Small-Scale Biofuel Production: Assessment of Efficiency

Currently, the energy industry is tending toward a global expansion of the use of renewable energy sources, thereby contributing to economic development. In the Russian Federation, such transformation is particularly important in terms of enhancing the involvement of excessive wood waste in production. In this regard, processing wood waste into pellets has proven to be highly beneficial. Apart from increasing the efficiency of the harvested wood and reducing the fire hazard in waste storages, it also positively influences the structure of energy balance in specific regions, creating an impetus for the development of small businesses in the country. This paper aims to assess the economic effects of biofuel production together with the efficiency of processing wood waste into pellets as a factor in the development of small business in the Russian Federation. Net present value (NPV) is used as the main analytical tool to assess economic efficiency. A general scientific analysis of the open data is also applied, including analytical reviews of the Russian ministries and international organizations. As a result, the paper estimates the prospects of using wood biomass in the energy industry, provides options for establishing capacities of microenterprises engaged in pellet production, and considers the expected economic effect for various levels of capacity utilization. The scientific novelty of this paper is centered on the design of a biofuel production scheme from wood waste (wood pellets) for a small-business enterprise with minimum labor and production costs. The paper is highly practice oriented, as it substantiates the economic efficiency of pellet production by small businesses in the Russian Federation in accordance with current legislation and state subsidies. Overall, this paper provides enough evidence to seriously consider the prospects of wood pellet production in order to expand the share of renewable sources in the energy balance of the country.

Biofuels; Economic efficiency; Renewable energy source; Small business; Wood pellets

    One of the most important trends observed in the global energy market is its gradual shift toward wider use of renewable energy sources (RES). This transformation is extremely beneficial for the Earth’s climate, as the gradual abandonment of carbon-containing fuel and energy resources (FERs) leads to a significant reduction in carbon dioxide (CO₂) emissions. Though the decarbonization of energy is taking place worldwide, its intensity in different regions is determined by numerous factors, such as the level of technological development (Budiyanto et al., 2011; Qosasi et al., 2019), the prospects of environmental legislation, the availability of natural energy resources, and the role of specific countries in the international division of labor (Konnikov et al., 2020).

    Industrially developed countries widely promote respect for nature by developing and implementing technologies that preserve the environment, thus automatically transforming the fuel and energy balance (FEB), both within individual countries and globally (Nayaka and Bhushan, 2019; Shahbaz et al., 2020; Vankov et al., 2020). According to previous studies, the economic success of RES development depends on the utilization of various biomasses that can be processed and used as environmentally friendly biological fuels, thereby replacing primary FERs (Ugwua and Enweremadu, 2019).

    Wood pellets have been gaining popularity in the global energy market since the second decade of the 21^st century and have steadily increased in production and consumption, which is expected to exceed 40 million tons and a total value of more than $9 billion by 2020. Significantly enough, the most drastic increase has been observed in the recent decade when the figures doubled. Despite certain fluctuations in statistics on production and consumption, the global demand for wood pellets is expected to increase to at least $18 billion by 2027. Remarkably, almost half of the pellets’ volume is produced in North America (the United States and Canada) and China. According to the 2020 data, Russia ranks fifth among world leaders, with an annual production of about 2 million tons (Gemco Energy, n.d.). The bigger picture shows that Russian pellet exports did not exceed 0.9 million tons in 2015. If such a pace of development is maintained, Russia will be able to move up to the second position among the world’s leading exporters, following the United States, leaving Canada, China, and the Baltic States behind.

    Europe is the main consumer of wood pellets in the world (Statista, 2019). In turn, North America is expected to see a growing demand for pellets by an average of 7–8% per year due to the gradual abandonment of the consumption of hydrocarbon FERs (Gemco Energy, n.d.).

    Wood pellets are produced and consumed at greater rates, as the reserves of easily mined FERs are drying out, and the effects human activity cannot be neglected any longer (Picchio et al., 2020). As a response to these urgent problems, timber waste can be effectively used in the production of wood pellets, especially taking into account the fact that its share sometimes reaches more than 15% of the initial raw materials. What is more, environmental problems associated with the need to store these wastes are becoming less     acute (Scherhaufer et al., 2018).

