Scenarios of Palm-Oil Biodiesel in the Mexican Transportation Sector

Abstract

This work analyses the environmental and economic feasibility of producing palm oilbased biodiesel in Mexico in order to substitute of diesel fuel consumption using B5 first and B10 to 2031 in the transportation sector. Two scenarios were created by projecting demand and costs for biodiesel as well as greenhouse gases emissions reduction and area requirements. In the economic section, the cost-benefit analysis of biodiesel and the mitigation costs of carbon dioxide were estimated. This work shows that Application of tax incentives could make biodiesel competitive against diesel. Introduction Biodiesel has been used in some countries as a substitute for diesel fuel in the transportation sector. In 2017 the production of biodiesel was increased by 82% compared to the year 2016 in the European Union. Countries with the highest production of rapeseed-based biodiesel are Germany 4,005 K t/year (151 PJ), Spain 3,398 K t/year (128 PJ), and The Netherlands 2,505 K t/year (95 PJ) [1]. Production of biodiesel in United States mainly derived from soybean oil was 9,275 K t/year (351 PJ) in 2016, which represented an increase of 40% compared to the year 2015 [3]. Mexico has the problem of declining proven oil reserves and official sources estimated them in 8.5 years [4]. On the other hand, the use of energy generates a large amount of greenhouse gases (GHG), so in 2015 at the country level were emitted 442.3 million tons of CO2 (Mt CO2) of which 33% were generated by the road transportation sector; 7% corresponds to diesel vehicles [5]. In 2016, internal demand of diesel fuel in the Mexican transportation sector accounted nearly 26% in relation to the other fuels and grew at an average annual growth rate of 2% in the last 10 years [6]. The use of palm oil in Mexico as B5 and B10 can help reduce CO2 emissions and reduce dependence on fossil fuels in the transportation sector. Given that the main raw material is vegetable oil, biodiesel is becoming a notable factor for promoting the regional development in Mexico. In this work, we develop scenarios to use B5 and B10 in the Mexican transportation sector and we evaluate these scenarios in terms of a cost-benefit analysis, the amount of carbon dioxide CO2 reduced and the area cultivated with oil palm. Likewise, CO2 mitigation costs were estimated, and the impact of tax incentives on the economic feasibility of biodiesel was analyzed. Methodology To develop this work the following steps are made base on [7]: 1 The calorific value of biodiesel considered in this article is 37.8 MJ/Kg [2] By-Products of Palm Trees and Their Applications Materials Research Forum LLC Materials Research Proceedings 11 (2019) 135-142 doi: https://doi.org/10.21741/9781644900178-8 136 A. The trend scenario corresponds to the scenario based on diesel while the alternative scenario was developed to use in a large scale the biodiesel in the Mexican transport sector. B. Scenarios were built and simulated using LEAP (Long-range Energy Alternative Planning System [8]). C. In this study the base year is 2005, due to the data were available for that year meanwhile the period of analysis was until 2031 D. The energy consumption was obtained in the trend scenario and the same energy consumption was considered for the alternative scenario. E. For the alternative scenario oil palm-cultivated area requirements were obtained. F. The CO2 emissions were calculated for each of the analyzed scenarios. G. The overall and mitigation costs of the alternative scenario were calculated. H. Finally, the economic feasibility of alternative scenario is analyzed considering the implementation of tax incentives. Scenarios construction 1. Trend scenario The establishment of the trend scenario were conducted based on the followings two components: 1. Evolution of diesel vehicle fleet: The first step consists of estimating the evolution of vehicle fleet in the reference year, based on the existing stock, sales and vehicles that will be retired over the analysis period. This fleet was divided into the following categories: a) heavy-duty trucks, and b) passenger vehicles and private cars. The statistics on heavy-duty trucks reported at federal level are considered as a good approximation to depict the size of this fleet at national level. According to these, 97% of diesel-powered vehicle fleet was composed of heavy-duty trucks, while passenger vehicles accounted for slightly over 2%. The remainder was private cars. The second step consists of assigning a life cycle profile for each vehicle category so that the distribution of vehicles of different ages can be described in the reference year. According to our results the heavy-duty fleet is very old, since 78% of its vehicles are over 10 years old. In the 2006-2031 period, the growth of vehicle fleet is determined by sales and the survival of vehicles as they get older. Vehicle sales totaled 450 thousand for heavyduty trucks [9], 12,500 for