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Biodiesel- A growing source of alternative energy?

Agriculture.com Staff 02/08/2016 @ 9:27pm

Biodiesel is an increasingly important use for soybean oil, with a projected 170% increase in use this year to 245 million gallons, or a 490-fold increase since 1999. Projections are that this year the growth will consume about 13% of the bean oil consumption, up from 5% last year.

Biodiesel is a biofuel substitute for diesel, and is made mostly from soybean oil (over 90%), but also other oilseed crops are used including palm oil, animal fats, and recycled oils. With similar properties to diesel, it can be blended in almost any ratio with diesel in vehicles, often at the 20% level (B20).

In 2000, USDA created the CCC Bioenergy Program that encouraged biodiesel production through cash payments to producers. Production jumped from 500,000 gallons in 1999 to 28 million gallons by 2004. In 2005, 91 million gallons were funded and USDA forecasts 2006 to hit 245 million gallons. These are huge jumps in a few short years! Although costs of producing biodiesel are forecast to be about $2.45/gallon to produce, and over $3 once marketing/construction costs are included, recent legislation has granted biodiesel a $1/gallon excise tax credit and a $.10/gallon small producer tax credit. Government incentives along with higher diesel prices in the past year have made biodiesel a viable and profitable alternative.

Although the Bioenergy Program authorization ends in FY 2006, with high diesel prices and new tax incentives, USDA forecasts biodiesel production will reach 245 million gallons in 2006. The National Biodiesel Board indicates there are 65 commercial US biodiesel plants, with annual production capacity ranging from 200,000 gallons to 30 million gallons (most plants under 6 mln gallons, but 7 plants above 15 mln gallons), with total capacity of 400 million gallons. Newer plants tend to be larger. They also report that 50 new plants are under construction as of April 2006 that are expected to add another 700 million gallons annual capacity. Over 100 plants are forecast to be on-line by 2007.

Soybean oil is the most common feedstock supply, but the largest plant under construction at 85 million gallons capacity uses canola oil. Judging by the capacity built by investors, biodiesel production is expected to continue growing rapidly over the next few years. Current projections include a slowdown in growth as it reaches a higher level, but projections still call for just under 400 million gallons to be produced in 2007.

In 2006/07, the 2.6 billion lbs used for biodiesel production accounts for the oil from 229 million bushels of soybeans, or about 8% of estimated soybean production in 2006. Although biodiesel is growing at a faster pace than ethanol on a percentage basis, both biodiesel and ethanol may have a difficult time making a dent in gasoline demand as feedstock supplies of both corn and bean oil are small relative to the size of the overall fuel market.

In fact, while 20% of the US corn crop is used for ethanol this year, the energy content of that production is only equivalent to 1.5% of US crude oil imports. Crude oil imports account for about 58% of our energy needs. That gives you an idea of how vastly large the overall market for energy is compared to the US corn and soybean crop. If the entire corn crop were used this year for ethanol, only 7.5% of US crude oil imports would be met. There just isn't enough corn/soybeans to meet this demand at this time.

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