June 21, 2004
From french fries to fuel | Maine biofuel advocates hope to create a flourishing market for the renewable fuel — and lure a startup production facility to the state
By Melissa Waterman
Fried food ˆ those crispy clams, scallops and shrimp that we eat with such guilty pleasure ˆ is synonymous with the carefree days of summer. But for Peter Arnold, renewable energy coordinator at the Chewonki Foundation, an environmental education organization in Wiscasset, all that summertime fried food also means more car fuel and heating oil. Since 2000, Arnold has been concocting biofuel from used cooking oil at the Chewonki Foundation to illustrate that the nonpolluting, renewable fuel can be produced and used efficiently in Maine.
Arnold creates his biofuel on site from old oil he collects from area restaurants. The biofuel in turn powers the organization's tractor and two passenger vans, and partially heats Chewonki's Center for Environmental Education. Each year, Chewonki produces the 2,000-3,000 gallons of fuel required for the vehicles and the building.
Now, Arnold and others hope to convince investors that there's enough demand for biofuel to merit construction of a large-scale production facility in Maine. Last year, a feasibility study financed by a consortium that included Chewonki; Frontier Energy of South China, the state's largest dealer of biofuel; New England Organics, a waste recovery and compost company in Falmouth; the University of Maine and the Center for Environmental Enterprise in South Portland found that a $1.5 million plant could produce 250,000 gallons of biofuel a year to start. The results were promising enough that the partners are now finishing up a formal business prospectus with which to woo possible investors.
But one large question remains: What is the demand for this fuel in Maine ˆ and does it extend beyond environmentally aware organizations like Chewonki? According to Joel Glatz, president of Frontier Energy, consumer and business demand for the fuel exists and is growing dramatically, in part because of biofuel's versatility. "The neat thing about biodiesel," says Glatz, "is that you don't need any extra equipment to burn it. You can transition in and out of biodiesel at will."
Still, only half a million gallons of biofuel ˆ a broad term that encompasses both biodiesel, which is used in vehicles, and home heating oil made from renewable resources ˆ are used annually in all of New England. Increasing that demand and equalizing the cost of the fuel compared to conventional petroleum fuel ˆ today, biodiesel costs 15%-20% more than petroleum products ˆ are two obstacles facing investors.
In an effort to give the nascent biofuel industry in Maine a jump start, Rep. Ed Suslovic (D-Portland) and Rep. Nancy Smith (D-Monmouth) cosponsored a bill that will provide a five-cent- per-gallon tax credit to biofuel producers within the state, whether they use waste oil from restaurants or so-called "virgin" oil from soybeans. Suslovic says the bill, which Gov. John Baldacci signed into law in May, received bipartisan support ˆ at least in part because the industry does not as yet exist in Maine, so the tax credit doesn't affect state revenues at all. "It's a win-win-win," says Suslovic. "We can develop a market for agricultural byproducts, increase our energy independence and generate public health benefits as well."
According to Suslovic, a small tax credit has helped the biofuel industry take off in Minnesota in the last four years; he hopes the same results will ensue in Maine. "It was clear that having the credit in place was absolutely critical to entice private investors," he says.
One New England company already has taken advantage of the increasing demand for biofuels.
Chelsea, Mass.-based World Energy Alternatives operates a biofuel plant in Lakeland, Fla. that produces 18 million gallons a year ˆ nearly three-quarters of the 25 million gallons of biofuel manufactured nationally in 2003. Production has increased sharply since just two years earlier, when the entire industry produced just five million gallons, according to Jenna Higgins, director of communications for the National Biodiesel Board, a Missouri-based trade association. "The increasing demand comes from a combination of factors: the mandated requirement for cleaner fuels and the urge to be 'green,'" Higgins says.
The cost differential
For Glatz, who started his business eighteen years ago with a convenience store and a single oil truck, biofuel was the solution to a problem he faced in 2001. "I was looking for a way to heat a building at the Good Life Center [the former home of the late Helen and Scott Nearing in Harborside] without using wood heat or a petroleum product," Glatz recalls. "I was at the Common Ground Fair and stopped to talk to Naoto Inoue, owner of the Solar Market in Arundel. He had a huge display about biodiesel, which seemed perfect for the Good Life Center."
Over that winter Glatz considered the costs and benefits of distributing the fuel through his company. "I talked with my partner who said, why not set up a table at the Green Future Fair in Belfast and see if you can get the thing off the ground." At the fair, Glatz was swarmed with people ready to place orders for biodiesel for their vehicles. "I had about 1,000 to 1,500 gallons pre-sold and we got lots of press coverage," Glatz says. "So in 2002 I went down to Boston [to World Energy Alternatives' Chelsea facility] in a truck and got 3,000 gallons." He returned to Chelsea again that fall for another load, and then wondered if he could sell the product as heating oil.
