Biodiesel, ethanol hold big promise

Biodiesel, ethanol hold big promise

http://www.ajc.com/business/content/business/stories/0620bizbiofuel.html

 

Until recently, Desmond Stewart had to look far and wide for someone willing to buy the fluid left over from his manufacturing operation in South Georgia.

 

Then gas prices spiked.

 

Wind Gap Farms, where Stewart is manager, takes spent yeast from beer plants, removes the alcohol and sells the dry material as flavoring for pet food makers. But that still leaves the alcohol.

 

Stewart does a little more processing and sells the fluid — ethanol — to buyers who blend the cleaner-burning alternative fuel with gasoline. For years that meant he had to send it up north.

 

"There was nobody buying it in Georgia," Stewart said.

 

That changed about a year ago, inspired by rocketing gasoline prices.

 

"Today I could sell 10 times what I have," Stewart says.

 

Biofuels are hot in Georgia and across the nation. State officials know of only three small alternative-fuel-making plants in Georgia. But more than 20 groups are considering building manufacturing plants here to make biofuels — ethanol or biodiesel, state officials say.

 

The proposals are pumped less by support for more environmentally friendly fuels than by dollar signs.

 

High oil prices make the economics of alternative fuels more attractive. Couple that with tax incentives, government mandates for oil alternatives and uneasiness with reliance on foreign oil and you may have the makings of a boomlet in new fuels.

 

The question is whether the industry's heady business expectations are based on fumes more than long-term reality.

 

"Right now I think you are seeing a bit of a bubble," said Murray Campbell, a South Georgia cotton and peanut farmer who heads a company hoping to start construction this year on an ethanol plant in Camilla.

 

The company, First United Ethanol, is recruiting investors to help pay for a $143.5 million plant.

 

It's expensive and complex to build plants that will consistently produce fuels that meet set standards, said Jill Stuckey, who heads the alternative fuels program for the Georgia Environmental Facilities Authority.

 

She predicts that most of the entrepreneurs considering local facilities will quit before they get that far. But she expects some to make it and demand for the fuels to increase as oil prices remain high.

 

"It's not going to be like the 1970s where the price of oil shot back down and all of those things went away," she said. "I think they are here to stay."

 

Environmentally friendly

 

Ethanol is often blended with gasoline as a way to lower tailpipe emissions. Recently, oil companies have scrambled to buy more ethanol to replace another additive that raised environmental concerns.

 

In addition, last year's federal energy policy act required doubling the nation's use of alternative fuels by 2012.

 

Ethanol prices have increased with demand, raising questions about whether there will be enough of the product to fill demand, at least in the short term.

 

The price surge "makes the opportunities look more inviting" for people trying to enter the industry, Campbell said, but "our business model is certainly not based on these prices."

 

Instead, he and other agribusiness people leading First United Ethanol analyzed a decade's worth of prices for ethanol and for the plant's raw materials — corn, in this case. Still, he predicts energy prices will remain high.

 

The company also plans to sell byproducts from the process, including carbon dioxide for dry ice makers as well as distiller's grain for animal feed.

 

Biodiesel — used in diesel-powered rather than gas-burning vehicles — faces different pressures. Nationwide, capacity to make biodiesel easily outstrips current sales and production, said Leland Tong, a market development consultant for the National Biodiesel Board, an industry group.

 

About 75 million gallons of biodiesel were produced in the United States last year, and the figure may be 150 million to 200 million gallons this year, Tong said. That's sharp growth, which he said could continue if diesel prices stay high. But capacity is already about twice actual production and growing, according to his talks with producers. While some of that capacity may be overstated, some biodiesel plants may go out of business as the industry tries to find balance, Tong said.

 

Finding ways to expand

 

Many producers have focused on sales to distributors serving commercial and government truck fleets or school bus operators. But finding ways to expand to the general public is a crucial step, Tong said.

 

One of the biggest risks for alternative fuel makers is ensuring they have enough affordable raw materials — a potpourri of kitchen and farm products, such as soybean oil, corn, canola oil.

 

Some biodiesel plants make their fuel from yellow grease — restaurant waste. Its price has jumped from 4 to 7 cents per pound four years ago to 15 to 30 cents per pound now, Stuckey said.

 

A rush of new biodiesel plants in Georgia could send material prices still higher and lead to shortages, said Keith Hopkins, a vice president of Rome-based U.S. Biofuels, which makes biodiesel primarily from poultry grease.

 

He and his father, Greg Hopkins, started the business three years ago as an offshoot of the family's chemical business.

 

Now, biodiesel is the bigger of the businesses. The family is in the process of spending about $6 million as it shifts its operations to a bigger plant next month, increasing its production from 300,000 gallons a month to 800,000 gallons.

 

Biodiesel competition

 

Nearby, another biodiesel producer is also banking on growth.

 

Rick Sargent started producing the fuel as a way to use a byproduct from using soybean oil at his chemical company in Rome. Now the company, Peach State Labs, has launched its own fuel brand, SoyMet, and plans to build a plant to convert soybeans, sunflower seeds or peanuts into oil to make fuel for vehicles and industrial boilers, Sargent said.

 

He hopes to recruit franchisees to open SoyMet-branded stations to sell alternative fuel to the public.

 

While many small companies are betting on alternative fuel expansion, some big ones are also jumping in, including agribusiness giant Archer Daniels Midland and Perdue Farms, the big poultry producer.

 

Meanwhile, Georgia Tech researchers are trying to improve the process of making ethanol from wood chips and switchgrass.

 

And to demonstrate the feasibility of small operations, the nonprofit Southern Alliance for Clean Energy plans to open a 24-hour-a-day fueling station in Atlanta late next month and a small alternative fuel production facility on Moreland Avenue later this summer

 

"The market will grow as it becomes more convenient," said Robert Del Bueno, manager of the organization's ReFuel biodiesel program.