Report 6 Biodiesel and Bio Ethanol

Note
Consulting Engineers
and Planners A/S
NIRAS
Sortemosevej 2
DK-3450 Alleroed
Denmark
Telephone +45 4810 4200

EPU: Danida IRP 2 Fax +45 4810 4300
E-mail niras@niras.dk
Reg. No. 37295728 Denmark

F.R.I, FIDIC
Technical and Economic Potential of Bio-diesel and Bio-ethanol
A report prepared under the
Malaysian - Danish Environmental

Cooperation Programme
Renewable Energy and Energy

Efficiency Component
14 August 2005
The views expressed in this document, which has been reproduced

without formal editing, are those of the author and do not necessarily
reflect the views of the Government of Malaysia nor DANIDA.
1. Introduction
1.1 Objective
This note is elaborated on background of previous transport studies
and studies of bio-fuels, and attempts to describe the potential and
effects of a possible future production of bio-fuels in Malaysia.
The purpose of this note is to relate the supply-potential of biodiesel

and bio-ethanol from an extra production in the Malaysian palm oil
industry to the present situation in the Malaysian transport sector.
1.2 Background
The transport sector is the second most energy consuming sector in
Malaysia, accounting for over one third of total primary energy
consumption. This position appears to continue in the future, while the
/opt/scribd/conversion/tmp/scratch2360/42127954.doc
2
total energy consumption is expected to triple by the year 2020

(compared to 2000). With the current fuel mix in the transportation
sector, petrol and diesel demand will exceed domestic production
within the next decade. The development in demand for each fuel type
can be influenced in several ways, some of which involve the
introduction of alternative fuel technologies in the sector. The palm
oil industry has been identified as a major domestic source of
biodiesel and bio-ethanol (from EFB).
To introduce the biodiesel and bio-ethanol, even in blends with

relatively low percentage of biofuel, would have a substantial positive
impact on the environmental problems caused by the transportation
sector (emissions) and at the same time help ensure national energy
security.
Also from an economical point it is desirable to diversify fuel supply,

and lessen reliance on fossil fuels as the world market oil prices tend
to keep rising.
1.3 Bio-fuels
New technologies for fuel production and new engines technologies
are the objects of intensive research worldwide.
Also the utilization of renewable fuels for transport purposes is

increasingly being investigated, and biodiesel and bio-ethanol are
already produced in large scale plants, in several countries.
The production of biodiesel is based on vegetable oils and fats, while

the production of bio-ethanol is based on carbohydrate (sugar)
compounds. Both fuels are therefore renewable and can be utilized in
existing engines. The fuels can be produced by existing technology,
utilising a reliable resource basis which enables large scale
production. They can in blends be applied to the existing vehicle fleet,
can be introduced in the existing distribution system and can therefore
be introduced in a short time perspective. Furthermore these fuels are
bio-degradable, have low GHG contribution and show better exhaust
characteristics, thereby improving the air quality.
2. Biodiesel
2.1 Introduction
Biodiesel, also called fatty-acid-methyl-ester, is in principal vegetable
oil that was chemically modified (esterfication) with methanol. When
talking about biodiesel in the following it is assumed that it is in the
form of palm oil methyl ester (palm diesel).1
1
In order to avoid misunderstandings: Also Crude Palm Oil (CPO) can be mixed
with medium fuel oil (MFO), which is currently being tested in some pilot
projects. CPO / MFO blends are sometimes also addressed as B5 and B20
mixtures, both terms that are widely used for biodiesel/petroleum diesel mixes. It
3
2.2 Production
Malaysia started a palm diesel program in the 80’ties. The Malaysian
Palm Oil Board (MPOB) in cooperation with Petronas developed a
special bio diesel production technology on the basis of palm oil, of
which the main purpose was the production of carotene, vitamin Q,
lipids and other substances, and where biodiesel is produced as by-
product and exported.
2.3 Utilisation
Biodiesel can be utilized as fuel for vehicles and stationary engines in
its pure form or in blends with petroleum diesel. No technical
problems appear when utilizing biodiesel petroleum diesel blends of
up to 30 % biodiesel, whereas some seals and pipes may require
replacement when using 100% biodiesel. Currently some standard
blends have taken root, e.g in the US the preferred blend seems to be
20% biodiesel (B20), in France and Germany 5 % (B5) , and the
Czech Republic uses biodiesel in a 30% blend (B30).
Blends are introduced in order ease the distribution but also in order to
meet certain environmental goals (reduction of sulfur in fuel).
2.4 Malaysian Resource Base

