Europe, Biodiesel, and Market Development

There has been "news" that Europe's biodiesel industry is falling on hard times. The combination of higher ag prices, excess capacity of world B100 production, combined with the recent 'food-versus-fuel' and deforestation arguments coming from the EU's environmental circles has caused attitudes to go lukewarm towards biodiesel.

The above is my 'cliff-notes' description of the Wall Street Journal article that came out yesterday. If you are looking for the article it's titled: "Europe's Biodiesel Drive Sputters" by John Miller. (Thanks to Glenn Montgomery for emailing it out to the Biofuels4Oregon listserve)

The problem is that I don't think this argument is the real issue. The media and policy people are misdirected in their concerns. It is market development not market support that is causing the issues in Europe and the US as well.

Don't get me wrong, all the issues reported by the WSJ are real. I just don't feel they are why European biodiesel producers (or American for that matter) are having a hard time. There is a bright-line difference between market forces efficiently allocating resources and individual players making bad decisions industry wide.

The real problem is the inability of biodiesel producers to develop their own markets and customers for their products. Any business model that relies solely on brokers and middlemen to move 100% of their product is going to be doomed to little or no profits.

The EU relied to heavily on subsidies that dropped biodiesel's price artificially low against petroleum. The European producers developed a market which was driven on price not on value. When price was no longer in their favor their market immediately turned harsh. The only reason most of their customers had been inspired to buy biodiesel was because it was cheaper.

To compound European market woes, they were successful enough creating a price driven market to attract other biodiesel producers with competitive advantages in feedsock production and labor regulation enabling much lower cost B100. They had no marketing or brand differentiation to discern superior and sustainable EU biodiesel from a Malaysian or South American competitors. Hence the only signal in the market place is price.

Beyond selling biodiesel as a cheaper fuel they have no focus on developing their own markets at all. That is the problem with agriculture in general. They want the government to protect them and then scoff at niche markets as to risky. CO2 and emission reduction is a market many other technology companies have done well with. Even successfully selling products at above market rates.

Contrast that with selling the value of a product by application as opposed to selling it based solely on price. In the EU and in the US the emphasis has always been on artificially reducing the cost of biofuels as opposed to correctly raising the price of petroleum. Note the success of natural gas in the US. A fuel sold primarily on its clean attributes and therefore becoming the silver bullet solution for any emmission problem.

What this WSJ article says to me is that local biofuel companies need to develop their own markets for their products. That at a certain point the fuel needs to stand on its own with a certain deeply penetrated niche market. There are places, especially in regulated industrial markets, where biodiesel is worth more than petroleum at any price.

Tax help and mandated use might cover fixed costs for a biodiesel producer but in large commodity markets producers tend towards no profits. The producers seem to be relying completely on government help, protection, and mandates to make their markets happen.

That's Europe's problem. Their policy is just focused on creating a guaranteed market to sell into and based on this alone they hope for guaranteed profits. I just don't see it happening. Third world producers with state guided economies and no property rights will be able to dump all profits out of any mandated market. They will dictate the bottom of the feedstock markets regardless of what First World economies try to do (short of protectionism).

That is the future of commodities and is why enforcing verifiable labels like "Fair Trade", "Organic", "Sustainable", and "Made in the US" are so important. Customers seeing a value beyond price is the only place any business including biofuels can ever turn a long term profit.

Sorry for the rant.

Soy Bean Board looks "Beyond Bean"

Some interesting proposals of what will next be viably made out of soy beans.

- Soy plastics and foam use by auto makers.
- Soy based foam for home insulation.
- Soy foam backed carpeting in your house and commercial building.
- And the ultimate sole purpose for this post: Perry Ellis Soy-Underwear, with soy based textile fibers.

From the Biobased News.

US Natural Gas Pipelines

Just something interesting to look at.

Please note the west coast. In particular the lack of infrastructure in California. Makes you wonder where electrical power will come from if coal and oil are off the table as our energy needs expand. Throw on top of that regulatory environment a low carbon standard and we look a little light way out west.