One drawback to biofuel is that at 100% concentration, it gels when the temperature drops below freezing. To avoid that problem, biofuel is mixed with regular petroleum fuel. The most common blend of biofuel, known as B20, mixes 20% biofuel and 80% petroleum.
Glatz does the mixing himself, depending on whether the product will be used for motor fuel or for home heating oil. Glatz bought a heated boat-storage building adjacent to his South China offices to store the raw product in colder months. As news of his company spread via word of mouth and stories in the state's newspapers, orders for home heating oil and diesel began to trickle, then to surge in. "We sold 10,000 gallons in total in 2002," reports Glatz. "We sold 50,000 gallons in 2003. I predict that we'll see 100% growth per year for the next five years."
He notes that his customers ask for home heating oil and vehicle fuel in almost equal numbers; combined, those sales comprise between five percent and 10% of total fuel sales by Frontier Oil Company, Frontier Energy's parent company.
One of those customers is retail giant L.L. Bean. According to Ann Butter, senior supervisor of logistics at the company, corporate interest in biofuel was sparked after the company gave $1 million to Acadia National Park in 2001 to support the park's fleet of propane-powered vehicles. "Then we started looking a little closer to home," Butter says, "wondering what we could do within our own company" to cut emissions of greenhouse gases. Using biodiesel in L.L. Bean trucks and other vehicles seemed a logical choice. "Biodiesel was very easy. There were no conversion costs, no problem switching back and forth to conventional fuel," explains Butter.
After meeting Glatz at a trade show, the company arranged to have a 1,000-gallon tank of B20 installed at its Desert Road facility in 2003. Throughout last year's exceptionally cold winter, three trucks used the fuel with no difficulties reported at all. "This year we are expanding to six tractors and two 18-wheeler trucks," reports Butter. "We've had fabulous success with use of the product and are very optimistic that the price will come down and more companies will want to use it."
Right now, though, there's at least a 20-cent-per gallon differential between the cost of biofuel and the cost of regular fuel. Frontier Energy sells its conventional #2 heating oil for $1.49 a gallon; B20 biofuel goes for $1.85. Diesel gas is $1.85 a gallon; biodiesel is $2.19. According to Suslovic, that difference is due in part to the cost of transporting biofuel to Maine. "Making it here would keep the cost down," he says.
Creating a market
Last winter, the Blaine House, the Department of Motor Vehicles building and the State Planning Office all stayed warm using biofuel rather than traditional oil. The Department of Transportation uses biodiesel to power its Freeport fleet of offroad equipment and vehicles and to heat its building in town. According to Beth Nagusky, director of Maine's Office of Energy Independence, the state has a vested interest in promoting usage of biofuel. "It's a renewable fuel that's made in the United States, reduces our dependence on foreign oil, is clean to burn and reduces greenhouse emissions," explains Nagusky. "Our role is to help create the market."
Nagusky hopes Maine will join other New England states in a regional initiative to boost the biofuel market. Through the New England Council of Governors, she suggests, the six states could agree to procure biofuel for their state buildings and vehicles, giving the market a great shot in the arm. John Shea, energy and environmental programs coordinator with the New England Council of Governors, says that such a cooperative agreement "could happen. It falls within our activities." In the meantime, Nagusky says, her office within the State Planning Office tries to educate consumers on the benefits of biofuel; she's also working to find ways to offset the greater cost in order to increase demand.
Those efforts align with Arnold's approach at Chewonki. "Education fosters demand," he argues, adding that many people, if not many companies, use the fuel in Maine already. "People want to do what makes sense as long as it's not too costly. And overall, Mainers want energy security. They are thinking of ways to take responsibility for their own energy production."
The feasibility study issued by Wright-Pierce Engineering of Topsham last fall found that there's plenty of used vegetable oil sloshing around Maine that could be converted into fuel. The state's five southern counties produce 860,000 gallons of waste oil a year, which is equivalent to at least 250,000 gallons of pure biodiesel. Right now restaurants pay to have the used oil disposed of.
But a production facility wouldn't have to rely on waste oil alone; like many existing biofuel plants, a Maine facility could use soybeans ˆ a possibility that appeals to Suslovic. He gives as an example an Aroostook County potato farmer who typically rotates his crops every four to five years. Rather than plow under the rotated crop, the farmer could plant soybeans or another oil-producing crop. The soybeans could be harvested and processed to become animal meal, and the byproduct ˆ soybean oil ˆ could be used in a biofuel production plant. Farmers would have a new market for what was once considered a low-value agricultural byproduct.
