Economic feasibility of algal biodiesel under alternative public policies

Abstract

The motivation for this research was to determine the influence of public policies on economic feasibility of producing algal biodiesel in a system that produced all its energy needs internally. To achieve this, a steady-state mass balance/unit operation system was modeled first. Open raceway technology was assumed for the production of algal feedstock, and the residual biomass after oil extraction was assumed fermented to produce ethanol for the transesterification process. The project assumed the production of 50 million gallons of biodiesel per year and using about 14% of the diesel output to supplement internal energy requirements. It sold the remainder biodiesel and ethanol as pure biofuels to maximize the rents from the renewable fuel standards quota system. Assuming a peak daily yield of 500 kg algal biomass (dry basis)/ha, the results show that production of algal biodiesel under the foregoing constraints is only economically feasible with direct and indirect public policy intervention. For example, the renewable fuel standards' tracking RIN (Renewable fuel Identification Number) system provides a treasury-neutral value for biofuel producers as does the reinstatement of the renewable fuel tax credit. Additionally, the capital costs of an integrated system are such that some form of capital cost grant from the government would support the economic feasibility of the algal biodiesel production.