Over the last forty years, Malaysian palm oil industry has grown by
leaps and bounds to become the world largest producer and exporter
of palm oil and its products.
The planted acreage has increased correspondingly and in 2004 the

palm oil estates covered 3.8 million hectares. The production of palm
oil has also increased from about one hundred thousand tones in 1960
to 13.35 million tonnes in 2003.
Nevertheless there are some challenges for the palm oil industry to
face.
While the market for edible oil is expected to increase during the next
decades, there is no more suitable land for oil palm cultivation in
Peninsular Malaysia. Although there is still land suitable for oil palm
cultivation available in Sabah and Sarawak, the acreage is limited and
other issues, such as the conservation of the rain forests, limit future
extension of the palm oil estates.
The industry is also facing acute labour shortage. More labour is

required for new estates. The cost of production will also go up. In
order to maintain its competitiveness the palm oil industry has to
is recommended to introduce general rules for naming of their blends in order to
avoid misunderstandings. This report focuses exclusively on palm diesel as
CPO/MFO fuels are regarded as pilot fuels.
4
increase the productivity per unit land area of palm oil products. The
current national palm oil yield is about 3.7 tonnes per hectare per year
as compared to the theoretical maximum of 17 tonnes per hectare per
year.
While the full theoretical yield is impossible to achieve, it should be

possible to narrow the yield gap through research and development
efforts, improved cultivation techniques, improved plantation
management and improved plant material.
There are already a number of estates producing about 6 tonnes of

palm oil/hectare/year, but also still a larger number of estates
producing less than 3 tonnes/hectare/year.
So even if it is assumed that the land covered by palm oil plantations

will not increase in hectares, the palm oil yield by hectare is assumed
to increase significantly.
2.5 Potential Supply

The following table shows the expected forecasts for the palm oil
industry. For the forecast of the expected biodiesel production it is
assumed, that all additional oil production will be available for palm
diesel production.
Projected Projected CPO Potential

Yea CPO for Biodiesel Biodiesel
r Prod. Prod. Prod.
t / year t / year mill. l / year
2005 14,360,000 -
2015 17,740,000 3,380,000 3,930
2025 17,910,000 3,550,000 4,128
Table 1: The table shows the potential biodiesel production in basis of

forecasted crude palm oil production. The CPO production forecast was
assumed by MPOB, Dr. Chow on the assumption that the CPO production
projected/ extraction efficiency is at 18%. The density of biodiesel was
calculated with 0,86 g / l.
3. Bio-ethanol
3.1 Introduction
Bio-ethanol is biologically produced on basis of sugars, which after
fermentation form ethanol. The ethanol is then concentrated and can
be utilised as petrol additive in unmodified petrol engines, or as pure
bio-ethanol in modified engines.
The demand for ethanol as fuel is at the moment enormous projects

are planned all over the world.
5
3.2 Production
Bio-ethanol can be produced by different technologies from sugar
compounds or cellulose.
Conventional ethanol production bases on the fermentation of sugar

(glucose). Fruits, sugar cane or grains such as corn and wheat,
potatoes and soy bean are used as raw products for ethanol production
in many industrial scale plants around the world.
Cellulose-based ethanol is produced from cellulose (hemicelluloses)

containing material. In a pre-treatment process, cellulose is converted
to glucose, which then is fermented. Cellulose-based ethanol has a
high level of environmental sustainability because it can be made from
the non-food portion of renewable feed stocks that are today regarded
as residues from agriculture.
Until recently, producing cellulose-ethanol has been very costly, but

