Optimal Localization of Biofuel Production on a European Scale

Wetterlund, E. (2010). Optimal Localization of Biofuel Production on a European Scale. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-10-020

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Abstract

Second generation biofuels use non-food lignocellulosic feedstock, for example waste or forest residues, and have in general lower environmental impact than first generation biofuels. In order to reach the 2020 target of 10% renewable energy in transport it will likely be necessary to have a share of at least 3% second generation fuels in the EU fuel mix. However, second generation biofuel production plants will typically need to be very large which puts significant demand on the supply chain. This makes it necessary to carefully choose the geographic location of the production plants. A geographic explicit model for determining the optimal location of biofuel production has been developed at IIASA and has previously been used in studies on national scale. The model is based on mixed integer linear programming and minimizes the total cost of the supply chain, taking into account supply as well as demand side.

The aim of this study is to develop the localization model to cover the European Union, and to use it to analyze how for example policy instruments and energy prices affect second generation biofuel production. Two policy instruments are considered; targeted biofuel support and a CO2 cost. Two feedstock types (forest residues and lignocellulosic waste) and three biofuel production technologies (methanol, Fischer-Tropsch diesel (FTD) and lignocellulosic ethanol) are included. For all three technologies heat for district heating is co-produced, and for FTD and ethanol electricity is also co-produced.

The results show that with current energy prices and a targeted biofuel support equivalent to existing tax exemptions, over 1.5% of the total transport fuel demand can be met by second generation biofuels to a cost of 18 Euros/GJ. A CO2 cost of 100 Euros/tCO2 results in a biofuel production equivalent to 2% of the total fuel demand, but to a higher cost (23 Euros/GJ). Targeted biofuel support promotes FTD which has higher biofuel efficiency, while a CO2 cost shifts the production towards ethanol due to larger co-production of electricity and high CO2 emissions from displaced electricity. In order to reach a 3% second generation fuel share to a reasonable cost waste feedstock must be used. If only forest residues are considered the biofuel supply cost exceeds 30 Euros/GJ, compared to around 11 Euros/GJ if low cost waste can also be used. The CO2 reduction potential is found to be strongly connected to the co-products, in particular electricity, with a high biofuel share not being a guarantee for a large decrease of CO2 emissions.

It is concluded that in order to avoid suboptimal overall energy systems, heat and electricity applications should also be included when evaluating optimal bioenergy use. It is also concluded that while forceful policies promoting biofuels may lead to a high share of second generation biofuels to reasonable costs, this is not a certain path towards maximized reduction of CO2 emissions. Policies aiming at promoting the use of bioenergy thus need to be carefully designed in order to avoid conflicts between different parts of the EU targets for renewable energy and CO2 emission mitigation.

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