Supply Chain Planning and Design for Biodiesel Production Via Wastewater Sludge

1. Supply Chain Planning andDesign for Biodiesel Production Via Wastewater Sludge Sandra Duni Eksioglu, PhD Industrial Engineering Department Clemson University International Congress and Expo on BIOFUELS & BIOENERGY August 25-27, 2015

2. Bioenergy: Opportunities • Bioenergy production is expected to increase: • RFS: Production of biofuels by 2022: 36BGY • 2013: 14BG of corn-ethanol & 1BG of biodiesel • It is a clean and renewable source of energy. • It reduces the risk of oil embargos, price strikes, geopolitical dependence • It supports US farmers and • local economy www.wfpa.org

3. Bioenergy: Major Challenges • Technological challenges • Food versus fuel debate • Biomass logistical/transportation challenges: • Biomass supply is constrained by land availability • Biomass is seasonal • Biomass looses dry matter with time • Production yields are uncertain • Bulky & difficult to transport • Widely dispersed geographically • Small & medium-sized farms

4. Bioenergy and Environment • US is committed to reduce GHG emissions by 17% below 2005 levels by 2020 • Environmental policy focuses on physical processes Energy efficient facility/vehicles: USDA Alternative Fuel & Fleet Efficiency programs Alternative fuels: Biodiesel Income Tax Credit, Excise Tax Credit, Alternative Fuel Excise Tax Focus on physical processes overlooks the impact of business processes and operational practices on emissions • Inventory replenishment decisions impact emissions Inventory Inventory • Outsourcing, centralized warehousing, rapid-response logistics, just-in-time production, etc. impact emissions.

5. BIODIESEL Supply Chain Structure Municipal WWT Plants Pulp & Paper Meat Packing Poultry Slaughtering & Processing Animal & Marine Fresh/Frozen Fish Biocrude Plants Diesel Plants Customers Sludge Supply

6. BIODIESEL Supply Chain • Research Questions Estimate supply-chain related costs for production of biodiesel. • Biomass transportation (sludge): • What factors have a great impact to the transportation cost of sludge? • Under what conditions pipeline becomes a viable transportation mode? • Supply chain design and management: • Should a biocrude plant be co-located at a WWT facility? • What factors have a great impact on the supply chain costs? Provide insights about biodiesel supply chain related costs to potential investors.

7. Solution Approach • Sludge Transportation • Techno-Economic Analysis Input Analysis • Case Study • Numerical Analysis • Sludge Supply Analysis • Regression Analysis • GIS Tools • Model Validation & Verification • GIS Tools • Supply Chain Design & Mgmt.: • Bi-level stochastic Optim. Model

8. Cost of ownership Annual sale taxes License fees and taxes Management and overhead cost Insurance cost Fuel cost Labor cost Maintenance and repair cost Tire cost Transportation Cost Analysis • Facility-owned Single Trailer Truck, 30m3 capacity. • Similar analyses is conducted for rented Single Trailer Truck, facility-owned and rented Tandem Trucks of 30m3 and 40m3 capacity. (b) Variable costs ($/m3/mile) (a) Fixed costs ($/m3)

9. Transportation Cost Analysis II. Pipeline Transportation of Sludge Smaller the capacity, higher transp. costs.

10. Transportation Cost Analysis • Data: Mississippi Department of Environmental Quality. • Pipeline vs. truck for volume of sludge shipped: 843.5 m3/day • Variable cost ($/mile/m3) is smallest for facility-owned tandem trailer truck. • As transportation distance increases, pipeline costs decrease.

