The big news to come out of last week’s Biodiesel Finance and Investment Summit is this: the biodiesel industry must evolve in order to remain viable.
The crux of this evolution, however, is in what direction and to what end?
The major players in the biodiesel space are presently arriving at a series of crossroads that primarily concern the adoption and development of future feedstocks, technological advancements and alternative business models. Some will succeed, whereas some will inevitably fail. The decisions made within the biodiesel industry in the next few years will determine the top of the food chain in the biofuels feeding frenzy.
Failed first generation biofuels operations are already filing for bankruptcy, soon to be gobbled up or picked apart by their more flexible, forward-looking counterparts. There are a number of one-dimensional plants halting development or canceled outright for this reason alone. There is blood in the water and a lot of it points back to the issue of feedstocks.
“Without oil coming from non-traditional feedstocks, this industry is in trouble.”
This quote from John McKenna, Chairman and CEO for Hamilton Clark & Co, perhaps best encapsulates the overall concerns of the Summit’s speakers and attendees.
Alternative feedstocks, next generation feedstocks and quite simply, feedstock development and integration were given plenty of airtime over the course of the two day event hosted by Infocast at the Princeton Club in Midtown Manhattan.
Jacob Davis, Project Manager for Biodiesel Systems, was quick to note that the biofuels industries represented a “new class of farmers with a new set of crops,” while Brent Baker, CEO of Tri-State Biodiesel noted that “if you want to be in the biodiesel business, you want to be in feedstocks or at least as close to them as possible.”
Baker has plenty of reason for this assertion, as his company collects the bulk of their biodiesel feedstock from the deep fryers and waste bins of over 1500 restaurants in New York City.
Jonathan Koch, Managing Director of US Renewables Group, added that the margins were much higher in the agricultural sector of the biodiesel industry, noting that the bulk of the money to be made was “in developing feedstocks, not in fuel production.”
Developing and sourcing the next generation of feedstocks dominated discussion in terms of urgency and analysis. Among the list of feedstocks currently being explored as substitutes to the now dominant soy- and palm-based operations, inedible livestock tallow (fat), as well as white and yellow grease, were discussed with great frequency.
Owing largely to the inexpensive prices that these livestock and cooking waste streams currently carry, these low-cost feedstocks are now in high demand, which of course produces a basic problem: when cheap, finite resources are in high demand they quickly cease to remain cheap and instead increasingly become scarce and locked-up commodities.
The merits of these feedstocks were agreed upon in terms of reconfiguring what would otherwise be a waste stream into a value-added commodity, but the notion of basing a business model solely on the current pricing of inedible fats was heartily discouraged as short-sighted and one-dimensional.
Algae was on the tips of everyone’s tongues, but examples of “proven” models were few. Jerome Peters, Senior Vice President & Group Director for Project Finance for TD Banknorth, mentioned algae-based systems that had produced 1,200 – 5,000 gal/acr. based upon estimates released by Royal Dutch Shell. This, however, did little to sate everyone’s appetite for information, as questions regarding all aspects of algae-based businesses and systems poured in during the Q&A periods that followed each session.
Pressed further, Peters elaborated that TD Banknorth was developing installations along the lines of the ‘biorefinery‘ paradigm i.e. co-producing a diversity of products from a number of feedstocks, thus increasing the plant’s flexibility and adaptability in what will surely be an increasingly turbulent commodities market. Peters also made mention of using spent distiller’s grain for the production of biofuels — a decidedly different take on the ethanol-from-corn paradigm that may exhibit a better energy balance than what currently exists in the traditional model.
If there were any doubt in the room after all of this discussion, John McKenna issued another declaration that one could take to be unanimously agreed upon in that “the traditional model is not working.”
The implication of ‘tradition’ existing in what would otherwise seem to be a relatively new industry in biodiesel production hints at its ties to both the agricultural and petroleum industries, as well as several antiquated business-as-usual management models.
Clearly, a bevy of solutions needs to be found and integrated into the formulation and overall operations of the biodiesel industry or else it will flounder and implode. To this, again, McKenna has an answer in that “technology has to delink the feedstock/cost problem.”
At face value, what McKenna is positing is that solutions that provide a robust, economically sound platform for biodiesel production can be found in technological advances and applications.
So, what then of technology?
As it turns out, technology was discussed, but details were offered at a minimum — which is understandable, as these are business folk (bankers, lenders, developers, etc.) not scientific researchers or tech-wizards. On the other hand, the lack of technological solutions discussed was slightly disconcerting, as this industry seems to necessitate a holistic awareness of the fast-moving patterns and forward-looking signals that are coming out of tech sectors with regards to multiple areas of biofuels production.
To be fair, Chris Sorrells, Managing Director of NGP Energy Technology Partners, was on hand to denote the tech that he was looking for in a prioritized rundown: First and foremost, feedstock development tech was of the utmost importance, followed by infrastructure, logistics and transport tech, with catalyst/reactant tech following close behind.
Brent Baker seemed to be the dominant champion of technological solutions, positing that “technology needs to be upgraded — it is not a given in this industry.”
As the Chief Executive Officer behind Tri-State Biodiesel, Baker should know, as producing biodiesel from waste vegetable oil (WVO) requires more robust tech than what would otherwise suffice for straight vegetable oil (SVO) systems. If anything, those people involved in the WVO-biodiesel market may be the ones to follow if looking for tech signals and solutions, as well as patterns leading into the more marketable and soon-to-be divergent “sustainable biodiesel” arena(s).
Baker went on to note that there is a growing demand for higher quality biodiesel products than what currently exists in the marketplace. At that, Jacob Davis went on to note that refocusing biodiesel products into custom/premium blend contracts could be immensely marketable. Davis offered the example of UPS switching to biodiesel for their ‘green fleet’ and asking “Where is this fuel coming from? There is a story there.”
Clearly, Davis posited, tailoring a product (or blend) for highly visible companies and/or projects would increase PR, market viability and consumer sophistication — all good things for everyone in the biodiesel space, especially those shaping the custom blends market(s).
In closing, it would be negligent to omit the prescient ‘industry homework’ that Brent Baker left for the Summit attendees to digest, as it reads like a perfectly sensible wishlist for both biodiesel businesses and advocates alike (see Brent’s comment below for further clarification):
First, work towards achieving a holistic energy balance of 3x – 6x — that is, generate three to six times the energy that you put into your final product.
Second, do not compete with food.
Third, do not use palm oil [video], as it is an inferior, detrimental and unsustainable feedstock
Fourth, do not produce ethanol, as it is an inferior, costly and needy product.
Fifth, push auto manufacturers and OEMs to accept and warranty B20 blends of biodiesel in their current and upcoming fuel lines.
Sixth, in terms of governmental support, push for a blending credit of $1.50 for SVO and $1.00 for WVO systems to further incentivize the development of a domestic biodiesel industry that will benefit the United States in innumerable ways.
Lastly, Baker recommended that everyone pay attention to a documentary that was premiering at Sundance this year. Entitled “Fields of Fuel“, the film is drawing comparisons to “An Inconvenient Truth” in that is could thrust biofuels to the forefront of public discussion and attention in the coming years.
In all, it was good to see that the Bigs of the biodiesel industry are openly aware of the urgent need for reformulation and change. To be sure, there is no shortage of interest in how this awareness will play out in the coming months. 2008 could very well be the year that the biodiesel industry went boom!
Curtiss P. Martin is the Clean Technology Editor at ScribeMedia in New York City who is still conflicted at having to trade his biodiesel-baby, a 1984 Mercedes-Benz 300CD, for the NYC MTA.