recent innovations have made full scale plants realistic. While most
current cellulose-based ethanol production concepts use materials
such as cereal straws, it is possible to use other cellulose containing
materials - including wood. The production of bio-ethanol based on
cellulose is not yet widely practiced, but several demonstration plants
are installed or under installation worldwide, and the technology
shows large potential.
3.3 Utilisation
Ethanol is a high quality fuel blending component that is used widely
by major oil companies and distributors, where there is an established
commercial market for ethanol.
The use of bio-ethanol in blends with fossil petrol (gasoline) is

widespread. For example bio-ethanol is mixed in 5% blends with
petrol in France. Approximately 12% of all U.S. gasoline and 5% of
all Canadian gasoline is blended with ethanol (2005)i, and in the
Chinese provinces of Holongjiang, Jilin and Liaoning, 80 % of all
petrol cars operate on ethanol/petrol blends. Ethanol can be used as an
automotive fuel by itself and can be mixed with petrol to form an
ethanol/petrol blend. The most common blends areii 5% ethanol
( known as E5) and 10% ethanol (known as E10).
3.4 Malaysian Resource Base

It has not been possible to identify possible resources for ethanol
production on starch or glucose, but the palm oil industry produces
large amounts of cellulose-containing waste product, the empty fruit
branches (EFB).
While the palm oil yield is expected to increase during the next
decades according to paragraph , the produced amounts of EFB are
6
not assumed to increase to the same extent. EFB are today used for
mulching, but many efforts are undertaken to create alternative
commercial applications for their utilisation. Nevertheless there does
not today exist a commercial market for the EFB.
3.5 Potential Supply

Tests done at DTU, Danish Centre for biofuels in 2005 has shown that
1 ton Dry Matter (DM) from EFB has the capacity to produce 388 l
ethanoliii on basis of their Danish Bio-ethanol technology.
On basis of the forecasted production of EFB, the following potential

bio-ethanol production in Malaysia has been calculated.
Potential
Projected
Bio-ethanol
Year EFB Prod.
Prod.
t DM / year
mill. l / year
2005 6,140,000 2,363
2015 7,590,000 2,937
2025 7,660,000 2,953
Table 2: The table shows the potential ethanol production on basis of

forecasted production of EFB production. The EFB production forecast was
made by MPOB, Dr. Chow on the assumption of the FFB processed, and
based on 22% EFB to FFB. The moisture of EFB is 65%.
4. Malaysian Transport Sector

4.1 Introduction
In the previous sections, the potential supply of palm diesel as well as
bio-ethanol has been estimated. This section provides an assessment
of a realistic/potential demand in order to estimate the economical (as
well as the environmental) impacts. The questions are: what are the
options; how big a share of the vehicle population can actually drive
on the biofuel available? And in that context, what are the costs of
doing this?
To assess the potential for palm diesel and bio-ethanol the current
number of diesel fuelled and petrol fuelled vehicles respectively must
be estimated.
4.2 Development Trend in the Vehicle Population

In Malaysia today the main part of the vehicle population consists of
petrol-fuelled vehicles.
The projected development of the vehicle population – and in

continuation of this, the fuel consumption - relies on experiences from
the Highway Network Development Plan Study that was carried out in
Malaysia in the 1990’es. The main objectives of this study were to
7
deliver guidelines for 9MP, but it also comprised various models for
forecasting transportation demand, including a linear regression model
for forecasting the number of vehicles on basis of the GDP and a trip
generation model on basis of GDP and the population. Combining
these models with data on fuel consumption per vehicle-kilometre the
forecasted fuel consumption in the road based transport sector can be
found.2 Below here the predicted number of gasoline and diesel
fuelled vehicles as well as forecasted yearly fuel consumption is
shown.3
Year 2005 2010 2015 2020
Cars, petrol 5,837,738 7,586,159 9,447,802 11,396,563

