On-Farm Biodiesel Production


Guidelines for Estimating Biodiesel Production Costs


Table of Contents

  1. Introduction
  2. Background on biodiesel
  3. Biodiesel vs. straight vegetable oil
  4. Benefits and drawbacks of using biodiesel
  5. Are there opportunities for on-farm biodiesel production in Ontario?
  6. Biodiesel Cost of Production Spreadsheet
  7. A Dairy Farm scenario
  8. Conclusions
  9. Other Resources

Introduction

The costs of petroleum-based diesel (petro-diesel) and heating fuel are rising, creating a growing interest in determining if on-farm biodiesel production is a feasible and economical farm-grown replacement for these farm inputs. On this page, we provide background information on biodiesel. We outline important factors to consider when determining if producing biodiesel for use on your farm is a practical and economical option for your situation. We also provide recommendations for further reading to assist you in evaluating the safety and fuel quality aspects of small-scale biodiesel production.

Background on biodiesel

The idea of using plant-based oils, such as soybean oil or canola oil, to fuel an internal combustion engine is as old as the diesel engine itself. Rudolph Diesel, inventor of the diesel engine, used peanut oil to demonstrate his new creation at the World's Fair in Paris in 1900. Throughout the 20th century, petro-diesel was relatively cheap and convenient. As a result, diesel engines were refined through the years to work well with this fuel source.

Petroleum diesel flows more easily (i.e. is less viscous) than either plant or animal-based oils. Using non-petroleum-based oils in today's diesel engines requires either modifying the vehicle's fuel system to accept these slower flowing oils or modifying the oil so that it can be used directly in a diesel engine. The chemical process commonly used to reduce the viscosity of bio-oils and turn them into biodiesel is called "transesterification."

The chemical transesterification of feedstock oils is a relatively straight-forward process. It can be described, in general, as follows:

100 kilograms (kg) feedstock oil + 10 kg methanol < catalyst > 100 kg FAME + 10 kg glycerol

  • catalyst refers to a small amount of a compound - typically potassium hydroxide or sodium hydroxide (lye) that helps to drive the chemical reaction shown
  • FAME refers to "Fatty Acid Methyl Esters" or biodiesel

The FAME, or biodiesel, that results from this reaction can be considered raw because numerous contaminants will remain, such as soap and alcohol. In order for the biodiesel to meet the American Society of Testing and Materials (ASTM) D6751 fuel quality standard for biodiesel, subsequent processing is needed to remove these contaminants. Using biodiesel that does not meet this standard risks damaging the diesel engine and nullifying engine manufacturer warranties.

The chemical manipulation of vegetable oils to produce biodiesel requires the producer to handle toxic and hazardous chemicals. A full discussion regarding the safety and quality associated with small-scale biodiesel production is beyond the scope of this page. However, we recommend that you seriously consider and account for the health and safety risks, as well as the economic realities, before proceeding with on-farm biodiesel production. Further information on small-scale biodiesel production safety and quality include Kemp (2006), researchers at the University of Guelph's Centre for Agricultural Renewable Energy and Sustainability, and the Olds College Biofuel Technology Centre. You can find more information on these sources in the resources section at the end of this document.

Biodiesel vs. straight vegetable oil

It is important to note the difference between using biodiesel and straight vegetable oil (SVO) as a fuel for diesel engines. Biodiesel, as a product of the transesterification process, flows more like petro-diesel. SVOs do not go through transesterification, so must be heated prior to leaving the vehicle's fuel tank to flow more easily through the fuel delivery system. As well, mechanically expelled new oils must be filtered to ensure gums and other resins are removed from the oil prior to their use as a fuel. Used vegetable oils also need to be filtered to remove any foreign particulates and other contaminants.

Some groups, particularly in Europe, are experimenting with mixing petro-diesel and SVO in various proportions, but often at a 1:1 ratio. This eliminates the need to modify the vehicle's fuel delivery system while avoiding the safety issues of extra processing associated with biodiesel production. More long-term driver experience is required to assess the impact mixing petro-diesel and SVO has on common diesel engine wear and maintenance.

