Multi-feedstock plants may offer hope
June 29, 2009
OMAHA (DTN) – Though current feedstock and market limitations have hurt the U.S. biodiesel industry, the silver lining may be that the industry is building for the future.
If other feedstock sources emerge in the next few years, the industry generally is prepared to respond with increased production — simply because the majority of biodiesel plants built and under construction or expansion have multi-feedstock capabilities.
For U.S. farmers who look at biodiesel as important to add value to their soybean crop, the good news is biodiesel production could add similar value to other oilseed crops down the road.
According to the National Biodiesel Board, 103 of the 176 operational biodiesel plants have multi-feedstock capabilities, while 21 of the 40 plants under construction or expansion are capable of using multiple feedstocks.
NBB said a multi-feedstock plant can typically use vegetable oils, animal fats, recycled cooking oil or yellow grease.
Being able to use any available feedstock is an advantage in these times of industry uncertainty, said Dave Elsenbast, vice president of supply chain management for Renewable Energy Group Inc. Based in Ames, Iowa, his company operates nine plants, including three that use multiple feedstocks.
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“We don’t want to shut our biodiesel customers down,” he said. “They feel more sure of having a supply of biodiesel. We try to be feedstock neutral; that way, there are more feedstock markets around to use what’s available.”
In recent years, Elsenbast said, REG has used more animal fats because they have been available and are less expensive than soy oil. He said the company is keeping its eye open for other potential feedstocks including algae oil, camelina sativa and others.
Though multi-feedstock plants are the wave of the future, the costs could prohibit many companies from retrofitting current single-feedstock plants or building a multi-feedstock plant from scratch.
Alicia Clancy, communications specialist with REG, said that adding multi-feedstock capabilities to a single-feedstock plant generally can cost anywhere from $8 million to $14 million.
Clancy said costs vary, depending on the technology, but building a multi-feedstock plant from scratch can cost anywhere from $1.25 to $1.60 per gallon of installed production capacity. In comparison, to build a plant that only uses refined soybean oil would cost anywhere from $1 to $1.40 per gallon of installed production capacity.
Even if soy oil prices are higher, Elsenbast said it has an advantage to other feedstocks. That’s because REG can forward contract soy oil on the Chicago Board of Trade, but not with animal fats, which aren’t publicly traded.
“Our desire would be to try to trade animal fats and waste vegetable oils on an index with heating oil, so it is a hedged output,” said Elsenbast.
While multi-feedstock capabilities are the wave of the future, he said it doesn’t tell the whole story.
Not all technology equal
“I think what is more important is the whole package you bring to this business,” Elsenbast said. “Not all technology is created equal.”
For instance, some biodiesel plants say they are multi-feedstock, he said, but it doesn’t necessarily mean they can convert all feedstocks into biodiesel that meets the American Society for Testing and Materials standards that indicate fuel quality.
Elsenbast said petroleum blenders that will be required by the new Renewable Fuel Standard to blend a certain amount of biodiesel “will want to make sure they’re dealing with companies that can deliver consistent product day in and day out. It’s a total business approach.”
In the 1990s, REG started biodiesel production using just soybean oil.
Elsenbast said he thinks the landscape for biodiesel production is limited by feedstocks. “We obviously need more feedstocks,” he said. “I’ve looked at everything. We’re so comfortable that we have a process that can deal with any feedstock that comes our way.”
John Hay, extension educator in biological systems engineering at the University of Nebraska-Lincoln, said multi-feedstock plants have an advantage compared to plants that use a single feedstock such as soybean oil.
In Beatrice, NE, for example, Beatrice Biodiesel LLC was building a 50-million-gallon plant that would have used only soybean oil as a feedstock, said Hay. When construction started in 2006, soy oil prices could still allow biodiesel companies to make profits. As prices rose, the Beatrice company was forced to liquidate its assets in Chapter 7 bankruptcy without ever producing a drop of biodiesel.
“They didn’t expect the price of feedstocks to go up,” Hay said. “Oil went from 30 cents a pound to 70 cents a pound during the time they were building that plant. Pretty much those plants using soy oil are not producing.”
Hay said with a multi-feedstock operation, such a plant has built-in feedstock flexibility.
“They can handle someone’s overflow,” he said. “Some of those facilities are doing fairly OK.”