Cars, diesel 22,177 28,819 35,891 43,294
Buses, petrol 5,997 7,810 10,039 12,797
Buses, diesel 56,851 74,044 95,177 121,327
Lorries, petrol 237,885 336,023 467,064 642,038
Lorries, diesel 638,276 901,593 1,253,192 1,722,671
Table 3a: Development in vehicle population distributed on fuel type [no. of

vehicles] - Business as Usual
Petrol Diesel
30.000
25.000
20.000
Mill. litres/year
15.000
10.000
5.000
-
2005 2010 2015 2020
Figure 1: Development in fuel consumption - Business as Usual
2
For more detailed description of assumptions and results, please refer to the
background report ‘Energy Use in the Transportation Sector of Malaysia’,
December 2004.
3
The figures are based on a ‘Do Nothing Scenario’; see background report
‘Energy Use in the Transportation Sector of Malaysia’ for further clarification.
8
4.3 Palm Diesel

As stated above, palm diesel is most often used in blends. Blends can
be found in various percentages and much research has been carried
out in order to find the most optimal composition of the fuel blend.
However, a blend of 5 percent by volume palm diesel with 95 percent
by volume petroleum diesel, a so called B5, has demonstrated
significant environmental benefits with a minimum increase in cost
for the consumers. When talking about palm diesel in the following, it
is assumed that it is in the form of B5.
As regards the fuel efficiency 1 litre of palm diesel contains ~10% less
energy per litre of than fossil diesel.
4.3.1 Potential Penetration

The potential palm diesel production is expected to be ~4,000 mill.
litres in 2015 rising to ~4,100 mill. litres in 2020, cf. table 1 above.4
This corresponds to 50% of the yearly diesel consumption in 2020. If
the focus is on B5, a considerable ‘over production’ of palm diesel is
observed, making it possible to start up an export to Western
countries.
Assuming that all the diesel fuel available is on the form of B5 in the
forecasting years 2015 and 2020, only ~300 respectively 410 mill.
litres of palm diesel would be consumed within the Malaysian
transport sector, leaving ~4,000 mill. litres to the export market.
Another option is to make efforts to increase the share of diesel-

fuelled vehicles. It is most likely that the mix between petrol and
diesel in the table above will move towards to a higher degree of
diesel-fuelled vehicles. Diesel engines are more fuel-efficient than
petrol engines (typical estimate is 10% energy saving). In Western
countries diesel passenger cars have obtained a significant market
share (in some countries >50%), with a further increase expected. In
Malaysia there is a huge potential for such a development, as the
present share of diesel-fuelled passenger cars is close to zero.
Increasing the proportion of diesel cars in Malaysia would require

efforts to increase industry and consumer awareness, but would on the
other hand be a way to reduce the reliance on fossil fuel, as the palm
industry shows a huge potential for producing palm diesel, cf. table 1
above.
Keeping the average lifetime of passenger cars in mind a realistic

scenario would be – provided the existence of governmental support -
to increase the share of diesel-fuelled passenger cars from <1% to,
say, 5% in 2015 growing to 10% in 2020.
4
Assuming a linear coherence in the production between 2015 and 2025.
9
Still using B5 this would increase the palm diesel demand to ~340
mill. litres in 2015 and ~500 mill. litres in 2020, still leaving a
considerable surplus production for an possible export.
The development in the vehicle population caused by this alternative

scenario (assuming governmental support for diesel cars) is shown in
table 3b below here, as well as the resulting changes in the
development of fuel consumption.
Year 2005 2010 2015 2020
Cars, petrol 5,837,738 7,586,159 9,007,802 10,296,563

Cars, diesel 22,177 28,819 475,891 1,143,294
Buses, petrol 5,997 7,810 10,039 12,797
Buses, diesel 56,851 74,044 95,177 121,327
Lorries, petrol 237,885 336,023 467,064 642,038
Lorries, diesel 638,276 901,593 1,253,192 1,722,671
Table 4b: Development in vehicle population distributed on fuel type [no. of

vehicles] – Promotion of Diesel Fuelled Cars
Petrol Diesel
25.000
20.000
Mill. litres/year
15.000
10.000
5.000
-
2005 2010 2015 2020
Figure 2b: Development in fuel consumption – Promotion of Diesel Fuelled