Benefits and drawbacks of using biodiesel

Many people question the net environmental benefit of using biodiesel or SVO for fuel instead of traditional petro-diesel. There is also societal concern over the impact biodiesel production could have on the food supply.

In general, biodiesel production yields more net energy than petro-diesel. Studies suggest that for every unit of fossil fuel used to produce biodiesel, the biodiesel made will yield 3.2 units of fuel energy compared to about 0.83 units for petro-diesel. The efficiency ratio for petro-diesel is likely to fall further as world oil reserves become more difficult to extract.

Fuelling a vehicle with biodiesel can also lower vehicle emissions. For every litre used, biodiesel emits 2.2 kg less carbon dioxide (CO2) into the atmosphere than fossil fuel. As well, biodiesel is naturally low in sulphur. Removing sulphur from petro-diesel, which is a requirement for diesel fuel sold in Canada today, requires additional refining. This results in further air pollution emissions.

Biodiesel can be used in its pure form or it can be mixed in various proportions with petro-diesel. A B20 biodiesel, for example, is a mixture of 20 per cent biodiesel and 80 per cent petro-diesel. The chart below shows the results of a 2002 United States Environmental Protection Agency (U.S. EPA) study that investigated the change in emissions levels from heavy-duty highway engines for various soybean-based biodiesel blends. It shows that emissions decreased for all air contaminants monitored except for nitrogen oxide (NOx) emissions. NOx is a significant greenhouse gas, but effective technology to treat the exhaust gases to reduce NOx emissions does exist.

Change in Heavy-Duty Diesel Engine Emissions for Various Levels of Biodiesel Use (Source: US-EPA, 2002)

NOx = Nitrogen Oxides

PM = Particulate matter

CO = Carbon monoxide

HC = Hydrocarbons

Figure 1. Change in Heavy-Duty Diesel Engine Emissions for Various Levels of Biodiesel Use (Source: US-EPA, 2002)

There are other factors that could also be considered drawbacks for biodiesel, including:

  • Cold weather performance. As air temperatures drop, waxes in the biodiesel will crystallize. The biodiesel will then begin to gel, clogging a vehicle's fuel supply lines and filters. Biodiesels made from rendered animal fats will gel at warmer temperatures than those produced from oilseeds such as canola. Gelling is inevitable regardless of the biodiesel's feedstock oil given the winter temperatures typical in Ontario. Mixing biodiesel with No. 1 petro-diesel fuel or other diesel fuel conditioners that are on the market can help "winterize" the biodiesel. Regardless, under Ontario climatic conditions winter mixes in excess of B20 will likely risk fuel problems on colder days.
  • Biodiesel has slightly lower energy content than No. 2 petro-diesel, so fuel consumption may be marginally higher. Researchers have concluded that one should expect up to a five per cent increase in fuel consumption with biodiesel for the same energy output.

Using biodiesel could also risk voiding original manufacturer engine warranties. Many who have experimented with using biodiesel have evidence to suggest years of trouble-free operation, but you should determine what your risk tolerance is before using biodiesel in your valuable equipment.

Could biodiesel production meet the current demand for petro-diesel?

  • Oil derived from locally grown oilseed crops could never meet the demand for diesel fuel. For example, in Ontario the five year (2009-2013) average soybean production was 3,098,754 tonnes. Canola production is much less for the same period at 59,860 tonnes. Even if all of the oilseed extracted from these oilseed crops could be converted to biodiesel, it would only offset about 12 per cent of Ontario's annual on-road diesel fuel consumption of five billion litres.
  • Inedible animal fats and used vegetable oils are another feedstock for biodiesel production. Even if all of these Ontario products were dedicated to biodiesel production, they would only add an additional two per cent of the supply needed for annual on-road diesel consumption.

Growing crops solely for the purpose of biodiesel production is currently not sustainable. Future technological advances to improve the efficiencies of both diesel engines and oil production from plants could improve this situation.

