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3.4 Economic evaluation of operation of vehicles on wood gas

3.4.1 The case for wood gasifiers
3.4.2 Method used for the economic evaluation
3.4.3 Economic baseline assumptions
3.4.4 Marginal costs for the wood gasifier system
3.4.5 Economy of a producer gas tractor
3.4.6 Economy of a producer gas truck

3.4.1 The case for wood gasifiers

Installation of a gasifier system on a vehicle involves a certain investment, leads to somewhat impaired performance, and increased time required for service, maintenance and repair. All this can be translated into increased costs for the vehicle. Wood gas operation is only economically feasible if these costs are outweighted by the savings on fuel costs.

It can be inferred from this that wood gas operation will be most competitive in situations where the annual utilization of the vehicle is high, the labour wages low and the price difference between petroleum fuels and wood is large.

An attempt will be made below to identify the ranges for these parameters where wood gas operation may be a competitive alternative.

3.4.2 Method used for the economic evaluation

The purpose of the economic evaluation presented here is to illustrate under which circumstances wood gas operation of a vehicle may compete with straight diesel operation. This will be done by a comparison between the marginal costs for the gasifier system and the savings on fuel costs for two applications, a farm tractor and a truck, of the same size as those described in section 3.2.

Three cost levels for the gasifier system will be analyzed, a high level representative of conversion of single vehicles in Sweden and two lower levels assumed to represent conversion of single vehicles in countries with much lower labour costs.

A range of labour costs and a range of fuel costs believed to represent the present situation in Sweden as well as in the Third World will be analyzed. Capital costs will be calculated by the annuity method assuming a fixed real interest rate 1/. All costs will be evaluated in US dollars at a mid-1984 rate.

1/ The real interest rate is equal to the actual interest rate minus the inflation rate.

3.4.3 Economic baseline assumptions

The economic evaluation will be made assuming a real interest rate of eight percent with labour wages in the range 0.5 - 16 US$/hour with a price of diesel oil of 8 - 16 US$/GJ and wood fuel of 0.1 - 3.5 US$/GJ. It should be mentioned that in Sweden the labour wages are about 16 US$/h. Diesel oil is sold at about 0.3 US$/l, i.e. 8.5 US$/GJ and wood chips as a commercial fuel at 3.4 US$/GJ.

In Chapter 4, the cost of preparation of gasifier fuel is estimated to be 0.11 h + 0.04 US$/GJ, giving a cost of 0.1 - 1.8 US$/GJ for the range of wages considered here. Diesel fuel in remote locations was estimated to cost 12.6 US$/GJ.

In Chapter 5, finally, the cost of coconut shell as fuel is estimated to 0.8 US$/GJ.

3.4.4 Marginal costs for the wood gasifier system

a) The capital cost

The marginal capital cost can be calculated by the annuity method if the capital investment and the economic lifetime of the gasifier system can be established.

The capital investment can be estimated from a recently converted Ford D-truck used for tests in Sri Lanka, which has been fitted with a gasifier system similar in size to the standard F-5/80-150 gasifier.

Table 3.19 shows how the different items of expenditure add up to the total conversion cost of about US$ 11000. This obviously is the conversion cost for a single vehicle converted in Sweden at a high labour cost (14.8 US$/h). It is quite clear that the labour cost is important since the manufacturing labour and fitting costs account for over 70 percent of the conversion cost. To illustrate the impact of a lower labour cost, Table 3.19 also shows the estimated conversion cost in a developing country with labour costs of 2 and 0.5 US$/h. In these estimates it is assumed that the time required is twice as high as a result of less well equipped workshop facilities and that the material costs are 10 percent higher. The conversion cost under these assumed conditions would be about US$ 5300 and US$ 3600 respectively.

With an assumed economic lifetime of six years and a real interest rate of eight percent, the annual capital cost for the gasifier system will be 21.6 percent of the capital investment.

b) Service and maintenance costs

Based on the experiences presented in section 3.2.4, the extra labour to keep the gasifier plant in operation can be estimated as 0.3 in/operating hour. The resulting cost will obviously depend on the labour rate, see Tables 3.20 and 3.21. The maintenance cost has-been assumed to be five percent of the capital investment for each 1000 operating hours. This leads to an estimated maintenance cost for operation in Sweden of 0.55 US$/operating hour, and 0.18 US$/operating hour in a country with a low labour cost.

For the economic evaluation of the wood gas truck, it will be necessary to consider the reduced load capacity and the longer distance travelled for a given load. The service and maintenance costs of the truck and engine will be assumed to depend on the annual driving distance according to Swedish experiences. For 60000 km/year it will then be 0.66 US$/km, for 30000 km/year 0.80 US$/km and for 1500 km/year 1,40 US$/km.

