Biodiesel’s Green Diesel Nightmare

I have been saying this for months, and others are starting to realize the same thing:

Renewable Diesel: Biodiesel’ s Nightmare

I first heard of this process last October at an NREL presentation (they called it “Green diesel” and could not identify COP as the oil company they were dealing with,) but details remain sketchy. The fact that it refers to the process as a “proprietary thermal depolymerization production technology” and the fact that it is using existing refinery infrastructure should cause alarm to biodiesel firms, and investors.

Why should this cause alarm? Because COP claims its “renewable diesel” is chemically equivalent to conventional diesel. If this is true, it’s quite possible that it has a lower cloud point than biodiesel, and so could be used at a broader range of temperatures. In addition, since COP is using conventional refining equipment, they may also be achieving higher energy yields.

According to NREL’s Overview of Petroleum and Biodiesel Lifecycles, Biodiesel conversion requires 80 kJ of energy for every 1000 kJ of energy in the biodiesel, while petro-diesel requires only 64 kJ to produce an equivalent amount of fuel.

With the exception of small biodiesel producers using local and distributed biodiesel feedstocks such as waste vegetable oil from restaurants, I expect that petroleum refineries will end up having an economic advantage making renewable diesel in comparison to conventional biodiesel producers. This means that commodity oils, and fats available in large enough quantities to interest refineries will be bid up in price to a point where less efficient biodiesel producers will be unable to operate profitably.

I have said it before, and I reiterate: Biodiesel’s days are numbered.

Disclosure: I do own ConocoPhillips stock. As does Warren Buffet. And Jim Cramer. Must not forget about Mad Jim Cramer.