Economics of biofuels: Market potential of furfural and its derivatives

Highlights: • We use an economic model to determine how market elasticities impact profits. • The economic impact of co-production of six furfural derivatives are assessed. • We identify the best furfural derivatives in terms of economic returns. - Abstract: Production of biofuels from cellulosic materials continues to face major challenges in terms of economic profitability. Our research focuses on evaluating the economic potential of several major biochemical co-products derived from renewable fuel production that may help to overcome these challenges. In our thermal deoxygenation (TDO) process of renewable fuel production, furfural (a platform chemical) is produced in significant volumes. The quantity of furfural produced at commercial scale, however, will likely impact the national and world price of this industrial chemical. This will reduce its ability to play an important role in the total economic viability of the renewable fuel process. Thus, it is better to convert furfural to other products to have a smaller impact on market prices and, consequently, a higher profit margin for the renewable fuel process as a whole. In this paper we identify the furfural derivatives that have a considerable market size and can be derived from furfural in one or two steps of conversion. We then look at maximizing the profits of a multiproduct biofuel producer facing world demand curves that consider the effect of the producer's output on market prices. We solve the parameterized model using nonlinear optimization method under a variety of alternative assumptions and scenarios. Our results show that renewable fuel production can be made significantly more financially attractive through sales of furfural derivatives. A key issue to resolve is the elasticity and cross-elasticity of demand for our identified industrial chemical.