ETHYL LACTATE PRODUCTION

64
Ethyl Lactate Group 5: Jeremy Jones Trung Pham Kristin Smart David Splinter Michael Steele Thursday, May 1st, 2003

Transcript of ETHYL LACTATE PRODUCTION

Page 1: ETHYL LACTATE PRODUCTION

Ethyl LactateGroup 5:

Jeremy JonesTrung PhamKristin SmartDavid SplinterMichael Steele

Thursday, May 1st, 2003

Page 2: ETHYL LACTATE PRODUCTION

Presentation Outline

SolventWhat is a solvent?Characteristics of a good solvent

Process considerationsPlant layout and process specificationsEquipment costsEconomic analysis

Business Plan (Mathematical model)OptimizationBusiness strategy

Page 3: ETHYL LACTATE PRODUCTION

What is a Solvent?

Industrial usesRemoves greaseCleaning purposes

Dissolves hydrocarbonsVolatility

High volatility – fast evaporation home useLow volatility - safety, reuse, emissions

Page 4: ETHYL LACTATE PRODUCTION

Conventional SolventsPetroleum Based Organic Compounds

Toxic, EPA standards limit use

Added cost of disposal

http://www.p2pays.org/ref/07/06851.pdf

Page 5: ETHYL LACTATE PRODUCTION

Green Solvents

Organic raw materialsRenewable resources

Non-toxicNo disposal costs

Non-volatileSafe and recyclable

Page 6: ETHYL LACTATE PRODUCTION

400

600

800

1000

1200

1400

1600

1985 1990 1995 2000 2005 2010Year

Dem

and

(mill

ion

lbs)

Green Solvent Demand

Total domestic solvent demand – 11 billion

pounds per year

Page 7: ETHYL LACTATE PRODUCTION

Solvent Comparison

EPA regulationsToxic Release Inventory (TRI)

Evaporation rateReusability in industrial applications

Price ($/lb)

Effectiveness Ability for a solvent to maintain its characteristics when reusedCharacterizes the strength of the solvent

Page 8: ETHYL LACTATE PRODUCTION

Why Ethyl Lactate?

Ethyl lactate – effective, economic, non-toxic

Page 9: ETHYL LACTATE PRODUCTION

Process Flow Diagram

Ethyl Lactate

Lactic Acid

Ethanol

Final Product – 99% Ethyl Lactate

C2H5OH+ C3H6O3 C5H10O3 + H2O

Page 10: ETHYL LACTATE PRODUCTION

Innovations

ElectrodialysisTraditionally useful for decreasing salt concentration in solutionLactic acid purification

PervaporationTraditionally useful for alcohol dehydrationOrganic removal from water

Page 11: ETHYL LACTATE PRODUCTION

Business Plan

Number of plants

Plant location(s)

Product market(s)

Raw material(s)

Raw material market(s)

Input Output

Mathematical Model

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Page 12: ETHYL LACTATE PRODUCTION

Base Equipment Costs

Equipment costs are based on 63 million pounds of annual ethyl lactate production

Base equipment costs include no capital improvements

Effects on capacityEquipment based on maximum possible capacity, then set to lower operating conditionsEquipment can be added later

Page 13: ETHYL LACTATE PRODUCTION

Raw Material Milling

Quantity – 3 unitsTotal equipment cost $480,000Rated throughput –41,000 lb h-1

327,000 lb per batch; 72.7 million pounds annually

Process time – 8 h

Page 14: ETHYL LACTATE PRODUCTION

Blending Tanks

Quantity – 10 unitsTotal equipment cost $3,140,000Volume – 80,000 L

Blends water and sugars; 90-10 weight %

Process time – 5.3 h

Page 15: ETHYL LACTATE PRODUCTION

Fermentation

Quantity – 14 units7 Ethanol-specific; 7 lactic acid-specific

Total equipment cost – $29,358,000Volume – 350,000 LProcess time – 27 h

Page 16: ETHYL LACTATE PRODUCTION

Electrodialysis Process

Solution purification by application of an electric

current.

