Biodiesel Production Trends Survey 2008

For the first time Biodiesel Magazine asks producers exactly how much biodiesel is being produced. The results of our comprehensive survey create an intriguing picture of the industry. Not all producers took our phone calls, but those who did spoke loudly.
By Craig A. Johnson | April 15, 2008
Staying in touch with biodiesel producers is the lifeblood of Biodiesel Magazine. It's what keeps our content fresh, focused and relevant. Since the publication's inception in 2004, we've reliably produced accurate monthly construction reports and a comprehensive, continually updated list of producers-searchable by name, state, feedstock, capacity and start date-on our Web site. Our efforts are amplified once a year when we conduct our annual "Proposed Biodiesel Plant List," an exhaustive census of would-be producers (coming in September).

This year, as the industry continues to face unprecedented challenges, we took things a step further. Late in 2007, as the rate of biodiesel plant startups began to wane, and reports-both fact and rumor-of severely limited production output began to surface, we decided it was time to go beyond construction and startups and take a good hard look at production trends. A survey was in order. About a dozen writers and editors teamed up, divided more than 150 plants proportionally, and hit the phones. We asked producers 16 questions pertaining to data fields ranging from the plant's nameplate capacity to feedstock storage capacity. Our principal aim, of course, was to find out for ourselves approximately how much biodiesel is currently being produced in the United States and Canada-and roughly how much was produced last year.

Of the 154 plants listed as "producing," or on line, on Biodiesel Magazine's Web-based plant list, 107 or nearly 70 percent responded to our survey. In addition, the survey was conducted alongside the biannual "U.S. & Canada Biodiesel Plant Map" providing the information for what we believe is the most accurate picture of the biodiesel industry available anywhere. Plants that didn't respond to our survey are listed as unknown on the plant map for the time being, and it's our intention to verify their information in the future.

Producers Respond
One of the primary reasons the survey was undertaken was to find out approximately how much biodiesel is being produced. In November 2007, National Biodiesel Board Chairman Ed Hegland told Minnesota Public Radio that actual production in the industry was estimated at a rate of 400 MMgy to 450 MMgy. This works out to an industry that was producing at 20 percent to 25 percent of its potential. Hegland said high feedstock costs kept some producers from producing at 100 percent of capacity.

The NBB's numbers are calculated differently from those generated by Biodiesel Magazine. NBB members are asked to report and pay dues based on how many gallons of fuel they produce. For our survey, the staff attempted to contact all plants that produce 1 MMgy and over, including those who aren't NBB members.

According to our producing respondents, the average plant produced roughly 40 percent of its nameplate capacity in 2007. For 2008, we asked producing respondents to estimate their current rate of production as a percentage of their nameplate. According to our producing respondents, the average plant in 2008 is producing at a rate of 45 percent of its nameplate capacity. The 2008 number reveals a slight increase, which could be because some of the respondents came on line late in 2007, and others may have been able to successfully incorporate less expensive feedstocks into their operations heading into 2008. As one plant owner said when asked what feedstock he was looking to use in 2008, "When my tanks are empty, we'll be switching to yellow grease."

Twelve of the producing respondents who were making biodiesel in 2007 say they are making less fuel in 2008. The average drop in production among these plants was 29 percent. Some producing respondents reported making more fuel in 2008 than they did in 2007. When adjusted to reflect only the 14 plants that were in operation during all of 2007, the numbers reveal a 22 percent average increase in production.

After speaking to more than 100 plants, we also learned that 21 plants are now idle. It is not clear if those will be restarted once margins improve, or if they will be repurposed, resold or removed. These plants are listed as idle on the current biodiesel plant map.

Feedstocks in Focus
The story of biodiesel production in 2007 was dominated by feedstocks. In late 2007, soy oil hit a 34-year high, causing many producers to completely rethink their business model. One producing respondent plans to send a spokesperson to Vietnam to "search for crude" soy that was less expensive. Another pointed out that "tax incentives for feedstock supplies are needed to stabilize the market." One of the respondents who reported his soy-only plant is currently idle said, "Until Uncle Sam does something about the skyrocketing feedstock problems, we'll keep [the plant] turned off."

Of course, not all plants use soy, and there is some question in the industry as to whether having an on-site crush facility can help a producing plant realize an economic advantage. Clearly, for soy-based operations, many questions need to be answered.

We asked survey respondents what their primary feedstock is and if they expected to use a different feedstock in 2008. In our survey, 26 plants listed soy oil as their primary feedstock, or the feedstock they were currently using. Out of 26 respondents, 12 expect to use different feedstocks in 2008. The results indicate that of these producing respondents, six that were designed specifically for soy now expect to use animal fats in 2008.

We also asked producing respondents to tell us what feedstocks they'd experimented with in the past. Of all the producing respondents, 18 had tried using animal fats.
From this survey we also determined that very few plants were looking to algae as a feedstock they expect to use in 2008. Three producing respondents reported interest in algae.

That may be because they see the technology as too expensive, or still out of reach for a commercial-scale operation. As one plant manager recently remarked, "Algae is a headline in 2008, but it isn't a fuel until 2010."

A Typical Plant
In order to describe a particular product's ideal customer, advertisers will often create a demographic profile of the subject based on generalized traits among group members. In a similar fashion, we used the data collected from our survey to paint a picture of what an average biodiesel plant responding to our survey might look like.

The typical responding producer plant is located in the central portion of the United States-the Illinois, Iowa, Missouri tri-state area. The 15 MMgy plant is designed for soy oil as its primary feedstock, but has changed to a multi-feedstock platform since it came on line in January 2005. In addition to using a variety of feedstocks such as animal fats and waste vegetable oil, the management team has investigated less common feedstocks such as palm oil and rapeseed.

Capital is hard to come by for this plant, and in the past they've been able to switch feedstocks more easily using funds they had on-hand, and by managing risk effectively. Today, using alternative feedstocks means spending money that the management team didn't expect to a year ago. And although they have the ability to process an assortment of feedstocks, they are closely watching the futures markets and public policy shifts.

The plant has a full-time staff of 13 employees, including a general manager, and has recently added one new part-time worker in the past 18 months.

Our average plant handles its own biodiesel marketing. The plant has about 400,000 gallons of on-site feedstock storage capacity, which allows it to operate for some time between feedstock shipments, if necessary. Again, this is based on our responding producers and not on a real 15 MMgy plant.

When it comes to participating in the industry, the general manager is a full voting member of the NBB. The company is not currently a member of the BQ-9000 program, but is pursuing certification sometime in 2008.

Looking Ahead
As this is the first industrywide survey Biodiesel Magazine has undertaken, clearly there is much more to learn. From this survey we've come closer to knowing the actual production totals for 2007 and 2008. In addition, we've discovered 21 plants are idle waiting for margins to improve. Producing respondents are keenly aware of the struggles they face in the
coming months. Many plants moving away from soy oil indicate their willingness to reinvent themselves in the face of difficult economic conditions.

Not surprisingly, interest in other feedstocks is increasing as producing respondents seek new ways to make their industry profitable once more. As companies explore their options, looking toward waste oils, animal fats and other feedstocks, the real benefit may lie in the ability to use a variety of feedstocks depending on market conditions.

Craig A. Johnson is the Biodiesel Magazine plant list and construction editor. Reach him at cjohnson@bbibiofuels.com or (701) 738-4962.

 
 
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