Production costs are a major component in the market viability of a fuel because if they are too high, and subsidies are not enough to reduce the market price, then the fuel will not sell. The two major components of the total price are the cost of the raw materials and the cost of processing. The raw materials, or the oils used, can account for up to 75% of the total cost.3 The cost of raw materials includes the price of the source material (soy, algae, etc), plus the cost to process the source material into the oil. Because market prices and the processes to convert them into oil can vary for each production method, total cost also varies by source material.
There are multiple methods for producing BD from plant oils, but the primary method used in industry is transesterification because it has consistently been the cheapest because it is the least energy intensive.3 Transesterification is the process of reacting alcohol with oil to form esters and glycerol.
The esters produced in the reactions are the components used as BD. Because the process and reactions involved are very similar for different plant oils, the processing cost is essentially the same. To keep the processing costs down, the remaining components can be recovered and reused.
The 4% alcohol can be reused in additional reactions, the 1% fertilizer used in growing the source material, and the 9% glycerin can be sold for a number of purposes including pharmaceuticals, food additives, and cosmetics. With all recovery taken into account, some calculations place the total production cost of soy based BD to be as low as $2 per gallon. In 2006, when PD was $2 per gallon, the price of a barrel of oil was approximately $60. ASP conclusions put the optimistic production cost of algae based BD to be competitive at $59 per barrel of oil, meaning the final selling price would also need to be $2 per gallon to be cost competitive.