Page 17: ETHYL LACTATE PRODUCTION

Lactic Acid Separation by Electrodialysis

Why Electrodialysis (ED)?Uses 90% less energy than traditional methodsLow operating costPure Product

Electrodialysis EquipmentPower SourceAnode/Cathode with rinse container“Stacks”

Page 18: ETHYL LACTATE PRODUCTION

Bipolar With Anion-Exchange Membranes ED

= Anion Exchange Membrane

= Bipolar Membrane

Water(For Use in Other Processes)

LA LALA

H+

H+

H+

H+

H+

H+

OH-

OH-

OH-

OH-

OH-

OH-

L- L-

A+ A+

H2O H2O

Page 19: ETHYL LACTATE PRODUCTION

Electrodialysis Specifications

Quantity – 1 unit

Total equipment cost – $122,000

Throughput –105 gpm

Page 20: ETHYL LACTATE PRODUCTION

Ethanol Distillation

Quantity – 2 units

First column -$44,000

Second column -$80,000

Final purity – 95 wt%

Page 21: ETHYL LACTATE PRODUCTION

Storage Tanks

Quantity – 24 units

Total equipment costs – $7,512,000

Volume – 80,000 L

Ethanol, lactic acid, raw materials

Page 22: ETHYL LACTATE PRODUCTION

Esterification Reaction

Quantity – 9 units

Total Equipment Cost

$3,730,000

Volume – 32,000 Lproduces 289,000 lbs of ethyl lactate per batch

Page 23: ETHYL LACTATE PRODUCTION

Quantity - 4 units

Total Equipment Cost

$620,000

Throughput: Total = 43 gpmUnit = 11 gpm

Pervaporation

Page 24: ETHYL LACTATE PRODUCTION

Ethyl Lactate Production

AlcoholAcid

AlcoholWaterEsterAcid

Product Ester (Trace Alcohol)

Acid Recycle

H2O/Alcohol< Azeotrope

WaterAlcoholEster

Alcohol/Water Azeotrope Recycle

PervaporationUnit

EsterificationReactor

DISTILLATION

DISTILLATION

Water

Dehydrated Lactic Acid and Ethanol

Page 25: ETHYL LACTATE PRODUCTION

Ethyl Lactate Purification

Quantity – 2 unitsTotal Equipment Cost

Column 1: $ 44,000Column 2: $ 60,000

ThroughputColumn 1

• 8450 lbmol/hrColumn 2

• 5090 lbmol/hr

Page 26: ETHYL LACTATE PRODUCTION

Ethyl Lactate Purification

Column 1 - excess lactic acid removal

Column 2 Distillate: Ethanol/Water AzeotropeBottoms: Ethyl Lactate (with trace alcohol)

Page 27: ETHYL LACTATE PRODUCTION

Total Capital Investment48 mil lb 117 mil lb 175 mil lb 292 mil lb

43,000,000 105,000,000 150,000,000 261,000,0008,210,000 18,000,000 26,200,000 44,100,0002,700,000 6,050,000 8,880,000 14,900,000308,000 691,000 1,020,000 1,710,000

2,310,000 5,190,000 7,610,000 12,800,0003,850,000 8,640,000 12,700,000 21,300,0003,470,000 7,780,000 11,400,000 19,200,000

Total Plant Direct Costs 63,900,000 151,000,000 217,000,000 375,000,000

16,400,000 38,400,000 55,100,000 94,800,00023,000,000 53,700,000 77,100,000 133,000,000

103,000,000 243,000,000 350,000,000 603,000,000

5,220,000 12,200,000 17,600,000 30,300,00010,400,000 24,500,000 35,200,000 60,600,000

119,000,000 280,000,000 402,000,000 694,000,00021,000,000 49,400,000 71,000,000 122,000,000

