Global Biodiesel Production: A Different Perspective

By Klaus Ruhmer | September 01, 2010
For generations, global fuel and energy supply has been playing a critical role for almost everyone. Wars have been fought over energy and some of the world's largest corporations have prospered by producing, generating and supplying energy and fuel. Only recently have people and governments everywhere started to take a different perspective on supply and use of energy. Topics like global warming, greenhouse gas and carbon emissions, as well as concerns about global energy reserves and their safe retrieval, are becoming more important. The recent oil spill in the Gulf of Mexico reminds us all that our dependence on oil and energy can lead to massive catastrophes.

Regardless of the fuel we use in our cars, one fact remains: diesel fuel powers our economies. Essentially all the food we consume is produced on farms using diesel-powered farm equipment. All goods we purchase such as clothing, furniture or toys come to us by diesel-powered vessels, trains or trucks. The roads we drive on, the buildings we live and work in are built using diesel construction equipment. Fuel oil similar to diesel fuel is used to provide heat for homes, buildings and industry around the world.

This is where the value of biodiesel comes in. It is the only available biodegradable drop-in replacement for petroleum diesel in the foreseeable future. With this you may ask yourself, why wouldn't we all use biodiesel? There are several reasons why biodiesel hasn't yet been widely adopted. First, there isn't enough to replace all our diesel needs. This has lead to the "is it really worth it, it's only a drop in the bucket" mindset. Biodiesel is forced to compete with petroleum diesel as a commodity. Feedstock cost is responsible for about 80 percent of biodiesel cost, while crude oil production cost is less than 30 percent of petroleum diesel cost. Last but not least, an established, well-capitalized and investor-driven petroleum industry is defending its interests and the status quo.

What does all this mean for global biodiesel production? The answer is quite simple. At this point in time, biodiesel requires support and political commitment. European governments imposed blending mandates and tax advantages related to biodiesel blending. The U.S. instituted a $1 per gallon blenders credit as a production incentive, which has been allowed to expire. A blending mandate (RFS2) became effective only recently. Its impact on the dire U.S. biodiesel industry remains to be seen since there is an "easy out" for obligated oil-companies. Canada is more effectively supporting its biodiesel industry by an over-time declining production incentive combined with an increasing blending mandate. In South America, biodiesel has a promising future. For many years now Brazil has worked on reducing its dependence on fossil oil. People and government are behind this goal. Many countries in Africa have made strong commitments to various biofuels including biodiesel, to secure energy supply for their economies. China's growing economy drives an incredible growth in energy demand. Although the Chinese government hasn't yet made final decisions on how to support biodiesel in particular, it will play a critical role next to many other renewable energy sources. Other Asian governments have already implemented blending mandates and are rapidly expanding their renewable energy infrastructure. India is considering a 20 percent biodiesel mandate to curb greenhouse gas emissions.

From a biodiesel technology and production perspective, one fact has become clear: only the flexible, multifeedstock-capable, highly efficient biodiesel plants producing top quality fuel, while not competing for food, have a chance to be competitive and stay in business. Biodiesel quality standards such as ASTM D6751 or EN14214 are becoming more and more stringent. Quality deficiencies and off-spec biodiesel are detrimental to the entire industry as they negatively impact the public acceptance of the fuel. In Europe and the U.S., many producers were forced to go out of business because their plants were not able to accommodate different and lower cost feedstock such as used cooking oil or animal fats while still meeting quality and yield requirements. Commodities like fuel offer very narrow margins. Only plants with a biodiesel yield close to 100 percent have a chance to be successful.

We are facing finite fossil energy resources-ultimately we have to sustainably produce and grow the energy and the food we need. Biodiesel is one piece to the puzzle. Biogas, biomass, wind, solar, water and others are also needed.

Klaus Ruhmer has business development responsibility for BDI-BioEnergy International AG and Enbasys (BioGas) in Canada and the U.S. Reach him at [email protected].
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