Another speculation on my part. How much you want to bet there is a similarly situated amount of available natural gas in the Rockies? This resource just not being developed due to the tighter development framework for the newer West Coast over the last fifty years.

Martin Tobias Steps Out of Imperium

On the way out last week this Imperium Renewables Press Release came across my email. (Also check out the CNet article as well as the Seattle Post Intelligence article)

It was a pretty big surprise to everyone which just drives gossip from every side of the industry. Truthfully I wasn't even thinking about work at all over the holiday. It didn't even strike me as relevant to post this news until a friend from the east coast asked about it.

My thoughts. Imperium has a pretty strong wind to its back. This leads me to wonder if this is a positive thing for Imperium as they move forward to their Initial Public Offering. A strategic restructuring to move forward.

A review of Imperium Renewables fortunes:

1) Imperium has lined up a few long term supply agreements (guaranteed off take and quantifiable cash flow).

2) Imperium has lined up a reasonable amount of oil supply from both Canadian canola and Pacific palm farmers (reasonably assured feedstock with a large leveraged buying position).

3) They have a large terminal in the tightest fuel supply region of the US with a mandated biodiesel blend coming in both Oregon and Washington (guaranteed market for their product with a low cost and higher volume capital infrastructure than any other biodiesel producer next to REG).

In short on a fundamental basic of business level they are sitting pretty. They just need to sell a boat load of stock to give them enough operating cash flow to grow as promised.

I think it would be hard for much of anything to be bad news for what they are doing. Regardless of which token, rockstar, legendary executive is their CEO. We will just have to wait and see.

Bio-Butanol from E-Coli

Butanol Molecule Shown Above; Source: Hydrocarbons Technology

Wired Magazine has one of the best issues ever this month. It is worth buying to check out.

Online they continue it on with even more cool information. In particular they have a list of "Top 10 New Organisms of 2007." Though I went to the article for the butanol producing bacteria I stayed for the glow in the dark cats. Can't argue with science fiction cool.

The E. Coli strain was created by a group of Canadian students from the University of Alberta who were participants in the International Genetically Engineered Machines competition.

For those of you who have never heard of butanol its a promising alcohol fuel. Butanol is significant in biofuel circles for two big reasons. Butanol has a higher btu content than ethanol making it potentially a superior gasoline blend stock and could be a breakthrough additive for biodiesel production as a substitute for methanol in production.

So both sides of the industry look to butanol for next generation potential.

Currently butanol is much more expensive than ethanol or methanol leaving it priced out of the market except in niche applications. With biodiesel production in particular butanol supposedly makes a biodiesel product with winter gelling properties far below freezing (I've heard mention of -20 degrees below 0F).

Quick background in butanol's place in the biodiesel industry its simple to understand. Biodiesel is a diesel product made from vegetable and animal fat feedstocks (follow the link to the wikipedia description).

To make biodiesel an alcohol is mixed with a catalyst (in biodiesel home brewing these are commonly methanol/alcohol racing gasoline and lye) in the proper proportions. This is then mixed with the oil feedstocks and mixed thoroughly producing a reaction.

The end primary products from this reaction is biodiesel and glycerine. Typically the biodiesel molecule is a methyl ester. Causing this same reaction with butanol would cause the end biodiesel product to be a slightly different molecule, a butol ester. The butol ester having superior cold weather properties to a methyl ester.

Taking a Holiday

Merry Christmas
(In the Mike Huckabee sense of the word)

(The above is a joke in the Politically Incorrect usage of the phrase)

A Primer on Biodegradable Plastics

The Christian Science Monitor has a great piece covering the ins-and-outs of biodegradable plastics. It offers depth I've never seen in a news story.

"Fields of Fuel" Movie Trailer

From Josh Tickell; author of From the Fryer to the Fuel Tank and Biodiesel America.

Fields of Fuel
The Movie Trailer

Check it out. It's a new cut of the trailer and worth the watch. Can't wait till Josh finishes production.

