Comments on: Which will be bigger: biodiesel or ethanol fuel?

Question: Which will be bigger: biodiesel or ethanol fuel?

ykjay — Thu, 16 Feb 2006 15:31:47 -0800

Should I invest in companies developing biodiesel or ethanol fuel?

There has been a lot of discussion everywhere lately about alternative energy sources. Electricity is nice, but, in a nutshell, batteries won't store NEARLY as much energy as fuel for some time, and people like to drive and live in the boonies, etc. I'd like to figure out which technology has the more promising future. Biodiesel is already a going concern, a big concern in some places. Then I see cellulosic ethanol production being touted by a high-profile ex-oilman, and read that a lot of cars in Brazil run on ethanol from sugar cane, and I don't know.

If you don't have a favorite, perhaps you have a favorite site or three on the subject, and can expand my research base.

By: odinsdream

odinsdream — Thu, 16 Feb 2006 15:47:05 -0800

In my state, there's a cooperative, semi-business-like venture known as Piedmont Biofuels. You may want to get in touch with them. I say "semi-business-like" due to the fact that they're very small, and if I had to pick one of their biggest weaknesses, it would be the business organization side of things. Otherwise, they're all very nice, competent (in terms of biodiesel production) folks who really enjoy chatting about the process and its potential.

By: odinsdream

odinsdream — Thu, 16 Feb 2006 15:47:59 -0800

(By the way, they're currently looking for funding to get their first large-scale production plant running.)

By: well_balanced

well_balanced — Thu, 16 Feb 2006 15:49:28 -0800

I'm not an expert but I do know a bit about biodiesel. There are companies in the U.S. that are actively making a profit on biodiesel production and biodiesel is something that can be introduced into the fuel supply and existing infrastructure with little to no other modified elements. I certainly don't believe that biodiesel is going to solve all our problems but it is a fact that it is a selling product with a hungry market right now and diesel engines in one form or another aren't going away any time soon.

I don't feel qualified to comment on the future of ethanol production and use in the U.S. but I don't believe there are any production passenger or commercial vehicles sold in the U.S right now that you can go fill up with ethanol.

Biodieselnow.com

Blue Sun

By: JekPorkins

JekPorkins — Thu, 16 Feb 2006 16:18:32 -0800

I don't believe there are any production passenger or commercial vehicles sold in the U.S right now that you can go fill up with ethanol.

(I may be mistaken, as I am not an expert in flexible fuel vehicles, but I know that the Big Three have been selling lots of flexible fuel vehicles in the U.S. for years now (including FFV versions of most of the popular passenger vehicles and SUVs), and they run on Ethanol (e85, specifically). There may be other manufacturers who sell flexible fuel vehicles, too. Maybe e85 isn't what you were thinking of, though)

By: grex

grex — Thu, 16 Feb 2006 16:45:15 -0800

Electricity is nice, but, in a nutshell, batteries won't store NEARLY as much energy as fuel for some time

This looks promising.

By: harkin banks

harkin banks — Thu, 16 Feb 2006 18:26:46 -0800

This is a question I have been wrestling with for some time. I would like to invest in some of the smaller players, but I can't help but feel that once the small ventures prove the viability of the model, larger players will swoop in and take the profit.

Another biodiesel venture that is actively looking for funding is Yokayo Biofuels, on the north coast of California. I have no connection with Yokayo other than occasionally buying their BD, but they have a good reputation and big plans, much like Piedmont Biofuels.

By: charmston

charmston — Thu, 16 Feb 2006 18:56:13 -0800

A few years ago, the WWREC attempted to open an ethanol plant outside of my hometown of Menomonie, Wisconsin. Menomonie residents made a stink (pun intended) due to the odor that the plant would bring, among other concerns.

I'm not sure about the specifics of it, but if this is a common problem, I can see the ethanol industry having trouble taking off. Food for thought.

By: ykjay

ykjay — Thu, 16 Feb 2006 19:08:55 -0800

Anybody have any info. for outside the US? Germany imports palm oil from Indonesia for biodiesel (it's lucrative, so farmers are cutting down rainforests to grow more palm nut trees for oil - good intentions run amok). Is anything happening in Africa, Australia or South America? Canada has Iogen for cellulosic ethanol, but that's all I know of for now.

By: JPD

JPD — Thu, 16 Feb 2006 19:29:54 -0800

Don't trust anyone to do the math on this for you. And remember in the end its better to bet on economic rationality winning out - but recognize the fact that no one really knows anything for sure.

