WITH crude oil climbing above $55 a barrel, such alternative fuels as biodiesel are getting a closer look. Biodiesel, in particular, seems to be carving out a niche as a promising new fuel for heavy-duty vehicles.
However, customers and distributors still have a lot of questions about biodiesel and its potential for the marketplace. Russ Teall, president of Biodiesel Industries, provided some answers during a biodiesel workshop at the Western Petroleum Marketers Association (WPMA) annual conference February 22-24 in Las Vegas, Nevada.
Key questions center on availability and price. Teall explained that production capacity for biodiesel is still limited even though the raw material supply is virtually endless. In addition, only a small number of petroleum marketers are handling biodiesel at this point.
Annual production of biodiesel is around 25 million gallons and could reach 100 million gallons in the next three years, according to a report from the Agricultural Marketing Resource Center at Iowa State University. Even if production grows as much as predicted, biodiesel supplies still will be just a fraction of petroleum-based diesel.
Limited supply contributes to higher prices. “Producers have worked hard to bring down the price, but biodiesel is still around $2.75 a gallon in those areas where it is available,” Teall said. “That's quite an improvement from a price of $3.50 to $4 a gallon when this product was developed.”
In contrast, on-highway diesel refined from crude oil averaged $2.19 a gallon at retail in the United States back in mid-March. The nationwide high was $2.44 on the West Coast.
Due to the price and supply issues, biodiesel producers are being very selective in the markets they target. “Mandated markets — such as school districts, city bus systems, and other government entities — offer the best opportunity,” Teall said. “We're able to charge a premium in those markets.”
Federal regulations coming into force will require power-generating companies to use a certain percentage of renewable fuels. Biodiesel also should gain market share as an adjuvant (an herbicide activator agent) in agricultural applications, a solvent in various industrial applications, and a release agent for coating concrete molds.
Biodiesel certainly has some advantages over petroleum-based diesel, especially the ultra low sulfur diesel that will be mandated in heavy-duty trucks for the 2007 model year and beyond. Teall pointed out that biodiesel has a higher cetane rating and lower emissions and toxicity.
Better lubricity is one of the most important benefits of biodiesel. A two-percent biodiesel blend returns lubricity in petroleum-based diesel to pre-1994 levels. Minnesota plans to require two percent biodiesel in all the diesel sold in the state.
Teall said the B20 (a 20% biodiesel blend) actually performs best in diesel engines and is the most popular blend. “We get the most hydrocarbon emission reduction with B20,” he said.
Finally, biodiesel can be made from a variety of renewable feedstocks, including soybean oil and recycled fryer oils from fast food restaurants. “We actually see the best emission reductions (nitrogen oxides) with the recycled fryer oils,” he said. “Soybean oil produces the most. Additives can reduce NOX levels to a point where biodiesel is as clean as or cleaner than natural gas.”
Biodiesel is handled in the same way as petroleum-based distillates. This means petroleum haulers will be able to use the same tank transports. The only real challenge they will face will be in blending biodiesel and petroleum-based diesel in the trailers. Teall cautioned that petroleum-based diesel must be loaded on top of the smaller quantity of biodiesel in a splash-loading scenario.
Petroleum marketers that are dealing with the blending issue include Haycock Petroleum, which was the first biodiesel distributor in Las Vegas. The company started handling biodiesel in 2001 in partnership with Biodiesel Industries. More plants are under development.
“Our strategy is to put the plants as close as possible to the markets we are serving,” Teall said. “We believe that the key to success is to limit transportation as much as possible. It's better to partner with petroleum distributors and build strategic relationships.”
Biodiesel Industries has production facilities in California, Colorado, Nevada, Texas, and Australia. The largest plant is in Australia, and it has the capacity to produce 12 million gallons of biodiesel annually.
Years of research went into development of the first Biodiesel Industries production facility, which the company calls a modular production unit (MPU). The standard MPU can produce three million gallons of biodiesel a year. The MPU design allows for easy and inexpensive expansion, and facilities can have multiple MPUs.
All MPUs are made from high-grade stainless steel with electrical components designed for flammable liquids. The design is capable of processing multiple feedstocks, including recycled cooking oils, animal fats, and virgin vegetable oils.