Sugar Cane Ethanol Plant

Executive Summary

As the alternative energy industry continues to grow in the United States, Global Impact Chemical Corporation (GICC) has taken interest in producing vehicle biofuel from plant matter such as sugarcane. With a capital cost limitation of 1 billion USD, a process plant design and the corresponding economic analysis were devised. Liberia, Guanacaste Province, Costa Rica was chosen as the plant’s location due to inexpensive cost and proximity to rich natural resources. Due to market demand of anhydrous ethanol in the United States and hydrous ethanol in Brazil, both forms of ethanol may be produced with the proposed plant design.

Research on current ethanol manufacturing processes guided the final design of the ethanol plant. The proposed design was divided among three major processes: milling, fermentation, and separations. An electricity cogeneration system and an additional bagasse hydrolysis process assist in keeping the proposed plant self-sufficient and increase ethanol production. Microsoft Visio and Aspen HYSYS were used to design complete process flow diagrams and simulate the fermentation and separations processes. All other calculations were performed in Microsoft Excel. It was estimated that an initial feed of 147 tons per hour of sugarcane, milled and fermented with the bacteria S. Cerevisiae, produced the desired total of 20,000 kg/h of hydrous ethanol and 19,500 kg/h of anhydrous ethanol. Aspen Economic Analyzer aided in estimating the cost of the sized equipment in each of the three major processing steps. The total capital cost of the plant, as designed, is estimated as $465.9 million.

Economic analysis predicts a net present value of $240 million on a twenty-year basis. Furthermore, the estimated rate of return is 19.7% after twenty years, with a pay-back period of 4.10 years, satisfying the desired payback time of three years. A gross margin percentage of 70% after plant startup was calculated, thus the plant’s potential financial performance is significantly better than the average range of 40-50%. According to the analysis, the proposed sugarcane ethanol plant design would be economically viable and would provide GICC with a promising first step towards a biofuel for alternative fuel vehicles.

Introduction

Fuel ethanol has been an important alternative fuel for decades. With petroleum prices reaching upwards of $100 per barrel on a regular basis, the market for fuel ethanol is poised to grow even further. Currently the largest producer of ethanol in the world is Brazil, where a combination of fuel composition standards, supplier incentives, and low sugarcane prices combine to make the production of sugarcane ethanol a lucrative opportunity. The market in Brazil appears to be nearing saturation, however, as evidenced by a growth rate in production of only 5% from 2009 to 2010 [1]. This pales in comparison to the near 30% growth that the US market has experienced over the last 5 years. It is believed that much of this growth is due to the high gasoline prices in the country and that this may be addressed by an increase in the production of alternative fuels. Our team has decided to pursue the design of a sugarcane ethanol plant to be located in Costa Rica which will serve both the domestic, Costa Rican market, and the US market. Costa Rica offers an area with low sugarcane prices which will allow us to follow the more efficient sugarcane-fed process instead of the cornbased process pursued in the US. Costa Rica also offers free-trade agreements [2] which allow the ethanol to pass into the US tariff free, providing a significant advantage over Brazilian competitors.

Anhydrous ethanol, contains 99.5 wt% ethanol, while hydrous ethanol contains only 95 wt% ethanol. Anhydrous is required for vehicle use in the United States, as opposed to Brazil which uses hydrous. The key difference is an azeotrope that is required to be crossed in the ethanol-water mixture to distill to anhydrous ethanol.

The actual design of our plant was driven by current manufacturing processes found in literature. The design is split up into four main sections for simplicity which are milling, fermentation, separations, and utilities. Aspen HYSYS was used to model the separations process unit while Microsoft Excel was used in the design of the fermentation and milling units. All Process Flow Diagrams were produced in Microsoft Visio.

Design Basis

This venture seeks to produce anhydrous ethanol for domestic sale in Costa Rica and for export to the United States market. In 2008, the Costa Rican government established a mandate dictating that all gasoline sold domestically must contain 7% ethanol. The Costa Rican government expects to increase the percentage of ethanol mixed with gasoline to 12% in the next 4-5 years. Over the past two decades the U.S. ethanol market has grown dramatically. Between 1990 and 2007, U.S. ethanol consumption increased from 3.4 billion liters per year to 26 billion liters per year. Such a significant increase in demand is attributed to the implementation of the Clean Air Act and the establishment of a renewable fuel standard in the Energy Policy Act of 2005. The renewable fuel standard requires that gasoline sold in the U.S. contain a renewable fuel standard, such as ethanol. The latter mandate required 15 billion liters of renewable fuel in 2006, increasing to 28 billion liters in 2012. The Energy Independence and Security Act of 2007 expanded the renewable fuel standard, reaching an ultimate peak of 136 billion liters in 2022 [3]. In 2009, Costa Rica produced 100 million liters of ethanol, 70 million of which were exported [4]. It is important to note that these values are significantly less than the production values for the years preceding 2009 as a result of the global reduction in demand. It is anticipated that Costa Rica’s annual ethanol export growth mimics the average annual growth rate of the U.S. market of 38 percent. Domestic consumption is anticipated to increase 10% annually. The proposed plant will seek to capture (based on 2015 values, when construction of the plant will be completed) 5% of the domestic market, and 30% of total ethanol exports. In order to achieve this goal, the present ethanol plant is designed to produce 178 million liters of ethanol per year. This information is summarized in the attachment SCEP Design Basis vFP.