Are there opportunities for on-farm biodiesel production in Ontario?

Waste or used vegetable oils and animal fats are the most economical feedstocks for biodiesel production. There is only a limited supply of these waste oils. If they are not available, the largest potential on-farm source of feedstock oil in this province is soybeans. Pressing soybeans yields not only oil but also soybean meal. Ontario livestock producers often grow soybeans on a portion of their land, sell the harvested beans and subsequently purchase soymeal to include in their livestock feed rations. Let us explore further the value-added potential of on-farm soybean processing.

Determining how to extract the oil from the oilseed is the first step. When selecting an oil expeller, choose one with higher extraction efficiency because it will improve the profitability potential. See Figure 2.

Oilseed expellers can range in terms of oil extraction efficiency. While lower cost units may be more attractive initially, more expensive expellers with a higher oil extraction efficiency and lower maintenance costs often prove more economical.

Figure 2. Oilseed expellers can range in terms of oil extraction efficiency. While lower cost units may be more attractive initially, more expensive expellers with a higher oil extraction efficiency and lower maintenance costs often prove more economical.

Table 1 shows the volume of oil that can be expected from soybean and canola seed. Oil content of the common seed crops will vary depending on variety and crop growing conditions.

Table 1. Expected Oil and Meal Yield from Common Oilseeds through Expeller-Pressing
Oilseed Expeller-Pressed Oil Yield
(L/tonne1)
Expeller-Pressed Meal Yield
(kg/tonne2)
Soybeans 80 - 112 890 - 860
Canola 160 - 360 810 - 610

1L/tonne = litres per tonne
2kg/tone = kilograms per tonne

Table 2 provides guidance on the amount of mechanically pressed soybean meal that could be included in the ration of selected livestock. Estimates for canola meal are also shown. The lower values for canola are due to the generally recognized lower palatability of canola meal as a livestock feed. The amounts assume a higher level of fat (energy) content in the on-farm processed meal than with off-farm (solvent extracted) meal because it is assumed all oil on-farm extraction would be achieved through mechanical pressing. While efficiencies can vary among mechanical presses, expeller presses generally leave 45-50 per cent of the oil contained in the oilseed in the meal. A solvent-type approach, used in industry, leaves about six per cent but is very costly and not feasible on-farm.

Table 2. Typical Meal Consumption Expectations of Selected Livestock
Livestock Type Typical Weight Range
(kg)
Average Daily Meal Consumption Potential
(kg/day/450 kg of livestock weight1)
Soybean Meal Canola Meal
Dairy Cow 550 - 700 1.1 0.63
Beef Cow 550 -700 0.6 0.29
Beef Feeder 180 - 635 0.40 0.20
Dairy Goat 75 - 95 1.3 0.79
Broiler Chicken 0 - 2.6 4.32 -
Feeder Hog 27 - 118 3 - 42,3 -

1kg/day/450kg = kilograms per day per 450 kilograms of livestock weight
2Assumes meal product is processed sufficiently to destroy trypsin inhibitor.
3Range given is due to the base grain used in the hog ration. If corn-based, use the lower value. If wheat-based, use the higher value.

Notes:

Values shown in columns 3 and 4 in Table 2 are not intended for use in developing detailed feed rations for livestock. They are a guide to estimate the approximate potential for a livestock farm to utilize the meal byproduct from on-farm oilseed crushing. The same values represent "average" annual amounts and not peak potential consumption rates for the livestock types listed.

Depending on the type of livestock fed, the extra oil left in the meal with expeller pressing could increase the meal's value as a feed supplement. For example, dairy producers may be interested in including additional fat in their cows' diets to increase the fat content of the milk produced. Hog producers may be less interested because additional fat in the animals' diets will encourage "soft fat" in the resulting meat. As well, with monogastric animals (animals with stomachs that have only one compartment, such as hogs and chickens), further heat treatment of mechanically-pressed meal may be needed to destroy the trypsin inhibitor that would otherwise lead to poor protein absorption. This will depend on the temperatures the oilseed is subjected to as it passes through the expeller.

