Production possibility frontier analysis of biodiesel from waste cooking oil

This paper presents an assessment of the productive efficiency of an advanced biodiesel plant in Japan using Data Envelopment Analysis (DEA). The empirical analysis uses monthly input data (waste cooking oil, methanol, potassium hydroxide, power consumption, and the truck diesel fuel used for the procurement of waste cooking oil) and output data (biodiesel) of a biodiesel fuel plant for August 2008–July 2010. The results of this study show that the production activity with the lowest cost on the biodiesel production possibility frontier occurred in March 2010 (production activity used 1.41 kL of waste cooking oil, 0.18 kL of MeOH, 16.33 kg of KOH, and 5.45 kW h of power), and the unit production cost in that month was 18,517 yen/kL. Comparing this efficient production cost to the mean unit production cost on the production possibility frontier at 19,712 yen/kL, revealed that the cost of producing 1 kL of biodiesel could be reduced by as much as 1195 yen. We also find that the efficiency improvement will contribute to decreasing the cost ratio (cost per sale) of the biodiesel production by approximately 1% during the study period (24 months) between August 2008 and July 2010.