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The Future of Biodiesel


Biodiesel Grows Up

Peter Brown
Principal Euro Marketing Tools

The day of the small batch plant has come and gone. The early days of Birkenstock, biodiesel and back room brewers have evolved into a serious business with large companies making complex transesterification facilities all over the world. That phase of the business is now disappearing.

The new reality, as the recent Renewable Energy Group announcements indicate, is leading into the maturing stages of technology that produces revenues. The idealism of the early days could not be sustained because the idealists ran smack dab into the cold hard PR of the large petroleum companies.

So what is the new reality? If you want to survive in the biodiesel world and want to make money using the biodiesel process, every aspect of your production cycle has to become critical; the new reality implies breaking each production segment down into its component parts and creating a revenue stream at each intersection. The key is the ability to install the equipment that will allow you to be as flexible as possible.
Start with the feedstock because that determines how far and how fast you can adapt to changing market conditions. The two things to keep in mind here are availability and price. Never assume that your present choice of feedstock will be available when you need it. Take the case of palm oil; although there are tons of the stuff available all over the world, many countries are now considering legislation to ban palm from their shores because of the food or fuel campaign being so relentlessly pursued in the “civilized” world. This is an obvious rich country versus third world ploy because, in the US for example, no one questions the food versus fuel argument when it comes to soy oil, and soy is so much more useful than palm since it serves as the basis for so many other products, contains one half to a third of the oil compared to palm and is a whole lot healthier. As a biodiesel producer, be aware that ecologists in some parts of the world are not in favor of using existing plant and animal life for transportation purposes.

Predicting new feedstocks is an arcane science, jatropha came out of nowhere, and there is much talk of camelina or algae. Will the new processors be able to handle these newer oils? Will animal fats be cheaper? How will they be prepared for production? We only recommend a multi feedstock processor because as long as you meet the basic criteria, you can make biodiesel without too many constraints. But be aware that a “small” change can hide a lot of rework, so if the processor is flexible then the programming can adapt the catalyst, feedstock, and methanol equation quite easily to meet your immediate requirements. If not, plan to spend quality time with your plant designer.
Michael Brown, Chairman of the Board and co-founder of Greenline Industries realized the importance of that flexibility from the first small batch plant they built. “There are no guarantees in this business, none whatsoever, not the feedstock, not the distribution, not the offtake and certainly no financial guarantees anywhere. So we designed a machine that allows soy in the morning, palm in the late shift, algae when it shows up and whatever other exotic oily substance, plant or animal, that will be thrown at us during the life of the plant.”

Closely allied to availability is the price question, we are seeing record highs in soy, effectively removing it from the pool, producers are selling the oil and not processing it into biodiesel. With that in mind, should you consider installing a crushing facility, and cut your production at the feedstock level? The margins in crushing are slim, but they are consistent, which is why many larger installations are now asking for seed processing and crushing facilities to be installed at the same time. Many ports in Europe have crushing facilities on the docks. Historically, they were installed because their grains have been handled both locally and from all over the world, they get processed on arrival in the port itself. In the United States, there are no crushing facilities west of the Sierras.

Lowering the feedstock price is an essential tactic for the new installation and one way to do that is to blend different oils so that the FFA levels are within the acceptable limits. Not all units can handle blends, and some blends can be exotic like chicken fat and soy, or coconut and palm. These are actual requests that EMT has fielded from places like Fiji and Liberia, places where mistakes will be hard to correct and changes impossible to implement.
As far as exotic oils and strange blends, wise plant manufacturers will protect themselves in one of two ways. The first is to test run the plant for final delivery on their approved oil, most often RBD soy, and provide the buyer with the keys to the plant only after it has run on that oil for a specific number of hours producing ASTM or EN standard fuel. The second will request a sample of the oil that will be run in the plant and have enough adjustments built into the system to allow for other oils to be used. Always get the second option because there are many ways that the future of the facility will hinge on the ready acceptance of alternate feedstocks.

Feedstock flexibility and availability are not the only considerations, there are volume considerations. The facility is expected to run continuously at near capacity, but what if there are climactic considerations, availability issues, local ordinances and other reasons to slow down production? What if, as happened recently in a facility in France, for religious reasons a 100,000 ton unit was not allowed to blend non-kosher animal fats because the glycerin offtake would be unsellable in Africa? That is where the ability to run portions of the plant is an essential consideration. The modern modular facilities have multiple production lines. This has two advantages, the first was just discussed, and the second is that there can be no single source failures leading to a complete system shutdown with the attendant horrors of an idle plant while the single large processor is repaired. Continuous production on multiple lines can be slowed or even stopped on two of the lines for whatever reason, and startups are simpler because the facilities can be brought on line sequentially. Each line can be tailored to perform specific tasks to meet clear goals. One can be highly productive for glycerin offtakes, the others strictly ASTM biodiesel.

Robert Luiten, CEO of Zenergy International Inc. started his whole operation with a clear idea of what biodiesel and the energy world going forward would entail. “We decided right from the start that every one of our facilities would enable flexibility and ability to act on opportunities to ensure profitability at all times. We will be opening world scale facilities in France, Malaysia, both sides of the United States, South America and possibly Africa with a clear understanding that all our facilities will have an underlying mission of allowing any feedstock at any time and without national limits. Each facility will be ecologically clean, have a small footprint, be standardized across the globe, allow for expansion to meet specific needs and will be logistically optimized. There is no other way to meet the challenges coming at us.”

