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The next few months could be “make or break time” for the soy biodiesel industry in the U.S.

Biodiesel faces several challenges right now, including the high cost of the feedstock and the loss of the one dollar biodiesel blenders’ tax credit, which Congress allowed to expire on December 31^st.  Indications are that most biodiesel plants have ceased production as they await Congressional action on the tax credit, which may not happen until March.

In Iowa, the state’s Renewable Fuels Association has launched a campaign to highlight the importance of biodiesel—and renewable fuels, in general—to Iowa’s economy.  Monte Shaw is the executive director ofIRFA. “We’ve got a lot of exciting thing coming down the road for this industry—things that are going to really redefine renewable fuels for the future,” says Shaw. “Whether it’s exciting feedstock projects like the algae project at Shenandoah, or maybe it’s the biorefinery  project that’s scheduled to go into Newton.”

Good reasons, Shaw says, to keep Iowa’s biodiesel industry viable.

“If we let the current biodiesel industry wither away and lose the jobs we have today, it also means we’re not going to be the place—we’re not going to be the state—where those next generation investments and next generation jobs come either,” he says.  “So we’re really at a turning point, not just for the investors and jobs of today, but for making Iowa the place to be for the future of this industry as well.”

In addition to the federal tax credit extension, Shaw says IRFA will also be lobbying for a five percent biodiesel mandate in the Iowa legislature.

“We really do need a B5 fuel quality standard to create a low level of demand,” says Shaw. “It’s constant, it’s year-around, it’s predictable—and that’s what can help these plants cash flow during the good times and the bad times.”

A bill creating a B5 fuel quality standard passed the Iowa Senate in 2009, but time ran out before the Iowa House could consider the legislation.

The $1-a-gallon tax credit that keeps the industry afloat is due to expire Dec. 31, and lobbyists for biodiesel producers and soybean growers are scrambling to get Congress to enact an extension before lawmakers leave town for the holidays.

The House included an extension of the subsidy in a package of extensions for other business tax credits. However, the Senate has so far failed to act on the issue.

A House Democratic aide said Wednesday that there have been a “number of conversations” with Senate leaders about the issue, but that the Senate only has time to deal with health care and a defense bill. Press representatives for Senate leaders had no immediate comment on the issue.
Were the tax credit to lapse, “it would be a devastating blow to the industry,” said Michael Frohlich, a spokesman for the National Biodiesel Board.

Biodiesel plants could shut down or reduce production if the tax credit lapses, said Daniel Oh, president and chief operating officer of the Ames-based Renewable Energy Group Inc., which operates biodiesel plants in Iowa and other states.

If biodiesel production is limited, it could have a detrimental effect on the price of soybeans and other feedstocks utilized to produce biodiesel,” he said.
Biodiesel producers have been struggling to stay in business for some time because of the relatively high prices of their main feedstock, soybean oil, and the global recession, which has dampened fuel demand. They were dealt another blow early this year when the European Union imposed tariffs on imports of the U.S. product to offset the value of the tax subsidy.

U.S. biodiesel production is down 30 percent this year from 2008, and the industry is operating at about 15 percent of its production capacity.
A recent study by industry consultant John Urbanchuk warned that the “biodiesel industry could be expected to collapse” if the tax credit is removed.

With the tax credit, producers earned about 26 cents a gallon over their production costs in November.

Sen. Charles Grassley, R-Ia., said the uncertainty about the tax credit raised questions about the commitment of Democratic leaders to alternative fuels.

“This lack of action so far is especially inexcusable, considering the House and Senate have been in session nearly continuously for months,” he said.
John Hoffman of Waterloo, a former president of the American Soybean Association, said the tax credit is “essential to the continuation of the biodiesel industry.”

It’s been called ‘too good to be true’ and a ‘miracle’ fuel. It’s a biodiesel that’s made from waste, not food stock. If it’s successful, the new plant could replace the need for foreign oil.

The crowd at Ever Cat Fuels grand opening in Isanti, Minnesota learned all about a new way of making energy. They’re also seeing a biodiesel plant like no other in the world.

“It’s going to spur our economy,” said Clayton McNeff, co-founder of Ever Cat Fuels. “It’s a green technology, and it’s going to provide jobs. ”

The plant creates fuel without water, chemicals or waste. The new process called “Mcgyan”– named after its inventors — converts fats into fuel within seconds.

“When we get to full capacity in another week,” said McNeff, “we’ll be producing more than 10,000 gallons a day. And so that’s more than a truckload a day, so it will be going out to consumers very soon.”

“Biodiesel,” said Ben Yan holding up a bottle of the fuel. “This is the first time in this plant.”

They’re using vegetable oil waste as the base, but they could use anything from stink weed to algae.

For safety reasons, the only way to tour the plant is to watch through remote cameras. Two six-foot tall reactors will start by making 3 million gallons of fuel this year. In 3 years, that will be up to 30 million gallons per year.

“This is really a first of its kind plant,” said Yan. “It’s unique in the world. So, it had to be demonstrated at large scale and now our intention is to license the technology and so hopefully you’ll be seeing these plants all over the country.”

The plant creates fuel without water, chemicals or waste. The new process called “Mcgyan”– named after its inventors — converts fats into fuel within seconds.

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Size and feedstock are probably the two largest issues with biodiesel producers currently. Large plants aren’t doing well and small plants don’t make very much fuel. No matter what feedstock you choose it seems like the price is always going up. Versatility has become the name of the game and many Large traditional biodiesel facilities just do not make sense anymore. There are plenty of 100 MMgy biodiesel plants in the U.S. Mid-West; the majority are inactive right now because they’re not producing. There are not many places in the world left for a 100 MMgy plant, the majority of Large plants in the United States are just sitting dormant rusting, there’s not enough feedstock to support them currently.

Manufacturers of modular biodiesel production units believe they might have the answer. Their products are smaller and can be scaled up to various sizes when needed, plus they usually can be co-located with the feedstock source. They’re less of an investment than a larger facility, obviously, and many are capable of running multiple feedstocks right out of the box.

The fundamentals of modular production units are universal. Each unit is built at a manufacturing facility before being skid-mounted and delivered to its destination. Most, containerized units range in capacity from 1 MMgy to 5 Mmgy and can be linked together from the start to increase overall capacity although the general idea is to start small and expand as needed. Typically the feedstock supply will determine the facility size, making modular biodiesel plants an ideal choice.

You can purchase a small commercial biodiesel plant that produces 2.3 gallons per year for $50,000 from companies like Biodiesel-Equipment.com and monitor their production. The thought process is if you need to Increase or reduce production you can easily when market condition dictate action because of the small size of the plants. Smaller costs to maintain modular biodiesel production plants while keeping up with production needs & market conditions is the future of the Biodiesel Industry.