Impact of feedstock diversification on the cost-effectiveness of biodiesel

While biodiesel production and consumption for use in transportation has risen considerably over the last decade, its competitiveness in the marketplace is largely due to regulatory and fiscal support from governmental bodies, exceeding $25 billion in 2010 in the EU and US alone. The price of feedstocks represent 80–85% of the total biodiesel cost, and with over 350 different oil feedstocks available for blending, there is potential to optimize feedstock blends to reduce costs. This paper presents a chance-constrained optimization model that considers the technical constraints of conventional, first generation feedstocks, pricing trends, as well as the uncertainty and variation latent within these numbers. Further, the frequency with which a feedstock blend portfolio should be re-evaluated is considered through a case study. The model is then applied to a second case study for actual fuel constraint scenarios used in the EU and US. The results demonstrate the potential for substantial cost savings through targeted feedstock diversification, minimizing risks to producers from price fluctuations while still meeting technical fuel standards.