Biodiesel Market Searches for Alternatives to Soybeans

By Tim Hoskins, Iowa Farmer Today

AMES — Even with challenges facing the biodiesel industry, leaders remain optimistic about the long-term potential of the fuel.

The main challenge for the industry now is the cost of feedstock, says Gary Haer, vice president of sales and marketing for Renewable Energy Group (REG) and vice chairman of the National Biodiesel Board.

Soybean oil was the traditional feedstock that started biodiesel production. However, soybean oil currently is above 60 cents per pound.

Haer sees the feedstock issue as a short-term problem. The higher feedstock cost is forcing plants to find different oils to make biodiesel.

Animal fats are one alternative feedstock being used in newer plants that were designed to use it.

Biodiesel companies are working with seed companies to improve the genetics in the plants to produce more oil and they are looking at different feedstocks including algae and corn oil.

Many ethanol plants are using or investigating ways to pull the corn oil out of the kernel before making ethanol. The corn oil could be used to make biodiesel or used in applications that use other oils.

Therefore, it could add supply to the vegetable oil market, he says.

However, diesel prices also have increased and allowed some biodiesel producers to continue to operate, says Randy Olson, executive director of Iowa Biodiesel Board.

Olson says some biodiesel plants have reduced production due to high feedstock costs, but other plants continue to run at full capacity.

The tightening of credit also has hampered some plants due the added capital needed to purchase feedstock, he says. That is the short-term challenge.

Haer says the long-term outlook still looks good because there is “huge opportunity for biodiesel.”

He notes the industry’s 5×15 goal, which is to have biodiesel comprise 5 percent of the diesel market by 2015. Currently, the U.S. diesel market is 60 billion gallons, so 5 percent would be 3 billion gal.

The Renewable Fuels Standard includes a requirement to use biodiesel, Haer says. It starts at 500 million gal. in 2009 and increases to 1 billion gal. by 2012.

“That would be huge,” he adds.

In addition, Minnesota, New Mexico and Washington are working on state mandates or incentives for biodiesel use, Haer says.

As of the beginning of the year, 171 companies had invested to build a biodiesel capacity of 2.24 billion gal., according to the National Biodiesel Board.

Biodiesel production from Oct. 1, 2006, to Sept. 30, 2007, was 450 million gal.

In the next 12-18 months, a production capacity of 1.23 billion gal. is being constructed

As of August 2007, the Iowa Biodiesel Board reported there are 14 biodiesel plants with a production capacity of 318.5 million gal. It noted two plants with production capacity of 35 million gal. were under construction.

Other sectors also may add demand for biodiesel.

Haer says bioheat, which adds biodiesel to heating oil mostly in the Northeast, is one area of growth potential.

Adding biodiesel to heating oil helps reduce the amount of soot in the house during the wintertime, he says.

“It (bioheat) helps enhance their (the heating oil) image.”

Another growth sector is using biodiesel in confined spaces. The federal government is changing the rules for particulate matter and exhaust in confined spaces, such as mines.

Haer thinks that would boost demand boost for the industry.

“I am very optimistic about the future of biodiesel,” says Olson.

I am also very optimistic about the future of biodiesel, although I am not sure where that future lies. Indeed, it can be made from such a variety of substances that it may be made from something entirely different in different regions of the country and the world.

The future does not, I believe, lie in governmental mandates of its use which could stifle competition from competing fuel sources which would ultimately be bad for the consumer.

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