Published on January 6th, 2014 | by Derek Markham0
Green Business Ideas: Biodiesel Cooperative
With the growing interest in alternative fuels, one possible green business idea that combines recycling of resources with a product that is constantly in need (fuel) is a biodiesel cooperative or biodiesel processing facility.
1. What is a biodiesel co-op?
Biodiesel is an environmentally friendly (renewable), typically domestically produced, and healthier alternative to traditional diesel fuel. Most diesel engines can freely substitute the two fuels with no noticeable loss in performance. The only significant drawback to biodiesel as a fuel is that its freezing point is higher than traditional diesel, meaning that in areas with harsh and extremely cold winters, biodiesel fuel either needs to be warmed prior to ignition of the vehicle, or, more commonly, it needs to be diluted with traditional diesel. This is where the common moniker B20 comes from: it is a blend of 20% biodiesel and 80% diesel fuel. B100, then, would be 100% pure biodiesel, which can be run in warmer times of year or in areas where winters are not so harsh. See Biodiesel.org for more information on biodiesel.
Biodiesel cooperatives provide biodiesel fuel to their members for use in their diesel vehicles, generators, or furnaces. The fuel is usually derived from local sources of high quality (but possibly used) plant oils like palm, rapeseed (canola), and coconut, and processed into biodiesel fuel. The fuel can be distributed at a dispensary but may also be delivered based on customer demand.
While the industry enjoyed tremendous growth throughout the last decade, several factors have slowed growth and mired large-scale biodiesel producers in financial troubles. First, the European Union banned imports on genetically modified crops and associated products, which made up a significant (and more importantly, hard to document) portion of America’s biodiesel fuel. Secondarily, demand for all fuels has dropped off as the economy slipped into recession. Third, gas prices (and consequently, diesel prices) have dropped across the board, making biofuels less attractive than they were to price-wise, to consumers.
These trends should not deter you from this business if it is something that interests you, for several reasons. First, gas prices have dipped, but in the long-term, there is nowhere for them to go but up. Anyone telling you otherwise is just kidding themselves. Second, small-scale operations like a biodiesel co-operative tend to be somewhat insulated from large-scale regulatory issues like that of the European Union, above. Third, being a small-scale operation actually presents you with a number of advantages that will help insulate you from economic shifts, including intense customer loyalty (biodiesel advocates tend to be the kind of folks who emblazen their vehicles with biodiesel stickers–many of these same folks would much prefer to buy through a local source than through a regular gas station that serves biodiesel that may come from less-sustainable production methods).
2. What required knowledge or skills are necessary?
Some experience in chemistry and a laboratory setting will be very beneficial to begin a biodiesel co-operative. You’ll need to do some good community organizing to attract members and their member contributions to the soon-to-be or recently launched co-op, reducing or possibly eliminating, the amount of total financing required.
3. How much money is required to start?
$$-$$$ (on a scale of $ to $$$$$) Depending on how resourceful you are in cobbling together the processing equipment, the investment to get started can be minimal, but for larger scale processing, it may be best to purchase new equipment instead of building your own. There are biodiesel processing kits available for purchase, as well as biodiesel books, which may be helpful for getting familiar with the process and getting some experience under your belt.
4. What is the income potential?
$$-$$$ (on a scale of $ to $$$$$) For a cooperative venture, the raw profits may be less than selling the biodiesel outright to anyone that wants to buy it. Like many cooperative enterprises, the pricing structure needs to take into consideration the fact that a reserve of cash can be very helpful for expansion or for weathering slower months, and it’s necessary to build a ‘living wage’ for those doing the work into the financial forecast.
5. What is the best location for a biodiesel co-operative?
Urban (best), semi-urban (very good), suburbs (fair), rural (fair/poor).
6. Three best questions to ask yourself to find out if this business is right for you (if you can answer yes to all three, this business might be for you):
- Do you enjoy tinkering in your garage, with chemistry sets, and experimentation?
- Do you know a handful of people who would be charter members and early adopter customers of your co-op and who want to use biodiesel fuel regularly?
- Do you know of several restaurants that would give you their waste oil or sell it to you extremely inexpensively?
[Image: Donald Lee Pardue]