Modelling Production Cost Scenarios for Biofuels and Fossil Fuels in Europe

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Das Wichtigste in Kürze Executive SummaryCompetitive production costs compared to conventional fuels are imperative for biofuels to gain market shares, as current tax advantages for biofuels are only temporary. Comparing production costs of different biofuels with fossil fuels is a challenge due to the complexity of influencing factors. The objective of this research paper is threefold: 1) to project future biofuel feedstock prices based on the crude oil price development, the price index for agricultural products, growth in world population, growth in wealth per capita income, and change in energy consumption per capita, 2) to simulate production costs under consideration of likely economies of scale from scaling-up production size and technological learning and 3) to compare different biofuels and fossil fuels by scenario analysis.A calculation model for biofuel production is used to analyse projected production costs for different types of biofuels in Europe for 2015 and 2020. Unlike engineering oriented bottomup approaches that are often used in other biofuel studies, the macro-economic top-down approach applied in this study enables an economic comparison and discussion of various fuel types based on reference scenarios of crude oil prices of €50, €100, €150 and €200 per barrel.Depending on the specific raw material prices as well as the conversion costs, the analysis delivered a differentiated view on the production costs and thus on the competitiveness of each individual type of fuel.The results show that 2nd generation biofuels are most likely to achieve competitive production costs mid-to long-term when taking into account the effects from technological learning and production scale size as well as crude oil price scenarios between €50 and €200 per barrel for both reference years. In all crude oil price scenarios, bioethanol from lignocellulosic raw materials as well as biodiesel from waste oil are associated with high cost saving potentials which enable them to outperform fossil fuels and 1st generation biofuels. Modelling Production Cost Scenarios for Biofuels and Fossil Fuels in Europe AbstractThis paper presents the results of a calculation model for biofuel production costs in 2015 and 2020 based on raw material price projections and considering scale and learning effects. Distinguishing six types of biofuels, the paper finds that scale economies and learning effects are critical for 2nd generation biofuels to become competitive. In case these ef...

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