Big Sustainable Business in Biodiesel.

I am a serial entrpreneur like many of those involved with the commercial biofuels industry.

I am also an environmentalist.

Although entrepreneurship and environmentalism are far from mutually exclusive in concept, there are times I must admit that the choices I am faced with can seem to not permit compromise, forcing me to live in a kind of existential opposition.

These are hard times for biodiesel producers, both large and small.

Margins are slim, and depending on the feedstock cost, may be non-existent. California has banned biodiesel in underground storage tanks. Some producers think that this ban has reduced demand for biodiesel in the state by 75%.

Of course some additional factors at work might be recent declines in the retail price of petrodiesel, the California Air Resources Board and Air Quality Management Districts’ historic disdain for biodiesel based on the results of NOx testing, and rumors of bad batches that propagate like wildfire amongst the biodiesel-aware community.

And yet, even under the additional burden of an economy in malaise, I here word of plant expansions in the West Coast, our own plant mere days from going on-line, and an economic stimulus package that includes biodiesel by name.

I spoke to someone today who works for a larger biodiesel producer/marketer. He intimated that I as a smaller producer would have a more difficult time than larger producers who had the benefit of “economies of scale”.

Of course this is standard “big business” thinking, but I think there is an argument for this sort of thinking being wrong in a sense for biodiesel producers . For producers focused on recycling waste oil to produce their product local “mining” of the oil can be more cost effective than purchasing large quantities of oil from a renderer. In this case, the size and scale of the plant you build to produce biodiesel is not necessarily helped by building a tremendous amount of excess capacity.

Imagine if you will that I decide that one four-story McDonald’s will better serve the community than four (4) single-story restaurants that are geographically dispersed throughout my town. As a business owner this does help me, since I only need to deliver my product to one location. The problem is that this model fails to serve the core McDonald’s customer desire of convenient access to food as well as allowing competitors to occupy more space and attract customers away from the one large central location.

But perhaps most importantly, our approach is not an economy of scale approach. Our approach is a service and product quality approach. I believe that the smaller producer cannot attempt to compete with “big business” economy of scale until they have grown the business through service and high quality product distribution. The small business must perform in such a way that it is driven to, or forced into, further expansion.

Make it a better place!