    Since the pellets are produced without any chemical additives, they are currently considered the most environmentally friendly biofuel used. In addition, when burning, the pellets emit the same amount of CO₂ as during the natural decomposition of wood (Sippula et al., 2017). What is more, wood in general has been proven to exert less damage on the environment compared to fuel oil (Paolotti et al., 2017).

This paper aims to assess the efficiency of wood pellet production as a factor in the development of small business in the Russian Federation. To achieve this goal, the paper aims to do the following:

1.        Evaluate the prospects of using wood biomass to maintain the country’s FEB.

2.        Develop a range of capacities potentially applied by the microenterprises engaged in pellet production.

3.        Calculate the expected economic effects of different production capacities.

       The scientific novelty of the research is centered on the design of biofuel production from wood waste (wood pellets) by a small-business enterprise with minimum labor and production costs. 

    According to the results obtained from this paper, Russia shows sufficient potential to transform the energy balance toward a wider use of RES, including wood biomass, which, for now, remains largely unclaimed, posing a fire-related threat to storage areas. The economic calculations allow for the conclusion that pellet production in micro-business conditions is viable. In addition, with a production capacity of 300 kg/h, it would pay off within six years, even at a minimum selling price, and if a transportation subsidy were acquired, this period would be reduced to five years. Taking into account real global prices, investments in the wood pellet business may turn out to be twice as lucrative, provided that no force majeure takes place and that proper competitiveness of Russian production is ensured. Having considered three modes of capacity utilization, we can conclude that profit can be obtained in the second operation year and, with greater capacity utilization, in the first year.

Abdoli, M.A., Golzary, A., Hosseini, A., Sadeghi, P., 2018. Wood Pellet as a Renewable Source of Energy from Production to Consumption. Springer, Cham, Switzerland

Babkin, A.V., Vertakova, Y.V., 2015. Methods for the Assessment of the Economic Potential of an Industrial Enterprise: Analysis and Characterization. In: Proceedings of the 25^th International Business Information Management Association Conference—Innovation Vision 2020: From Regional Development Sustainability to Global Economic Growth, IBIMA, pp. 1294–1302

Babkin, A.V., Kuzmina, S.N., Oplesnina, A.V., Kozlov, A.V., 2019. Selection of Tools of Automation of Business Processes of a Manufacturing Enterprise. In: Proceedings of the 2019 IEEE International Conference Quality Management, Transport and Information Security, Information Technologies IT and QM and IS, pp. 226–229

Barbanera, M., Lascaro, E., Stanzione, V., Esposito, A., Altieri, R., Bufacchi, M., 2016. Characterization of Pellets from Mixing Olive Pomace and Olive Tree Pruning. Renewable Energy, Volume 88 pp. 185–191

Buchholz, T., Gunn, J.S., Saah, D.S., 2017. Greenhouse Gas Emissions of Local Wood Pellet Heat from Northeastern US Forests. Energy, Volume 141, pp. 483–491

Budiyanto, B., Setiabudy, R., Setiawan, E.A., Sudibyo, U.B., 2011. Development of Direct Current Microgrid Control for Ensuring Power Supply from Renewable Energy Sources. International Journal of Technology, Volume 2(3), pp. 199–206

Chen, H., Guo, Y., Wang, F., Wang, G., Qi, P., Guo, X., Dai, B., Yu, F., 2016. An Activated Carbon Derived from Tobacco Waste for Use as a Supercapacitor Electrode Material. New Carbon Materials, Volume 32(6), pp. 592–599

Colantoni, A., Paris, E., Bianchini, L., Ferri, S., Marcantonio, V., Carnevale, M., Palma, A., Civitarese, V., Galluci, F., 2021. Spent Coffee Ground Characterization, Pelletization Test and Emissions Assessment in the Combustion Process. Scientific Reports, Volume 11, pp. 1–14

