In previous economic studies of biodiesel production, the main economic factors such as capital cost, plant capacity, process technology, raw material cost, and chem­ical costs were determined (Zhang et al. 2003). The major economic factor to con­sider for the input costs of biodiesel production is the feedstock, which is about 75 to 80% of the total operating cost. Other important costs are labor, methanol, and catalyst, which must be added to the feedstock (Demirbas 2003). Using an estimated process cost, exclusive of feedstock cost, of US$0.158/L for biodiesel production, and estimating a feedstock cost of US$ 0.539/L for refined soy oil, an overall cost of US$ 0.70/L for the production of soy-based biodiesel was estimated (Haas et al.

2006) . Palm oil is the main option that is traded internationally, and with potential for import in the short term (Dene and Hole 2006). Costs for production from palm oil have been estimated; the results are shown in Table 5.4 (Dene and Hole 2006).

The oil in vegetable seeds is converted into biodiesel through oil extraction, oil refining, and transesterification. The cost of biodiesel can be lowered by increasing feedstock yields, developing novel technologies, and increasing the economic re­turn on glycerol production by finding other uses for this byproduct, which, at the moment, due to oversupply is sold for little or no value. Alternatively, the use of cosolvents, such as tetrahydrofuran, can consolidate the alcohol-oil-ester-glycerol system into a single phase, thereby reducing the processing costs (Granda et al.

2007) . However, these improvements still would not make biodiesel economically competitive at the current stage.

Biofuel production costs can vary widely by feedstock, conversion process, scale of production, and region. On an energy basis, ethanol is currently more expensive to produce than gasoline in all regions considered. Only ethanol produced in Brazil comes close to competing with gasoline. Ethanol produced from corn in the US is considerably more expensive than from sugar cane in Brazil, and ethanol from grain and sugar beet in Europe is even more expensive. These differences reflect many factors, such as scale, process efficiency, feedstock costs, capital and labor costs, coproduct accounting, and the nature of the estimates.

The cost of large-scale production of bio-based products is currently high in de­veloped countries. For example, the production cost of biofuels may be three times higher than that of petroleum fuels, without, however, considering the nonmarket benefits. Conversely, in developing countries, the costs of producing biofuels are much lower than in the OECD countries and very near to the world market price of petroleum fuel (UN 2006). Average international prices for common biocrude, fat, crops, and oils used as feedstock for biofuel production in 2007 are given in Table 5.5 (Demirbas 2008). The cost of feedstock is a major economic factor in the viability of biodiesel production. Nevertheless, the price of waste cooking oil is 2.5 to 3.5 times cheaper than virgin vegetable oils, and this can significantly re­duce the total manufacturing cost of biodiesel (Table 5.5). Biodiesel obtained from waste cooking vegetable oils is considered a promising option. Waste cooking oil

is available at relatively cheap prices for biodiesel production in comparison with fresh vegetable oil costs.

The economic advantages of a biofuel industry would include value added to feedstock, an increased number of rural manufacturing jobs, greater revenue from income taxes, investment in plant and equipment, reduced greenhouse gas emis­sions, reduction of a country’s reliance on crude oil imports, and support for agricul­ture by providing new labor and market opportunities for domestic crops. In recent years, the importance of nonfood crops has increased significantly. The opportu­nity to grow nonfood crops under the compulsory set-aside scheme is an option to increase biofuel production.

Renewable liquid fuels such as bioethanol, biodiesel, green diesel, and green gasoline are important because they replace petroleum fuels. It is generally consid­ered that renewable liquid fuels address many pressing concerns, including sustain­ability, reduction of greenhouse gas emissions, regional development, social struc­ture and agriculture, and security of supply.

The socioeconomic impacts on the local economy arising from providing power through renewable resources instead of conventionally generated technologies are very important. These impacts include direct and indirect differences in jobs, in­come, and gross output. There are significant socioeconomic impacts associated with the investment in a new power plant, including increases in employment, out­put, and income in the local and regional economy. Increases in these categories occur as labor is directly employed in the construction and operation of a power plant, as local goods and services are purchased and utilized.