Brewer's Grain: The Next Fish Feed

Why is fish farming something to watch?

Ask any Climatologist (or militant vegetarian for that matter) and you will be told that beef as a protein source isn't going to cut it on a world wide scale. Combine the cost and waste associated with beef production with depleted international fisheries and you've got either a crisis or market opportunity. It all depends on which side of the equation you look.

New Belgian Ale is investing in developing their mash into a high protein fish feed. This being a concept in ethanol circles discussed repeatedly given the net return on calories put in for fish farming. Way more meat protein in higher value fish than you would see from the same inputs given over to beef.

For a protein poor world fish farming is a growing industry, and feeding the fish a meal rich in protein itself is a challenge. That's where beer/ethanol mash has a real market opportunity. According to New Belgian the chief protein source in their distiller's grain is the bacteria which drives the process of beer making. So essentially, with aquaculture, you turn lower value protein from dead bacteria into higher value protein wrapped up in tasty salmon.

Next thing to watch for. Large ethanol producers proposing fish farming as a vertically integrated acquisition. In particular, having a guaranteed highest market value place to put the corn mash after production might mean the difference between profitability and bleeding losses in the current ethanol market.

Read the full story about New Belgian's research efforts in the Rocky Mountain News.

Wal Mart Drops Hints that it Might Buy It's Own Power Plants

Saw it at the Environmental Leader.


Wal Mart, suggest that it would buy its own power generation. This coming after Wal Mart was criticized for only moving 1% of it's energy needs over to solar panels. The Wal Mart spokesperson saying that though greening its image, Wal Mart is still a frugal company and will move when cost effective. Green power being to expensive in the retail commercial market in the quantities they would need to buy.


If Wal Mart does buy power plants this would be big. This would be a huge move in vertical integration for a large power user. I believe it would be the first Corporation to take responsibility for 100% of its own power generation at the point of creation.

What Does the World Think?

StarOilco's New Truck Logoing

The Oregonian Does Wind Power

From Wednesday's Oregonian. The picture was so well done I couldn't help but post it up. Perfect enough for Power Point. Check out the full size PDF. Its worth the look.

Nymex Launches Green Tag Exchange

From the Wall Street Journal:

In the latest sign of growing appetite for environment-related investment tools, New York Mercantile Exchange parent Nymex Holdings Inc. and a group of Wall Street trading houses plan to launch an exchange for trading carbon emissions and other environmental products.

The new market for off-sets is called the Green Exchange. The Environmental Leader also provides and even better article including extensive links.

Willow - Potential Biofuel Feedstock

Joel Ens, a grad student from the University of Saskatchewan, has proposed willow as a potential biofuel and biomass feedstock. The willow offers characteristics of growing long consistent branches rapidly. The full article available by stopping by the Biobased News.

I've never heard of a pruning a fast growing tree. Looking this direction might have real potential for Oregon. Oregon being a highly productive nursery tree state, the Willamette Valley having a great deal of rain fall, and the idea of landscaping trees serving a dual purpose should be promising.

I have heard similar proposals around bamboo as a great perennial crop. The big difference with willow being a twenty year scope of rotation versus a few years for bamboo. The bamboo root ball become to dense after a few years but bamboo as a crop should allow multiple harvests a year. The great consistent rain fall of the Willamette Valley in Oregon also contributing a great deal to the productive potential for a bamboo biomass crop.

Compressed Air Car Going Forward

I came across a little article about the upcoming launch of the Air Car as a viable transportation vehicle in the emerging economies of the world.

According to Plenty Magazine this new transportation technology is gearing up for mass production in India, China, and other developing nations. I also found a little more information at Engadget about the leading design moving into mass production by Tata Motors.

Asia Looks to Algae for CO2 Sequestration

Covered at Wired.com, and reported by the Associated Press.