Investments in early stage technologies are incredibly speculative. Are you prepared to lose every dollar you invest? Cause if you aren't walk away now. Go find something more appropriate for your risk tolerance.Ask yourself why you are investing in Bio-Diesel or Ethanol. If it is because it makes you feel good then recognize your return might not come in form of of cash. Nothing wrong with that - just your choice. Once you make up your mind to invest try and meet the guys. In my experience environmentally friendly businesses are often started out by dreamers with great ideas but completely lacking the ability to commercialize them.

Remember as an investor you are seeking a return. For me that return is money. For you it could be feeling like you are doing something good for the world - and that's cool. Just know what you are going into it for.

Even the smartest guys are wrong almost as much as they are right. And in something like this - the number of times they are wrong is much greater then the few times they are right. Just that when they are right the returns are so huge it evens out the losers.

I had a much longer post about how to assess the opportunity and what but then I realized I don't really know WTF I am talking about. If you really want some ideas about how to value the business you probably need to spend some time learning about the processes, current costs, potential changes in cost, and the various subsidy regimes. A lot of work. Probably a month or more of calling guys up, surfing the web and crunching #'s in .xls.

By: JPD

JPD — Thu, 16 Feb 2006 19:31:32 -0800

Also when you do web research - you must visit both pro and anti websites. Both will be very biased - but you average them out and you've got a pretty good shot at not being incredibly wrong.

By: bonehead

bonehead — Thu, 16 Feb 2006 20:08:09 -0800

While the business case for cellulosic ethanol may be worthwhile, I've never seen solid numbers from any of the private producers. noncelulosic ethanol, i.e. ethanol from grains or sugar costs more to produce than it can be sold for.

I've yet to see a biodiesel that can be made in any quantity for less than the cost of petrodiesel. Biodiesel is much harder to make with a usable controllable quality than its proponents make it out to be. They also have a nasty tendency to spoil, to go rancid, after a couple of weeks of storage.

Toxcicities and environmental fates of all of these fuels are unknown. Remember the fallout from MTBE? Regulators sure do. It has not yet been proven that any of these replacement fuels are any less of a problem environmentally than regular fuels. You don't want to invest in a company only to find that California heavily restricts its sale.

By: A dead Quaker

A dead Quaker — Thu, 16 Feb 2006 20:18:15 -0800

Tractors run on oil mostly. Fertilizer is made using oil. My vague understanding is that biodiesel cannot support itself and will always require a good deal of oil to produce it.

I recommend wind power.

(Link provided by ConEd, my electric company.)

By: Good Brain

Good Brain — Thu, 16 Feb 2006 23:01:44 -0800

How much money do you have to invest? At this point, most of the alternative fuels ventures are either part of very large companies with established lines of business (like oil companies and agribusiness concerns), or they are startups that are most likely seeking venture funding, and not publicly traded.

By: nanojath

nanojath — Fri, 17 Feb 2006 09:02:05 -0800

I'll say two things: first, opinions differ widely on your specific questions, not to mention whether both, either, or neither of these fuels have a real value at all or are essentially energy boondoggles. Second, almost everyone with a strong opinion in this arena is partisan or getting their information from someone who is partisan. I don't think there are any particularly reliable indicators that would suggest whether either of these is likely to take off in a truly significant commercial fashion, or whether one would be likely to do better than the other. I'll recommend the site of my old employer, ILSR. They are unquestionably partisan, pro-biofuel, and as I recall a bit more bullish on ethanol, so many grains of salt. However, they have also been involved with researching the industry for a very long time - in terms of actual movers and shakers in these industries they are probably one of the best connected think tanks in the USA. You can get a lot of basics about biofuels there.

If you're thinking, due to current events, of biofuels as an investment with a high probability of making you significant money, I'd be very, very skeptical and cautious. And I'm pretty pro-biofuels myself.

By: jasondigitized

jasondigitized — Fri, 17 Feb 2006 09:25:18 -0800

On the high risk side look at VLNC who is into lithiated metal phosphate (LMP), lithium-ion battery technology. VLNC have significant patents and the principle owner is Carl Berg. They have partnered with the Chinese to make large scale LMPLI batteries. LI has an energy density near 4 times that of lead acid batteries and 1.7 times that of nickel metal hydride. That changes the electric propulsion equation dramatically. They are also benign - near zero environmental impact. Toyota will move to LMPLI batteries 2008-09 with the new Prius.