We're Small-Scale and Growing
Major changes to the biodiesel industry are still being played out and one thing is for sure-the days of large multi-million gallon per year plants are drawing to a close. That doesn't mean they will all close down, but there definitely won't be room for all of them to exist. With the decline in world markets, we are starting to see plant consolidation within the industry and many large producers are either sitting idle or have closed down altogether. This has not been the case with Midlands Biofuels-in fact, growth of our company has been so rapid that equipment has been purchased, and locations in South Carolina for our second and third plants are already being identified. Feedstock availability and transportation costs are two major issues facing large producers, but there may be a solution: smaller, more efficient plants.
In the past, individuals and corporations poured millions of dollars into plants that were built to run on tax credits, not positioned for long-term growth. With high oil prices, they were able to compete with the petroleum companies, but many still sent their biodiesel overseas to turn a decent profit. Large rendering companies would argue that WVO is not a viable option for biodiesel production due to its inconsistency and availability. Our biodiesel exceeds ASTM standards and outperforms animal fat-based biodiesel in cold weather and cetane value. Many of the large rendering companies have to compete with small biodiesel producers who offer more personalized service, thus reducing their stranglehold of the WVO market. The good news is that there is room for the rendering companies and small biodiesel producers to exist. Producing biodiesel is not something that will make you rich overnight, but if a company can control their feedstock prices, they can be competitive. The guys at MBF believe there are three things to consider for the future success of small biodiesel plants: taking the proper steps to determine the size and scale of the plant, learning to operate three businesses as one, and developing good business partners, relationships and employees.
No biodiesel can be produced without feedstock. When considering the size and scale of a plant one must examine the type and availability of feedstocks. That being said, smaller plants should always utilize WVO first. It is abundant throughout the U.S., even more so in the Southeast. Small plants should also be able to operate as multifeedstock plants. WVO quality is inconsistent and probably the most difficult feedstock to process, therefore, when other types of feedstocks become available on an irregular basis, they should be ready to take advantage of the opportunity.
Smaller plants must have three business functions: collecting feedstocks, processing and producing biodiesel, and distributing the biodiesel. It's important to note that marketing must be implemented in the collection and distribution functions of the business. Bottom line, small plants must collect their own feedstock in order to compete and be profitable. This means they must manage customer accounts that include marketing their services, managing containers, collection schedules, equipment and transportation. This is where smaller plants must work hard to develop good solid relationships. Finding good employees and developing those employees is also extremely important for the growth of any company.
Finally, tax credits and subsidies are a good thing for the biodiesel industry, and federal tax credits must be passed to get the industry growing again. In the long run, however, the industry must be able to operate without subsidies. The availability of financing is also critical for the industry and the credit crunch has not helped plant start-up efforts. Banks and investors are still hesitant to offer financing no matter how strong the business plan is. At the end of the day, entrepreneurs with strong leadership and technical abilities-not the government or multinational companies-are going to grow this industry.
"Bio" Joe Renwick and Brandon Spence are owners of Midlands Biofuels, a community-scale biodiesel plant in Winnsboro, S.C. Reach them at (803) 718-9741.