Document Type

Working Paper

Date of this Version

4-18-2017

Abstract

This project proposes a production plant that will utilize 9.58 million kg/year of spent coffee grounds in order to produce 1.03 million liters/year of coffee biofuel and 2.56 million kg/year of biomass pellets. This plant will be located in northern New Jersey, where the maximum amount of spent coffee grounds can be obtained every day from each of the five boroughs in New York City. Practically, trucks could obtain grounds from 875 Starbucks and Dunkin Donuts coffee shops, collected 3-4 times per week. Overall uptime is taken to be 90%. The biodiesel is formed by oil extraction, conversion to free fatty acids and glycerol in a fat splitter and esterification in a bubble reactor. The biomass pellets are formed by drying and pelletizing after removal from the extractor. Thorough sensitivity analyses were performed to determine plant feasibility based on gas prices, flow rate and a combination of both. Based on the current market value of gas and realistic expectations of coffee collection, total capital investment is $4,028,000 and a weighted average cost of capital of 15% is applied. The NPV of this project in 2017 is -$6.8 million. The IRR is negative and the third-year ROI is -22%. Therefore, given the current biodiesel market and coffee ground accessibility, pursuing this project is not recommended. However, when the biodiesel price is at its 90th percentile over the past 10 years and a capacity of five times as much coffee grounds per year is obtained, matching the total of Bio-Bean, the IRR is 17%, the NPV in 2017 is $0.9 million and third year ROI is 9.5%. If biodiesel price reaches $4 per gallon and the investing company has the ability to access coffee grounds from the equivalent of 4,375 coffee shops, this project may be feasible, just as long as the investing company does not have an alternative investment with a NPV higher than $0.9 million over the next 20 years.

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Date Posted: 21 April 2017