Page 117 - Biofuels for a More Sustainable Future

104 Biofuels for a More Sustainable Future

system. The costs can be expressed in terms of their conventional compo-
nents as presented in Eq. (4.5):

C t ¼ I t + O t + M t + G t (4.5)
where I is the initial capital cost, O is the operation cost, M is the mainte-
nance cost, and G represents others marginal costs, respectively, in a given
period of time t.
However, for a system producing several products such as food, chemical
inputs, fuels, and so on, this LCOE is not recommended because each prod-
uct can have different qualities. Another indicator widely used in the assess-
ment of the economic viability of biorefineries is the net present value
(NPV) of the investment, which indicates the financial sustainability of
the project, calculated by Eq. (4.6).
t
X Cash flow
NPV ¼ n Total investiment (4.6)
ð 1+ iÞ
n¼1
NPV is usually employed because it enables an evaluation in monetary
and absolute terms. The use of NPV is recommended when addressing pro-
jects of different sizes, where different scenarios are analyzed, with several
configurations. Inconsistencies are therefore avoided in the profitability
analysis of each project, which could be present if a relative parameter
was used to evaluate economic performance. The next section shows an
application of the NPV concept to the FT case.

20 Determination of NPV for the Fischer-Tropsch case
(FT case)

Calculation of the cash flow for the enterprise should include different finan-
cial aspects such as fixed costs (labor costs, maintenance, etc.) and variable
costs (raw material costs and other inputs). The investment required for con-
structing a production unit (plant) can be based on its capacity, and Eq. (4.7)
presents an estimate for this value, employing capacity and costs of a known
plant with similar components. The initial investment (capital cost or process
plant construction costs) can be adjusted from one period to another by the
CEPCI index (Chemical Engineering, 2017).
α

Capacity
2 CEPCI 2
Cost 2 ¼ Cost 1 (4.7)
Capacity
1 CEPCI 1