The U.S. Biodiesel Industry Matures

From military fleets to long-haul truckers, farm equipment to heating oil supplies, and of course, in diesel vehicles’ gas tanks, biodiesel is cropping up all over the U.S. as the clean fuel made primarily from soybeans experiences breakneck growth. This rapidly maturing business was clearly visible in San Diego, California, last week at the industry’s national conference and trade show.

First, some telling stats: Last year, blenders throughout the U.S. made 75 million gallons of the fuel, up from 25 million just a year prior in 2004. Reflecting this growth, attendance at the National Biodiesel Board’s (NBB) conference was more than 2,500, up from around 1,500 the year before. And just days prior to the conference, President George W. Bush’s State of the Union address included a suggestion that biofuels will play a critical part in lowering the nation’s dependence on foreign oil. Critics may legitimately grumble (and grumble they did) that any effort to reduce dependence on foreign oil should include a mandatory rise in vehicle fuel efficiency standards and a DOE budget for renewable energy that doesn’t eliminate key programs like geothermal to make way for others, but the President’s mention of biofuels in such a public platform was icing on the cake for an industry that’s optimistic about continued growth. The President’s FY 2007 Budget includes $50 million for clean diesel programs — a $38 million increase — and $11 million for implementation of the Renewable Fuels Standard. It was fitting then that Environmental Protection Agency (EPA) Administrator Stephen L. Johnson addressed the conference as the keynote speaker, his first public appearance after the President’s speech. “Our country is on the verge of a dramatic change for how we power our cars, our homes and our businesses. And innovation – including innovations in biodiesel – is the catalyst of this change,” Johnson said. There’s a host of factors driving the growth in biodiesel, and federal tax credits are chief among them. Just as solar, wind, and other renewables received helpful tax credits in the Energy Policy Act of 2005, biodiesel too benefits from tax credits through the year 2008. And just like those other industries, they are cautiously optimistic the credits will be extended. Jenna Higgins, Communications Director for the NBB, said having the head of the EPA as the keynote speaker shows biodiesel is now a priority with the Administration and is seen as an important part of its overall energy strategy. “We’ve never had such a level of support at our yearly conference,” Higgins said. “That really shows biodiesel is in the eyes of our government.” If the EPA’s top administrator represented serious federal support then country-singer and biodiesel advocate Willie Nelson brought the star power and a specific plug for the nation’s trucking industry to embrace biodiesel. Nelson headlined a press conference that was broadcast live to an XM Satellite radio show popular with truckers. Later, Nelson headlined an event to celebrate the opening of a dedicated BioWillie biodiesel pump at a San Diego gas station. Beyond the headlining speeches and star power, there were a few issues rising to the surface at conference that are playing an increasing role in the biodiesel industry: bioheat and quality certification. Bioheat First off, “bioheat,” a name the industry has only recently agreed on for the use of biodiesel blends in heating oil, is widely seen as a successful new avenue for growth in with the homegrown fuel. Currently, most biodiesel sales are targeted to fleets of vehicles such as the military or transportation companies, but bioheat is the use of biodiesel in home heating oils, usually in small blends such as five percent. This is widely seen as promising and relatively untapped new field that offers the possibility of being a substantial market for the fuel, especially in places like the Northeast where it has already seen steady growth. “Bioheat has become a passion, an obsession, a cause, a cause we’re all here to celebrate. I can see the growth that’s going to occur,” said Michael Devine, of Devine Brothers Inc., a fuel distributor in Connecticut who has expanded his operation into providing bioheat and co-presented at the Bioheat session. Devine didn’t say bioheat is without its challenges. While bioheat was actually cheaper in many areas after Hurricane Katrina struck, Devine said bioheat is typically four or five cents more per gallon than regular heating oil. He also stressed the second point that continuously came up in the conference of a need for quality in the product and the overall industry. Everything from how the fuel is blended to how it’s stored and transported must be done to the highest standards. While B20 — a 20 percent blend of biodiesel with 80 percent regular diesel – is most popular for transportation-based biodiesel, Devine suggested lower blends such as B5 and B6 for home heating purposes. Among his suggestions for bioheat distributors was to hire a PR agency to help take advantage of the fuel as a value-added product that can sell itself, despite the slightly higher cost. “This is a public relations dream,” Devine said. “For those of us who were in the oil business, talk about being in the uncool business, but bioheat is a great public relations opportunity for us. Bioheat gives you an opportunity to look unique.” Quality Certification Concerning the importance of quality, as Devine mentioned, the NBB is so concerned about quality they recently established a list of guidelines for governing production, transportation, storage and other issues that are critical to biodiesel. It’s called BQ-9000 and is similar to ISO ratings or other certifications for products in other industries. “A lot of new fuel suppliers are going to be coming online so attention to quality will be more important than ever,” NBB’s Higgins said. “It’s critical that the fuel meet the specifications. An off-specification batch can create problems and a bad batch of fuel can be devastating.” The same mix of factors like tax credits and high energy costs that are driving the biodiesel industry, if left unchecked or unregulated, could lead to bad batches of fuel that could give the industry a black eye. That would be similar, historically, to solar energy, particularly the solar hot water industry, in the ’70s when federal tax credits strongly drove the market but many a fly-by-night operation sprang up to take advantage of the business leading to poor customer service and many defective systems. Bad batches leading to ruined engines or home heating boilers have not been an issue, but Higgins says the certification is just a sound, preemptive precaution and a sign of a maturing industry. Biodiesel Industry Snapshot So far the industry is fairly well distributed between large and small operations. There is no one major player, some plants are farmer owned and operated, quite a few are small producers in the couple million gallon-a-year range while there are a few 30 million gallon-a-year operations. And just as the ethanol industry has its wild, but conceivable dream of someday being largely distilled through cellulosic technologies that could use plant waste or high-yield plants like switchgrass, biodiesel hopefuls look to breakthroughs with algae or mustard-seed as a feedstock for the fuel. On the shorter term, maintaining those tax credits will be crucial, just as it is for the solar industry or wind power industry. And another immediate hurdle, says Higgins, is educating the public about the fuel. She said the public is getting more familiar with biodiesel but that doesn’t always mean they’re putting it in their diesel vehicle tanks or home heating systems. “The needle is definitely moving,” Higgins said. “But there’s always a fear of the unknown so introducing biodiesel to the public is one of our missions here.” While there’s been plenty of federal attention at using hydrogen and fuel-cell driven cars to solve the nation’s transportation dependence on foreign oil, Higgins says she’s optimistic that biodiesel brings an immediate solution requiring no major modifications or research breakthroughs. “There’s no one silver bullet to our energy needs but biodiesel is absolutely one of our best tools to make a difference in energy supply and works with what we already have. It can play a valuable role in diversifying our energy supply and increasing the amount of fuel that is domestically produced. It’s here today and it works immediately. For an alternative fuels to be successful it has to work with what we have.”


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