Energy Use in BBE Ethanol Production Processes - Assignment Example

Dear Sirs, Review of Energy Use in BBE Ethanol Production Processes As we approach the first anniversary since the commissioning of GSMI upgraded ethanol plant, we consider it to be timely as well as necessary to provide a report on our review of the operational costs associated with the ethanol production at the upgraded plant During the recorded 203 days from January to September 2010, certain deficiencies have been identified, all of which have contributed to the increased operational costs which were not foreseen before. It was noted that although the production targets have consistently been achieved, this has equally but questionably increased the production costs. This review presents certain factors that have been painstakingly determined in the hope that such factors would be considered. At the same time, remedial actions would be initiated producing solutions that will address the gradual recouping of the losses incurred. If remedial steps are not promptly taken to counter this development at this stage, this is likely to have an adverse effect against our efforts to regain our investment in the project within the agreed time frame of five (5) years. The group strongly believes that the recommendation made on the reconsideration of the alcohol selling price per litre at the end of this report/review is timely and applicable to creating an environment that supports our business and allows us to manoeuvre and explore new opportunities. A summary of the factors that have been identified during the review are set out forthwith hereunder for further perusal and consideration. Full details and particulars have been tabulated, case by case on the attachments as well as our production cost calculated on baseline or unit costing. Summary 1. Quality of raw material Under the material specification of our MOA dated 23rd December 2008, the raw material specification is a minimum of 70% starch content per one tonne of cassava for use in ethanol production. On that specification, the projected alcohol production volume has been _ ___ litres. It is noted that the average starch content of the raw material supplied thus far has only been 66%. The low starch content of 66% has fallen below the required minimum level which is 70%. There is an opportunity loss of 4% which is about 5 MT/Day of cassava with the additional usage of 19.9 MT of steam per day. As for the fermented mash, we have recorded a plus of almost 28 MT/per day; however, the ethanol density varies by 0.44% from the required standard levels. This is despite the fact that there were no differences in the distillation ratios as well as the fermented ratio which had been stable all along. In accommodating these processes, this has culminated to the usage of an extra 19.9 MT of steam per day; thus, necessitating a review of the active operational days (203) . The excessive steam levels have had varying effects to the operational costs which calls for remedial options to be looked into. This had accumulated to a total of 4,040 MT for the period ending 203 days. This translates to a total of 9,534,400 pesos which could have been to our advantage, however to no avail. 2. Low efficiency of distillation process It has been noted that the existing distillation column had been operating in low efficiency as indicated by the usage of excessive steam during the process to produce the required volume of alcohol as forecasted. Low efficiency out-put can be attributed to the old age of the distillation columns. The distillation ratio in this stance had varied by 5.8% from the norm, meaning that there had been a loss of 3.14 KL fine alcohol per day and 0.24 KL industrial per day. The expected opportunity loss to us had been 3.14 KL of fine alcohol per day on the tolling for every litre of fine alcohol for the 203 days of the operational period; this amounted to 10,836,140 pesos. In addition to that, the expected additional incremental benefits for the same period translate to some 8,268,460 pesos for the expected additional incentives. In total, the excessive steam of 19.9 MT per day used has amounted to a total unexpected income loss of 19,104,600 pesos that could have been to our advantage. It is also noted that there had been nil supply of the raw material on a daily rate for 27 days, which is considered a loss on the alcohol, both fine and industrial at a rate of 53.69 KL per day for the period ending 27 days and steam requirement of 436.2 MT per day for the same period. 3. Low cassava powder & mixing process water The amount of steam usage required for the processed water is 55°C but required 65°C exceeding the expected rate by 8.69 MT per day for the number of active operational days (203). The process water and after-mixing-temperatures on this occasion have been below the required level by 10°C, yet the cooking temperature had been stable. Nevertheless, this could be considered as normal using process water sourced from the recycled water from the distillation process. If this can be considered ,65°C would be maintained. Although the required production had been achieved, the additional usage of steam is a concern that had accumulated to 1,764.07 MT to the period. This translates to a total of 4,163,205 pesos which can be regarded as excessive processing cost that could have been to our advantage. 3.1. Required additional steam for initial cassava process water Two sets of utility shut-downs have been recorded; a duration of 57 days of in-active period. These are the 27 days of nil supply of the raw material and the 30 days shut down of the utility due to maintenance and emergency. The Initial steam requirement for process water after this is at a rate of 48 MT of steam per day; however, in this stance, 1.52 MT of more steam per day was utilized to normalize the process thus clocking up a total of 86.64 MT of additional steam usage for processing water. This has accumulated to additional costs totalling 204,470 pesos that could have been to our advantage. This factor or case is the same for additional steam requirement for the yeast propagation and re-sterilization of pipeline & heat exchanger. 