Seattle Biodiesel Homegrown Fuel Takes Root

Just as the PC has the Mac, and the Yankees have the Red Sox, ethanol has a competitor in biodiesel, diesel fuel refined from plant seeds. Two titans of Silicon Valley who have done battle in the Google versus Microsoft wars have now moved over to the competition in biofuels. Vinod Khosla, as discussed previously, is banking on cellulosic ethanol; Martin Tobias is backing biodiesel. They both ended up being right in software. The extent to which each will be right in the competition for the dominant biofuel "operating system" will be a fascinating tale to watch unfold.

Soybeans grown in the Midwest have historically gone to feed hogs. Now, thanks to a former software developer, they are feeding beetles— Volkswagen Beetles, to be exact. Powering Martin Tobias's Beetle seems a higher purpose for the humble soybean than making Jimmy Dean's pork sausages.

It was a seemingly long jump for this emerging energy guru: from the clean and orderly campus of Microsoft to the next industrial age, hard by the brown water of the Duwamish River. But according to Tobias, the same lust for innovation and capacity for risk taking applies in building a biofuels company as in pushing the boundaries of software. His company, Imperium Energy, is now building the largest biodiesel plant in the Western Hemisphere.

His process is simple. It involves crushing the beans and shipping the oil by rail to Seattle, where the glycerin is removed in a quiet, nontoxic, low-emission process, resulting in a steadily improving quantity of gallons of biodiesel produced per acre of planted soybeans. There are no tall cracking towers, no residual tar, and no chance of Exxon Valdez—ike oil spills with this super-clean technology. Tobias considers his process to be the real McCoy of biofuels production processes, capable of producing five million gallons per year with a longer shelf life and purer characteristics than other biofuels, due to its advanced refining technology.

The purity also is a selling point. His firm is now talking with several school districts about running their school buses on clean-burning biodiesel. Parents may appreciate his fuel when it is pointed out that the accumulation of diesel pollutants inside an average school bus is sixteen times higher than the toxic parts per million in the air outside the bus.37

Tobias had two weapons at his disposal in producing a biodiesel that could go head to head with petrochemicals. One handicap that biodiesel fuels have faced is that they tend to thicken or congeal in colder temperatures. Imperium believes that its process can solve that problem in two ways. First, Imperium employs a "cold filtering" system, similar to that used in cold filtering beer, in which the triglycerides that cause the congealing problem precipitate out before the fuel leaves the refinery. Second, when his company refines oils from the seeds of canola and mustard plants grown in Washington State, congealing problems will disappear. But even before that happy day, biodiesel made from soybeans is already in use at -25°F temperatures in Yellowstone National Park with the aid of simple heating devices on the gas tanks. Better to warm diesel lines than to warm our planet.

When it comes to biofuels, cleanliness is next to godliness. Imperium is negotiating with Seattle City Light to sell biodiesel at a premium price, allowing the utility to take advantage of a credit for the use of low-emission biodiesel. This "premium pricing" presages exactly the type of economic arrangement that will blossom in the future on a grander scale once a cap on total national greenhouse gas emissions drives these transactions. What is happening on the shores of the Duwamish River today may be happening nationwide in the future: one business entity paying another to clean up its act.

This team is now selling all the fuel it can produce, even though it's more expensive than regular diesel, even with the excise tax benefit. The cost of biodiesel dipped below the price of regular for just a brief period in the summer of 2005. Compared to that of regular diesel, the future of biodiesel looks bright, though, since the last dinosaur died some time ago and the price of oil over the long term can hardly be predicted to go down. In contrast, we are just starting to plant canola and drive down biofuel costs as we reach scale and increase the efficiency of production.

At the moment, consumers are flocking to pay a bit more for biodiesel, leading to a growth in sales in recent years. From 500,000 gallons in 1999 to 250 million gallons in 2006, a five-hundred-fold increase in five years, the rate of growth may be faster than that of any fuel in history.38 The customers of Imperium are buying environmental sanity, energy independence, and the confidence that they are helping solve a global concern.

But to reach the ultimate market, the masterminds at Imperium will have to one day produce biodiesel at a cost competitive with that of regular diesel. They cannot be satisfied with the easy pickings. They have already significantly reduced their operating costs. Their progress is not as rapid as Moore's Law prescribes for computer chips, but Tobias, a veteran of the software world, sees the same path to success with a fuel involving photosynthesis as with an industry involving software synthesis.

Several fundamental factors warrant optimism. First, biodiesel has the advantage that it can be woven into the web of the distribution system for today's fuels, because it can be injected directly into the stream of regular diesel being delivered by pipeline. Second, blends at low levels have been widely endorsed and accepted by major manufacturers. Third, the improved lubricity of biodiesel is just what the doctor ordered for reducing engine wear. These intrinsic benefits make realistic the estimate that biodiesel can contribute 2-10 percent of our diesel needs in a matter of several years—a small percentage to be sure, but a solid and rapid start on the road to biodiesel's becoming a significant part of the biofuels revolution.39

Biodiesel does have detractors. Some suggest that its use could increase emissions of nitrous oxide. Studies point to different conclusions in that regard.40

Energy balance questions are also raised. In a head-to-head comparison between biodiesel and traditional diesel fuel, however, biodiesel eats regular diesel alive, with a fossil fuel energy balance rating of 3.2 to 1, well ahead of petroleum diesel's 0.83 to 1.41 Cellulosic ethanol could have a ratio of energy inputs to outputs several times that figure.

