Reportedly, some fast food chains started (2007) to use their waste cooking oil to make bio-diesel. In one example encompassing 1200 restaurants, the entire corporate truck fleet of 155 vehicles was
converted to biodiesel, which means 6.1 million liters of waste oil put to use on the roads. Other sources reveal that McDonald's trucks in Austria have been using biodiesel "for a few years."
In order to show how Comparative Decision Analysis-Economic Safety Margin (CDA-ESM) can
help in the selection of the best Vegetal Waste Oil management alternative, we will consider as an
example a restaurant, i.e. a commercial kitchen (for example an ”average sized” fast food restaurant,
of roughly 150m2, or less than 500m3 construction volume) or any equivalent Medium Sized Business (MSB).
The MSB's Management wants to find a better way to deal with their waste frying oils, but also wants to avoid the implementation of the filtering station necessary for an automotive use of its
waste oils(1). Furthermore, the MSB does not have enough vehicles to make the fleet conversion
economically feasible/reasonable.
Management is also fully aware that, reportedly, some large chains like Burger King and
McDonald’s would like to utilize frying oil to heat water, but has heard they don’t have the space for a redundant system and fast-food restaurant personnel may not have the time nor the ability to operate a more complex burner system. However, Management has recently learned that there are
off-the-shelf solution with burners capable of burning waste oils that are simple to use, can even
accommodate several fuels, and, with some restrictions, can be inserted in existing furnaces, thus
avoiding expensive replacements.
Management has therefore to decide whether they want to maintain the status quo, i.e. the presently active waste frying-oil management/disposal or to switch to a new installation which would include
a burner capable of using those waste oils to generate useful heat. The new installation should not
be redundant (no need for extra room) with the present one, and should either use the existing
furnace with a new burner, or replace the old system with a brand new one.
This paper shows how to set up the data necessary for the alternative selection using an innovative
alternative evaluation methodology called CDA/ESM (Comparative Decision Analysis/Economic
Safety Margin) (C.+F. Oboni, 2009). CDA/ESM brings to MSBs the opportunity to apply Risk
Based Decision Making to the alternative selection process and to explore how two code compliant and perfectly legitimate alternatives may differ on the long term, not only in their costs, but also in
their risk profile (upside and downside risks, i.e. opportunities and failures).
CDA/ESM eliminates the pitfalls of NPV (see below) and has been used at preliminary design level
(Oboni and Oboni 2007, 2008; Oboni 1999-2000, 2005) to support decisions in many
industries/situations by comparing alternatives in financial terms, including:
a) life’s cycle economic balance encompassing internal and external risks and
b) project implementation and demobilization costs and risks.
CDA/ESM has been successfully applied to date to industrial alternatives such as: rope v.s. road transportation, surface v.s. underground solutions, environmental rehabilitation projects, water treatments alternatives, transportation networks and go/no-go decisions.
CDA/ESM is particularly useful when comparing long term projects, as its “risks included” cumulative cost evaluation eliminates the “zeroing effect” and the “rosy scenario syndrome” linked to NPV (See Web Pages in References). It has already been shown in many instances that attempts to tweak the NPV to include risks are generally misleading (C.+F. Oboni, 2009).
(1)Vegetable oils have to be treated, reducing their viscosity, in order to be used in modern diesel
engines without damage. Old d
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Cda Esm Waste Oil Disposal Applications
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How to get the most out of (Vegetable) Waste Oil for your Small or
Medium Business: CDA-ESM can help you to select the best option
By C. Oboni and F. Oboni, Oboni Riskope Associates Inc. www.riskope.com
Introduction
Reportedly, some fast food chains started (2007) to use their waste cooking oil to make biodiesel. In
one example encompassing 1200 restaurants, the entire corporate truck fleet of 155 vehicles was
converted to biodiesel, which means 6.1 million liters of waste oil put to use on the roads. Other
sources reveal that McDonald's trucks in Austria have been using biodiesel "for a few years."
http://green.autoblog.com/2007/07/02/mcdonaldswillmakebiodieselfromitsownwastegrease
fortru/
Biofuels summary:
The most known form of biofuels is called Biodiesel (BD in Europe, B in the USA). Pure vegetal BD bear
the index 100 (BD100), whereas mixes with oil derived diesel bear an index related to the ratio of vegetal
product: thus BD20 means a diesel cut at 20% with vegetal oils.
These products have international specs (ISO 14214, ASTM D 6751, DIN in Germany).
Biodiesel is ten times less toxic, than kitchen salt. It is a better solvent than normal diesel and as a result it
can damage some joints and pipes in older (before '92) standard diesel engines, but can also “cleanup”
residues, scaling etc. in engines.
Biodiesel is not explosive, biodegradable and normally has lower emissions than standard diesel.
Biodiesel reduces net emissions of Carbon Oxyde (CO) by 50% and Carbon Dyoxyde (CO2) by 78.45%,
because the emitted carbon is the one resent in the vegetal, and not one “trapped” underground and brought
to the surface.