Income from the sale of the meal byproduct is critical if oilseeds are to be crushed and the oil used for biodiesel production. Livestock producers may already have the on-farm capacity to use this byproduct as animal feed. Cash crop soybean or canola growers would need to find a reliable market for the meal they generate if they want biodiesel production to be economical.

Biodiesel Cost of Production Spreadsheet

A series of spreadsheets were prepared to assist in evaluating the cost of production (COP) for specific small-scale biodiesel production situations. They also point out the key factors affecting the cost of producing biodiesel, such as meal price. These spreadsheets were developed by Roy Arnott, P.Ag., Business Development Specialist with Manitoba Agriculture, Food and Rural Development. They have been modified to reflect Ontario cropping practices and costs.

Inputs into the spreadsheets include:

  • Plant Size (litres biodiesel production/year)
  • Plant capital costs (building, oilseed crusher, biodiesel processor etc.)
  • Plant operation costs (Labour, hydro, administration, insurance, property taxes etc.)
  • Process input costs (oilseed cost of production, methanol, catalyst etc.)
  • Purchase price of farm diesel fuel
  • Anticipated diesel/biodiesel blend to be used on-farm (e.g. 20 per cent, 50 per cent. 100 per cent)
  • Expected oilseed yield (kg/tonne of oilseed)
  • Expeller oil extraction efficiency

The spreadsheets assume:

  • Buildings and equipment used are valued at new cost
  • Soybean or canola seed feedstock is valued at cost of production, not retail cost.
  • Feedstock cost (e.g. soybean or canola oil) includes the market value of the meal produced.
  • All biodiesel produced is for farm use only in non-licensed vehicles (i.e. no fuel tax cost)

Biodiesel COP spreadsheets can be accessed from the Ministry of Agriculture, Food and Rural Affairs' (OMAFRA) website. Select the spreadsheet that matches the oil feedstock that you will use (waste oils, mechanically crushed soybean oil or mechanically crushed canola oil). If you are using a combination of oils, complete a COP spreadsheet for each oil feedstock type and combine the results proportionately. When combining spreadsheet results, however, be sure to assign capital costs proportionately to the various oil sources.

It is important to mention that, effective April 1, 2014, unless otherwise exempted (e.g. coloured diesel) all fuel, including biodiesel, used to generate power in an internal combustion engine is taxable at a rate of 14.3 cents per litre. Therefore, any person or business that manufactures biodiesel in Ontario, or that imports biodiesel into or from Ontario on or after April 1, 2014, are required to be registered with the Ministry of Finance under the Fuel Tax Act.

What implications does this have for on-farm biodiesel production costs? If the biodiesel is manufactured solely for personal use in non-licensed motor vehicles (e.g. farm tractors or back-up diesel generators), then the biodiesel production is tax exempt. If, however, any of the biodiesel produced is used in a licensed motor vehicle (e.g. farm truck), the biodiesel used in this manner is subject to tax, which then affects overall production costs. Also, under these circumstances, the biodiesel producer needs to register as a biodiesel manufacturer with the Ministry of Finance in accordance with the Fuel Tax Act and account for any costs associated with this step in their overall cost of production.

Visit the Ministry of Finance website for more information on the April 1, 2014, revocation of biodiesel exemption, how the biodiesel tax exemption applies to the on-farm cost of production of biodiesel and frequently asked questions about the Fuel Tax. Or contact the Ministry of Finance at 1-866-ONT-TAXS (1-866-668-8297).

