Taking the Pulse of the Biodiesel Industry

By Jed Seybold | January 17, 2008
A mail survey of 600 biodiesel professionals conducted June 1, 2007, by West Conshohocken, Pa.-based Paratherm Corp., provides a good picture of working and planned facilities in the United States. The survey was followed up with in-depth phone interviews of survey participants. The respondents' job titles ranged from chief executive officer, plant manager, application engineer and insurance specialist, among others. Plant production capacities ranged from 20,000 gallons per year to 60 MMgy. The feedback of the 120 respondents discussed plant size, feedstocks, process heating, waste heat recovery and roadblocks to the biodiesel industry.

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.

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."

Some feel that the learning curve applies to the biodiesel business model. Bently Biofuels uses feedstock from the area surrounding its home in Minden, Nev. "Our business has been insulated from the feedstock crunch in that we collect, on a very local level, waste oil, downgraded oil and vegetable oils from local farms," says General Manager Carlo Luri. "By focusing on getting our feedstocks and providing it to end users locally we insulate ourselves from outside feedstock pressure and cost to transport. We don't shop for feedstocks or ship biodiesel more than 200 miles."

Clearly, high prices are affecting what feedstocks are being used. The overwhelming trend is that companies are looking to new feedstocks to create biodiesel and keep plants running. Many companies are moving toward animal fats. "We are moving more toward fat feedstocks and first-use animal fats because they make a very good product compared to vegetable oils," says Charles Cross, president of United Oil Co. in Pittsburgh. "The end users need to concentrate on furthering biodiesel and not the origin of the feedstocks, as long as the product meets the American Society of Testing Material D 6751 standards. Fleet managers are well served to develop relationships with a particular producer to ensure product consistency, making maintenance challenges easier."

Russ Reed, plant manager at Sanimax Energy in DeForest, Wis., has another view. "Plant technology defines what your feedstock and end product cost will be," he says. "The technology drives the feedstock and the feedstock drives the technology. Each plant's design should be tailored to the region and the feedstocks that are available in that region. Plants should not be cookie-cutter operations. Customizing the design will allow a plant to operate most effectively in different environments, which is crucial to effectively running a business, keeping plants running with increased feedstock pressures and furthering the biodiesel movement. As an example, don't go to Georgia and design a plant to accommodate canola. It should be designed to process catfish, poultry and yellow grease. Our business has not changed that much with feedstock pressures. We designed our plant from the beginning to accommodate multiple feedstocks. We use every tallow-yellow grease, choice white and unrefined blend."

Facility and Process Design: Lessons Learned
Plant and process design are critical elements to accommodating multiple feedstocks and producing biodiesel efficiently. The survey revealed that 55 percent of companies do their engineering internally. However, outside consulting is often used. Out of 120 survey respondents, 23 percent were operating two or more biodiesel facilities. There are obviously lessons to be learned as multiple plants are opened.

In the survey, steam was used to heat processes 48 percent of the time, followed by thermal fluids at 31 percent. Sunshine Biofuels uses steam because they have expertise in steam systems. Others like United Oil Co. " had steam, so we didn't give it much consideration," Cross says. "We have a good outlet for our crude, so we don't need to invest in the equipment to further refine the glycerin. We don't feel the investment will be worth the increased cost and regulations."

In the past, many plant construction and design firms used steam. Interestingly, as companies have opened and operated multiple plants, they have re-evaluated process heating systems. "We stopped using steam for our process heating," says Raj Mosali, chief executive officer of Miamisburg, Ohio-based Jatrodiesel. "There was too much maintenance and the pressure was too high. Thermal fluids allow us flexibility in our operating temperatures. We can set the temperature, flip a switch and quickly be up to where we need to be. If we wanted to further refine glycerin we would have to increase temperatures, which we can do with our thermal fluid system. We have a good outlet for our crude glycerin, so we have not needed to further refine it."

Sanimax's Reed says his plant uses steam and thermal fluids. "We use steam only for tank heating and line tracing," he says. "Thermal fluids allow lower intensity pressures and have no freeze-up concerns, which could be a problem in cold climates like Wisconsin. While the systems can be relatively expensive to install, they can decrease maintenance and operation costs. In our second plant we use only steam, but that is because it does not involve distillation. We don't need increased heating and the control that thermal fluids provide."

Smaller operations also have found thermal fluids to be a good fit. Steve Fugate, chief executive officer of Tiffin, Iowa's Green World Biofuels, uses thermal fluids in the heating process and complements it with a solar hydronic system in the pre-heating and drying stages. Bently Biofuels also has an 800-square-foot solar thermal array that complements a biomass boiler. They are collecting about 1 MMBtus per day with the system. Using water linked to a glycol system through a liquid-to-liquid heat exchanger, the heat transfer system is used for process, building, domestic water and finished product heating.

"We use thermal fluids in our process heating and feel it is very economical," says Stephen Russel, fleet superintendent for Keene, N.H.'s public works. "We use waste heat recovery throughout the process. We work with the Keene State College to study air quality of biodiesel with different mixtures, under a grant from the EPA. We power about 125 vehicles for the town and college (with biodiesel) produced from brown recycled grease. We are working to produce up to 50,000 gallons and are supplementing low income heating needs with a 10 percent to 20 percent biodiesel mixture."