Biodiesel is practically exempt of aromatic hydrocarbons, thus emissions of benzopyrens are reduced to a
maximum of 71%; it does not emit Sulfur, as it does not contain any: it reduces fine dusts to a maximum of
65%. However, biodiesel produces more Nitrogen Oxydes (NOx) than oil derived diesel, a problem that can
be solved by inserting, for example, catalyzers in the exhausts of diesel engines.
Waste vegetal oils can be valued as fuel, whereas they do represent a cost if disposed of. Thus they
overcome difficulties linked to taking away normal agricultural land use to supply the fuel industry, which
can generate spikes in food prices, as we have seen in the last years. Therefore Waste vegetal oils constitute
a sustainable resource.
In order to show how Comparative Decision AnalysisEconomic Safety Margin (CDAESM) can
help in the selection of the best Vegetal Waste Oil management alternative, we will consider as an
3. Description of the Case Study
The Medium Sized Business (MSB) under consideration has to dispose of appx. 5,000 liters of
waste vegetal (frying) oil per year. The MSB could be a commercial kitchen (for example an
”average sized” fast food restaurant, of roughly 150m2, or less than 500m3 construction volume).
The MSB's Management is examining various alternatives to its waste oil management, such as:
1) Maintaining the status quo (disposal and using mineral oils/gas to provide heat and hot water).
2) Replacing the furnace/boiler with a new model allowing to burn the vegetal waste oil.
3) Replacing only the burner with a new one capable of burning vegetal oils.
Of course in case of the last two alternatives' selection the new burner will have to be compliant
with environmental protection regulations, using vegetal waste oils. Alternatives 2,3 would allow
the MSB to stop the long term contract they have with a waste oil disposal company and
reduce/eliminate their use of mineral oil/gas.
The selected time horizon for the analysis is twenty years.
The Status Quo alternative (1) encompasses a contractual arrangement with a company that picks
up and legally disposes the waste for the MSB for a given lump sum annual fee. The contract
foresees penalties if the volume is larger/smaller than ±5% than the contractual value. There is also
an exit fee if the contract is stopped by the MSB before its term.
Burning waste oil on site (2,3) will generate heat that can be used for sanitary/process water and
heat. In this case MSB will have to pay the early stop penalty.
Of course, each one of the paths, including Status Quo, has its own risks that should be considered
in the decision making process/ alternatives' evaluation.
Classic decision making
In a case like the one under consideration, the MSB's Management would likely make the decision
based on “guts feelings”, or, at best, use the Net Present Value (NPV) to compare alternatives.
NPV is a very widely used evaluation technique which uses a number of assumptions, including a
major one on the financial discount rate, to define a number, the NPV, which represents the amount
of money one would have to put in the bank to obtain the same final result (gain or loss) than one's
project, at the end of its life. NPV, by its own nature, underestimates anything that happens far away
in the future to cover a large expense twenty years from now, one could invest a small amount and
let it grow, so the NPV of that future expense is minuscule compared to expenses that will happen at
the beginning of the project's life (Answers Corporation. 2009. http://www.answers.com/topic/net
presentvalue#Common_pitfalls) .
There is one additional major problem with NPV: in its classic implementation people insert yearly
expenses, yearly income, and NO risks! Thus the alternative displaying the best NPV may turn out
to be a ruinous one on real life!
4. Risk Based Decision Making: preparing the data for CDA/ESM
Before being able to evaluate alternatives with CDA/ESM, thus avoiding the NPV pitfalls (see
above), we need to perform a hazard identification on the three alternatives, and evaluate the
probability (likelihood) of occurrence of each hazard, together with the cost of consequence of an
occurrence of that hazard, thus leading to a summarized risk evaluation.
The tables below summarize the data for each alternative.
The column “Cost of consequence” defines, when needed, several magnitude scenarios.
For example the first line of Alternative 1 displays the maintenance/replacement of the traditional
burner: Scenario (1) depicts the “normal wear and tear” covered by the “normal maintenance” costs
(which will be inserted in the analysis not as a single value, but as a average, minmax cost range),
whereas scenario (2) depicts the possible need for full replacement (which will again be inserted as
a minmax range and an average cost).
In the “Likelihood” column, each scenario and cost of consequence will be paired with a
probability/likelihood which will be determined quantitatively using for example the technique
described in http://foboni.wordpress.com/2009/11/04/easywaytodefiningprobabilityofafirein
aresidentialareaofvancouver/
Alternative 1: Status Quo
Element/Hazard Cost of consequence Likelihood
Burner to maintain/replace with 1)Yearly maintenance costs 1) almost certain, yearly
standard one if need be range
2) Replacement cost 2) depends on the present state
Furnace replacement Replacement costs Depends on the present state
Fuel costs variations Could go up: Decreasing likelihoods:
1) 50% (average, minmax) 1)
2) 100% (average, minmax) 2)
3) 300% (average, minmax) 3)
Penalties if variaton of volume Based on contract Based on business volumes
to dispose forecast
Escalation of price to dispose Use various scenarios Based on scenarios
Etc.