A Dairy Farm Scenario

To demonstrate the use of the biodiesel cost of production spreadsheet, consider a 350-acre, 70-cow dairy farm that uses 15,000 L of diesel fuel annually in its operation. We chose a dairy farm because it has the greatest potential to make use of the resulting soybean meal from the oil extraction process in its animal feeding program. Data from Table 1 suggest that approximately 98 L of oil will be expelled from a tonne of soybeans. Assuming a 2,700 kg/ha (40 bu/ac) soybean yield, about 57 ha (140 acres) of soybeans would be required to satisfy the farm's complete diesel fuel needs. Similarly, using Table 2, a rough estimate of the farm's soybean meal requirements is 40 tonnes/year. Crushing 57 hectares of soybeans would produce approximately 170 tonnes of soy meal.

If the grower wants to produce just enough meal to meet the farm's needs, only about 14 ha (35 acres) of soybeans would have to be processed. However this would mean only about 25 per cent of his the farm's diesel fuel needs would be met. For this scenario, we will assume that 15,000 L of diesel fuel is produced and that the extra meal can be sold to a neighbour at market value. This farm's feed rations can be reviewed to see if greater use could be made of the meal available.

Table 3 summarizes the remaining inputs used in the dairy farm's soybean-based biodiesel cost of production spreadsheet.


Table 3. Input to Biodiesel Production Costs Spreadsheet for Example Dairy Farm

Biodiesel Plant Production
Input Value Units
Plant Size - thousands of Litres 15 L/1000
Days of operation per year 65 (days/yr)
Hours of operation per day 8 (hrs/day)
Employees per shift - biodiesel production 0.25 number
Labour rate cost per hour 18.00 ($/hr)
Feedstock oil required per litre of biodiesel produced 0.99088 L
Methanol required (Cost per tonne) 700 ($/tonne)
Methanol recovered (Percent) 25 (%)
Catalyst required (e.g. potassium hydroxide) (Cost per tonne) 3000 $/tonne
Glycerol byproduct (Value per tonne) $110 $/tonne
Purchase cost per litre of petro-diesel (coloured) farm fuel - Ultra Low Sulphur Diesel (ULSD) 1.20 $/litre
On-farm biodiesel blend usage 100 %
On-farm fuel efficiency increase with biodiesel usage 1.5 %
Soybean Oil Production
Input Value Units
Soybean cost of production - assumes Round-up ready, no-till soybeans (Cost per acre)
(refer to latest OMAFRA Field Crop Budgeting Aid for soybeans)
269 ($/ac)
Soybean average yield (Bushels per acre) 42 (bu/ac)
Soybean meal (48 per cent protein) (Value per tonne) 372 ($/tonne)
Seed crushing days per year 155 days/yr
Crushing hours of operation per day 24 hrs/day
Employees per shift - crushing 0.05 Number
Labour rate cost per hour 18.00 $/hr
Soybean oil content 17.5 %
Residual oil in soybean meal 8.5 %
Shrinkage in oilseed processing 3.0 %
Extra oil meal premium 0 %
Soybean oil bulk density (Kilograms per litre) 0.920 (kg/L)
Other Operating Costs
Input Value Units
Hydro (assumed all processing done at peak or mid-peak times of day) (Cost per kilowatt hour) 0.124 ($/kWh)
Maintenance 2.5 %
Wastewater/washwater disposal and miscellaneous administration costs per year 2000 $/year
Ontario Fuel Tax Submission and registration with Ontario Ministry of Finance (Cost per litre) 0 $/L
Insurance 0.5 %
Property taxes 0.5 %
Investment rate 3.0 %
Operating interest rate 5.0 %
Capital Costs - Buildings
  Original Value ($) Salvage Value (%) Useful Life (yrs)
Biodiesel plant 2,000 10 20
Crushing plant 3,500 10 20
Capital Costs - Machinery and Equipment
  Original Value ($) Salvage Value (%) Useful Life (yrs)
Biodiesel plant 2,500 10 15
Crushing plant 30,000 10 15

Total Land Value = $13,585/hectare ($5,500/acre)


Table 4 summarizes the biodiesel cost of production estimate for the sample dairy farm presented above. This cost of production of approximately $0.22/L was determined by entering the inputs (shown in Table 3) into the biodiesel COP (soybean) spreadsheet found on the OMAFRA website. Based on the values and assumptions made in the scenario, an annual savings of approximately $1.01/L or $15,000 on diesel fuel used on this dairy farm could be expected. Other input assumptions and their effect on the cost to supply biodiesel for this on-farm example can be explored using the on-line spreadsheet.