Asian scientists are looking at seaweed farming as a potent tool for carbon sequestration. The article covers the basics. Seaweed grows fast, seaweed is already used in food production, seaweed has a good deal of potential as a next generation biofuel feedstock, and seaweed may take a lot of energy to harvest.

What makes this proposed algae use different than the others I've posted? This is done in the ocean and not in a closed system. So instead of a pure, scientifically controlled strains of algae they would just go for whatever takes off in the Ocean. Not exactly a measurable sure bet beyond the fact that CO2 will be used in the growth of the algae strain that takes off.

Not mentioned. The fact that large stands of algae could cure dead zones effected at the mouth of large rivers (the Mississippi and gulf of Mexico). This same use of algae could have longterm effects on the ecosystems they are grown in (meaning potential longterm environmental concerns).

Something about algae always reminds me of nuke power. Easy to understand, a great deal of potential, but for some reason the true commercial projects never seem to happen. Something about this proposal just looks like a litigation magnet.

Willie Nelson talks BioDiesel

Jeff Cooper at Syndikast recomended this site (follow the link to his work). I met Jeff while he was producing a few news segments about renewable energy here in Oregon. Some of these segments made it onto Current TV.

While checking out Current TV one of the segments that caught my eye was a Willie Nelson interview about biodiesel from PBS they had cross posted from You Tube.



As one of the first investor in SeQuential-Pacific's plant here in Salem, Oregon Willie has a very special place in my heart.

SeQuential Biofuels' Retail Concept Seen Elsewhere

My friends over at SeQuential Biofuels look to be leading a national trend. Leading earlier this year with a concept refueling station dedicated to serving a lower-carbon sustainably minded consumer demographic SeQuential launched their first station in Eugene, Oregon.

This month Convenience Store News has a plethora of stories covering the emerging trend towards higher value offerings in a traditional convenience store.

First in a story called "Reverse Migration" they cover a new trend towards brands seeking a greater urban presence for gas stations and c-stores. In an opinion piece they also mention the "Future of Convenience" being healthy fresh food. Higher value food product offerings setting up convenience stores to compete against traditional fast food with a healthier, faster, product. In another snippet they also cover the bet being made by Whole Foods to pursue an urban convenience store model (which just begs for gas/ethanol/diesel/biodiesel pumps).

Way to lead the pack SeQuential. From the first time I ever met Ian Hill at SeQuential he mentioned a vision a refueling station concept dedicated to sustainable products and true substitutes to petroleum fuel. At the time my thoughts were "Who would be dumb enough to voluntarily go into retail fueling as a business?" Today I gladly eat my words as they have done an amazing job at developing B99 markets and their first station is performing beyond traditional car-count expectations both at the island and in their convenience store.

Glad to see that the trend spotted by Ian back in 2002 was something shared by those with much more capital and far more research. He felt it in his gut, acted on it, and today I expect great things from this model of differentiated triple bottom line motor-fuel.

For another similar story. British grocery stores push the envelope on who can be the "greenest" (their words not mine). The big story are biodigesters. A technology well known here in the Northwest as its common with paper plants to reclaim a little additional energy off of their waste product.

NOTE: The Whole Foods mention in the Convenience Store News was not available on line. If anyone wants to see it feel free to leave your name, fax number, or email address in the comments and I will forward you a copy of it. I will also erase your personal info after sending it (in the interest of avoiding anymore spam I keep my email off this blog).

Look at the Past to Get Ideas for the Future

I came across a few interesting items following up with the Cyclone Engine technology.

Jay Leno actually makes "A Case for Steam." This of course is the source for the picture shown above. Hard to believe but steam may have a second life in the 21 century.

Here also an interesting History of the Steam Engine. It's interesting to look at these technologies and know they were considered dead end technologies over a century ago. Yet today they look viable again to another group of tinkerers with far superior tools. Which brings me to another interesting article on technology.

Fastcompany Magazine has an article about the new Nasa space craft: To the Moon in a Minivan. What is the connection to the article above? Think of how far technology has come for the space program in the last thirty years. Now think if the geniuses like James Watt and Rudolf Diesel could do it all over again with titanium, carbon fiber, and computer controls.