Process heating systems are an important element in plant design and handling multiple feedstocks. Heating systems also play a significant role in how far glycerin byproduct can be refined.

Finding Markets and Uses for Glycerin
Most companies, 68 percent surveyed, end up with a crude glycerin byproduct. However, 16 percent are taking the glycerin to technical grade and only 3 percent pharmaceutical grade. Companies have found different outlets for these grades of glycerin, and some are burning it.

Sanimax refines to a technical grade. "We can take it to a pharmaceutical grade, but the last 1.5 percent of the process does not work out economically for us," Reed says. "We have outlets for the technical grade and are better suited to that. We buy other companies' crude glycerin and refine it. The challenge is getting the quality of glycerin to work with. We work hard at buying glycerin that can be blended and processed into a quality product. We buy the glycerin from the owners of the byproduct only, so we can know the feedstock origin and match the crude to our processing technology." Sanimax has burned the glycerin, but has better uses for it economically given the lower Btu values.

Freedom Fuels does not refine the glycerin to pharmaceutical grade, but sells a technical grade to a kosher facility and the rest of the crude to Cargill. "We have been hearing there is a good market in Europe and Asia for crude glycerin; we haven't had to investigate it because of our current situation," Blair says. "We have done some experimenting with burning glycerin but have not had strong enough success to go that route."

T.J. Morris, application engineer with Keenesaw, Ga.'s Thermal Fluid Systems Inc., says clients have been experimenting with burning glycerin. "While it has less Btu content than diesel No. 2, it can be used in low-grade heat processes. Eliminating salts and alkaloids is proving a challenge."

McKee has looked at further processing glycerin to technical or pharmaceutical grade. "The jury is still out on its worth," he says. "It is a question of degree, which is not a well understood concept in the canola business. Canola is almost an ideal crop for biodiesel; this will just make it a little better. As farmers we don't have waste product. We use the crude glycerin in cattle feed. We have experimented with burning it in our combines. It is important that people understand the relationship between farm production and the real world. Canola is 90 percent as efficient as fuel oil. When it is being burned at 2,000 degrees Fahrenheit you are not going to notice any difference in performance. Plus, we are harvesting the same time as the crop is ripening so we are mostly using nature's power."

Green World's Fugate offers another insight. "It works well, but you have to burn it at 1,200 degrees Fahrenheit or greater, or you get a toxic smoke," he says. "Used oil heaters are a good way to properly burn the glycerin, which is done in auto shops and other industrial heating."

IMA's Weaver also weighs in. "There is no insurance issue," he says. "We advise to go to a broker early and ensure you have the proper fire protection. We have engineers who will determine where methanol concentrations are and how a leak would be contained if it were to happen. In further refining the glycerin we see mostly large facilities doing it. There is a small market and the cost stops most companies from taking it that far."

Challenges to the Growth of the Biodiesel Movement
There are many challenges to furthering the industry, including feedstock availability, economic feasibility, supply chain constraints and political influences.

Green World Biofuels sees collecting used oils as a problem. "The biggest problem that we hear is restaurants and waste oil facilities calling for pickups and it is just not getting done," Fugate says. "National rendering companies are doing a horrible job of picking up the used oils. These resources just end up sitting there and are a disposal issue for the restaurants. We are working in Iowa with cities and municipalities to get them to convert old sewage trucks and fire engines into grease collection vehicles. This would ensure grease is properly disposed of by restaurants, and allow the town to turn it into biodiesel to power their fleets and facilities."

Other large industry concerns could prevent further growth. "We don't currently have expansion plans, but have our eyes open," Cross says. "We would like to see an increased demand for the product. An obstacle to expansion of the industry is allowing tax breaks for ConocoPhillips to make renewable diesel that has the exact same specifications as petro-diesel. Allowing this injustice will kill the industry and eliminate all the progress made through state and federal legislation. If this unfair 'greening' of petroleum diesel is allowed, you will not see additional capitalization of biodiesel and ethanol production facilities."

Biodiesel producers face difficult challenges in keeping the movement going. Stuart Stranahan works with Olympic Biofuels in Bainbridge Island, Wash. His pilot project had to stop production, liquidate equipment and scrap plans for an additional plant. He still distributes biodiesel and remains optimistic. "I believe in biodiesel and intend to stay in the game and get back to sustainable production," Stranahan says. This type of perseverance combined with plant designs and processes that allow for flexibility in feedstock and production will keep biodiesel on track as a viable fuel source in the United States.

Perseverance will have to be combined with constant evaluation of biodiesel production processes to keep the industry moving forward. As the industry matures, companies must find ways to ensure the production of biodiesel is profitable. Flexibility in feedstocks, intelligent plant design and established distribution channels are essential elements to keeping biodiesel moving forward as a fuel source for the present and future.

Business Development Engineer Jed Seybold conducted the survey of 600 biodiesel professionals and follow-up interviews on behalf of Paratherm Corp., which provides heat transfer fluids to biodiesel producers and is an associate member of the National Biodiesel Board. Full survey results are available upon request at www.paratherm.com/surveys/biodiesel.asp. Reach Seybold at jseybold@paratherm.com or (800) 222-3611.
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