The potential for reduced costs of renewable liquid fuels and conservation of scarce fuel resources results in significant reductions in fuel usage. In addition to these economic benefits, development of renewable resources will have environ­mental, health, safety, and other benefits.

Agricultural ethanol is at present more expensive than synthesis-ethanol from ethylene. The simultaneous production of biomethanol (from sugar juice) in parallel to the production of bioethanol, appears economically attractive in locations where hydroelectricity is available at very low cost (~US$ 0.01/kWh) (RFA 2007).

Currently there is no global market for ethanol. The crop types, agricultural prac­tices, land and labor costs, plant sizes, processing technologies, and government policies in different regions cause ethanol production costs and prices to vary con­siderably by region. The cost of producing bioethanol in a dry mill plant currently totals US$ 6.24/L. Corn accounts for 66% of operating costs while energy (electric­ity and natural gas) to fuel boilers and dry DDG represents nearly 20% of operating costs (Grassi 1999).

Ethanol from sugar cane, produced mainly in developing countries with warm climates, is generally much cheaper to produce than ethanol from grain or sugar beet in IEA countries. For this reason, in countries like Brazil and India, where sugar cane is produced in substantial volumes, sugar-cane-based ethanol is becoming an increasingly cost-effective alternative to petroleum fuels. Ethanol derived from cel — lulosic feedstock using enzymatic hydrolysis requires much greater processing than that derived from starch or sugar-based feedstock, but feedstock costs for grasses and trees are generally lower than for grain and sugar crops. If targeted reductions in conversion costs can be achieved, the total cost of producing cellulosic ethanol in OECD countries could fall below that of grain ethanol.

Estimates show that bioethanol in the EU becomes competitive when the oil price reaches US$ 70 a barrel while in the USA it becomes competitive at US$ 50 to $ 60 a barrel. For Brazil the threshold is much lower — between US$25 and US$30 a barrel. Other efficient sugar-producing countries such as Pakistan, Swaziland, and Zimbabwe have production costs similar to Brazil’s (Urbanchuk 2007). Anhydrous ethanol, blendable with gasoline, is still somewhat more expensive. Prices in India have declined and are approaching the price of gasoline.

The generally larger US conversion plants produce biofuels, particularly ethanol, at lower cost than plants in Europe. Production costs for ethanol are much lower in countries with a warm climate, with Brazil probably the lowest-cost producer in the world. Production costs in Brazil, using sugar cane as the feedstock, have recently been recorded at less than half the costs in Europe. Production of sugar cane ethanol in developing countries could provide a low-cost source for substantial displacement of oil worldwide over the next 20 years.

For biofuels, the cost of crop feedstock is a major component of overall costs. In particular, the cost of producing oil-seed-derived biodiesel is dominated by the cost of the oil and by competition from high-value uses like cooking. The largest ethanol cost component is the plant feedstock. Operating costs, such as feedstock cost, co­product credit, chemicals, labor, maintenance, insurance, and taxes, represent about one third of total cost per liter, of which the energy needed to run the conversion facility is an important (and in some cases quite variable) component. Capital cost recovery represents about one sixth of the total cost per liter. It has been shown that plant size has a major effect on cost (Dufey 2006). The plant size can reduce op­erating costs by 15 to 20%, saving another $0.02 to $0.03/L. Thus, a large plant with production costs of $0.29/L may save $0.05 to $0.06/L over a smaller plant (Whims 2002).

Biodiesel from animal fat is currently the cheapest option ($ 0.4 to $ 0.5/L), while traditional transesteriflcation of vegetable oil is at present around $ 0.6 to $ 0.8/L (IEA 2007). Rough projections of the cost of biodiesel from vegetable oil and waste grease are, respectively, $ 0.54 to $ 0.62/L and $ 0.34 to $ 0.42/L. With pretax diesel priced at $0.18/L in the USA and $0.20 to 0.24/L in some European countries, biodiesel is thus currently not economically feasible, and more research and tech­nological development will be needed (Bender 1999).