Glycerin production will also contribute to the bottom line. Accept from the outset that with the current high glycerin prices a reasonably competent system will require a glycerin purifier. The purifier will allow returning almost pharmaceutical levels of purity for a reasonable price. Again, keeping glycerin in the equation only makes sense if you plan in advance. Not so long ago it was customary to refer to the “Glycerin Problem” and several products we examined had to do with burning glycerin to produce process heat or electricity. These solutions may be an option in some extreme cases, but more and more glycerin is becoming a viable and economic factor in the biodiesel production cycle. Besides, the glycerol that settles at the bottom of the tank is not a clean burning fuel, it is a mixture of a lot of chemicals just waiting to get loose in the atmosphere, better to clean it up and sell it off.

Process heat and electrical consumption are closely related. Both are expensive and both are consumed in large quantities. Some processors are more economical than others. The solutions to energy needs are as varied as the feedstocks. One thing is certain, energy costs will not be coming down and consumption for large industrial sites will become a regional liability. Each system on the market is based on the simple mathematics of the transesterification process. How each system meets the requirements is why there are so many different vendors in the market. In energy consumption the key is flexibility.

A good way to access new oil sources is to build an FFA stripper. There are really two kinds on the market, the older chemical based strippers which are relatively inexpensive to buy, expensive to run and the newer thermal units that are the opposite. We suggest that the second option be taken because the pollution levels are negligible, the output clean FFA which can be resold into the cosmetic and pharma markets, and the oils are very pure, pure enough to be dropped into the processor. High FFA animal fats are available almost anywhere at low prices, and the newer FFA strippers even allow you to convert a number of alternative oils like sewer grease and others.

If electrical power is expensive in the region, look for mechanical heat exchangers running on hot oils from an FFA stripper, for example. In some areas, like Quebec, electricity from the James Bay project allows for cheap electricity so a higher degree of that energy source can be used. The tradeoffs can be best managed by building the system to allow for various contingencies.

Most production facilities require large buildings with numerous flat surfaces that would allow a certain amount of solar power to be installed. There have been significant advances in the development of photovoltaic panels which allow for the production of larger amounts of electricity. In many ways the technology still has a way to go, but it is certainly worth investigating not just the panels themselves, but also all the perks, grants and financial advantages of installing the units. I have worked with a biofuels and petroleum distributor in California who has automated all his dispensing racks, pumps and card lock systems using nothing but solar panels. He is now looking into building a biodiesel facility with increased solar support in the form of a hot water system and even using a hot oil device for process heat.

I would like to add an aside here on the use of biodiesel to run diesel generators for commercial production of grid power. We have worked on three of those projects, one in the US, one in Europe and the third in Africa. Only the African project makes any sense and that for very specific reasons. The feedstocks are rotting in the plantations and are available almost for free, providing a simple crushing facility is available. The manpower is both highly trained in plantation management and incredibly inexpensive; finally, a small biodiesel plant in that country will provide energy independence from the large oil companies who are sucking the place dry. The other two projects were abandoned in light of feedstock costs and the generators have been converted to natural gas turbines.

Most people involved for any length of time in the biodiesel market started because of a genuine ecological concern. That concern extends in many directions, some facilities are clean production sites using no water, minimizing emissions and providing clean glycerol for purification. Excess methanol is recaptured and returned to the system, all the other wastes are dealt with in an ecologically friendly manner. If you are not altruistic at least be practical, a clean production facility will sail through the permitting stage. Plants with a dirty reputation, high water usage and effluent rich will hit the local planning department like a hairball in a cat. Remember, your plant will hire local people, it will become part of a community and it will be welcomed with pride by the Town Fathers, make sure it survives the smell test.

Nicolas Tesseire, international business director for Lorient’s AUDELOR, the business development team for the city of Lorient in France told me: “We receive a large number of requests for industrial implantations in our city and port. But, because of past bad experiences with some very dirty industries, we are very careful when considering who and what we allow into the area. As a tourist area and one of the largest sailing areas in the world, we pay particular attention to air and water quality issues. This is typical in all developed countries and will become prevalent all over the world. But bioenergy can be clean, regardless of feedstocks and offtakes, but it has to start being clean the day we start our planning.”

The hardest part now has to be faced, with feedstock options under control, processing alternatives weighed, offtake agreements signed, alternative offtakes considered and accepted, energy costs pared to the bone and excess power sold to the local utilities, every single grant, rebate and financial perk producing, the last step is to put it all together in a comprehensive business plan.

I have looked at a large number of business plans for small to huge facilities, and no matter how comprehensive and all encompassing they may be, the financing institution will always zero in on the oddest things. A very large British bank wanted to know if the employees in the plant would be unionized; an American lending institution had severe reservations about a site in New Jersey and dropped out of the project. You never know what will come up, and instead of trying to anticipate some of these questions, keep some good news in reserve. One of my favorites is to bring up carbon credits when you need to divert attention from a pet peeve.

To start with, somebody is making serious cash with carbon credits since they are a new form of currency. We are still investigating their application to the production of biodiesel, and we never hesitate to bring this up because granting carbon credits depends very much on the individual project. All we know for certain right now is that the user of biodiesel does have access to these credits, the question remains how far up the production chain can you go to get them?

With all of the above in mind, please prepare the business plan with enough options and alternatives to allow your financial institution to feel good about your project. Biodiesel is a risky business with very few safety nets. But the basics never change, you will be making a commodity that everyone admires, it will be legislated into every diesel tank in the world and there are incredible opportunities for anyone who can remain flexible, on target and genuinely involved in all aspects of the project. Your business plan should be a reflection of all that. But again, keep options in mind and contingency plans on the table, this is a new era in biodiesel where anything goes, anything can happen and the revenue streams have never been more diverse.

Peter Brown is the Principal of Euro Marketing Tools, a sales and marketing group specializing in the creation of ecologically friendly biodiesel facilities in Europe and the United States. The group can provide every aspect of the project from site and process selection through engineering and financing. He can be contacted at peter@euromarketingtools.com or 1-408 206 7035