Cars
4.4 Bio-ethanol
As stated above a so called E10, 10% ethanol to 90% gasoline
volumetric blend, is widely accepted as a blend fully compatible with
conventional gasoline vehicles.5 This blend has demonstrated high
reliability, furthermore its higher oxygen content makes it burn more
5
At least this is valid in all recent models. Older models may not be fully
compatible with E10, due to violation with car manufacturers warranties.
10
completely resulting in reduced emissions. When mentioning bio-

ethanol in the following, it is assumed that it is in the form of E10.
As regards the fuel efficiency 1 litre of bio-ethanol corresponds to 0.7
litre of fossil petrol.6
4.4.1 Potential Penetration

The potential bio-ethanol production is expected to be ~3,000 mill.
litres in 2020, cf. table 2 above. This corresponds to 12% of the total
petrol consumption in 2020.
Assuming that the focus is on E10, the potential supply is very much
in conformity with the potential demand.
5. Economic Viability
5.1 Introduction
The penetration of biofuels is much dependant on the costs for he
production of the blend. It shall be emphasized that in the calculation
of the prices of B5 and E10 blends it is not taken into account that
diesel (and to smaller extent petrol) is subsidized in Malaysia today.
Pump prices are consequently calculated and compared on basis of the
‘true’ cost prices. This is due to the reason that the subsidies will be
regulated in the near future.
The components of the pump prices are given in a booklet published

by EPU, making it possible to calculate the diesel and petrol pump
prices on basis of the actual world market oil price.
5.2 Palm Diesel

In the background paper the cost of producing palm diesel has been
investigated. Adding production cost and investment cost result in a
total cost price on (1.64 + 0.13 =) 1.77 RM/diesel-equivalent litre
palm diesel.7
The diesel price is dependant on the world market oil price, which has
risen steadily the last year. The components of the diesel pump price
are given by EPU, making it possible to calculate the diesel pump
price on basis of the actual world market oil price. Based on last
year’s average crude oil price of 47 USD/bbl, the production cost is
calculated as 1.26 RM/litre. 8
6
‘Biofuels for Transport’, IEA 2004.
7
Calculated on the world market prices of crude palm oil, glycerol and methanol.
8
In the background report the price of crude oil has been investigated in order to
find the ‘break even’ price, where the palm diesel is economical equal to the
petrol diesel. Keeping the world market prices of the palm diesel components
constant, the palm diesel is economical when the crude oil price exceeds 62
USD/bbl.
11
Mixing palm diesel and petrol diesel in a B5, the pump price would be
(0.95*1.26 + 0.05*1.77=) 1.29 RM/litre B5. On top of this a fixed cost
(commission, profit etc.) on 0.15 RM/litre is added, resulting in a
consumer’s price of 1.44 RM/litre B5 - that is an increase of ~2% of
the pump price ((1.26 + (profit) 0.15)RM/litre).
5.3 Bio-ethanol
Whereas the palm diesel is a lot more well-founded fuel technology it
is considerable more complicated to estimate the production price of
bio-ethanol, as this depends highly on the provided feedstock and only
few data are available. Not much is to be found in the literature about
bio-ethanol from EFB, the following depends highly on expert
assessments (and not so much on actual experiences in this field).
Furthermore ethanol derived from cellulosic material requires much

more processing than from sugar-based feedstock. On the other hand
cellulosic feedstock costs are often lower than sugar-based feedstock.
The following relies highly on the experiences from US and Canada,
where a study on cellulosic ethanol from poplar trees were undertaken
in 2001. Although, as stated before, the climate plays an important
role in the price setting, it is assessed that these experiences are most
reliable to this present case. Taking all the components of the bio-
ethanol production into consideration, the cost price of bio-ethanol is
estimated as 1.50 RM/gasoline-equivalent litre.
As for the diesel the price of gasoline is depended on the world market
oil price, which has risen steadily the last year. From EPU the
components of the gasoline pump price is given, making it possible to
calculate the gasoline pump price on basis of the actual world market
oil price. Starting from the last year average crude oil price on 47
USD/bbl, the production cost is calculated as 1.35 RM/litre.
Mixing bio-ethanol and gasoline in a E10, the pump price would be

