. Biodiesel Production Cost

The cost of producing biodiesel depends on a number of factors, including the feedstock used in the process (i. e., the production cost of biomass), the capi­tal and operating costs of the production plant, the current value and sale of by­products, and the yield and quality of the fuel and by-products. Table 8 provides total and unit production costs of a representative European biodiesel plant (Italy) using rapeseed oil as feedstock (2010), which is a good example that includes the average characteristics of Italian plants, on the base of the information collected through firm survey (Finco 2012). The plan has capacity for 150,000 tons and pro­duces 150,000 tons of biodiesel.

Table 8 shows that the major economic factor to consider for input costs of bio­diesel production is the feedstock, which is about 80 % of the total production cost. This means that the market trend commodities prices highly influence the result of the biodiesel industry. In particular, feedstock costs can vary significantly from region to region due to their availability and market fluctuations, which can also make biodiesel production costs vary over time. Vegetable oils prices have changed significantly in the last 5 years. The prices have been rather stable until end of 2006, while from 2007 to 2008, they are more than doubled, declining again in 2009 reaching the 2006 level. In the second semester of 2010, the price registered another increase followed by a slight fall in 2012 (OECD-FAO 2012).

Table 9 shows the net margin of our representative plant. Nowadays, our plant perceives a negative economic result because revenues do not cover production costs. This result is mainly driven by the biodiesel price that is fixed by the refiner­ies and it is not connected with the production costs.

There are two components that influence the value of biodiesel: the diesel price on Platts and a premium price. The premium is determined by the refinery indus­try, and it depends on the vegetable oils price and the contractual power of the biodiesel plant. Technically, the premium price should correspond to the difference between the production costs and the diesel price on Platts, which biodiesel pro­ducers widely call the ‘business margin.’

Table 8 Total production cost of biodiesel (2010)

Cost Item



Annual rate of depreciation



Management and maintenance plant cost



Biomass cost (rapeseed oil)



Other costs



Processing cost



Transportation costs



Total production cost



Production cost per ton (USD/ton)


Source Finco and Padella (2012)

Table 9 Net margin of

Biodiesel sales



biodiesel plant

Biodiesel price



Glycerin sales



Glycerin price



Net margin



Net margin per ton



Source Finco and Padella (2012)

However, according to the data from biodiesel plants, the premium price per­ceived corresponds to approximately 65 % of the ‘business margin.’ Moreover, this percentage depends on the policies adopted by the Governments, such as tax excise reductions or subsidies.

It is important to underline that biodiesel plants use a blend of vegetable oils and, consequently, the price can probably be lower than the rapeseed oil price that was used in the Table 9. Taking this into account, the results present an accurate representation of the Italian biodiesel industry.

However, the increased price of vegetables oil, the economic crisis, and policy changes at European level had negative impact on biodiesel production. For exam­ple, in Italy, the reduced tax exemption in 2009 and the subsequent abolition has diminished the profitability of the biodiesel plant realizing losses.

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