In their effort to get a biofuel production facility off the ground, Arnold and his partners will be meeting with state officials this summer to discuss the next steps in developing this potentially profitable industry in Maine. A more detailed business plan/pro forma document will be completed by Wright-Pierce this month. Then the courtship of private investors will begin. "This could be one small step toward easing the energy challenge in Maine," adds Suslovic.
Arnold creates his biofuel on site from old oil he collects from area restaurants. The biofuel in turn powers the organization's tractor and two passenger vans, and partially heats Chewonki's Center for Environmental Education. Each year, Chewonki produces the 2,000-3,000 gallons of fuel required for the vehicles and the building.
Now, Arnold and others hope to convince investors that there's enough demand for biofuel to merit construction of a large-scale production facility in Maine. Last year, a feasibility study financed by a consortium that included Chewonki; Frontier Energy of South China, the state's largest dealer of biofuel; New England Organics, a waste recovery and compost company in Falmouth; the University of Maine and the Center for Environmental Enterprise in South Portland found that a $1.5 million plant could produce 250,000 gallons of biofuel a year to start. The results were promising enough that the partners are now finishing up a formal business prospectus with which to woo possible investors.
But one large question remains: What is the demand for this fuel in Maine ˆ and does it extend beyond environmentally aware organizations like Chewonki? According to Joel Glatz, president of Frontier Energy, consumer and business demand for the fuel exists and is growing dramatically, in part because of biofuel's versatility. "The neat thing about biodiesel," says Glatz, "is that you don't need any extra equipment to burn it. You can transition in and out of biodiesel at will."
Still, only half a million gallons of biofuel ˆ a broad term that encompasses both biodiesel, which is used in vehicles, and home heating oil made from renewable resources ˆ are used annually in all of New England. Increasing that demand and equalizing the cost of the fuel compared to conventional petroleum fuel ˆ today, biodiesel costs 15%-20% more than petroleum products ˆ are two obstacles facing investors.
In an effort to give the nascent biofuel industry in Maine a jump start, Rep. Ed Suslovic (D-Portland) and Rep. Nancy Smith (D-Monmouth) cosponsored a bill that will provide a five-cent- per-gallon tax credit to biofuel producers within the state, whether they use waste oil from restaurants or so-called "virgin" oil from soybeans. Suslovic says the bill, which Gov. John Baldacci signed into law in May, received bipartisan support ˆ at least in part because the industry does not as yet exist in Maine, so the tax credit doesn't affect state revenues at all. "It's a win-win-win," says Suslovic. "We can develop a market for agricultural byproducts, increase our energy independence and generate public health benefits as well."
According to Suslovic, a small tax credit has helped the biofuel industry take off in Minnesota in the last four years; he hopes the same results will ensue in Maine. "It was clear that having the credit in place was absolutely critical to entice private investors," he says.
One New England company already has taken advantage of the increasing demand for biofuels.
Chelsea, Mass.-based World Energy Alternatives operates a biofuel plant in Lakeland, Fla. that produces 18 million gallons a year ˆ nearly three-quarters of the 25 million gallons of biofuel manufactured nationally in 2003. Production has increased sharply since just two years earlier, when the entire industry produced just five million gallons, according to Jenna Higgins, director of communications for the National Biodiesel Board, a Missouri-based trade association. "The increasing demand comes from a combination of factors: the mandated requirement for cleaner fuels and the urge to be 'green,'" Higgins says.
The cost differential
For Glatz, who started his business eighteen years ago with a convenience store and a single oil truck, biofuel was the solution to a problem he faced in 2001. "I was looking for a way to heat a building at the Good Life Center [the former home of the late Helen and Scott Nearing in Harborside] without using wood heat or a petroleum product," Glatz recalls. "I was at the Common Ground Fair and stopped to talk to Naoto Inoue, owner of the Solar Market in Arundel. He had a huge display about biodiesel, which seemed perfect for the Good Life Center."
Over that winter Glatz considered the costs and benefits of distributing the fuel through his company. "I talked with my partner who said, why not set up a table at the Green Future Fair in Belfast and see if you can get the thing off the ground." At the fair, Glatz was swarmed with people ready to place orders for biodiesel for their vehicles. "I had about 1,000 to 1,500 gallons pre-sold and we got lots of press coverage," Glatz says. "So in 2002 I went down to Boston [to World Energy Alternatives' Chelsea facility] in a truck and got 3,000 gallons." He returned to Chelsea again that fall for another load, and then wondered if he could sell the product as heating oil.
One drawback to biofuel is that at 100% concentration, it gels when the temperature drops below freezing. To avoid that problem, biofuel is mixed with regular petroleum fuel. The most common blend of biofuel, known as B20, mixes 20% biofuel and 80% petroleum.