passenger vehicles [10], and 1,000 for private cars [11] in the reference year. With regard to the trend in vehicle sales, it is considered an average annual growth rate of 4% for both, heavy-duty and passenger vehicles, according to their historical growth [9]. Thus, it is expected that heavy-duty and passenger vehicles continue to grow at their historical growth rates; however, it is foreseen a further expansion of vehicle sales, owing to the replacement of some units of the existing vehicle stock, which is mostly composed of old units. In order to gradually replace existing vehicle stock, a survival profile describing the retirement of old vehicles is used. This profile represents the percent survival of vehicles as they get older as well as the percent share of vehicles that gradually will be retired from the existing vehicle stock in the country and always takes a percent share of 100% during the first year. This profile can be expressed by the following function: F (t) = F (t-1) e tK (1) Where F is the fraction of surviving vehicles and t is the age in years of the vehicle. By-Products of Palm Trees and Their Applications Materials Research Forum LLC Materials Research Proceedings 11 (2019) 135-142 doi: https://doi.org/10.21741/9781644900178-8 137 t t F t F K )) 1 ( ln( ) ( ln − − = (2) K represents a decreasing rate of the existing vehicle stock in time t, and takes a negative value. The survival profile of heavy-duty trucks and passenger vehicles was represented by these equations. In both cases K was obtained by averaging calculations for 4 years, resulting in K= -0.01 and K= -0.04 for heavy-duty trucks and passenger vehicles, respectively. For private cars, and due to the fact that related information was not available, the value of K was assumed -0.0236, which corresponds to the one reported for gasoline vehicles in Mexico [12]. Once the survival profiles and existing stocks in the reference year as well as the annual growth in future sales have been obtained for each vehicle category, the trend in vehicle fleet is simulated using LEAP for the analyzed period. Thus, for each year of analysis, annual sales are summed to the existing vehicle stock in the reference year, while the number of vehicles that will be retired from this stock is subtracted according to the survival profile of each vehicle category. According to our results diesel vehicle fleet would reach 20.45 million in the year 2031, of which 16.5 million corresponds to heavy-duty trucks, 480 thousand to passenger vehicles, and 3.3 million to private cars, respectively (see Figure 1). 2. Estimation of diesel demand: In order to calculate the total annual diesel fuel demand in the transportation sector it is required to estimate for each vehicle category the fuel consumption of existing vehicle fleet in the year t. This is obtained from an estimate of the number of existing vehicles in the year t, their average annual mileage (in kilometers), and the average annual diesel consumption. Fuel consumption of heavy-duty trucks and passenger vehicles was calculated based on data reported for these vehicle categories in the USA [13]. The annual mileage (in kilometers) was calculated using the average value reported in the 2002 National Inventory of Emissions. Based on these data, energy consumption for each vehicle category was calculated in LEAP by multiplying the existing vehicle stock in the year t, the annual mileage (in kilometers), and the fuel consumption. In trend scenario, the vehicle fleet would consume 1,543 PJ by the year 2031. By-Products of Palm Trees and Their Applications Materials Research Forum LLC Materials Research Proceedings 11 (2019) 135-142 doi: https://doi.org/10.21741/9781644900178-8 138 Fig. 1. Evolution of diesel-powered vehicle fleet in the Mexican transportation sector [7]. 2. Alternative scenario The alternative scenario considers the same evolution in vehicle fleet at national level that the Trend Scenario and aims at identifying the main parameters related to the substitution of diesel fuel in Mexico. The main assumptions for the construction of this scenario are: • It considers the use of B5 and B10, which implies the massive use of palm oil-based biodiesel. • The plantations and infrastructure for production and distribution of biodiesel have been developed in the country. This considers a potential for growing oil palm, taking account of requirements such as water, temperature, soil and fertility have an optimal gross potential of 2.5 million hectares (Ha) in Mexico [14] and a yield of 3,239 liters (L) per hectare or 20 tons of fresh fruit bunches (FFB) per Ha [7]. • The calorific value of biodiesel is lower 13% in mass terms than that of diesel fuel [15]. • It considers that the emissions of carbon dioxide (CO2) for biodiesel (B100) are neutral. • It considers that biodiesel is produced in plants with a capacity of 38 million of L per year, which requires investment costs of $12.5 million [7]. • The structure of operating costs used in this article, i