Biodiesel Production in Maine using Waste Restaurant Grease Fats, Oil and Grease Management Alternatives February 15 and 16, 2005 presented by

Norman Gridley Acadia Environmental Technology

Agenda ¾ Biodiesel

Basics ¾ Project Overview ¾ Business Planning ¾ Market Drivers ¾ Next Steps

Introduction ¾ Share information

and experience gained in developing the business case for a biodiesel production facility in Maine

¾ Identify

opportunities and roadblocks to market development

Biodiesel Basics ¾ Biodiesel

is a fuel made from organic feedstocks; in the US, typically from oil crops such as soybean ¾ Biodiesel can replace petroleum diesel ¾ In transportation, blends are commonly used, such as B20 ¾ Current national production of biodiesel is modest but growing ¾ See www.nbb.org for more information

Biodiesel Production

Diesel fuel usage in Maine ¾

Year 2002 totals (from Energy Information Administration) of petroleum distillates in Maine z z z z

¾

residential use 273 million gallons commercial and industrial use 125 million gallons on-highway use 168 million gallons total nearly 600 million gallons

Biodiesel sales in Maine, 2003: no more than 45,000 gallons (source: Frontier Energy, Solar Market)

Overview of a facility in Maine ¾ ¾ ¾ ¾ ¾

Located in southern Maine (between Portland and Kittery) Use Waste Vegetable Oil (WVO) as feedstock Produce up to 1 million gallons/yr of B100 using proven technology Flexible design and operation to accommodate market variations (scale-up, scale-down) Private, profit -making venture

WHAT HAPPENS WITH WVO GENERATED IN MAINE NOW?

Can trap grease be used as a feedstock for Biodiesel? ¾ Theoretically this

is possible ¾ Problems with solids, water content, and chemical contaminants ¾ At least one company (Superior Process Technologies) states its technology can achieve this conversion ¾ Not yet proven economically

How would a facility get the WVO feedstock? ¾ Options: z z

z

1. Collect from individual restaurants 2. Purchase Yellow Grease (YG) from Baker or another rendering company 3. Use a combined approach

Biodiesel Production Facility Business Planning Elements ¾ Definition

of the business ¾ Raw materials ¾ Facility location ¾ Market ¾ Competition ¾ Management and staffing team ¾ Financial evaluation ¾ Supporting information

Market Drivers …what factors detract from biodiesel sales and what factors enhance and promote sales?

Retail Fuel Pricing Trends ¾ Petroleum

diesel (petrodiesel) prices steadily rising ¾ Soy based diesel prices rising due to rising input costs ¾ A B20 blend is 20% affected by soy pricing and 80% by petrodiesel price ¾ Rising petrodiesel prices heighten public awareness

Energy Self-Sufficiency ¾ Reliance

on imported oil puts us at risk of supply instability ¾ Heavy imported oil use increases the importance of international stability ¾ Domestic production of biofuels offsets this risk, while increasing value-added domestic activities

Significant Environmental Benefits ¾ Biodiesel

improves emissions in almost all categories of contaminants ¾ Biodiesel is nontoxic and nonhazardous ¾ Biodiesel production and use reduce net CO2 impacts ¾ Biodiesel from WVO turns waste into a resource, enhancing sustainability, and creating social and environmental benefits

Environmental Objectives ¾ Environmental

policies or objectives that are addressed by using biofuels ¾ Some jurisdictions have implemented biofuel percentage objectives ¾ State of Maine has shown leadership in using biofuels ¾ Individual consumers also make choices in line with personal objectives

Environmental Education ¾ USM

biodiesel fuel program based on student input ¾ Chewonki Foundation environmental education and demonstration projects ¾ High School pilot programs for use of biodiesel fuel in school buses ¾ National efforts i.e. National Biodiesel Board

Taxes and Subsidies ¾ Blender

credit passed into law at federal level – not yet regulated ¾ Producer credit recently approved at State of Maine level (5 cents per gallon) ¾ These tools can serve as catalysts for a project

RESULTS OF BUSINESS PLANNING FOR BIODIESEL PRODUCTION IN MAINE

Business Plan Supporters ¾ Chewonki

Foundation (sponsor) ¾ New England Organics (a division of Casella Waste) ¾ John Allen (private investor) ¾ Alfred Padula (private investor)

Production ¾ Capital

and operating cost estimates developed ¾ Economy of scale favors larger facilities (10 million gallons per year and up) ¾ Budget pricing obtained directly from vendors

Scale of Investment ¾ Level

of investment is modest (2-3 million) ¾ Scale of project makes it difficult to provide a comprehensive, integrated project team on a fulltime basis ¾ Potential sources of investment capital: z z z

Individual private investors Corporate investments Partial support from state funding sources

Financial Projection ¾ Base model

of 1 million gallons per year of

production ¾ Capital cost estimates ¾ Operating cost estimates ¾ Revenue projections ¾ Performance (net return) projections

Financial Results ¾ Capital

Cost between 2.5 and 3.0 million ¾ Annual operating cost between 1.5 and 2.0 million ¾ Net production of 1 million gallons/yr B100 ¾ IRR from -17 to +50 percent based on five years of operation, depending on assumptions taken

Cost Uncertainties ¾ Wholesale sales z

of B100 at what prices?

Financial modeling at $2.50 and $3.00 per gallon

¾ Highly influenced z z z

by:

Input (WVO) costs Glycerin disposal costs Tax credits

SUMMARY ¾ ¾ ¾

¾

A one million gallon per year B100 production facility is potentially financially viable Financial results highly dependent on WVO cost and B100 revenue Smaller scale facility would be more of a ‘boutique’ operation and could be less adversely affected by B100 revenue limitations Larger scale facility would be more regional, and perhaps better located in MA, RI or CT

WHAT’S NEXT? ¾ The

project is potentially economic ¾ It needs incentives to help get it off the ground ¾ It needs a management team and structure to support it ¾ It needs commitments to purchase the product

Thanks for your interest. Norman C. Gridley, P.E. [email protected]