Ethanol and biodiesel may not be worlds apart…

I have spent the last few days in scenic Florida at the NBB’s 2012 conference. It has been an interesting event, part time to see old friends and industry veterans, part opportunity to hear about the industry from both NBB’s and Big Petroleum’s perspectives, and finally time to see what wares the larger technology vendors have augmented their armouries with in the last year or two.

I have received invitations from several ethanol producers in the last few months interested in the co-locating a Promethean-scale biodiesel plant next to their ethanol production facility. This has historically been a challenging sort of partnership for the for both biodiesel and ethanol producers alike given the intertwined states of current technology and economic conditions.

A current factoid is that there is more than 2 billion gallons of biodiesel capacity ready today with a market size of 1.3 billion gallons (given RFS 2 mandated production targets). With that quantity of excess capacity, I do not believe that any new large-scale greenfield biodiesel plants need to be built anytime soon. Even with site-sourced feedstock, its axiomatic that the investment in a new facility is unnecessary with the quantity of willing and able buyers that are out there for DDG-derived oil.

At the moment the most logical model for those plants interested in processing DDG-derived oil remains sourcing and transporting it from logistically tenable ethanol plants. This also allows the plant to leverage it’s current fuel blending and distribution infrastructure, which is feasible, yet obviously tangential, to the core business of the manufacturer.

And then there is the additional issue of the technical complexity of converting corn oil into biodiesel. The fact is inedible corn oil is difficult to process into biodiesel feedstock. Coupled with the ever-evolving set of ASTM specifications for biodiesel and plant installation now runs the risk of having to upgrade there equipment early enough that it ruins any amortization assumptions made to support timely ROI (return-on-investment).

That said, I do believe that there is a bright future for the ethanol industry to create plants that make specialty chemicals out of byproduct streams. That is one reason I believe I have been receiving so many paid invitations; we have a good deal of experience in developing products out of our byproduct streams.

Make it a better place!

Todd

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