Project Economics

The total fixed capital cost of the current design is $465.9 million. The ISBL is $267.3 million and the OSBL is $178.2 million, with an engineering and contingency cost of $20.5 million. This cost, and all other price data, were adjusted for Costa Rica’s geographic location and 2011 dollars. The main product revenue from anhydrous ethanol is $117 million annually, with additional revenues of $84 million and $3 million generated from the sale of electricity and food or industrial grade carbon dioxide, respectively. The cost of cost of sugar-cane, our raw material, adds up to $18.4 million annually. Other variable capital costs include waste removal at $6.1 million annually and consumables at $3 million annually. All available capital cost streams can be viewed in the Cost of Production spreadsheet in the attachments. Using the 7 year MACRS depreciation method, a 30% tax rate [5], and capital available at 12%, the project is estimated to have a simple payback in just over 4 years with a net present value (NPV) of $27.2 million and $240 million at 10 and 20 years, respectively. The 10 year internal rate of return (IRR) is 13.5%, after 20 years IRR is equivalent to 19.7%. While the NPV and IRR financial estimates meet the goals set out by the CFO at the beginning of the project, the simple payback period is one year shy of the CEO’s goal. Two areas of potential error that need to explored future are royalties cost for the Organsolv process used (discussed in Bagasee Hydrolysis section) and the electricity regulatory statutes in Costa Rica. Additionally, the values in this economic analysis may fluctuate slightly as all of the smaller components of the plant such as pipelines undergo final design and sizing. The economic calculations are in the attachments Economic Analysis v4 and ICARUS Project Summary.

Plant Location

Costa Rica was chosen for a host country for several reasons. First, Costa Rica is a signatory of the Central America and Dominican Republic Free Trade Agreement (CAFTA-DR), which facilitates free trade (duty free) between the Unites States and Costa Rica. As per the ethanol provision of the CAFTA-DR, in alignment with the Caribbean Basin Initiative (CBI), which has limited ethanol imports to the United States at 7% of US domestic production, Costa Rica is allotted 117 million liters of ethanol exportation to the US annually. As of 2005 Costa Rica was exporting about 57 million liters annually to the US, while the US market for fuel ethanol consumption has increased by 11% per year from 1995 to 2004. Therefore, Costa Rica can certainly find a market for the addition 57 million liters annually it is allotted to export to the US. Other sugar rich countries such as India and Brazil are not in the free trade agreement, and therefore are subjected to harsh tariffs on exports to the US. CAFTA-DR and CBI also prohibit ethanol with origins other than the signatories (ethanol processed but not synthesized in the signatories) from entering the US, therefore complete production in Costa Rica is necessary [1]. The one unfortunate element of producing in Costa Rica is a lack of government incentives; however, it is possible that they could appear with the increase in fuel blend requirements. With the strongest economy and most stable government in Central America, Costa Rica made an excellent choice for plant location [5].

Currently, companies are developing ethanol production facilities in Costa Rica. One such company is United Biofuels of America. While these facilities will provide competition to our production plant, the overall trend towards less petroleum dependence within the country will provide business for many facilities. On the raw materials side, there has been a steady increase in sugar cane production in Costa Rica over the last fifty years [5].

The plant will be located in Liberia, Costa Rica as shown in figure 1. Liberia is the capital of the Guanacaste Province and is the home to a population of over 35,000. Liberia was chosen within Costa Rica due to its proximity to many sugar plantations, Pacific Ocean ports, and the Pan-American Highway. Additionally, the Tempisque River runs adjacent to the town, providing on site fresh water. The proximity to the sugar plantations will reduce the shipping costs associated with procurement of the raw sugar cane. The Pacific Ocean will provide shipping access to foreign nations. The Pan-American Highway will provide necessary infrastructure for materials procurement and product shipping. Additionally, Costa Rica offers potential for shipping from the Atlantic (Caribbean) coast to add lucrative markets such as the European Union.

The design is planning to purchase a site just northwest of the town, at the intersection of the Tempisque River and the Pan-American Highway. This site will provide proximity to Liberia and neighboring towns for our plant staff, without bringing the industrial complex to the cultural and beautiful city center. If adequate public transit does not already exist, GICC will look to partner with city officials to develop a bus system between the city center and the plant. This is just one of many plans GICC has explored to be a good corporate citizen in Costa Rica. The one square kilometer site is estimated to cost $30 million.

Guanacaste Province, is also home to one of Costa Rica’s best technical universities, Invenio, which is located in Canas. Invenio is a premier science and technology university. The Guanacaste Operations team is developing methods to involve the current and future student body through internships on the development, and operation of the plant [5]. In the future, GICC will look to Invenio for a source of engineers and other technical personnel to run the plant.