New policies for GHG reduction open new biodiesel markets

By Susanne Retka Schill | November 20, 2009
With greenhouse gas (GHG) emissions regulations becoming more likely, a new market may emerge for biodiesel among facilities wanting to reduce their fossil fuel use by substituting biodiesel in industrial boilers that run on fuel oil, helping reduce GHG emissions from fossil sources. Already in the works for 10,000 commercial facilities is a new U.S. EPA rule requiring GHG emissions reporting that begins Jan. 1.

EPA established a threshold for mandatory reporting of emissions of 25,000 metric tons of CO2 equivalent (mtCO2e). Most biodiesel producers are not expected to meet the threshold due to the low energy requirements of the biodiesel process. It is expected that several large ethanol plants are likely to meet the threshold, although ethanol is among several industries where compliance details will not be finalized before Jan. 1. A 25,000 mtCO2e threshold is roughly equivalent to the annual GHG emissions from about 4,600 passenger vehicles, 58,000 barrels of oil or 131 railcars of coal. For natural gas users, it amounts to 460,000 million cubic feet used per year.

The reporting rule covers fossil fuels only, and includes facilities with stationary fuel combustion such as boilers producing heat, steam or electricity in industrial, commercial or institutional settings. A facility on the threshold could reduce its fossil fuel use by substituting biodiesel or other biomass fuels. The carbon threshold is likely to be exceeded by boilers with a maximum heating capacity of 30 million Btu per hour or higher, or facilities burning more than 50 million Btu per hour of natural gas. "That's a pretty sizeable heat load," said Beau Griffey, account executive with Minneapolis-based U.S. Energy Services. "A lot of food plants probably won't make that threshold." EPA estimates 10,000 facilities nationwide will exceed the threshold for GHG emissions reporting, which accounts for 85 percent of total U.S. GHG emissions.

It isn't likely that industries will turn to biodiesel to avoid the reporting threshold, Griffey said. "The cost of reporting is probably fairly low and the cost of noncompliance may not be that great at this point," he explained. However, the cap-and-trade legislation being debated at press time does include penalties for exceeding limits, and it is anticipated that if cap-and-trade legislation isn't passed, the EPA will move to regulate GHG emissions. When GHG reduction does become public policy, substituting biodiesel and other biomass-based fuels will be an option for reducing GHG emissions.

There may be another argument for widespread adoption of biodiesel as boiler fuel. Currently, industry provides a base load for natural gas use, but when winter comes and residential heating begins, natural gas rates go up. Having an alternative fuel would take the pressure off peak demand, and potentially introduce some competition to reduce rates. One industry observer pointed out many industrial boilers using natural gas are equipped with backup fuel oil systems, complete with heaters, storage and feed systems that could be used with biodiesel regardless of its cold flow properties. Biodiesel's solvent characteristics would be an advantage, the observer noted, helping to clean fuel oil's insulating soot from heat exchange surfaces. The value of biodiesel blended into fuel oil could soar if the benefit of improved heat exchange is calculated and added to the cost benefit from burning cheaper-grade fuels blended with premium biodiesel, while still meeting permit limitations on particulates and other emissions.
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