Table 3.19 Cost of converting a vehicle to wood gas operation

Cost item

Actual cost-for conversion of a truck in Sweden

Conversion in countries with lower labour costs


Estimated conversion cost, wages 2 US$/h

Estimated conversion cost, wages 0.5 US$/h





753 1/



This is the cost of replacing the diesel engine by a renovated used gasoline engine. It will be assumed representative of the cost of the necessary adjustments to a diesel engine for dual fuel operation.

Gasifier and gas cooler




Material cost increased by 10%, labour time increased by a factor of 2.

Gas filters





Starting fan




Cost increased by 10%

Fittings, valves, gaskets, auxiliaries, controls









Labour time increased by a factor of 2.



5266 2/

3640 2/

1/ At labour wages of 15 US$/h.

2/ These estimates do not appear unreasonable in comparison with costs reported for somewhat simpler systems manufactured in Brazil (750-2000 US$) and Sri Lanka (1000 US$).

c) Fuel costs

Fuel costs will be calculated assuming dual fuel operation and a fuel consumption for the tractor according to Table 3.13 and for the truck according to Table 3.16.

3.4.5 Economy of a producer gas tractor

The annual difference in cost between a diesel tractor and a wood gas tractor will be evaluated for three economic situations, namely:

- European conditions (Sweden)


16 US$/h

Wood fuel

3.5 US$/GJ

Diesel fuel

8.5 US$/GJ

- Intermediate conditions


2 US$/h

Wood fuel

2 US$/GJ

Diesel fuel

8,5 US$/GJ

- Favourable conditions for producer gas


0,5 US$/h

Wood fuel

0,5 US$/GJ

Diesel fuel

16 US$/GJ

The annual utilization will be assumed at 500, 1000 and 2000 hours. This range is believed to cover what is encountered in practice. To simplify the comparison, it will be assumed that the power loss of 20 percent can be accounted for by adding an investment to the producer gas alternative equivalent to the difference in cost for new tractors with that power difference. The cost difference can be estimated to be about US$ 2500 and it will be assumed that it must be depreciated on 10000 operating hours. The comparison is made in Table 3.20 where the indifference costs for wood fuel and diesel fuel are also shown for each case.

It is quite understandable that wood gasifier tractors are not in regular use in Sweden. The operation implies a loss even if the wood fuel is free of charge. It is not until the price of diesel fuel increases by 100 to 200 percent that a wood gas tractor would be economic.

Table 3.20 Economic Comparison between a Wood Gas Tractor and a Diesel Tractor (1984 US$)

Table 3.21 Economic comparison between a wood gas truck and a diesel truck

The situation is quite different if the wages and the cost of fuel wood are lower. For the intermediate case analyzed the producer gas tractor will be economic if the annual operating hours exceed about 700. At the very lowest wages and wood fuel cost, and the high cost for diesel fuel, the producer gas tractor appears very attractive. The payback time for the gasifier system is of the order of 13 to 36 months under the conditions analyzed for this situation. It is an interesting observation that use of expensive systems built in Europe would not entirely eliminate the-economic possibilities for gasifiers in the Third World. The producer gas tractor would still be economic in the case of very low wages and wood costs and with a high price for diesel fuel. In the intermediate case it would still be economic for long annual operating times. It is also true that even a very cheep gasifier system would not be economic in Europe. Even if the gasifier did not cost anything, the additional labour costs exceed the savings on fuel and this eliminates any possibility of economic operation with producer gas, except perhaps in cases where the tax system works in such a way that a person's own labour effectively costs much less than that of hired hands. 1/

1/ The situation could be applicable under some circumstances in Sweden.

3.4.6 Economy of a producer gas truck

The difference in annual cost between a diesel truck and a wood gas truck will be evaluated for the same economic situations as considered for the tractor. The initial cost of the truck is assumed to be US$ 28000, with ten percent added for freight costs to a third world country.

The difference in cost is shown in Table 3.21 for three utilization levels, i.e. 60000, 120000 and 240000 tons and kilometers per year.

The average velocity is assumed to be ten percent Less for producer gas operation, mainly because of stops for fuel charging. In European conditions the average velocity is assumed to be 60 km/in for the diesel vehicle. In the other cases, where road conditions are less favourable, the average velocity is assumed to be 25 km/h.

As can be expected, the results of the comparison are qualitatively similar to those presented for a farm tractor. Wood gas operation in Sweden will not be economic until the diesel price has increased considerably - by more than 200 percent.

Under intermediate conditions where wages and the price of fuel wood are lower, wood gas operation does not appear economic either. This is a different conclusion from the tractor case, and can be explained by the differences in use pattern. If it had not been necessary to drive the wood gas vehicle a longer distance to carry the same load, the wood gas truck would have been marginally economic for the case of 240000 ton km/year. The increase in diesel fuel price required for wood gas to be economic is between 100 percent and 25 percent. For long distances driven annually, it may be economic at the present oil price if the wood is extremely cheap.

For the extreme case of low wages, low fuel wood price and high price of diesel fuel, the wood gas truck appears extremely profitable with a pay-back time of two years or less for the gasification equipment.

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