The Liberace Edition

Wired Magazine recently did a little coverage about the "Autopia WTF?" picture contest held at the LA Auto Show. They formally refer to it as the LA Auto Show Caption Contest. Simple premise, a picture of a car with a caption.


The Caption with picture below:



"The Liberace Edition SLK has been a slow seller for Mercedes, moving only one unit. But Elton John is reportedly happy with it."

Interesting "Cyclone" Engine Technology

Cyclone Power Technologies has an interesting multi-fuel rated engine. Its based off of the Rankin Cycle Steam Engine invented by James Watt. As energy prices have been rising a host of old experimental technologies are marching forward. The beauty is that many of these technologies have never been played with in today's world of computer digital controls, nano technology, as well as space age polymers and alloys.

They have video and technical white papers around their technologies. Its worth a look. What is great about following these new engine designs is how the same concepts pop up in different forms. I notice the wider I drag my net over emerging technologies the more similar all the new 'outside-the-box' technologies become.

Cyclone's website promises not only small applications as shown but also in big diesel commercial and industrial application.

If this is a good idea, which it looks like it is. Watch, more than one company is commercializing it. The fun as an observer is figuring out who has not only the technical concept down but the talent to develop markets for it.

It makes me wish I was going to Power Gen next week. Now that I've seen it online I want to see it up close. But as with all things in life. Way more things to do than time and money will allow.

The Rand Institute Points to Diesel

God I love diesel, and so does the Rand Institute. (Loves in the most clinical, scientific and unbiased sense of the word)

Though this is the research paper which points to ethanol as the weakest of all liquid motor fuels I still like their analysis. (See GM post below)

Check out the Press Release. Also worth checking out is the actual working paper itself: The Benefits and Costs of New Fuels and Engines for Cars and Light Trucks. It offers some in depth cost analysis which lends itself well to citation and simplex presentation.

GM Responds to USA Today on E85

I was really surprised to see this. GM officially defending ethanol as an extension of their product line.

It looks like the engineers over at GM are looking differently at fuel. In fact on the GM website there is a blog post where a GM official representative points to Brazil as a model for potential ethanol availability.

GM came out in response to a USA Today report that E85 was inferior to all other motor fuels including gasoline. As reported in USA Today:

Graham's team calculated the individual and societal costs and benefits of conventional gasoline vehicles, gasoline-electric hybrids, high-tech diesels and flex-fuel vehicles burning E85 full time. Conclusion: Unless gasoline prices, averaging $3.10 a gallon now, rise above $4 and average $3.50 or more the next few years, or ethanol prices drop a lot, diesel's the best overall solution; E85's the worst.

On Firday, GM stood by the premise of ethanol as a viable substitute/blend-stock to petroleum gasoline. What excites me is the fact that GM is siding behind ethanol as a long term fuel. This is the first I have ever seen a major manufacturer actual come to defense of a biofuel beyond making PR laps whenever oil prices rise.

I saw it first at DomesticFuel.com and followed it over to GM's own page.

“We believe ethanol as a renewable fuel is the best near-term alternative to oil as a transportation fuel and replacing gasoline with ethanol positively contributes to lowering greenhouse gas emissions,” said GM Chief Economist Mustafa Mohatarem in the statement. “You cannot take a snapshot in time and define a mature market.”

This snapshot being a reference to where ethanol can go as a fuel technology. Where the "next generation" ethanol technologies will drive future energy prices (downward) and the performance of vehicle engines able to use the higher octane cleaner fuel (upward).

And again another excerpt from Reuters on the same subject:

"By 2012, it will be easier to say which GM vehicles are not E85-capable than to list which ones are FlexFuel," said Beth Lowery, GM vice president of Environment, Energy and Safety Policy. "And we are just as committed to helping build the infrastructure for E85."

For more on GM's E85 Flex Fuel Vehcile support check out their official E85 website: Live Green Go Yellow.