This article will summarize the results of the survey response percentages and will be elaborated on with comments from 22 follow-up phone interviews. The survey and interviews show the many facets of the biodiesel industry, and how companies are competing for feedstocks and distribution while working as an industry to achieve the goals of decreasing dependence on foreign oil and making biodiesel a viable fuel source for the future.
With the shrinking availability of feedstocks driving the costs of producing biodiesel higher, how are companies coping with the current market conditions? There’s no better way to find out than by asking the industry.
Designing Plants that Survive
For the biodiesel industry to survive as a long-term fuel solution, it is important to design facilities that are best able to meet the challenges of limited feedstocks and distribution channels. Size, proximity to transport, heating systems and ability to adapt are all elements that should be well thought out during plant design.
Two plant sizes that are able to ride out difficult market fluctuations are small regional operations and large facilities that can negotiate on all levels of operation. The mail survey supports this conclusion as smaller operations (1 MMgy to 9 MMgy) were the most common plant size with 38 percent of the respondents. Larger operations (10 MMgy and larger) made up 29 percent of the survey respondents.
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The findings were similar in post-survey phone interviews. Some plants under construction were stopped short of completion and existing facilities have been “mothballed” due to lack of feedstock availability, financing and high costs making operations unprofitable. Many of those able to keep processing biodiesel have flexibility in feedstocks, run very efficient processes and maintain good distribution networks.
“The trend we see for plants with staying power are in the 3 MMgy range, so the cost of running the plant is not so great,” says David Weaver of the biofuels practice group within IMA Financial Group in Wichita, Kan. “They have access to local feedstock and the biodiesel can be taken by one offtake partner. The other successes are larger and in it for the long haul. Thirty million gallons per year would be on the small side, on up to 80 MMgy. These companies have the size to negotiate long-term feedstock and offtake agreements. They are also well situated and have access to rail, truck and port which allows for flexibility in feedstock procurement and offtake transport.”
While size is an important factor in a biodiesel facility, feedstock flexibility, efficiency of process heating and design, marketing of the glycerin byproduct and distribution channels all contribute to the success of a biodiesel operation.
It Pays to be Feedstock Flexible
Feedstock flexibility is an essential element in designing biodiesel facilities that will allow the biodiesel industry to thrive. The mail survey showed respondents use a variety of feedstocks. Crop and seed oils were used in 71 percent of operations. Animal fats, used cooking oils and yellow grease were each used in 25 percent to 34 percent of facilities. In follow-up phone interviews, animal fats, used cooking oils and yellow grease were used with more frequency due the high cost of soy oils.
Some companies are staying with soy oils because of their cold weather qualities. Jim Blair, technical manager for Mason City, Iowa’s Freedom Fuels plant, says his facility only uses vegetable oils. “The economics have gotten worse,” he says. “We are running and producing still, but we are looking for alternatives to the high cost of feedstocks. We have been looking to South American soybean oil, and palm oil to see if it makes financial sense.”
Mark Dehner, marketing manager for Growmark in Bloomington, Ill., says his company continues to use soy oil. “We have not changed feedstock plans,” he says. “We are an agricultural supply co-op and our customers grow soy. We have stuck with soy because we understand the cold properties and how to handle it. There would be a learning curve in using other feedstocks.”
Other producers use canola as a main vegetable oil source. Grover McKee, owner of Burden, Kan.’s Salemby Resources says weather had a negative impact in 2007. “We had a crummy production year because we were rained out,” he says. “We had a great crop and couldn’t get it harvested; it rotted in the fields.” He uses canola as his main feedstock and soy as secondary source, which he says is not cost effective.
Flexibility in feedstocks is a growing trend that should begin during plant design. The industry has changed; many companies that are strictly soy focused have had to stop production because of design constraints. Planning for multiple feedstock capabilities is a minimum requirement for new facilities. Growing your own feedstock is also a huge advantage that allows protection from high market prices caused by the lack of availability.
Karl Locascio of the Indiana Soybean Alliance wonders if anyone has the answers when it comes to how many acres of feedstocks need to be planted to keep up with demand. “I’ve read that Brazil is not going to have a big increase in soybeans this year, and we are expected to be down from last year’s record highs,” he says. “Corn can’t afford to give up those acres because we are still opening new ethanol plants. The real focus should be on looking beyond soybean oil as the primary feedstock for biodiesel. Soybean oil will always have a place in the biodiesel industry, but if the industry is going to continue to grow, we need to look at other options. In addition, we are entering an age where new technologies are in the pipeline that can add improvements in the food and feed value of soybeans, which opens even more markets for soybeans. Again, this is a good thing for the soybean producer. I feel we should continue along the path we are on, but keep focused on other feedstock sources. The ethanol industry is looking at and researching using corn cobs as the feedstock for their cellulosic ethanol plants. Utilizing more of the corn plant is a great place to start.”
While the business presents challenges, some, such as Roger Holleger, owner of Sunshine Biofuels in Camilla, Ga., view the adversity as an opportunity. “We were using soy and are now using chicken fat,” he says. “Our margins have gotten far better. We are constantly reviewing plans regarding our feedstocks. That is the only way to make it. Anytime you change feedstocks there is a learning curve to using it in the process.”
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