Table 4. 15,000 L/year Biodiesel Production Costs for the Example Ontario Dairy Farm

A. Operating Costs

1 - Input Costs
  Cost/Litre ($/L) Total Cost ($)
1.01 - Net feedstock cost (soybeans minus soybean meal) -$0.9339 -$14,008
1.02 - Methanol $0.1053 $1,579
1.03 - Catalyst $0.0443 $665
Subtotal Input Cost -$0.7843 -$11,764
2 - Other Operating Costs
  Cost/Litre ($/L) Total Cost ($)
2.01 - Hydro $0.2004 $3,005
2.02 - Maintenance $0.0633 $950
2.03 - Wastewater/washwater disposal $0.1333 $2000
2.04 - Ontario Fuel Tax Submission* $0.000 $0
2.05 - Miscellaneous administration $0.000 $0
2.06 - Insurance $0.0127 $190
2.07 - Property taxes $0.0037 $55
Subtotal Other Operating Costs $0.4134 $6,200
2.08 - Operating interest $0.0103 $155

*This example assumes all biodiesel fuel produced will be used in non-licensed vehicles.

Total Operating Costs (Cost/Litre) = -$0.3606

Total Operating Costs = -$5,409

B. Fixed Costs

3 - Depreciation
  Cost/Litre ($/L) Total Cost ($)
3.01 - Buildings $0.0165 $248
3.02 - Machinery and equipment $0.1300 $1950
4 - Investment
  Cost/Litre ($/L) Total Cost ($)
4.01 - Buildings $0.0061 $91
4.02 - Machinery and equipment $0.0358 $536
4.03 - Land $0.0110 $165

Total Fixed Fixed Costs (Cost/Litre) = $0.1993

Total Fixed Costs = $2990


Total Operating and Fixed Costs (Cost/Litre) = -0.1613

Total Operating and Fixed Costs = -$2,420


C. Labour

Cost/Litre ($/L) = $0.3792

Total Cost ($) = $5,688


Total Cost of Production (Cost/Litre) = $0.2179

Total Cost of Production = $3,268


D. Value of Biodiesel

  Cost/Litre ($/L) Total Cost ($)
5.01 - Estimated on-farm biodiesel value $1.2000 $18,000
5.02 - Estimated increased fuel efficiency value $0.0183 $274
5.03 - Glycerol sales $0.0103 $154

Total Value (Cost/Litre) = $1.2286

Total Value = $18,274


Total Value - Cost of Production (Cost/Litre) = $1.0107

Total Value - Cost of Production = $15,006


Disclaimer: This budget is only a guide, using point-in-time values for the purpose of illustrating the cost of production spreadsheet output. It is not intended as an in-depth study of the cost of production of this industry. Interpretation and utilization of this information is the responsibility of the user. No liability for decisions based on this publication is assumed by OMAFRA.


The spreadsheet shows that the cost to grow the oilseed crop (e.g. soybeans) and the value of the resulting meal have the greatest influence on the cost of producing biodiesel. The dairy farm scenario assumed the soybeans would be grown on the farm's land. The land cost was not included in the soybean crop's $664/hectare ($269/acre) cost of production value. If a land rental rate of ($346/hectare ($140/acre) was added, the biodiesel cost of production would rise to an uneconomic $1.46/L.

A Comparison of Farm Petro-Diesel Cost with the Cost of Production of Biodiesel using Farm-Grown Soybeans and Selling the Soy Meal By-Product.

Figure 3. A Comparison of Farm Petro-Diesel Cost with the Cost of Production of Biodiesel using Farm-Grown Soybeans and Selling the Soy Meal By-Product.

