The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Feasibility Model (2011)

Reference Number: MTAS-738
Tennessee Code Annotated
Reviewed Date: September 19, 2017
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Feasibility Model: $45,000 Capital Outlay/20,000 Gallons of Annual Production
Using 2011 dollars, the initial cost of a similar system (55-gallon biodiesel processor, storage tanks and bins, and WVO drums and jugs) is approximately $60,000. Note that the 55-gallon processor is capable of producing two batches per day. If this fixed cost is spread over a five-year period, and if 20,000 gallons of fuel could be produced per year when the program is fully operational, this results in a fixed cost of $0.60 gallon of biodiesel excluding depreciation. Changing the production rate higher or lower will either lower or raise, respectively, the cost per gallon. The variable costs (methanol, sodium hydroxide, amberlite resin, and electricity) are listed in the table below and result in $0.99 per gallon of biodiesel. Therefore, a total cost of producing the fuel could be approximately $1.59 per gallon at the production rate of 20,000 gallons per year for five years. After five years, the costs to produce the biodiesel would consist only of the variable cost of $0.99 per gallon. The price per gallon of petroleum diesel as of November 28, 2011, was $3.63 per gallon. Using these figures, cities would save a minimum of $2.04 per gallon or a total annual savings of $40,800 during the first five years. Another way to explain the savings is that the biodiesel processor unit would pay for itself in approximately 18 months.

Variable Costs of Biodiesel Production
Ingredient Cost Cost, $/gal biodiesel
Methanol $2.75/gal


Potassium Hydroxide $0.50/lb 0.05
WVO $0.00/gal 0.00
Amberlite $10.7/lb 0.04
Electricity cost $0.14/kWh 0.35
Total cost   $0.99/gal+ $0.60/gal fixed ($1.59/gal)

Overall, the fleet manager, mayor, and city council have been very happy with the program. Benefits from this program include fuel and cost savings to the city (and taxpayers), improved local air quality from using the biodiesel, greater community involvement through the household-used oil recycling program, and reduced sewer maintenance costs. The fleet manager is strongly committed to continuing and expanding the program into the future. For additional information in a video format, visit