Running costs to be inserted in the analysis of Alternative 1 will of course be the “usual” cost of
fuel, and “usual” cost of disposal.
In Alternatives 2,3, there will be no “usual” cost of fuel unless future legislation would forbid the
use of waste oils completely (there are scenarios for legislative changes that would enforce the
implementation of catalytic converters or pretreatment of the waste oil).
Also, in alternative 2,3 the possible need to install an additional tank to allow feeding the system
with an “emergency” fuel, in case the business would not be selfsufficient have been taken into
consideration.
5. Alternative 2: Furnace and Burner Replacement
Element/Hazard Cost of consequence Likelihood
Furnace and Burner Average, minmax estimates Certainty: it will be done if
Implementation alternative is selected!
Penalty for stopping the See contract Certainty: it will be done if
disposal contract alternative is selected!
New burner maintenance 1)Yearly maintenance costs 1) almost certain, yearly
range
2) Replacement cost 2) extremely unlikely
Implementation of special Average, minmax estimates Based on business volumes
fixture (additional outside tank) including possible cost of the forecast
to cope with possible deficit of “emergency” fuel
waste oil
Overcosts in case future laws Scenario: Likelihood:
prohibit waste oil burning as 1) preliminary treatment will require discussion with
foreseen today 2) need a catalytic converter local authorities to allow
3) requires switching to other determination of likelihood
fuel (NB: this is a catastrophic
scenario, as it means reverting to a
waste oil disposal through a
company, buying fuel etc.)
Furnace replacement Replacement costs Extremely low (new furnace)
Alternative 3: Burner Replacement (implemented in old furnace)
Element/Hazard Cost of consequence Likelihood
New burner implementation Average, minmax estimates Certainty: it will be done if
alternative is selected!
Penalty for stopping the See contract Certainty: it will be done if
disposal contract alternative is selected!
New burner maintenance 1)Yearly maintenance costs 1) almost certain, yearly
range
2) Replacement cost 2) extremely unlikely
Implementation of special Average, minmax estimates Based on business volumes
fixture (additional outside tank) including possible cost of the forecast
to cope with possible deficit of “emergency” fuel
waste oil
Overcosts in case future laws Scenario: Likelihood:
prohibit waste oil burning as 1) preliminary treatment will require discussion with
foreseen today 2) need a catalityc converter local authorities to allow
3) requires switching to other determination of likelihood
fuel (NB: this is a catastrophic
scenario, as it means reverting to a
6. waste oil disposal through a
company, buying fuel etc.)
Furnace replacement Replacement costs Depends on the present state
Etc.
CDA/ESM Analysis
Once all the data for the three alternatives are ready, the CDAESM application can be launched.
The result will be a detailed year by year evaluation of the performances of each alternative,
including their specific risks, leading to a sensible comparison thus enabling a rational and a
sustainable Risk Based Decision Making.
Conclusions
The aim of this paper is to show how innovative evaluations techniques can be used by small and
medium sized business to select among alternatives.
Thanks to CDAESM the power of Risk Based Decision Making is now available to small and
medium sized businesses.
References
F. Oboni. 19992000. Risk/Crisis Management Systems Design, University of British Columbia
F. Oboni. 2005. Do Risk Assessments Really Add Value To Projects?. CIM, Ottawa
F. Oboni and C. Oboni. 2007. “Improving Sustainability through Reasonable Risk and Crisis
Management”. ISBN 9780978446208
F. Oboni and C. Oboni. 2008. Oboni, Risk and Decision Making. www.edumine.com
C. Oboni, F. Oboni, 2009, Stop Procrastinating! NPV is Dead: Use Risk as a Key Decision
Parameter, CLRA Meeting, Quebec City.
APPENDIX
This Appendix is based on recent research from one of the leading technical universities of Italy
(Zecchinato, L., Utilizzo di olii vegetali a scopo energetico, Politecnico di Torino, Facoltà di
Ingegneria Chimica, 32008).
The research report states that “for the tests we have used a burner ARCO BR5, a low pressure
burner built to burn Naphta, Fuel, Vegetal Oils, or Wasted Oils (mineral or vegetal), pure or in
mixes, as needed (www.arcobruciatori.it ). The burner works under the principle of low pressure
and emulsioning, i.e. by mixing a part of the primary combustion air with the fuel. Thanks to this
principle, with a good airfuel mixing already in the compressor and with the spraying through a
specially made nozzle, the burner produces very low emissions with any of the tested fuels, in
compliance with the Italian and most emission codes.”
The figure below summarizes the reasearch results for combustion tests of Refined R or Unrefined