In the past, biodiesel users were a small fringe group. Biodiesel, however, is now big business, with the challenges that many big businesses face.

Tyson foods getting into biodiesel

The U.S. meat market creates hundreds of millions of pounds per year of waste product. These products, however, are proving a very effective source of raw materials for biodiesel production. Tyson Foods has partnered with Syntroleum to build a $140 million plant called Dynamic Fuels. The plant uses animal byproducts, including fat, sinews and tallow, to create what is called a drop-in biodiesel fuel.

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This drop-in fuel can be used directly in place of oil-based diesel fuel, has lower particulate emissions and burns much more cleanly than traditional diesel fuel. At full capacity, the Dynamic Fuels plant can create 75 million gallons of fuel a year, in comparison to the 58 billion gallons of diesel that are used in the United States each year.

Problems with scale

The scale at which biodiesel must be produced in order to create an impact in the market is huge. There are at least a half-dozen biodiesel companies that have started up and gone public in the last few years. These companies use everything from wood fiber to vegetable oil to create biodiesel, and they are seeing investment from oil companies around the world. Many of these fuels can be made for around $60 to $100 per barrel, which will become equivalent if oil-based diesel prices reach and stay at $4 per gallon. The biggest problem many of these companies face is effectively scaling their process, which is specific, chemical-heavy and difficult to replicate.

Biodiesel fraud increasing

Several U.S. District courts are looking into possible cases of fraud in the biodiesel industry. Two dozen violation notices have been served to bio-fuel refiners that have been purchasing green fuel credits from the company Clean Green Fuel, which is scheduled to go on trial in Baltimore later this year for allegedly selling renewable fuel credits without actually producing the renewable fuel that was supposed to be behind those credits. The problem is not specifically that Clean Green Fuel was producing bad biodiesel or was producing fuel that was not usable, but instead that the green fuel credits the company was selling were not backed up by actual production.