Heating oil marketers can help customers reduce their carbon footprints and replace fossil fuels with renewable energy by selling biodiesel made from food waste. The possibilities were on display during a tour of the Newport Biodiesel plant that was part of the recent Southern New England Energy Conference, held in Newport, R.I. Newport Biodiesel President Blake Banky told visitors, “We take garbage and make clean-burning fuel from it.” The company sources much of its vegetable oil, which is their feedstock for making biodiesel, from 2,000 restaurant partners in New England. The restaurants collect their waste oil in special bins provided by Newport Biodiesel, and the company sends drivers out periodically to retrieve the feedstock. When the restaurant partners cannot provide enough waste oil to meet Newport Biodiesel’s production needs, the company purchases yellow grease, which is sold as a commodity on the open market. Newport Biodiesel pays the restaurants for the oil at a rate that has ranged over the years from $0.80 to $1.40 per gallon. The value of yellow grease on the open market is what drives this pricing.
Waste Becomes Feedstock
The company begins the production process by separating the energy-laden grease from the water and particulates that are mixed with it when the waste oil arrives. Rather than dispose of those waste products, Newport pays to have them collected by operators of anaerobic digesters that use the waste to create biogas, which can be burned like natural gas. “We’re about as green as one can get. Our waste stream is another’s feedstock.” Banky said. Newport Biodiesel continues processing the yellow grease at its plant to remove more water and, through a light chemical process, converts it into biodiesel that meets the ASTM D6751 specification. The company maintains a laboratory on site for fuel quality testing and uses a thirdparty laboratory as well. The process also generates glycerin as a byproduct, which Newport Biodiesel sells. The processed biodiesel is sold to fuel distributors and loaded into tank trucks with a loading arm that dispenses 400 gallons per minute. Buyers generally purchase the fuel without the accompanying Renewable Identification Numbers (RINs), which are federal energy credits used to promote renewable fuel production under the federal Renewable Fuel Standard 2 (RFS2). RINs have a value that rises and falls with market conditions.
One of the challenges facing producers like Newport Biodiesel is uncertainty about the principal federal government incentives that promote the use of biodiesel. Both the Biodiesel Blenders Tax Credit (BTC) and RFS2 are currently in limbo. The BTC, which provides a $1/gallon tax credit when biodiesel is first blended with petroleum, lapsed at the end of 2013 but could be reinstated retroactively by Congress. RFS2, meanwhile, is designed to mandate the quantities of biofuels that must be blended into the petroleum fuel supply, but the U.S. Environmental Protection Agency (EPA) has delayed setting the 2014 Renewable Volume Obligations (RVO), leaving both buyers and sellers of RINs guessing as to their value. Banky told Oil & Energy that uncertainty about the incentive programs creates challenges for producers like Newport Biodiesel. “It is difficult for the industry to price inputs and outputs at a level that will provide biodiesel producers with a fair rate of return on capital and efforts when the ultimate state of the tax credit and RVOs are unknown.”
He said the incentives are very important for getting biodiesel production up and running. “It is the view of Newport Biodiesel that renewable fuels will be a very important part of the energy program going forward,” he said. If the incentives are simply shut off, there is risk of the industry losing ground rapidly and retracing the progress it has made, he added. While the federal incentives may or may not last, biodiesel producers are expected to benefit from the State of Rhode Island’s new Bioheat® fuel mandate, which requires that every gallon of heating oil sold in the state contain at least 2 percent biodiesel as of July 1, 2014. “We believe the Rhode Island mandate is a good example for the entire country,” Banky said. “It is reinforcing demand for renewable energy, and we are starting to feel the pull.” Newport Biodiesel was founded in 2006 by Nat Harris, who started out by making heating fuel for his home. The company graduated to commercial production and moved to its current location in 2008, where it now has a production capacity of 2 Newport Biodiesel provides these bins to its million gallons a year.