region (Inflation Adjusted)
• 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
*Note: All dollars are inflation adjusted to 2007 dollars.
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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.
Figure 5: Lifecycle Biodiesel Production Process Flow Chart
Start
Extract Oil from Crop
Harvest Crop
Maintain Crop
Plant Crop
Prepare Land
Select Crop
Crop Alternative
Oil Press Functionality
Biodiesel Processor
Functionality
Potential Income
Clean the Oil
Titrate Oil Methoxide
Blend Oil and Methoxide
(Transesterification)
Wash the Biodiesel
Drain Glycerin
Verify Standard D6751 is met
Sell Glycerin
Sell Meal
Sell Biodiesel
Use Biodiesel
Lifecycle Biodiesel Production Process
Legend
Catalyst (KOH)Methanol
Storage
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Select Biodiesel Acreage
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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Primary Stakeholder Main Objectives
Farmer Make money by selling new product
Secondary Stakeholders
Main Objectives Tensions
NeighboringFarmers
•Invest their money in their community by purchasing their fuel from a local biodiesel producer.
•Minimizing risks and hazardous spills increases biodiesel production expenses.
Farm Workers•Earn a salary by helping with the production process of biodiesel
•Providing training and safety gearincreases production cost.•Workers handling products incorrectly can cause injury, loss of life, property damage, or environmental contamination.
Food Consumers•Purchase crops for their consumption at a stable price
•Reducing the amount of crops produced could cause in increase in crop price
Government•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
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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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.
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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
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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
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System Component Selection• Oil Press
▫ Manufacturer: Cropland Biodiesel™
▫ Cost: $3925 + Freight Shipping
▫ Capacity: ~200 lbs/hour
• 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
Figure 6: 3 ton Oil Press
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.
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System Requirements
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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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
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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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
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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
Monte Carlo Simulation Design
Biodiesel
Production
Simulation
Business
Simulation
Biodiesel Yield
Net Present ValueCrop Alternative
Vegetable Oil YieldCrop Yield
Glycerin Yield
Biodiesel Acreage
Meal Yield
Net Energy Ratio
Random Variable
KEY
Output
10 Acres
15 Acres
20 Acres
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Biodiesel Production Design of
Experiment
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Biodiesel Production Simulation
Random Variables
Canola Corn Peanut Soybean Sunflower
Crop Yield Beta(1740, 2233) [1] Beta(2538, 7148) [2]TRIA(1350, 3070,
3800) [3]Beta(1412, 2646) [3] UNIF(967, 1510) [3]
Vegetable Oil
Percentage
Normal(.42, .0001) [4]
Normal(.04, .0001) [4]
Normal(.42, .0001) [4]Normal(.16, .0001)
[4]Normal(.43, .0001) [4]
OilPress
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
Net Energy Ratio Equation
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Contributing source: Hoover, Scott; Energy Balance of a Grassroots Biodiesel Production Facility, 2005
•Variables with largest impact: Biodiesel yield per acre and diesel
usage per acre
Product Yield Equations
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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
•Variables with largest impact: Crop yield per acre and oil content
Business Simulation Design of
Experiment
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Business Simulation Random
VariablesCanola Corn Peanut Soybean Sunflower
Crop Price
Gamma(1.7, .5, 6.3) [3]Weibull(2.1, 1.6, 1.5)
[1]Norm(.25, .0016) [2]
MinExtreme(9.7,1.8) [1]
Weibull(2.1, 1.6, 1.5) [1]
MealPrice
Lognormal(203, 345, 130) [4]
Norm(255, 653) [9] Norm(200, 400) [4]Gamma(128, 39,2)
[4]
Lognormal(33, 106, 39) [4]
Planting Costs
205Triangular(204, 207,
438) [5]Logistic(602, 48) [6]
Triangular(83, 147, 246) [7]
191
Diesel Price
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
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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
Derived from: “Economic simulation of biodiesel production: SIMB-E tool”; Lopes, Neto, and Martins
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
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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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
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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
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Mean Peanut Canola Sunflower Soybean Corn
Average NER 4.1 3.4 3.1 1.8 0.8P(NER>1.0) 1.0 1.0 1.0 1.0 0.2Requirement
Met Yes Yes Yes Yes No
Results: NER and Cost per Gallon
Mean Corn Canola Sunflower Soybean Peanut
Cost per Gallon -$14.65 $0.69 $2.60 $3.26 $4.14
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Data Analysis
Mean Peanut Canola Sunflower Soybean Corn
AcresNeeded (out of 75 acres)
6 8 12 22 43
• 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.
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Results: Net Present Value
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Biodiesel Acres
Corn Canola Sunflower Peanut Soybean
10 of 75 0.80 0.14 0.0 0.0 0.0
Results: Probability of NPV being > $0.00
Biodiesel Acres
Canola Corn Sunflower Peanut Soybean
15 of 75 0.90 0.86 0.0 0.0 0.0
Biodiesel Acres
Canola Corn Sunflower Peanut Soybean
20 of 75 <1.0 0.89 0.10 0.0 0.0
Net Present Value – 10 Acres
-$50,000.00
-$40,000.00
-$30,000.00
-$20,000.00
-$10,000.00
$0.00
$10,000.00
$20,000.00
Year
NPVs at 10/75 Biodiesel Acres
npv canola (10,2%)
npv corn (10,2%)
npv peanut (10,2%)
npv soybean (10,2%)
npv sunflower (10,2%)
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.
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Net Present Value – 15 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
Year
NPVs at 15/75 Biodiesel Acres
npv canola (15,2%)
npv corn (15,2%)
npv peanut (15,2%)
npv soybean (15,2%)
npv sunflower (15,2%)
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.
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Net Present Value – 20 Acres
-$60,000.00
-$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
Year
NPVs at 20/75 Biodiesel Acres
npv canola (20,2%)
npv corn (20,2%)
npv peanut (20,2%)
npv soybean (20,2%)
npv sunflower (20,2%)
• 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.
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Sensitivity
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• 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.
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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Value Hierarchy
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Choose Best Crop Alternative
Biodiesel Yield
(gal/acre)
0.5
Planting Season Length (days)
0.3
Production Hazards
0.2
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Utility Analysis
• Utility for 20 acres, 2% discount factor
0.00
0.20
0.40
0.60
0.80
1.00
1.20
-100000 -50000 0 50000 100000 150000
Uti
lity
Net Present Value (dollars)
Utility vs NPV: 10%, Mean, 90%
Canola
Corn
Peanut
Soybean
Sunflower
Best Quadrant
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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.
Agenda
• Context Analysis
• Stakeholder Analysis
• Problem and Need Statements
• Design Alternatives
• Design Methodology
• Simulation and Results
• Recommendations
• Project Management
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Work Breakdown Structure
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Figure 15: Work Breakdown Structure
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
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Project Schedule
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Project Schedule
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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
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Earned Value
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Figure 7: Earned Value
0.00
50000.00
100000.00
150000.00
200000.00
250000.00
300000.00
Am
ou
nt
Sp
en
t (d
oll
ar
s)
Earned Value
Planned Value (PV)
Actual Cost (AC)
Earned Value (EV)
CPI and SPI
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Figure 8:CPI and SPI
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
September October November December January February March April
Ra
tio
CPI and SPI
CPI
SPI
Design of a Small Scale
Biodiesel Production System
Jeffrey Anderson
Jessica Caceres
Ali Khazaei
Jedidiah Shirey
Sponsor: Dr. Terry Thompson of North Point Farm