Figure 3 compares the opportunity cost of producing biodiesel on-farm instead of selling the soybeans on the commodity market. The blue line in Figure 3 represents the average weekly petro-diesel purchase cost in Ontario for the years 2012 and 2013. The green line represents the cost of biodiesel production, assuming the soybeans crushed could have been sold that week for the quoted market price (FOB Chatham elevator) and that the soymeal could have been sold for its quoted market value that same week. The red line is an adjusted version of the green line in that it assumes five per cent less than market price is received for the soybeans and that the soymeal is consistently sold for $30 more than its weekly quoted average price. Figure 3 shows that, for much of 2012 and 2013, purchasing petro-diesel was more economical than producing biodiesel from farm-produced soybeans that could have otherwise been sold at market price. This analysis, however, is quite sensitive to the soybean and soymeal prices, as seen in the difference between the graph's green and red lines. It emphasizes the importance of establishing a solid market for the soymeal produced in on-farm biodiesel production

Building, machinery and wastewater disposal costs are also expected when establishing and operating a biodiesel facility. Figure 4, however, shows that the cost to produce on-farm biodiesel is not nearly as sensitive to the cost of building and machinery needs as it is to the cost of supplying the oilseed or the market price of the resulting soymeal. The cost of properly disposing the washwater generated by the biodiesel washing process can have a significant impact on the profitability of the biodiesel production. Washing is necessary, as it helps the biodiesel to meet fuel quality standards. This emphasizes that water treatment systems need to be cost effective.

Sensitivity of Biodiesel Cost of Production to Selected Input Costs.

Figure 4. Sensitivity of Biodiesel Cost of Production to Selected Input Costs.

The final two inputs considered that can have a significant influence on the cost of production of biodiesel include the facility's annual production capacity as well as labour costs to operate and maintain the operation. Table 5 summarizes the effect of these two variables as they relate to the dairy farm scenario. Increasing production to make full use of the purchased equipment's capacity and reducing labour costs both help to reduce the cost of producing a litre of biodiesel.

Production Volume Labour
Capacity
(L/year)
Cost of Biodiesel Production
($/L)
Labour Cost
($/year @ $18.00/hr)
Cost of Biodiesel Production
($/L)
2000 2.05 $2,600 0.01
5000 0.78 $4,370 0.13
10,000 0.36 $5,688 0.22 (dairy scenario)
15,000 0.22 (dairy scenario) $7,445 0.34
25,000 0.10 $9,619 0.48
35,000 0.06 $13,114 0.71


The dairy farm scenario shows that there are many factors that need to be considered when assessing the economic viability of producing on-farm biodiesel. Every farm circumstance is different. The cost of production spreadsheet can help you determine if producing your own biodiesel is economically beneficial. Safety considerations and their associated costs also need to be accounted for and are not part of the scenario above.

Conclusions

There are many factors for you to consider when thinking of producing and using on-farm biodiesel:

  • whether to produce straight vegetable oil (SVO) or biodiesel
  • safety and environmental concerns related to the handling and disposal of chemicals and waste streams associated with biodiesel production
  • engine warranties
  • the source of oil to be used (waste oil vs. expelled new oil), and the cost to supply or grow and expel the oilseed
  • the potential to sell, or as feed, any meal that is produced in the expelling process

The answers to these considerations will have a strong influence on what the final cost will be for you to produce on-farm biodiesel. Safety measures need to be assessed and implemented. A cost analysis is recommended, using information specific to the planned facility, to assess the feasibility of growing and producing your own fuel. A series of cost of production spreadsheets are available on the OMAFRA website to assist in assessing your specific biodiesel production costs. In most circumstances, the production benefits do not outweigh the production costs and safety considerations.

Other Resources

Special thanks goes to Roy Arnott, P.Ag., Business Development Specialist from Manitoba Agriculture, Food and Rural Development, who developed the biodiesel cost of production spreadsheet that was used as the foundation for this analysis


For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca
Author: Kevin McKague - Engineer, Water Quality/OMAFRA
Creation Date: 04 March 2009
Last Reviewed: 04 November 2014