Piedmont Biofuels Cooperative Overall Analysis of Small Scale Biodiesel

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1 Piedmont Biofuels Cooperative Overall Analysis of Small Scale Biodiesel Matt Rudolf Executive Director Greg Austic Oil Collections Research Coordinator

2 Overall Analysis of Small Scale Biodiesel What is a cooperative? A cooperative is a form of business ownership that consists of a group of people who have joined together to perform a function more efficiently than each individual could do alone Cooperative members are usually directly involved in the inputs or outputs of the company. Often cooperatives have a 1 owner 1 vote rule, but are primarily governed by an elected board of directors.

3 Overall Analysis of Small Scale Biodiesel What is a cooperative? - examples Electricity Cooperatives Marketing Cooperatives Milk Cooperatives Food Cooperatives Small Biodiesel Cooperatives???

4 Overall Analysis of Small Scale Biodiesel All the right reasons...

5 All the right reasons... Functions of a Coop To acquire goods which the market is unable/unwilling to provide To save money/buying power (trap rents/profits) To ensure a high quality service/product To gain certain legal advantages Impetus for starting a coop Ideology Charismatic leader Existing community structure If you have these But none of these STOP!

6 All the right reasons... Small Biodiesel Cooperatives??? To acquire goods which the market is unable/unwilling to provide To save money/buying power (trap rents/profits) To ensure a high quality service/product To gain certain legal advantages

7 Overall Analysis of Small Scale Biodiesel The Interest Chain

8 The Interest Chain The Role of Cooperation/Integration Collectors very few Renderers/oil processors few Biodiesel producers few Biodiesel distributors many End users coop few coop Restaurants coop many production integrated restaurant coops coops coop coop early coops

9 Overall Analysis of Small Scale Biodiesel The numbers

10 The numbers Our Approximate Numbers Collection Small scale collection requires a special person to operate and grow. Production Cost: $.80 to $1 per gallon (includes labor) of cleaned oil. Cost MeOH, KOH: $1 and $1.50 per gallon biodiesel (plus labor). MeOH by the tanker, but large variation with methanol prices. Distribution Cost: $.20 - $.50 per gallon biodiesel. Distribution truck, driver, responsibility to customers.

11 The numbers Our Approximate Numbers (cont.) Lab testing: Cost varies wildly depending on methods, in house lab, amount of testing, etc. Taxes - $.55 per gallon between state and federal Upkeep, amortization Being cheap is not how to minimize costs

12 The numbers Advantages of small scale production/collection Collection is inherently local, increased fuel prices means local is more efficient Vertical integration Community help, involvement The green local argument is on your side Insulation from commodity fats/oils pricing for small scale oil collection Legal advantages

13 The numbers Disadvantages to small scale collection/production Spatially and market limited Labor is a significant proportion of costs Small scale purchasing/selling is more expensive and time consuming Limited capital

14 Efficiency, efficiency, efficiency Tips to economic viability Vertical Integration (collection, production, distribution, etc.) No lost profits along the chain Maintain control of inputs as much as possible Distribute directly from your production location (especially for on road sales) Minimize/eliminate shipping, transportation costs Build it right the first time do your homework! Consider small scale options for ASTM membership and testing for on-road sales

15 Efficiency, efficiency, efficiency Caveats to success Quality people multi-faceted, hard working, multiskilled, dedicated Every market is different Ensure that the model can survive with large price increases and decreases Dedicated members willing to support and invest in the co-op

16 Piedmont Biofuels Cooperative What do we do? Education Workshops/Demos Tours Internship Homebrew Production On Road Production Integration with Industrial for Lab QC Waste Vegetable Oil Collection Professional Consulting Property Maintenance and Housing (Community Building)

17 What makes us money? PBC Revenues, 2008 YTD, by %

18 How do we spend our money? PBC Expenditures, 2008 YTD, by %

19 Which parts can be replicated? Building a small scale (~50,000 gal/yr) biodiesel plant that provides a living for two, and biodiesel for your community. Oil Collections Sidestreams disposal at a compost facility On road sales Tethering to a commercial plant (aka. the Satellite Strategy)

20 Which parts cannot be replicated? The People and Commitment to the Project Financial Resiliency We have been back stopped by another entity, that has allowed us incur debt in the learning process Gravitational Pull and Religious Zeal Location Proximity to Chapel Hill area means we have a large amount of community support

21 Oil Collections Doing it the right way (if you are in the right area) We bought a 1500 gallon vacuum truck, and make monthly payments of about $700 on that loan. We have resourced getting new oil contracts, and have been inventive in trying to avoid paying for the oil. Getting containers and grease bins has been a barrier because we did not include that cost in our budget.

22 Deal with your sidestreams at least by composting them Methanol recovery is NOT optional

23 On road sales demystified For many years small scale biodiesel producers have viewed on road sales as too difficult and expensive. Now that both petroleum and commodity fats and oils are expensive, the small scale producer is in a unique position to have a profitable business based on fuel production for the first time. Done correctly, it is possible for a small-scale (~25-50k gallons per year) producer to make on spec fuel for sale. Starting January 1, the tax credit bumps to $1/gal for WVO

24 On road sales demystified NBB Membership - $2500/year for a small producer membership. $0.01/gal if over 250,000 gallons/year Lab testing Legally you just need to get the full assay done one time, we suggest you get it done quarterly. Cost is about $1000. Critical Parameters need to be tested every batch with an in-house laboratory.

25 On road sales demystified Commercial biodiesel must meet the ASTM D b spec Biodiesel production is not difficult however it can be challenging to consistently produce onspec fuel. Important tests that can easily be done in house: - Water and sediment centrifuge ($3500) - Flash point (esp. if not water washing) closed cup flash point ($4000) - Acid number Wet titration - Cloud point (esp. in winter) thermometer and freezer - Total and free glycerol 27/3 and SafTest ($7200) - Visual Inspection fuel should be clear and bright - Soap content* measure of residual soap in fuel - Moisture content* Moisture level in fuel (KF - $6500) *not part of ASTM spec but important for commercial Cross check your tests with other producers producers!!! Water test kit from Utah Biodiesel Supply - $205 Centrifuge from Ebay - $25-75

26 Overall Analysis of Small Scale Biodiesel Paradigm brainstorm

27 Paradigm Brainstorm Co-op of restaurants Similar to a milk producers cooperative those who generate the product receive the downstream value Makes sense if the goal is to make money Hard to organize restaurants fluctuating market, busy owners Grease is a very minor piece of a restaurant's business as a result, hard to motivate owners

28 Paradigm Brainstorm Satellite Strategy Helps keep collection local Diversify interest in success, enables more owners/investors Allows both large scale and small scale efficiencies Very dependent on good people

29 Paradigm Brainstorm Others Rent your oil Integrated farms and restaurants Mobile full service - clean oil delivery and glycerin pickup co-op

30 Overall Analysis of Small Scale Biodiesel Wrap-up People are key Micro informal share the work Small integrated diverse skill employees Large specialized low skill employees A cooperative is a tool in your toolkit make sure it's the right tool for the job Grease and biodiesel are limited resources so their markets are correspondingly limited