140,000,000 329,000,000 473,000,000 816,000,000

Direct Fixed Capital

1. Equipment Purchase Cost

Working capitalTotal capital investment

Total Plant Costs

11. Contingency

3. Process Piping

10. Contractor's fee

Item

8. Engineering 9. Construction

4. Instrumentation 5. Insulation 6. Electricals 7. Buildings

2. Installation

Page 28: ETHYL LACTATE PRODUCTION

FCI Versus CapacityFCI vs. Capacity

0

50

100

150

200

250

300

350

0 30 60 90 120 150Capacity (million lbs)

FCI (

$mill

ion)

Page 29: ETHYL LACTATE PRODUCTION

Total Product CostI. Manufacturing cost = direct production costs + fixed charges + plant overhead costs

A. Direct production costs

1. Raw materials $5,980,0002. Labor cost calculated from national wage data $3,020,0003. Utilities $3,190,0004. Maintenance and repairs $1,560,0005. Operating supplies $234,0006. Laboratory charges calculated based on operating labor $83,0007. Patents and royalties $200,000

$14,300,000B. Fixed charges1. Depreciation $3,410,0002. Local taxes $2,340,0003. Insurance $1,560,0004. Rent $411,000C. Plant-overhead costs $442,000

$22,400,000

A. Distribution and selling $628,000B. Financing $9,190,000

$9,820,000III. Total product cost $32,300,000

Total product cost

Set aside portion for patents purchasing

sinking fund method applied on 8% interest

simulated by SuperPro and ProII1% fixed capital investment15% maintenance and repairs

subtotal

subtotal

1.5% local rate at Dayton, Ohio1% of fixed capital investmentcalculated on land and buildings value

borrowing charged on 5% TCI

at 64 million capacity $0.03/lb

II. General expenses =distribution and selling + financing

subtotal

2% of total capital investment

Page 30: ETHYL LACTATE PRODUCTION

Annual Operating Cost48 mil 117 mil 175 mil 292 mil

2,680,000 8,620,000 12,900,000 21,500,0001,880,000 2,290,000 2,580,000 2,940,000

11,000,000 27,000,000 40,100,000 61,600,000 Laboratory/QC/QA 24,000 38,000 42,000 44,000

2,450,000 5,650,000 8,390,000 13,900,00018,100,000 43,600,000 64,000,000 100,000,000

Raw materials Capacity

Labor-Dependent Equipment-Dependen

UtilitiesTotal

Total staff: 55Total wage paid per year: $3,020,000Operating annual salary: $883,000

40%13%19%

28%

Management

EngineeringOperating

Other

Labor Cost Breakdown

Page 31: ETHYL LACTATE PRODUCTION

Operating Costs Versus Capacity

Operating Cost v. Production

y = 3,000,000 + 0.331*Prod

0

20000000

40000000

60000000

80000000

100000000

120000000

0 50000000 100000000 150000000 200000000 250000000 300000000 350000000

lb prod/yr

Ope

ratin

g C

ost $

Page 32: ETHYL LACTATE PRODUCTION

Business Plan

Number of plants

Plant location(s)

Product market(s)

Raw material(s)

Raw material market(s)

Input Output

Mathematical Model

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Page 33: ETHYL LACTATE PRODUCTION

Specific Locations

Most economic raw materialOats, corn, rice, soybeans, wheat

Possible market locationsRelative to industry and commercialization

Potential plant locationsNationwide basis

Page 34: ETHYL LACTATE PRODUCTION

Raw Materials

Considered 21 possibleraw materials

USDA-NASSCrop production by state for 2000-2001U.S. crop yield by county for 2001Sugar crops, starch crops, cellulosic

NACo – National Association of Counties

Page 35: ETHYL LACTATE PRODUCTION

Possible Market Locations

Considered 50 possible market locations

Industry Week U.S. 500

Current companies using degreasersMotor vehicles and partsElectronic and electrical equipment

