Feasability of a 5,000,000 gallon per year biodiesel production facility using canola, soybeans, and sunflowers as feedstock

Abstract

The rate of consumption of oil over the past few decades has skyrocketed and recently, the price has as well. It becomes necessary to explore alternative sources of energy in order to curb rising oil prices and develop a fuel which is more environmentally friendly. One fuel in particular, biodiesel, which is made from plant oils and animal fats, shows enormous potential to compete with conventional petroleum fuels. However, before massive investments are undertaken to build a production infrastructure, an analysis of the feasibility of production is necessary. In order to do so, a template was constructed using Microsoft Excel to estimate costs and revenues of a 5,000,000 gallon per year production facility in order to form a budget and give potential entrepreneurs and the like more information about their investments. Both an integrated crushing/biodiesel production facility and a stand alone biodiesel production facility under baseline assumptions and estimates show negative net present values and internal rates of return. Sensitivity analysis reveals that breakeven prices for varying scenarios range from approximately 4.50 to 4.80. Results reveal that an integrated crushing/biodiesel production facility using canola, soybeans, or sunflowers would not be a feasible investment taking into account cost of capital, labor, and feedstock at current prices for inputs and outputs.