Biodiesel industry sputtering

Biodiesel has always been a bit in the shadows, eclipsed by the notoriety and sheer size of the ethanol industry. At times that shadow has a chilling effect.

"It's a tough time for biodiesel right now," says Jeff Stroburg.

Stroburg manages one of the nation's largest biodiesel companies, Renewable Energy Group based in Ames, Iowa. The company manages six biodiesel plants, including one in Minnesota.

Stroburg says it's difficult to make money right now.

Soybean prices have increased more than 60 percent the past year, reaching a 34 year high. Stroburg says the sharp rise hits hard, since the price of soybean oil accounts for about 80 percent of the cost of making biodiesel.

"Which means that from a profit and loss perspective, we would be losing money on every gallon," says Stroburg.

Stroburg says his company's biodiesel plants are operating at 60 to 70 percent capacity to slow the losses. He says the Minnesota operation, SoyMor at Albert Lea, may be in a better position than most. He says easy access to soybean oil combined with good transportation links gives it some competitive advantages.

"It's a tough time for biodiesel right now."

Minnesota's biodiesel mandate also helps. Biodiesel is usually blended with petroleum fuel for truck and car use. Minnesota mandates that all diesel fuel sold in the state must contain at least two percent biodiesel. That helps provide a reliable market for the Albert Lea product.

Ed Hegland farms in western Minnesota. He was recently elected to chair a renewable energy trade group, the National Biodiesel Board.

"We have extremely high capacity to produce biodiesel but it just is not sustainable right now at these levels of what the feedstocks cost," says Hegland. "And so it really is dire straits at this point."

Biodiesel plants have shutdown temporarily in several states, including Texas, Georgia and Pennsylvania.

Nationwide biodiesel production capacity is just over 1.8 billion gallons a year. It's estimated actual production is only 300 million gallons, less than 20 percent of capacity.

The industry's problems come despite a generous federal subsidy and generally good consumer reviews. The government pays a one dollar credit for each gallon of biodiesel blended into petroleum fuel.

Biodiesel generally pollutes less than regular diesel, though it emits more particulate matter. Compared to ethanol, biodiesel has a better energy conversion ratio. For every unit of energy it takes to produce ethanol, the finished fuel yields back only one point three units.

Ed Hegland says biodiesel nearly triples that, more than three units back for every energy unit in.

"It has great potential to be a great, great product. We just need to get some of these economics sorted out," says Hegland. "And hopefully some legislation in Washington D.C. can address those issues."

Hegland hopes Congress will increase the biodiesel standard, requiring that more of the product be blended into diesel fuel.

He also hopes U.S. consumers will buy more diesel vehicles. He says for that to happen manufacturers must offer more choices. Right now most major truck lines offer a diesel option, including the Chevy Silverado, Dodge Ram and the Ford F-Series. But for cars the only choices are Mercedes and Volkswagen.

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