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BIODIESEL

The demand for biofuels to supplement or replace traditional petroleum-based fuels has risen dramatically in the past several years due to the converging forces of crude oil cost, ongoing environmental and sustainability issues, national energy security and technology advances. The transportation fuel requirements in the U.S. alone are equivalent to greater than 150 billion gallons of biofuel per year.  And long-term demand will continue to outstrip production capacity.

Among biofuels, biodiesel provides a clean, sustainable opportunity alternative to petroleum-based diesel. Biodiesel is derived from renewable resources such as vegetable oils, animal fats, or algae oils. It can be used as a pure fuel or blended with petroleum-based diesel (e.g., B5, B10, B20, B100). Blends of 20 percent biodiesel with 80 percent petroleum diesel (B20) can generally be used in unmodified diesel engines.

Biodiesel has many advantages:

• Biodiesel is environmentally-friendly
• It contains no sulfur or aromatics, resulting in substantial reduction of unburned hydrocarbons, carbon monoxide, and particulate matter
• Reduces net carbon dioxide emissions by ~75% compared to petroleum diesel
• Biodiesel is the only alternative fuel to have successfully completed the U.S. EPA-required Tier I and Tier II health effects testing under the Clean Air Act

THE UNITED STATES

According to the U.S. Energy Information Administration (EIA), within the overall transportation fuel market in the United States alone, 40 billion gallons of diesel are used each year for on-road transportation. 450 million gallons of biodiesel were estimated to have been produced in the U.S. alone in 2007, or more than 10 million barrels, representing a very significant increase in year-over-year production from 2 million gallons in 2000, but still a very small fraction of the overall demand for diesel fuel.

In the U.S. a six-fold increase in annual production is coming on line within the next several years. There are 38 plants under construction and 8 existing plant expansions contributing an additional capacity of 1.05 billion gallons of biodiesel annually (estimates as of February 2008)

EUROPEAN UNION

Production of biodiesel in Europe faces a similar dynamic to that in the U.S. According to Frost & Sullivan, Europe’s terrestrial biodiesel feedstock availability won’t be able to meet the 5.75 percent European Union blending targets.

REGULATORY PRESSURE

Regulatory pressure to produce renewable energy is widespread, and increasing. The year 2020 is now a popular target worldwide, with policies aimed at increasing the share of renewables as a percentage of total energy use. China has a legislated, binding target to triple renewable energy sources to 15% by 2020. The EU Renewables Directive adopted in 2001 has a target of 12% renewables by 2010; an increase to 20% has been recommended for 2020. California’s Renewable Portfolio Standard requires sellers of electricity to purchase 20% of their electricity from renewable sources by 2017, and sets a state goal of 33% by 2020. The State of Hawaii has set its own RPS of 20% of its energy needs coming from renewable sources by 2020. For biodiesel in particular, Europe, Brazil, China, and India each have targets to replace from 5% to 20% of total diesel with biodiesel.