11. Summary: Sludge Transportation Costs

12. A Two-Stage Stochastic Prog. Model Biomass supply uncertainty First-stage decisions x Uncertainty () Second-stage decisions y(, x) • Strategic decisions: • Plant locations/sizes • Pipeline location/size • Nr. of trucks purchased • Planning decisions: • Production • Transportation • Shortage

13. Model Formulation: Constraints Sludge Supply Production Capacity Pipeline & Truck Capacity Trans. Mode m Supply Point k Refinery i Plant j Supply Point k+1 Plant j+1 Refinery i+1 Plant j Plant j+1 Flow Balance

14. Model Formulation: Constraints Customer g Market Customer g+1 Refinery i Demand is Satisfied Non-Negativity Const. Binary Const. Refinery i+1

15. Solving the Two-Stage SP Model L-shaped algorithm Optimality Cut 1. One aggregate cut 2. Multiple cuts Initialize; n = 1 Solve the Master Prob. (xn, zn, vn) & LB n = n +1 Add nth optimality cut to MP. Solve Master Prob. Solve sub-problems (yn(), n) , Calc. UB 1. Using CPLEX 2. Lagrangean Relax. UB – LB <  n > Nmax NO YES Stop; Report solution

16. Scenario Definitions & Probabilities:Supply Uncertainty

17. Computational Results Distribution of Unit Cost ($2.72/gal) 1. Large capacity plants centrally located. 2. Co-locate with large WWT facilities. 3. Truck transportation Expected Val. Solution: Costs: $314.96 M Capacity: 75MGY Production: 72.55MGY Stochastic Solution Costs: $311.60 M Capacity: 80MGY Production: 75.59MGY Val. of Stochastic Solution $3. 36M

18. Modeling Environmental Policies Evaluate the impact of environmental policies on supply chain operations.

19. Modeling Carbon Cap • The following constraints is added to the mathematical model: • for each 

20. Modeling Carbon Tax • The following term is added to the objective function: • Where, is the carbon tax (in $/kg).

21. Modeling Carbon Cap-and-Trade • The following constraints is added to the mathematical model: • The following term is added to the objective function: • cp is the market price of carbon (per ton).

22. Modeling Carbon Offset • The following constraints is added to the mathematical model : • The following term is added to the objective function: • co is the offset price of carbon (per ton).

23. Computational Results CPLEX could not find a solution within 1% error gap in 36,000 CPU sec. BSCN-L BSCN-LR-L Stopped due to iteration with (2.77-4.29)% & (3.51-5.68)% opt. gap BSCN-ML BSCN-LR-ML Stopped due to 1% error Problem parameters: (94/26/10/52/3/3/s) Stopping criteria: Error gap < 1% OR Nr. of iterations 1,000. Problem size: 7,436 binary and integer variables; 8,242 continues variable (per scenario)

24. Transportation under Regulatory Policies Weyerhaeuser Co. Pulp & Paper Complex, Lowndes County Oxford POTW, Lafayette County Forest POTW, Scott County Peco Foods, Madison County Jackson POTW, Hinds County Hattiesburg South Lagoon, Jones County (c) Carbon Cap 2000 tons/year (a) Carbon Cap 2800 tons/year (b) Carbon Cap 2400 tons/year

25. Summary & Conclusions • Transportation activities in the supply chain will add on average $0.16/gal to the cost of sludge-based biodiesel. • Investments in improving biocrude technology will have a great impact on biodiesel production level and costs. • Carbon regulatory policies will have an impact on supply chain operations. • Shifting transportation modes from truck to pipeline. • Stochastic programing model provides better solutions to our problem.

26. Research Team • Department of Industrial Eng., Clemson Univ. • Sandra D. Eksioglu, PhD • E-mail: seksiog@clemson.edu • Mohammad Marufuzzaman • E-mail: maruf237@gmail.com • Department of Chemical Eng. Mississippi State Univ. • Rafael Hernandez, PhD • Todd French, PhD • Andro Mondala, PhD • Department of Civil & Env. Eng. Mississippi State Univ. • Dennis D. Traux, PhD

27. QUESTIONS Sandra D. Eksioglu, PhD Clemson University Department of Industrial Engineering seksiog@clemson.edu

28. Theoretical Results