The economics of pyrolysis oil
Pyrolysis oil (PO), a by-product of high temperature combustion of biomass, is one of many biofuels under investigation in Europe. VTT, a technology leader, coordinated an EESD project entitled COMBIO to assess the technical and financial viability of PO. Once fuel specifications were established and combustion properties were studied, VTT performed an extensive economic analysis of PO's competitiveness versus conventional fuels. The case study involved the introduction of a pyrolysis unit to a combined heat and power (CHP) plant fitted with a fluidised bed boiler. To determine the return on such an investment, VTT employed various econometric tools. For instance, the annuity method was used to determine the production costs associated with PO. In addition, the internal rate of return (IRR) was calculated to provide insight into the payback period. Current prices of light and heavy fuel oil were used while the price of PO was adjusted downwards to account for the added transportation and utilisation costs. VTT computed an attractive pre-tax IRR of 10%. Sensitivity tests revealed that IRR is susceptible to price fluctuations and PO output, but not particularly dependent on the initial outlay of capital.
