Bill Lascher
Pacific Coast Business Times
17 November, 2006
When it comes to alternative fuels, biodiesel hasn’t captured the imagination of American consumers and policymakers in quite the way that ethanol has, but a new analysis of the global biodiesel industry suggests that companies near and far are still banking heavily on the fuel’s potential.
The report released Nov. 2 by Menlo Park-based SRI Consulting, shows that worldwide biodiesel capacity, production and consumption grew by 32 percent between 2000 and 2005. Production and demand were both projected to double for each of the following three years. However, demand for the fuel is expected to grow more slowly, the report shows, with supply continuing to outstrip demand by more than two-to-one for the foreseeable future.
Ted Brown, a consultant to T.W. Brown Oil Co. in Ventura, is preparing to develop a biodiesel production facility and statewide network of fueling stations that will accept a common credit card. Brown also said he has developed a catalyst that he has added to his biodiesel to help improve the performance of automobiles using the fuel.
Meanwhile Ken Olsen, the president of Santa Barbara-based McCormix Corp. said that while a niche market has formed for his company’s biodiesel blends, he hasn’t seen any sign that the fuel has piqued any interest among McCormix’s lucrative fleet and rail customers.
Biodiesel is a fuel that can be created from natural oils such as animal fats, vegetable seeds and legumes.
Not to be confused with recycled restaurant grease that requires special modifications to vehicles; biodiesel requires no special infrastructure and can be used in existing diesel engines (some older vehicles require inexpensive installations of new synthetic fuel lines to replace materials that may corrode).
The fuel produces significantly fewer greenhouse gases than petroleum-based diesel fuel and has been touted by proponents because they claim its use will reinvigorate domestic farmers who may grow its feedstocks while limiting dependence on foreign oil.
In the Tri-Counties, institutions such as the County of Ventura, Naval Base Ventura County and the City of Santa Barbara have committed to converting some of their vehicle fleets to run on biodiesel. Some consumers have also purchased used diesel cars or new vehicles from companies such as Dodge, Volkswagen and Mercedes-Benz that sell models with diesel engines.
Brown said that T.W. Brown started selling biodiesel more than five years ago.
"It is just booming," he said.
According to Brown, his company is selling five times as much biodiesel as it did when it began. Demand has tripled in the past year alone.
On Nov. 14, Richard McPherson, a colleague of Brown’s, was scheduled to give a presentation to the Ventura County Air Pollution Control District on biodiesel, its uses and its potential air quality benefits, but discussion of a separate, controversial agenda item used up the allotted time for the meeting.
Brown has worked in the oil industry since he returned from service in World War II. He said the emergence of biodiesel is "encouraging" and he would like to open his own production facility in either Ventura or Santa Barbara County.
Although inspired by the efficiency of biodiesel (at the present time, biodiesel uses much less energy to produce than corn or cellulosic ethanol), Brown said the industry will only grow as far as its distribution network. Thus, he has proposed plans for biodiesel pumps throughout California and Oregon, so drivers headed north and south can make use of the fuel. If the pumps are all part of one network, he said, they can learn where other locations are and plan their route accordingly.
Olsen also said that distribution is a huge hurdle for biodiesel, but he was more pessimistic about its potential as an alternative fuel source, despite praise for its environmental and foreign policy benefits.
"The demand has risen, but it has not risen anywhere near the pace of the publicity," Olsen said. "The demand’s not going to be there until the engine manufacturers stop scaring people that the biodiesel is going to invalidate their warranties. If we can get the trains and the boats and the fishing fleets to use just a small percentage it would make a huge difference in the amount of biodiesel that’s consumed in the United States."
Although demand for biodiesel has crept up at McCormix, Olsen said that it still represents less than 1 percent of the company’s sales. Fleet managers ultimately decide on a fuel by how cost effective it is. As of Nov. 13, regular diesel was priced at $2.75 a gallon. Pure biodiesel at McCormix cost $3.79 cents per gallon, while a blend of petroleum diesel and 20 percent biodiesel (known as b20) cost $3.29 per gallon.
Olsen can’t drop that price until clients are buying biodiesel in the same bulk that they buy petroleum diesel.
"I have virtually every fleet in Santa Barbara," Olsen said. "People come in here to buy 12 gallons [of biodiesel] at a time. When I’m fueling the train it takes 3,000 gallons at a time."
However, there will be little time for McCormix to cash in if biodiesel becomes a mainstream fuel source. Eventually, Olsen said, major energy companies will realize that biodiesel is a threat to their profit margins, and they will begin carrying it.
"As soon as we do all the work and pave the way for this new alternative source of energy, the big boys will come in and they’ll do it much cheaper," he said.