Techno-economic assessment of biofuel production in the European Union

Aug 2004

In regard to the short and middle term options, biofuels seem to have an important role in the European Union with increasing production levels during the last years. Moreover, at the end of 2003, a Directive for the Promotion of Alternative Fuels for Transportation was adopted in Europe and initial substitution targets for all EU member states were established for 2005 and 2010.
The purpose of this techno-economic assessment is to highlight the various technological possibilities and economic aspects involved in the production of biofuel in Europe. The thesis is structured as follows:
An initial chapter provides an overview of the current biomass and bioenergy general market status including production levels, economic figures and future developments. Important attention is given to the situation of biofuels at both the European and worldwide levels.
The following section includes a technical assessment for two of the most important biofuels in Europe, biodiesel and bioethanol. The different production technologies, input feedstock needed and conversion processes are described. In addition, important environmental considerations and energy balances are taken into account.
The next part works out in detail an economic assessment including the cost components structures for biodiesel and bioethanol. Feedstock costs are obtained from agricultural sources and studies and conversion costs are calculated based on a yield sensitive analysis. This analysis is done to various European Member States and compared to the respective fossil diesel counterparts. The last part of this section calculates the different biofuel potential according to the prospects of agricultural set-aside shares allocations and the corresponding regional yields. Cost-potential curves were obtained from these calculations.
The last section of this study starts with an overview of the biofuel market development in Europe since 1993 until 2003 as an indication of the effect of various support mechanisms in the EU biofuel market development. Promotion instruments like Excise Duty Exemption, Levy/Subsidies, and Tender System are evaluated according to defined criteria and based on this assessment, some general recommendations in this regard are given. For the specific case of excise duties exemptions, an estimation of the effects and consequences on the overall biofuels costs performance is carried out for the case of Germany, considered to be an effective promotion mechanism in the EU.
The last section of this chapter includes an analysis of the Directive targets for 2005 and 2010 in terms of land availability and in terms of production surplus/backlog for all Member States at EU-15 and EU-25 level.

By: F. A. Toro Chacón (Institute for Systems and Innovation Research)

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