Page 36: ETHYL LACTATE PRODUCTION

Possible Plant Locations

NCOEPopulationNumber or preexisting companiesExpected rate of city growthSpecialization in manufacturing businesses

http://www.ncoe.org/lma/lma.pdf

Page 37: ETHYL LACTATE PRODUCTION

Possible Plant Locations

Considered 46 possible plant locations

NCOENational Commission on EntrepreneurshipCities containing high-growth companies and high labor market areasSpecialization in manufacturing businesses

Page 38: ETHYL LACTATE PRODUCTION

Possible Combinations

MaterialsMarketsPlants

or

Over 11,000 Combinations!

Page 39: ETHYL LACTATE PRODUCTION

Business Plan

Number of plants

Plant location(s)

Product market(s)

Raw material(s)

Raw material market(s)

Input Output

Mathematical Model

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Page 40: ETHYL LACTATE PRODUCTION

Freight Costs and TaxesFreight costs

$0.08 per pound per 1,000 milesRaw materials and ethyl lactate

TaxesLocal and state sales and property taxes

City StateState Sales Tax

Local Sales Tax

Chico CA 7.25 0

Binghamton NY 4 2

Olympia WA 6.5 1.5

Wenatche WA 6.5 1.5

Price after

taxes $/lb

0.0340

0.0294

0.0300

0.0300

Page 41: ETHYL LACTATE PRODUCTION

Business Plan

Number of plants

Plant location(s)

Product market(s)

Raw material(s)

Raw material market(s)

Input Output

Mathematical Model

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Page 42: ETHYL LACTATE PRODUCTION

Product Demand and Prices

Pgreen = (Tot Solv Dem)/(Green Solv Dem)Pethyl lactate = 9.7% + 0.1%/year

Product Sell Price:$1.00, with 0.05% depreciation

( * * * * *$1000jj Manuf Green EthylLacate

j Manuf

GDP lbsolventsDemand GSP P P PMGSP GDP

=∑

Page 43: ETHYL LACTATE PRODUCTION

Business PlanInput Output

Mathematical Model

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Number of plants

Plant location(s)

Product market(s)

Raw material(s)

Raw material market(s)

Page 44: ETHYL LACTATE PRODUCTION

+

++

+

∑∑= plantyearplantplantplant

yearyearplant

yearplant TCIi

FCIIwVsirr

CFNPW

)1(*)(

)1(,

Objective Function to Maximize

CF = Cash Flow

Irr = Internal Rate of Return

Vs = Salvage Value, 10% of FCI

Iw = Working Capital, 15% of FCI

Project Lifetime – 20 years

Page 45: ETHYL LACTATE PRODUCTION

Cash Flow Calculations

Raw Material Costs

Operating Costs

Shipping Costs

Total Costs

Revenue = Sales – Total Costs

Cash Flow = Revenue – (Revenue – Depreciation)*Taxes

Page 46: ETHYL LACTATE PRODUCTION

Constraints

yearmarketplantplantyearmarket productDemand ,,, ∑<=

product year 1 = 0

productplant, year = Σrm(rawmatplant, year*conversionrm)

Page 47: ETHYL LACTATE PRODUCTION

Business PlanInput Output

Mathematical Model

Number of plants

Plant location(s)

Product market(s)Raw material(s) Raw material market(s)Capacity additionYear of additionLoans and Repayment

FCI vs. Capacity Operating CostsRaw MaterialsLocations DistancesFreight costsTaxesDemandProduct Prices

Page 48: ETHYL LACTATE PRODUCTION

Raw Material:Corn, Location ResultsDubuque, Iowa

Page 49: ETHYL LACTATE PRODUCTION

Plant Capacity and Production

Rate of Return = 8.6%

0

20

40

60

80

100

120

140

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time (Year 1 = 2005)

Capc

ity (m

illio

n lb

s)