3.2. Additional steam requirement for yeast propagation For normal operating processes, initial temperature is required at 35°C to 95°C for yeast propagation process. This process had to utilize an additional 6.4 MT of steam per day to normalize the processing level that can accommodate the shut down for the 30 days and the non supply of the raw material for 27 days. This has resulted in the additional usage of steam. The cost to us on the additional steam usage of 364.80 MT for the process has translated to a total of 860,928 pesos as lost opportunity to us. 3.3. Sterilization for pipeline and heat exchanger To be able to normalize and stabilize the sterilization for the pipeline and the heat exchanger system, additional steam is required for the process. Considering the shut-down and nil supply of the raw material period of 57 days, an additional steam of 1 MT per day had been required and used for the normalcy of the process, running up an additional steam of 57 MT accumulating to a total lost opportunity of 134,520 pesos considered as additional operating cost. 3.4. Re-stabilization of the distillation column For the normalcy of this process, 15.8 MT of steam per hour is required as normal for the full 8 hours before any processing can be done. However, in accommodating the shut-down period of 57 days, this requires 70% (11.06 MT) of normal steam requirement which is 15.8 MT per hour. Although that happened, a process of processed water can be used to enhance this operation using the same amount of steam. Unfortunately, this wouldrequire additional usage of steam for the water process alone. This situation, which has cost us an additional steam of 88.48 MT of steam, translates to a total of 11,902,330 pesos. 3.5. Opportunity on alcohol losses From fermentation to distillation processes, the sterilization had resulted to increased impurities as a result of over-aging and leakages on the top and bottom distillation columns as caused by the shutdown periods. This has resulted in 116 litres of “bad” alcohol from over-aging and 270 litres through leakages from the top and bottom distillation columns totalling 386 litres of “bad” alcohol amounting to 22,002. The expected incentive to this is 13 pesos per litre totalling lost opportunity of 286,026 pesos. At the expected quality the tolling fee is 17 pesos per litre for an expected opportunity of 374,034 pesos. 4. Utility shut down resulting in no supply From January to the end of September 2010, there have been a total of 203 operationally productive days. A total of 57 days was lost due to the shutting down of the utility and non supply of raw material. In some cases, the entire processor shut-down occurred, due to routine maintenance that is required for the plant; in other cases, the shut-down may have occurred as a result of emergency measures needed to have the utility back in operation. This method is understandable; however, there are consequences that resulted from the closure of the utility for excessive number of days, the following revelations require our attention for recovery of the following itemized opportunities that have been lost to us. Although production had been affected during shut-down period, operational costs, attributed especially to labour, remained fixed all throughout. 5. Reduction in operational days As a direct result of the utility shut-down, a reduction of 30 productive days had occurred. Further to that, another shut-down had been made as direct result of non supply of the expected raw material for further 27 days, totalling 57 non-active productive days, whilst still maintaining operational costs pertaining to personnel emoluments and other labour costs. As a result of the shut-downs, we have calculated our losses in alcohol production to be significant for the period ending 57 days of in-active productivity. A total opportunity of 3,060.33 KL of alcohol had been lost us, an incremental benefit of 39,793,000 and a tolling fee of 52,035,300 pesos 6. Alcohol DBI old processing/tolling costs As per the tabulated information on DBI production cost and from our observations from culled from past review records, the initial cost of production per one litre of alcohol was at 24.42 pesos; however, it was later adjusted to 17 pesos per litre. In contrast, this is not the true reflection of the production cost and as illustrated by the above factors. In fact, the actual costs have dramatically exceeded that, which is currently being paid at the rate of 17 pesos per litre of alcohol. On the basis of the facts as tabulated for your perusal and those highlighted above, it is recommended that the original rate of 20 pesos per litre of alcohol be considered and adopted for the betterment, sustainability and the viability of our business. We have been operating on 24.42 pesos per litre of alcohol whilst painfully accepting the 17 pesos per litre of alcohol, meaning that based on the estimate, we have been operating at a loss of 7.42 pesos per litre of alcohol. Our recommendation that the 20 pesos be considered and adopted is a fair one to both partners based on the justifications that we have had to provide. 7. Extension of grace/commissioning period We note that following the commissioning in January 2010, a three month grace period was allowed that had lapsed in March. This was on the assumption that the aforementioned factors and deficiencies would not be encountered. However, it is clear that the current circumstances now indicate otherwise and we would rather request that the purposes of calculating these deficiencies be the basis for an extension of the grace period as well as the possibility of sharing both the utility costs and the tolling fees. In considering this, the actual grace period should be from September to December 2009. During this period, utility costs had been normal. We have had encountered bad alcohol during commissioning; therefore, we would request that tolling be considered for the given grace period. Finally we would like to take this opportunity to request that a review of the MOA signed on the ______ be convened so that the factors and deficiencies stated above are considered, and solutions to them be pursued to ensure improvements in efficiency in current operations. We therefore would be much delighted to holding a conference with you to further discuss the aforementioned matters discreetly that would ultimately lead to a lasting solution. Yours faithfully, Read More