https://sciencetrends.com/can-maximize-economic-benefits-microalgae-biofuel-production/
November 9, 2017
Can We Maximize The Economic Benefits Of Microalgae Biofuel Production?
by Amar Doshi
An increasing body of research has indicated that microalgae biofuels
have the potential to effectively transition society away from fossil
fuels at lower economic and social costs (Doshi, Pascoe, Coglan, &
Rainey, 2016).
However, the current infancy of production technologies results in low
cost-efficiency and the inability for the fuel to compete with fossil
fuels or even existing biofuels produced from agricultural-based
feedstock (e.g. corn, sugarcane, plant-based oils). Microalgae producers
have therefore focused on the commercial returns of niche nutraceuticals
despite this potentially stagnating development of a new industry and
being exposed to fluctuating prices of a small market.
An alternative pathway for microalgae industries
An alternative commercial pathway analyzed in this paper is the
production of biodiesel within an integrated, multi-output system. This
system benefits from key inputs (nutrient-rich wastewater and
carbon-rich flue gas) obtained through integrating with complementary
industries and allocated the resulting biomass to multiple outputs:
biodiesel, aquaculture feed, and agricultural fertilizer. This pathway
presents a number of key benefits for both the private sector and also
society in general.
In particular, it allows the private producer to establish the industry
and produce the biofuel at a competitive price whilst still achieving
financial feasibility. More broadly, integrating with a complementary
waste-producing industry (like aquaculture) allows for the
bioremediation of waste effluents that reduces financial costs for both
parties whilst lowering potential environmental costs borne by society.
The analysis extended the typical techno-economic analysis model to
capture the integration and multiple outputs. Unlike other assessments
that try to estimate a unit price for producing biodiesel, this work
assumed that the biodiesel would be a perfect substitute for fossil fuel
diesel and was priced at a similar level. The microalgae would be
intensively cultivated in open-ponds and the biomass allocated to the
three outputs. Additionally, any biomass converted into biodiesel would
have to go through a lipid-extraction process leaving behind residual
biomass that could then be reallocated to other outputs.
Why microalgae biofuels aren’t attractive
Assuming a 20-year production period, the analysis found that the system
would only be financially feasible (through a positive Net Present Value
or NPV) if a maximum 40% of the biomass was allocated to biodiesel, with
the remaining biomass (and residues) being equally allocated to feed and
fertilizer. The capital infrastructure for biodiesel production
represented the highest source of explicit capital costs at 76.7%.
However, it only contributed to 2.27% of revenues. It was primarily
through the production of high-value feed and fertilizer that the system
achieved feasibility. If 100% of the initial biomass were allocated to
biodiesel and only residues to the other products, it would only
contribute 7.35% of revenues. Interestingly, the use of waste effluents
as a source of nutrient inputs reduced what was the highest contributor
to operating costs.
A brighter future for microalgae biofuel industries
A sensitivity analysis across a number of production and economic
parameters revealed that improvements in the growth rate, a touted
possibility through bioengineering, had the greatest impact on the
feasibility of the system although this was largely due to the returns
from the non-biodiesel outputs. Most fascinatingly, a 20% improvement in
the cost-efficiency of the capital infrastructure for microalgae
biodiesel production was found to cut the overall payback period by 40%
and increase the NPV 17-fold.
The results highlighted the commercial and socio-economic potential of
microalgae biodiesel production within this integrated, multi-output
system. Biodiesel could be sold at a competitive $1.50 rather than the
cost price of $24.18 a liter whilst still maintaining financial
feasibility. Although the use of the most established and less
cost-effective transesterification process meant biodiesel production
would not be a profit-maximizing option, there is the potential for this
process or more efficient thermochemical conversion routes to improve
this aspect.
However, the development of biomass to biofuel conversion technologies
only capture one aspect of the potential for microalgae industries. The
environmental and economic benefits from microalgae production are not
directly captured in the market price. The benefits of integration with
waste producing industries and more broadly, the use of microalgae
biofuels over fossil fuels or conventional biofuels, could be a key
motivator for private and public investment. This would allow for the
accumulation of infrastructure, establishment of supply chains, progress
in research and development, and stimulate a market transition away from
fossil fuels. Hence, this research shows that assessment of newer fuel
technologies should consider the broader implications of the industry
and if it meets longer-term sustainability and economic requirements to
warrant a social license.
References
Doshi, A., Pascoe, S., Coglan, L., & Rainey, T. J. (2016). Economic
and policy issues in the production of algae-based biofuels: A review.
Renewable and Sustainable Energy Reviews, 64, 329-337.
doi:10.1016/j.rser.2016.06.027