Page 50: ETHYL LACTATE PRODUCTION

Capital Improvements

Number of plants Plant location(s)Product market(s)Raw material(s) Raw material market(s)

Output

Mathematical Model

Capacity additionYear of addition

Page 51: ETHYL LACTATE PRODUCTION

Plant Capacity and Production

Rate of Return = 8.6%

Plant Capacity and Production

020406080

100120140160

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Time (Year 1 = 2005)

Cap

city

(mill

ion

lbs)

Page 52: ETHYL LACTATE PRODUCTION

Budgeting

Number of plants Plant location(s)Product market(s)Raw material(s) Raw material market(s)Capacity additionYear of addition

Output

Mathematical Model

Loans and DebtRevenues for Additions

Page 53: ETHYL LACTATE PRODUCTION

Constraints for Budgeting

Raw Material Costs

Operating Costs

Shipping Costs Total Costs

FCIyear 1 <= Initial Capital

Repay LoansCapital Improvements

Debt <= FCIyear + Pcf*Cash FlowPcf = percent of annual cash flow

Page 54: ETHYL LACTATE PRODUCTION

InitCap = $52 million, MaxDebt = FCI

ROR = 24 % Max Cap = 198 million lbs

020406080

100120140160180200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time (Year 1 = 2005)

Capc

ity (m

illio

n lb

s)

Page 55: ETHYL LACTATE PRODUCTION

Annual Cash Flow

-200-150-100

-500

50100

150200

1 3 5 7 9 11 13 15 17 19

Time (Year 1 = 2005)

mill

ion

$

Sales

Loans

Repay Loans

Total Cost

TCI

Page 56: ETHYL LACTATE PRODUCTION

Vary Initial Capital and Max Debt by increasing percentage of cash flow

35.434.840

42.141.652

42.742.268

20% CF0%InitCap (million$)

NPW (million $ for ror = 15%)

Page 57: ETHYL LACTATE PRODUCTION

Sensitivity Analysis

Freight Costs Operating CostsRaw material costsRaw material ConversionProduct Costs

Mathematical Model

Vary until Change

Page 58: ETHYL LACTATE PRODUCTION

98198Max Capacity (million

lbs)

1.541.6NPW ($million)

50%100%Percent market

194198Max Capacity (million

lbs)

33.841.6NPW ($million)

$0.08/4$0.04/2freight cost/1000 lbs

188198Max Capacity (million

lbs)

9.441.6NPW ($million)

33%28%Operating Costs as

%prod

188198Max Capacity (million

lbs)

21.441.6NPW ($million)

110%100%raw mat costs

186198Max Capacity (million lbs)

11.341.6NPW ($million)

95% 100% Sale Price

Page 59: ETHYL LACTATE PRODUCTION

Risk Analysis

Price: 20% SD Demand: 20% SD

Mathematical Model

Create 100 scenarios

Similar to Monte Carlo Simulation

Uncertainty

Page 60: ETHYL LACTATE PRODUCTION

Risk Analysis : InitCap = $52 million, MaxDebt = FCI

Frequency for Different Range of NPW

0

5

10

15

20

25

152 157 160 163 166 169 172 175

NPW ( million $)

Freq

uenc

y

NPW Average = $41.6 million

Page 61: ETHYL LACTATE PRODUCTION

Conclusions

Ethyl lactate is effective solvent

Process is feasible and profitable

Oats is an effective raw material

Dayton, Ohio is an optimal location

Page 62: ETHYL LACTATE PRODUCTION

Future Study

Local demands and supplies in Dubuque, Iowa

Equipment purchasing

Budgeting analysis.

CO2 Sequestration:

Page 63: ETHYL LACTATE PRODUCTION

Contingency Plan

Lactic Acid Production

Ethanol Production

Polylactic Acid

Page 64: ETHYL LACTATE PRODUCTION

Cargill-Dow PLA Plant.

Blair, Nebraska.

September 2001.

Questions?