Biodiesel from waste cooking oil - feasibility study for a private fuel retailer in Yorkshire

FINANCIAL FEASIBILITY STUDY - Biodiesel Production from Waste Cooking Oil and Waste Animal Fats in the United Kingdom

Animal Fats in the United Kingdom
The British government has created a very favourable position for the environmental sector in the UK, due to more money dedicated to public awareness campaigns, as well as subsidies and incentives.

Due to the newest EU directives and the Animal Food Act, there are high amounts of waste cooking oil in the UK, it has a market price and there are several companies specialising in its collection. On one hand, the project is responsive to increasing demand of environmentally friendly products; on the other hand the project will help to mitigate the dependency on unsteady fuel prices.

The client is a privately owned fuel retailer with his own network of filling stations in the North-eastern part of England, having experience in the sector for many decades. They already produce biodiesel in a batch process and blend it with fossil diesel at a ratio of 2%. The company decided to make their production more efficient and invest in a continuous plant, at a capacity of 30.000 t per year. Feedstock consists of waste cooking oil and waste animal fats.

The financial analysis is based on different technical variants, not only based on different investment, but also on operation costs, origin and price of feedstock and financing options. It also comprises an analysis of technical, market and commercial risk, as well as sensitivity analysis of different parameters and detailed analysis of competition. Ownership and organisation have also been covered as the client might decide for a joint venture with an Austrian company well established in the biodiesel sector. The main output of the study are the results of the discounted cash-flow analyses, planned balance sheet as well as a forecast on the profit & loss statements for a production period of 7 years. Production costs per litre biodiesel for each variant have been listed, based on variable and fixed costs.

The project has proved feasible, with a payback period between 2 and 4 years, depending on the technical and/or commercial variant assumed. This financial feasibility study was not only the main basis for the client’s decision to go for the project, but was also represented to the bank for finance.

The production of bio fuels from wastes or renewable sources is not only relevant for the enhancement of the regional productivity, but also fulfils the British and EU policy concerning sustainable development and environmental protection, as well as international treaties, such as the Kyoto-protocol. Biodiesel blends improve engine performance and represent at the same time a safe recycling of waste cooking oil not to be allowed to re-enter the food chain.