Biodiesel plant design and operations

Biodiesel Plant Marketing & Business Plan

Biodiesel is a processed fuel that is produced from biological sources that are biodegradable and produce less C02 than conventional diesel (Woodman, 2007). The biodiesel industry today is well situated to take advantage of the combination of increasing consumer dissatisfaction with American reliance on foreign fossil-fuel energy sources while representing an environmentally responsible alternative as well. While the current consumer demand for biodiesel in the United States and abroad remains relatively modest, a growing number of private and public sector organizations are turning to biodiesel as a viable alternative to their energy needs. Despite these advantages, there are a number of constraints and potential threats to growth in the industry that must also be taken into account. As one industry analyst recently emphasized, "Ultimately, biodiesel could offer a ray of hope for a world squeezed by declining oil supplies, pollution, and global warming. But it's also an industry beset with growing pains and the threat of unsustainable production, particularly in the developing world" (Schmidt, 2007, p. 86). Marketed appropriately, though, biodiesel products represent a potential growth industry that enjoys a global market. In this regard, Schmidt adds that, "If one thing is certain, it's that biodiesel is a technology to watch. Before long, it could be the fuel of choice for millions" (p. 86). Taken together, the foregoing suggests that there are both opportunities to be had as well as threats involved in the biodiesel production industry, and these issues are discussed further below.

SWOT Analysis

According to Cravens (2000), the purpose of SWOT analysis is to help identify key issues that will provide a company's decision-makers with an informed strategic approach to marketing their product or service. In this regard, a SWOT analysis seeks to identify the respective strengths, weaknesses, opportunities, and threats related to the environment; strengths consist of positive aspects that are internal to the entity; weaknesses are those negative aspects that are internal to the entity; and opportunities are positive aspects that are external to the entity. Finally, threats are considered to be negative aspects that are external to the entity (Cravens).

Strengths. The Tampa-based production facility enjoys a number of inherent strengths, including:

The expertise and biodiesel production experience of the management staff;

In-house computer expertise;

Excellent labor relations.

Weaknesses. Renewable energy sources such as biodiesel continue to be faced with comparatively higher production costs than their fossil-fuel alternatives (Edinger & Kaul, 2003); however, given current skyrocketing trends in petrochemical prices, it is reasonable to assume that these disparities in production costs will diminish and some approaches may even become more cost efficient in the future.

Opportunities. According to a recent analysis by Swanson, Madden and Ghio (2007), biodiesel holds significant promise for becoming a commercially accepted part of the United States' energy infrastructure. For instance, these authors report that, "In November 2004, the signing of the Jobs Creation Bill HR 4520 marked an important turning point for the future production of biodiesel in the United States because it offers a federal excise tax credit" (Swanson et al., p. 496). Moreover, the opportunity for continued growth in the biodiesel industry is clear. In this regard, Swanson and her colleagues note that, "By the end of 2005, industry production was 75 million gallons, a 300% increase in 1 year. Current industry capacity, however, stands at just over 300 million gallons/year, and current expansion and new plant construction could double the industry's capacity within a few years" (p. 497).

Table __.

Historic U.S. Biodiesel Production Capacity.

Millions of Gallons

Source: Schmidt, p. 87.

Figure ____. Historic U.S. Biodiesel Production Capacity.

Note: Above figures reflect estimated production capacity reported by each facility rather than how much biodiesel was actually produced)

Source: Based on tabular data in Schmidt at p. 87.

Specific opportunities for the company's biodiesel products are discussed further in the target markets section below.

Threats. Although biodiesel is currently marketed as an environmentally friendly alternative to fossil fuels, there are some potential threats to the existing sources for much of the industry's production sources. In this regard, Schmidt emphasizes that, "Without more oversight, farming for biodiesel could exacerbate deforestation worldwide, and obviate the fuel's climate benefits, while contributing to erosion, air pollution, loss of biodiversity, and other environmental threats" (p. 87). Finally, while the company currently enjoys reliable local and foreign feed stock sources, the potential exists for a disruption in these supplies chains if unforeseen international events (e.g., terrorist attacks) take place; furthermore, existing suppliers may not be able to provide the levels needed to expand production in response to growing demand in the future.

Target Market review of Tampa's demographics shows that the city is comprised of approximately 80,000 people under the age of 18 years and 136,000 people between the ages of 19 and 64 years, 22.9% of whom speak a language other than English at home as shown in Table ____ below. Current estimates indicate that approximately 5% of these individuals will drive a diesel-powered vehicle of some type that could use a biodiesel alternative (Schmidt, 2007).

Table ____.

Tampa, Florida Demographics.

Metric

Tampa

Florida

Population, 2003 estimate

Population, percent change, April 1, 2000 to July 1, 2003

Population

Population, percent change, 1990 to 2000

Persons under 5 years old, percent, 2000

Persons under 18 years old, percent, 2000

Persons 65 years old and over, percent, 2000

Female persons, percent, 2000

White persons, percent, 2000 (a)

Black or African-American persons, percent, 2000

American Indian and Alaska Native persons, percent, 2000

Asian persons, percent, 2000

Native Hawaiian and Other Pacific Islander, percent, 2000

Language other than English spoken at home, pct age 5+, 2000

High school graduates, percent of persons age 25+, 2000

Bachelor's degree or higher, pct of persons age 25+, 2000

Mean travel time to work (minutes), workers age 16+, 2000

Source: U.S. Census Bureau, 2008.

Potential consumers from these respective age groups in Tampa would be those that currently drive diesel-powered vehicles and those that are interested in environmentally responsible alternatives to existing fossil fuel resources. Given the relative paucity of existing and potential private consumers for the company's biodiesel product lines, commercial applications would represent a superior market. For example, there are a number of large biodiesel commercial consumers in Florida that currently use hundreds of thousands of gallons of biodiesel, including Florida Power & Light Co. (FP&L), NASA and Universal Studios Theme Park (Kram, 2008).

According to Kram, FP&L began using biodiesel in 1999 and currently uses more than 2 million gallons a year; likewise, NASA operates 144 biodiesel-fueled vehicles and has used more than 276,000 gallons of the fuel since 2003 and Universal biodiesel-fueled tour boats. According to Kram, "Since March 2007, every diesel engine at the park has run on biodiesel, said David Winslow, director of engineering and environment sustainability technical services for Universal Orlando Resort. All of the park's water taxis and its ground fleet of more than 50 vehicles are already running on B20. The engines are certified to use B100, and could eventually be running on pure biodiesel. Half of the boats are scheduled to be converted this year and the other half in 2009. The conversion will increase the park's use of biodiesel by 50%" (p. 3). These industries are representative of the enormous potential market that the region's numerous governmental and private sector organizations represent for the company's biodiesel product lines, and as these industry leaders continue to report positive results from their use, it is reasonable to expect others to follow suit as well.

The European Union also represents a potential market for the company's biodiesel products. According to Edinger and Kaul, "Biodiesel was politically promoted in Germany in the past, resulting in 1% of biodiesel in the diesel market today. Current production is 250,000 tons per annum; an increase up to 1 million tons annually in 2003 is expected. 26 for the next decade, the EU commission targets a share of 8% biofuels in the market until 2020" (p. 66). Most trains also run on diesel and many train engines in the European Union are being converted to biodiesel (Woodman, 2007).