Glatz does the mixing himself, depending on whether the product will be used for motor fuel or for home heating oil. Glatz bought a heated boat-storage building adjacent to his South China offices to store the raw product in colder months. As news of his company spread via word of mouth and stories in the state's newspapers, orders for home heating oil and diesel began to trickle, then to surge in. "We sold 10,000 gallons in total in 2002," reports Glatz. "We sold 50,000 gallons in 2003. I predict that we'll see 100% growth per year for the next five years."
He notes that his customers ask for home heating oil and vehicle fuel in almost equal numbers; combined, those sales comprise between five percent and 10% of total fuel sales by Frontier Oil Company, Frontier Energy's parent company.
One of those customers is retail giant L.L. Bean. According to Ann Butter, senior supervisor of logistics at the company, corporate interest in biofuel was sparked after the company gave $1 million to Acadia National Park in 2001 to support the park's fleet of propane-powered vehicles. "Then we started looking a little closer to home," Butter says, "wondering what we could do within our own company" to cut emissions of greenhouse gases. Using biodiesel in L.L. Bean trucks and other vehicles seemed a logical choice. "Biodiesel was very easy. There were no conversion costs, no problem switching back and forth to conventional fuel," explains Butter.
After meeting Glatz at a trade show, the company arranged to have a 1,000-gallon tank of B20 installed at its Desert Road facility in 2003. Throughout last year's exceptionally cold winter, three trucks used the fuel with no difficulties reported at all. "This year we are expanding to six tractors and two 18-wheeler trucks," reports Butter. "We've had fabulous success with use of the product and are very optimistic that the price will come down and more companies will want to use it."
Right now, though, there's at least a 20-cent-per gallon differential between the cost of biofuel and the cost of regular fuel. Frontier Energy sells its conventional #2 heating oil for $1.49 a gallon; B20 biofuel goes for $1.85. Diesel gas is $1.85 a gallon; biodiesel is $2.19. According to Suslovic, that difference is due in part to the cost of transporting biofuel to Maine. "Making it here would keep the cost down," he says.
Creating a market
Last winter, the Blaine House, the Department of Motor Vehicles building and the State Planning Office all stayed warm using biofuel rather than traditional oil. The Department of Transportation uses biodiesel to power its Freeport fleet of offroad equipment and vehicles and to heat its building in town. According to Beth Nagusky, director of Maine's Office of Energy Independence, the state has a vested interest in promoting usage of biofuel. "It's a renewable fuel that's made in the United States, reduces our dependence on foreign oil, is clean to burn and reduces greenhouse emissions," explains Nagusky. "Our role is to help create the market."
Nagusky hopes Maine will join other New England states in a regional initiative to boost the biofuel market. Through the New England Council of Governors, she suggests, the six states could agree to procure biofuel for their state buildings and vehicles, giving the market a great shot in the arm. John Shea, energy and environmental programs coordinator with the New England Council of Governors, says that such a cooperative agreement "could happen. It falls within our activities." In the meantime, Nagusky says, her office within the State Planning Office tries to educate consumers on the benefits of biofuel; she's also working to find ways to offset the greater cost in order to increase demand.
Those efforts align with Arnold's approach at Chewonki. "Education fosters demand," he argues, adding that many people, if not many companies, use the fuel in Maine already. "People want to do what makes sense as long as it's not too costly. And overall, Mainers want energy security. They are thinking of ways to take responsibility for their own energy production."
The feasibility study issued by Wright-Pierce Engineering of Topsham last fall found that there's plenty of used vegetable oil sloshing around Maine that could be converted into fuel. The state's five southern counties produce 860,000 gallons of waste oil a year, which is equivalent to at least 250,000 gallons of pure biodiesel. Right now restaurants pay to have the used oil disposed of.
But a production facility wouldn't have to rely on waste oil alone; like many existing biofuel plants, a Maine facility could use soybeans ˆ a possibility that appeals to Suslovic. He gives as an example an Aroostook County potato farmer who typically rotates his crops every four to five years. Rather than plow under the rotated crop, the farmer could plant soybeans or another oil-producing crop. The soybeans could be harvested and processed to become animal meal, and the byproduct ˆ soybean oil ˆ could be used in a biofuel production plant. Farmers would have a new market for what was once considered a low-value agricultural byproduct.
In their effort to get a biofuel production facility off the ground, Arnold and his partners will be meeting with state officials this summer to discuss the next steps in developing this potentially profitable industry in Maine. A more detailed business plan/pro forma document will be completed by Wright-Pierce this month. Then the courtship of private investors will begin. "This could be one small step toward easing the energy challenge in Maine," adds Suslovic.
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