Design of a Small–Scale Biodiesel Production System
Jeffrey Anderson, Jessica Caceres, Ali Khazaei, Jedidiah Shirey
Abstract – The city of Fredericksburg is located in central Virginia and is home to 592 farms covering 16% of the total land area. Farms in this region have experienced declining profits from an average of $555 per farm in 1997 to -$14,931 per farm in 2007. One of the ways to reduce operating costs and return to profitability is to significantly reduce diesel costs. An alternative to purchasing diesel is to produce biodiesel from vegetable oil extracted from crops grown on the farm and sell the excess biodiesel that is not used. The goal of this paper is to design the process and evaluate the financial feasibility of converting farm crops into biodiesel using a small-scale biodiesel production facility on a farm. Five crops were selected as design alternatives based on regional availability, productivity, and cost criteria: Canola, Corn, Peanut, Soybean, and Sunflower. These alternatives were evaluated using two Monte Carlo models: (1) a Biodiesel Production Model to simulate the amount of biodiesel and other byproducts produced and (2) a Business Model to simulate the net present value of each alternative after 15 years. The biodiesel production model inputs are: (i) expected crop yield, (ii) oil content percentage, and (iii) oil press efficiency percentage. The outputs of this model are: (i) biodiesel yield, (ii) meal yield, (iii) glycerin yield, and (iv) net energy ratio; each of the yield outputs is an input for the financial model. Other inputs for the financial model include meal revenue, equipment costs, chemical expenses, planting and harvesting costs, lost profit cost, and biodiesel sales. The output is the net present value of each crop alternative at the end of 15 years. Utility of each crop alternative from first to last is as follows: Peanut (1.0), Sunflower (0.68), Canola (0.55), Soybean (0.52), and Corn (0.45). Plotting utility against net present value shows that Canola is the most cost-effective alternative and the recommended crop type.
Fredericksburg, Virginia is an independent city approximately 50 miles south of Washington, D.C. and encompassed by the counties of Spotsylvania and Stafford. These two counties are home to 592 farms ranging from 1 to 2,000+ acres, with an average size of 115 acres. These farms have a total of 72,000 acres of farmland, of which over 34,000 acres are cropland . The United States Department of Agriculture (USDA) defines a farm as “any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year” . The value of sales is the amount of income generated by the selling of agricultural commodities. Essentially, it is the farm’s paycheck before expenses. In 2007, 41.6% of farms in the Fredericksburg area had value of sales below $1,000, and 0.34% had value of sales greater than or equal to $500,000. The USDA further defines farms by size: small farms are farms with $250,000 or less in sales of agricultural commodities . In 2007 over 98% of the farms in Fredericksburg were, by USDA definition, small farms. This paper is specifically interested in these farms. The income of operation or income from operations (IFO) is the total profit realized by a business after all costs are deducted from all business related income to include total sales, government payments, and other farm related income . For the years 2002 and 2007, USDA data shows that the total income from operations (IFO) of Fredericksburg farms is negative. The average income from operations for farms in Fredericksburg has decreased from approximately $500 per year in 1997 to approximately -$15,000 per year in 2007 , , . The total farm IFO deficit has increased over 77% from $2.45 million in 2002 to $4.33 million in 2007. Data also show that the year 1997 was...