The biggest jump in productivity may come when the right feed stocks are in use. The canola that Imperium will one day use will reduce transportation costs by virtue of being grown closer to the plant; plus, canola produces roughly a hundred gallons per acre compared to fifty to sixty gallons per acre from soybeans.42 Mustard, a beautiful bright yellow plant now starting to cover eastern Washington farms, is similarly productive at a hundred gallons per acre.43

Investment guru Nancy Floyd points out that locating refineries close to eco-friendly markets on the West Coast can save as much as $.50 a gallon by reducing the shipping costs of feed stock, now being hauled in by rail from the Midwest. Nth Power, her venture capital firm, is investing in Imperium, which is planning to expand its operations in

Washington to serve clients in close proximity to the Seattle area. "We have seen a lot of deals in biodiesel and in ethanol, and what attracted us to this deal was their strategy of building low [cost] refineries in places where the customers are, and then moving upstream to develop low-cost local feed stock," Floyd says.44

Imperium and Tobias depend on the $.99 biodiesel excise tax credit and curse its limited term. Congress provided this credit for only two years. So when Tobias goes to investors to look for capital, he cannot guarantee them that the credit will last much longer. This undermines the point of the credit by scaring away investors who need to take a long-range approach. Congress would do well to quit playing games and set up credits for meaningful and predictable lengths of time.

Not surprisingly, Tobias sees biodiesel as having distinct advantages over cellulosic ethanol. First, he contends that no commercially available cellulosic ethanol will be produced for five years. Cellulosic is late to the party, according to this gung-ho entrepreneur. Second, it gets 20 to 33 percent less mileage on a conventionally designed engine, and he believes consumers will eventually respond negatively to that.

In Tobias's vision, the Europeans will shortly enter the American market with higher-efficiency diesel cars, and the Japanese will continue their onslaught with hybrids, setting up an industrial-size street brawl between biodiesel and hybrids. He is placing his bets on biodiesel, big time. Of course, in the future, these two technologies could be implemented together, to run hybrid drive trains on biofuels.

But ifbiodiesel and cellulosic ethanol are to be seen as distinct competitors, which they are, cellulosic clearly holds one indisputable trump card. It puts to work the entire carbohydrate storage of the plant. Biodiesel frees for human use only the carbohydrates stored in the fruit of the plant, be it palm oil, soybeans, or canola.

It is no surprise then that, anticipating improvements in yields, cel-lulosic is projected to produce between 1,000 and 1,500 gallons of ethanol per acre,45 while the most productive domestic biodiesel feed stocks (canola and mustard) currently do not exceed 100-150 gallons per acre. This 1,000 percent advantage is huge, especially when we realize that cropland is limited, even in the Midwest. And, while cellu-losic now produces less mileage per gallon than biodiesel, the rates are likely to be equalized when technology created by Saab and others eliminates the mileage penalty of ethanol.

Given that cellulosic has such a markedly greater per-acre capacity, it is hard to see how it would not eventually produce a much larger percentage of America's biofuels than biodiesel. But this assumes that it will overcome the "chicken and egg" problem of a lack of pumps and flex-fuel vehicles. If Congress does not act to push both along, biodiesel may be out of the gate so far ahead that the progress of cellulosic is delayed.

Quantum leaps may be possible in biodiesel production as well; a day may come when canola and soybeans are seen as the chimps of the space-flight age, acting as temporary organic substitutes for what may become the dominant feed stock for biodiesel: algae. Algae are perhaps the humblest members of the plant kingdom, being single-celled organisms with no fruit, no stalk, no flower, and very little poetry dedicated to their visage. They have, however, a prodigious ability to grow in limited amounts of space while producing gigantic quantities of oil. What has dominated the bottom of the ocean's food chain could one day dominate the biodiesel industry, according to research conducted by the National Renewable Energy Laboratory.46

In 1996, that research demonstrated theoretical production capabilities of 2,640 gallons of oil per year produced in a thousand square meters of space—in the case of the study, in small ponds. Even high-yield canola plants can produce only 50 gallons per year in a similar space.47 At least in theory, then, algae could produce over forty times the oil out of the same space as the highest-producing alternative crop. Even if the algae yields only 10 percent of its potential, it would produce over four times as much oil, given the same amount of growing space. Recent trials by private "algaculture" start-ups estimate potential yields of 10,000 gallons per acre or more.48

In addition to that strength of oil production, algae have a bonus for us. The gas we now seek to remove from the atmosphere, CO2, is what algae feeds on. This creates the possibility of locating algae production facilities next to fossil fuel-based plants and using the CO2 emanating from their stacks to feed the algae ponds. This was tested by the National Renewable Energy Lab in New Mexico, and it worked. This tandem usage could be one of the most satisfying "two-fers" in the energy world. An MIT-based consortium is testing such a pilot facility now at a coal plant. As an alternative, waste treatment plants could serve to provide carbon for our algae farms. The national lab concluded that its research "should not be seen as an ending, but as a beginning"49 Evolution began with single-cell organisms from the sea, so why shouldn't an energy revolution?

Together, these transformations are making it possible to realize the original dreams of Rudolf Diesel, who envisioned his engine being powered everywhere in the world by fuel made from vegetable matter. His first vehicle's peanut oil engine, developed in 1893, led him to say in 1912, "The use of vegetable oils for engine fuels may seem insignificant today, but such oils may become, in the course of time, as important as petroleum and the coal-tar products of the present time."50 Like fine wine, some great ideas need time to mature.

Biofuel's future is now being decided on the highways and back roads of America. Performance counts, and on that score, biodiesel is hitting home runs, with B20—20 percent biodiesel and 80 percent regular diesel—proving to have fuel consumption, horsepower, torque, and haulage rates as high as those of conventional diesel. It is winning where the rubber, and in this case the vegetable matter, meets the road. When one American suburban neighbor sees another getting better mileage, the age of biodiesel will arrive, one block at a time.

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