September 28, 2011
BY Ron Kotrba
The Waste to Fuels conference in San Diego wrapped up yesterday, I was there to moderate a general session panel on Innovations and Investment in the waste to fuels arena.
I introduced the panel by talking about how the single biggest cost to biodiesel producers is feedstock, around 80 percent or higher, and when vegetable oils peaked in price in 2008, it’s no wonder why many biodiesel producers who were reliant on single-source virgin oils began to look toward lower cost waste feedstocks such as used cooking oils, brown greases and other high-FFA materials. I also mentioned how EPA has designated waste biodiesel as achieving an 80 percent reduction in GHGs compared to the petroleum diesel baseline. Biodiesel from waste, I told the crowd, is not only the economical choice, but it’s the environmental choice as well.
Klaus Ruhmer, the North American business development head for BDI-BioEnergy International, was on the panel and he spoke about BDI’s Repcat process that can utilize high-FFA feedstocks using elevated temperatures and pressures.
Advertisement
Also on the panel I moderated was Kenneth S. Taratus Jr., the managing director of investment banking for Morgan Keegan & Co. Inc. He spoke about what lenders are looking for in renewable projects.
Firstly, he said projects must have fixed-rate offtake and feedstock supply agreements in place, and they want those to match, meaning if you have a 20-year offtake agreement, you should also have a 20-year feedstock supply arrangement. Taratus also said investment banks are not looking for technologies with the serial No. 0001; they want proven, existing technologies.
Also, minimum debt service coverage of 1.5 times is a must. Investment banks also want to see a high amount of equity, think in the area of $50 million.
“People also overlook construction risks,” he said. Lurgi, he used as an example, built an ethanol plant for $200 million, which ended up being sold for scrap at $8 million.
Advertisement
Ultimately, he said, to get financing, “you’ve got to fit in a box.”
On a different panel, Marc Privitera, cofounder of Preprocess Inc., gave a dynamic presentation on supercritical biodiesel processing and an account of this work on the now defunct BiofuelBox project in Idaho. While the project failed, it wasn’t because of the technology, he said.
Another takeaway message from the conference that many of the attendees shared with me, as a result of presentations given by other speakers, is that the sheer volume of federal and state regulatory hurdles that renewable projects must contend with are serious—very serious—roadblocks to projects moving forward. So much so that some attendees expressed to me that they are discouraged from even wanting to proceed with developing their projects. This must change if the U.S. wants to be taken serious about reducing its dependence of foreign oil and increasing its energy security.