with increasing co2 emissions around the
globe
toughening environmental regulations and
reductions in cost
biofuels now for the first time ever are
starting to look like a viable option to
compete with traditional fuels
without going into too many details and
doxxing myself i actually worked for a
biofuel company out in california
and i thought i'd share my perspective
on the industry where it's going
and what the biggest hurdles are don't
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upload
and let's jump in
probably the biggest misconception about
biofuels i see here on youtube
is that one day we'll be taking the
scraps from our plates after dinner
and sending those off to some collection
facility where they'll get turned into
biofuel
or better yet we'll have machines in our
homes that can convert the waste to fuel
right there in our garage while that
would be amazing for the biofuel
industry
it's a crazy pipe dream and nowhere
close to reality
practically all commercial biofuel in
the u.s is produced
directly from farming crops like corn
soybeans and sugarcane
another thing people don't realize is
that at least right now
the biofuel industry is mainly geared
towards biodiesel
and not bio gasoline that means that in
the near term
we'll start seeing trucks buses and farm
equipment making the transition to
biofuels
we will have to wait a bit longer before
people start putting it in their
personal cars
before we get into the economics of it
all what exactly are biofuels and how do
they work
a biofuel is simply any fuel derived
from biomass
or something that was once alive both
biofuel
and normal fuel produce emissions mainly
co2
but also other greenhouse gases like
hydrocarbons and nox
since biofuels are made from crops they
take up co2 as they grow
and when they're burned in an engine
that co2 is released back into the
atmosphere
so there's no net carbon emissions but
normal fuel is made from petroleum whose
carbon has been trapped underground
for millions of years so when petroleum
burns new co2 is added to the atmosphere
but most commercial biofuel isn't pure
biofuel
to best take advantage of current tax
incentives it's usually mixed into
traditional fuel
b20 is one of the most common biofuels
and it's made from 20
biofuel and 80 normal diesel and because
of some interesting chemistry
adding 20 biofuel actually has an
outsized effect
reducing emissions by more than just 20
by making the fuel
burn more cleanly probably the biggest
and most obvious hurdle for the biofuel
market
is cost modern diesel fuel has been
around for a little over a hundred years
and in that time the production pipeline
has been highly optimized and scaled for
profitability
the efficiency and scale of this
pipeline are especially important
because the fuel industry runs on crazy
thin margins
on average fuel retailers only make two
cents a profit per gallon of fuel
that means when you fill up your subaru
they're not even making half a dollar
as a side note gas stations are like
movie theaters they don't make their
money on their main products but on all
the food and treats they sell you
what's worse than the low margins is the
crazy high startup cost
in 2013 american fuel company ineos bio
opened up the first commercial scale
advanced biofuel plant in the us
the plant could produce 8 million
gallons of fuel a year at a cost of 130
million dollars
and three and a half years to build that
means on the free market
a biofuel refinery plant would take
decades to recoup their initial
investment
and this keeps the big dollar investment
firms away especially in the last decade
as they focus on fast growing tech
companies
the high upfront costs and low margins
have made it hard for most biofuel
companies to find external financing
on top of that in a free market at
current scales
biofuel is more expensive to produce
than traditional fuel
luckily for refineries they don't have
to compete in a free market
the u.s internal revenue code 6426
provides generous tax credits
for biofuel producers that helps them
compete on an even playing field
but this is a fairly new development
only in the last year or two
with reductions in costs from scaling
and more efficient production
an increased profit from subsidies and
tax incentives has biodiesel been able
to achieve cost parity with normal
diesel
but even with cost parity many companies
are reluctant to swap over their supply
chains
this is where biofuels last advantage
comes into play
in recent years some states mainly
california
have toughened their emissions
regulations requiring fewer emissions
and cleaner burning fuel starting
january 1st of this year
several public transportation networks
were required to maintain a certain
percentage of biofuel usage
across their fleet unsurprisingly these
new laws are why the biofuel industry is
focused on california
and the sudden demand for biofuel has
created problems for some transportation
agencies
as they've struggled to find enough
suppliers who could produce in large
enough quantities for them
so that's where we're at now but where
are we going
well we're in a weird place with biofuel
similar to where renewable energy was a
decade ago
because production is so low compared to
traditional diesel
biofuel production won't be profitable
for a while without government
intervention and tax credits
especially because the upfront costs for
opening these fuel plants can be tens or
even hundreds of millions of dollars
but the hope is that just like with
renewable energies that when the
government subsidizes the initial growth
eventually they can reach profitability
as they scale
the department of energy on a mission to
reduce foreign energy dependence
has also awarded tens of millions of
dollars in research grants to study
potentially new biofuels
with greater emissions reductions or
that can be made from things that are
currently seen as waste products
rather than being made from crops we
would otherwise eat the company i work
for
has actually been awarded a few of these
grants studying alternative sourcing for
biofuels
one problem however is the comparison
between public money and private money
while it isn't too difficult to get a
grant from the government if you have a
halfway decent idea
it can be really hard to get any kind of
private funding
california where most of the biofuel
economy is is governed by the investors
in silicon valley
and they like making a quick buck with
their low margins and high
upfront costs it's pretty hard to secure
any of this private funding
this is why you see stories like is
algae the future of biofuels
because some startup will do some
interesting work showing that algae can
make a really good biofuel
but the idea never materializes because
the company can't raise enough capital
to go into large-scale production also
with increased oil drilling and fracking
in the last decade oil prices have
fallen more than a third
since their highs in 2012 and as the
price of fuel comes down
the margin on biofuels shrinks with it
in fact
even with tax credits last year many
fuel ethanol plants had to shut down or
cut production
as the rising cost of coin destroyed
their margins down
to multi-year lows of only 3.5 cents per
gallon
that meant these factories were barely
making a dollar of profit per ton of
fuel they made
so yeah very low margins especially with
the investment economy likely set to
decrease in the near future
biofuels have a tough road ahead of them
and until other states follow suit
and mandate biofuel use the industry
will continue to struggle
to get off the ground i hope you enjoyed
getting smarter with us today
this was a bit of a special episode
since it's directly related to my
background
if you like the video consider watching
the one tagged in the outro on six ways
we can remove co2 from the air
and remember there is always more to
learn