Introduction
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THE FUTURE OF BIOFUELS: AN ECONOMIC ANALYSIS OF THE DESIGN AND OPERATION OF A MICROALGAE FACILITY IN TEXAS AND THE SOUTHWESTERN UNITED STATES A Thesis by MARC S. ALLISON Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE August 2010 Major Subject: Agricultural Economics THE FUTURE OF BIOFUELS: AN ECONOMIC ANALYSIS OF THE DESIGN AND OPERATION OF A MICROALGAE FACILITY IN TEXAS AND THE SOUTHWESTERN UNITED STATES A Thesis by MARC S. ALLISON Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Approved by: Chair of Committee, James W. Richardson Committee Members, Clair J. Nixon Joe L. Outlaw Head of Department, John P. Nichols August 2010 Major Subject: Agricultural Economics iii ABSTRACT The Future of Biofuels: An Economic Analysis of the Design and Operation of a Microalgae Facility in Texas and the Southwestern United States. (August 2010) Marc S. Allison, B.S., Missouri State University Chair of Advisory Committee: Dr. James W. Richardson The world of energy is changing. With rising energy costs and concerns over the supply of energy materials, more research is being conducted into alternative sources of fuel and microalgae is one of the sources being researched, although much research had been conducted on it as a part of the Aquatic Species Program from the 1970s to the early 1990s. With the emergence of microalgae as a source of alternative energy, the need for an economic analysis of microalgae has arisen. This research studies the economic feasibility of the design and operation of a microalgae production facility in two Texas locations (Pecos and Corpus Christi) and in southeastern New Mexico using a stochastic simulation model. It examines the production levels needed for the facility to be profitable and also some facility designs necessary for that profitability. It also measures several annual financial indicators so that potential investors have some estimates of the future profitability of the microalgae industry. The results show that for microalgae to become a viable commercial operation, production must be improved beyond the current levels and the levels suggested by the literature. Production needs to be at least 0.8 g/L/day with 40% oil content and 24” of iv water depth. Production must be improved through increasing growth rates and oil contents at greater water depths. Production can be improved through nutrient and carbon dioxide usage, two elements that are being heavily researched. Water usage will become a major focus because of the limited resources and the quantities necessary to operate a commercial-scale facility. With the necessary improvements in technology and research, microalgae could prove to be a viable source of alternative energy. v ACKNOWLEDGEMENTS First of all, I would like to thank my family, especially my parents, for the guidance, support, and advice they have given me through this process and throughout my life. I would not be where I am today without all of you. A special thanks to my cousin, Mr. Chris Eggerman, for steering me on the right path towards Texas A&M University. This is a very special place and my experiences down here are ones I will treasure the rest of my life. I would like to thank my committee chair, Dr. Richardson, and my committee members, Dr. Nixon and Dr. Outlaw, for their guidance and support throughout this process. Thank you for all the advice and helping me gain such a vast knowledge of model development. The things I have learned while working in the Agricultural & Food Policy Center will serve me well for my career. I would also like to thank Mr. Bart Fischer, who spent countless hours giving me advice and reaffirming my work in the construction of this model. I just hope I have left you with something useful to you as you finish your Ph.D. I would like to extend my gratitude to Dr. Anson Elliott and Dr. Arbindra Rimal of Missouri State University. Your guidance, encouragement, and persistence helped me find an area I am truly passionate about and a career path on which I can see spending the rest of my life. Your counseling put me on a track that made me well prepared for graduate school. To everyone at the Center of Excellence for Hazardous Materials Management, especially Doug Lynn and Greg Brown, thank you for sharing your insight and your data vi with us. This model would not be possible without the help of all of you. It is always great to see what farming mixed with engineering can create. Finally, to everyone else at Agricultural & Food Policy Center, thank you for your help, advice, and guidance. You all made me feel welcome and at home and I know that this group of people is one I will miss as I leave Texas A&M. vii TABLE OF CONTENTS Page ABSTRACT.............................................................................................................. iii ACKNOWLEDGEMENTS ...................................................................................... v TABLE OF CONTENTS.......................................................................................... vii LIST OF FIGURES................................................................................................... ix LIST OF TABLES .................................................................................................... xiii CHAPTER I INTRODUCTION............................................................................. 1 1.1. Problem Statement .......................................................... 1 1.2. Objective......................................................................... 2 1.3. Thesis Outline................................................................. 4 II BACKGROUND............................................................................... 5 2.1. Biodiesel.......................................................................... 5 2.2. Microalgae Overview...................................................... 8 2.3. Microalgae Production.................................................... 14 III REVIEW OF LITERATURE............................................................ 25 3.1. Microalgae Costs............................................................. 25 3.2. Variable Input Costs........................................................ 41 3.3. Microalgae Productivity and Composition ..................... 60 3.4. Algae By-products........................................................... 71 IV RISK AND SIMULATION.............................................................. 73 4.1. Risk.................................................................................. 73 4.2. Simulation ....................................................................... 79 4.3. Simulation Model Development ..................................... 82 4.4. Uncertainty...................................................................... 89 4.5. Scenarios......................................................................... 90 viii Page CHAPTER V THE MICROALGAE MODEL........................................................ 91 5.1. Model Overview.............................................................. 91 5.2. Model Description and Design........................................ 93 VI MODEL RESULTS AND ANALYSIS............................................ 214 6.1. Model Scenarios.............................................................. 214 6.2. Model Assumptions......................................................... 216 6.3. Simulation Results........................................................... 222 VII SUMMARY AND CONCLUSIONS................................................ 288 7.1. Summary of Microalgae Model and Results................... 288 7.2. Conclusions..................................................................... 289 REFERENCES.......................................................................................................... 293 SUPPLEMENTARY SOURCES.............................................................................. 299 APPENDIX A: DEFINITIONS TABLE .................................................................. 303 APPENDIX B: MICROALGAE MODEL TABLES ............................................... 304 APPENDIX C: MICROALGAE MAPS................................................................... 323 VITA ......................................................................................................................... 325 ix LIST OF FIGURES Page Figure 1 Zones of relative suitability for microalgae biomass production based on climate factors .......................................................................... 10 Figure 2 Zones of relative suitability for microalgae biomass production based on water......................................................................................... 11 Figure 3 Zones of relative suitability for microalgae biomass production based on the availability and suitability of land resources...................... 12 Figure 4 Zones of relative suitability for microalgae biomass production based on a compositing of climate, land, and water suitability maps ........................................................................................................ 13 Figure 5 Microalgae paddlewheel ......................................................................... 17 Figure 6 Microalgae cell.......................................................................................