(0.90*1.35 + 0.10*1.50=) 1.37 RM/litre E10.
On top of this a fixed cost (commission, profit etc.) on 0.22 RM/litre
is added9, resulting in a consumer’s price of 1.59 RM/litre E10 - that is
an increase of >2% of the pump price ((1.35 + (profit)0.22)RM/litre).
5.4 Sensitivity of Price Calculations

Although the production of biofuel involves considerable costs, the
consumer’s prices do not experience appreciable increases because the
blends contains only small amounts of biofuel. Naturally the picture
would change if the world market prices of the biofuel components
changes – or the crude oil prices experience dramatically changes.
9
As seen this component is considerable higher for petrol than diesel, which is
due to a doubling on commission as well as the company profit. Also the refinery
cost is considerable higher for gasoline than diesel.
12
As concerns palm diesel the price of crude oil has been investigated in
the background report in order to find the ‘break even’ price, where
the palm diesel is economical equal to the petrol diesel. Keeping the
world market prices of the palm diesel components constant, the palm
diesel is economically equal (= the cost prices are equal) when the
crude oil price exceeds 62 USD/bbl.
i
http://www.iogen.ca/3000.html
ii
http://www.deh.gov.au/atmosphere/ethanol/publications/ethanol-limit/background.html
iii
Denmark’s Technical University, Biocentrum: Ethanol potential from Empty Fruit braches, 29 June 2005

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Note

Telephone +45 4810 4200

Reg. No. 37295728 Denmark

Technical and Economic Potential of Bio-diesel and Bio-ethanol

A report prepared under the

Malaysian - Danish Environmental

Renewable Energy and Energy

The views expressed in this document, which has been reproduced

The purpose of this note is to relate the supply-potential of biodiesel

total energy consumption is expected to triple by the year 2020

To introduce the biodiesel and bio-ethanol, even in blends with

Also from an economical point it is desirable to diversify fuel supply,

Also the utilization of renewable fuels for transport purposes is

The production of biodiesel is based on vegetable oils and fats, while

2.4 Malaysian Resource Base

The planted acreage has increased correspondingly and in 2004 the

The industry is also facing acute labour shortage. More labour is

While the full theoretical yield is impossible to achieve, it should be

There are already a number of estates producing about 6 tonnes of

So even if it is assumed that the land covered by palm oil plantations

2.5 Potential Supply

Projected Projected CPO Potential

Table 1: The table shows the potential biodiesel production in basis of

The demand for ethanol as fuel is at the moment enormous projects

Conventional ethanol production bases on the fermentation of sugar

Cellulose-based ethanol is produced from cellulose (hemicelluloses)

Until recently, producing cellulose-ethanol has been very costly, but

The use of bio-ethanol in blends with fossil petrol (gasoline) is

3.4 Malaysian Resource Base

3.5 Potential Supply

On basis of the forecasted production of EFB, the following potential

Table 2: The table shows the potential ethanol production on basis of

4. Malaysian Transport Sector

4.2 Development Trend in the Vehicle Population

The projected development of the vehicle population – and in

Year 2005 2010 2015 2020

Cars, petrol 5,837,738 7,586,159 9,447,802 11,396,563

Table 3a: Development in vehicle population distributed on fuel type [no. of

Figure 1: Development in fuel consumption - Business as Usual

4.3 Palm Diesel

4.3.1 Potential Penetration

Another option is to make efforts to increase the share of diesel-

Increasing the proportion of diesel cars in Malaysia would require

Keeping the average lifetime of passenger cars in mind a realistic

The development in the vehicle population caused by this alternative

Year 2005 2010 2015 2020

Cars, petrol 5,837,738 7,586,159 9,007,802 10,296,563

Table 4b: Development in vehicle population distributed on fuel type [no. of

Figure 2b: Development in fuel consumption – Promotion of Diesel Fuelled

completely resulting in reduced emissions. When mentioning bio-

4.4.1 Potential Penetration

The components of the pump prices are given in a booklet published

5.2 Palm Diesel

Furthermore ethanol derived from cellulosic material requires much

Mixing bio-ethanol and gasoline in a E10, the pump price would be

5.4 Sensitivity of Price Calculations

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