Crawford, D.F., O’Connor, M.H., Jovanovic, T., Herr, A., Raison, R.J., O’Connell, D.A., Baynes, T., 2016. A Spatial Assessment of Potential Biomass for Bioenergy in Australia in 2010, and Possible Expansion by 2030 and 2050. GCB Bioenergy, Volume 8, pp. 707–722

Dupuis, É., Thiffault, E., Barrette, J., Adjallé, K., Martineau, C., 2021. Bioenergy Conversion Potential of Decaying Hardwoods. Energies, Volume 14(1), pp. 1–21

Gemco Energy, n.d. Wood Pellet Market in Europe, North America and Asia. Available Online at www.gemcopelletmills.com/wood-pellet-market.html, Accessed on June 10, 2021

Khadra, J.B., Goncharova, N.L., Radwan, Y., 2020. Regional Aspects the Small and Medium Enterprises and Their Impact on the Social and Economic Development. In: Proceedings of the 33^rd International Business Information Management Association Conference, IBIMA 2019: Education Excellence and Innovation Management through Vision 2020, Granada, Spain, April 2019, pp. 10–11

Kichigin, O.E., 2017. Fossil Fuel Production Impact on Regional Eco-Economic Development. International Journal of Ecological Economics and Statistics, Volume 38, pp. 12–22

Konnikov, E.A., Dubolazova, Y.A., Mansurov, R.D., 2020. Dialectics of the Renewable Energy Market. In: Proceedings of the European Conference on Innovation and Entrepreneurship, ECIE, pp. 952–960

Kostic, M.D., Velickovic, A.V., Jokovic, N.M., Stamenkovic, O.S., Veljkovic, V.B., 2016. Optimization and Kinetic Modeling of Esterification of the Oil Obtained from Waste Plum Stones as a Pretreatment Step in Biodiesel Production. Waste Management, Volume 48, pp. 619–629

Lisowski, A., Olendzki, D., Swietochowski, A., Dabrowska, M., Mieszkalski, L., Ostrowska-Ligeza, E., Stasiak, M., Klonowski, J., Piatek, M., 2019. Spent Coffee Grounds Compaction Process: Its Effects on the Strength Properties of Biofuel Pellets. Renewable Energy, Volume 142, pp. 173–183

Minajeva, A., Jasinskas, A., Romaneckas, K., Aboltins, A., 2018. Evaluation of Fodder Bean Waste Utilization for Energy Purpose. Engineering for Rural Development, Volume 17, pp. 1771–1776. Available Online at http://www.tf.llu.lv/conference/proceedings2018/ Papers/N315.pdf, Accessed on June 10, 2021

Modelska, M., Berlowska, J., Kr?giel, D., Cieciura, W., Antolak, H., Tomaszewska, J., Binczarski, M., Szubiakiewicz, E., Wito?ska, I., 2017. Concept for Recycling Waste Biomass from the Sugar Industry for Chemical and Biotechnological Purposes. Molecules, Volume 22(9), pp. 1–26

Nayaka, A., Bhushan, B., 2019. An Overview of the Recent Trends on the Waste Valorization Techniques for Food Waste. Journal of Environmental Management, Volume 233, pp. 352–370

Obidzi?ski, S., 2014. Pelletization of Biomass Waste with Potato Pulp Content. International Agrophysics, Volume 28, pp. 85–91

Pantaleo, A., Villarini, M., Colantoni, A., Carlini, M., Santoro, F., Rajabi Hamedani, S., 2020. Techno-Economic Modeling of Biomass Pellet Routes: Feasibility in Italy. Energies, Volume 13(7), pp. 1–15

Paolotti, L., Martino, G., Marchini, A., Boggia, A., 2017. Economic and Environmental Assessment of Agro-Energy Wood Biomass Supply Chains. Biomass Bioenergy, Volume 97, pp. 172–185

Perrin, A., Wohlfahrt, J., Morandi, F., Østergård, H., Flatberg, T., De La Rua, C., Gabrielle, B., 2017. Integrated Design and Sustainable Assessment of Innovative Biomass Supply Chains: A Case-Study on Miscanthus in France. Applied Energy, Volume 204, pp. 66–77

Picchio, R., Latterini, F., Venanzi, R., Stefanoni, W., Suardi, A., Tocci, D., Pari, L., 2020. Pellet Production from Woody and Non-Woody Feedstocks: A Review on Biomass Quality Evaluation. Energies, Volume 13, pp. 1–20

Pua, F.L., Subari, M.S., Ean, L.W., Krishnan, S.G., 2020. Characterization of Biomass Fuel Pellets Made from Malaysia Tea Waste and Oil Palm Empty Fruit Bunch. Materials Today: Proceedings, Volume 31, pp. 187–190

Putinceva, N., Ivanova, M., Liubarskaia, M., Ghosh, S.K., 2020. Implementation of Renewable Energy Sources in the Russian Energy System: Opportunities and Threats. In: ACM International Conference Proceeding Series, Article 47, pp. 1–8

Qosasi, A., Maulina, E., Purnomo, M., Muftiadi, A., Permana, E., Febrian, F., 2019. The Impact of Information and Communication Technology Capability on the Competitive Advantage of Small Businesses. International Journal of Technology, Volume 10(1), pp. 167–177

Saosee, P., Sajjakulnukit, B., Gheewala, S.H., 2020. Life Cycle Assessment of Wood Pellet Production in Thailand. Sustainability, Volume 12(17), pp. 1–22

Scherhaufer, S., Moates, G., Hartikainen, H., Waldron, K., Obersteiner, G., 2018. Environmental Impacts of Food Waste in Europe. Waste Management, Volume 77, pp. 98–113

Shabunina, T.V., Shchelkina, S.P., Rodionov, D.G., 2017. An Innovative Approach to the Transformation of Eco-Economic Space of a Region based on the Green Economy Principles. Academy of Strategic Management Journal, Volume 16(1), pp. 176–182

Shahbaz, M., Raghutla, C., Chittedi, K.R., Jiao, Z., Vo, X.V., 2020. The Effect of Renewable Energy Consumption on Economic Growth: Evidence from the Renewable Energy Country Attractive Index. Energy, Volume 207, https://doi.org/10.1016/j.energy.2020.118162

Sippula, O., Lamberg, H., Leskinen, J., Tissari, J., Jokiniemi, J., 2017. Emissions and Ash Behavior in a 500 kW Pellet Boiler Operated with Various Blends of Woody Biomass and Peat. Fuel, Volume 202, pp. 144–153

Song, S., Liu, P., Xu, J., Chong, C., Huang, X., Ma, L., Li, Z., Ni, W., 2017. Life Cycle Assessment and Economic Evaluation of Pellet Fuel from Corn Straw in China: A Case Study in Jilin Province. Energy, Volume 130, pp. 373–381

Statista, 2019. Import Volume of Wood Pellets Worldwide in 2019, by Major Country. Available Online at https://www.statista.com/statistics/477057/imports-of-wood-pellets-volume-by-key-country/ Accessed on 3 November, 2021

Tax Code of the Russian Federation (part two), 2000 N 117-FZ (as amended on 29.11.2021), Available Online at https://cis-legislation.com/document.fwx?rgn=1717

Ugwua, S.N., Enweremadu, C.C., 2019. Effects of Pre-Treatments and Co-Digestion on Biogas Production from Okra Waste. Journal of Renewable and Sustainable Energy, Volume 11(1), https://doi.org/10.1063/1.5049530

Vankov, J., Rotach, R., Laptev, S., Ziganshin, S., Afanaseva, O., 2020. Introduction of a Steam Screw-Rotor Machine to Improve the Energy and Economic Efficiency of Chemical Enterprises. International Journal of Technology, Volume 11(8), pp. 1628–1639