People who envision a prairie map speckled with dozens of biodiesel plants are in for a surprise, say industry experts.
Last winter, the federal Conservatives announced the government would be implementing a two percent renewable content requirement for diesel fuel and heating oil by 2012.
Analysts expect Canadians to be consuming about 30 billion litres of on-road diesel by that time. A two percent share of that market amounts to 600 million litres of biodiesel.
Biodiesel promoters say the industry isn’t feasible without that mandated demand. However, it won’t take many plants to meet the federal requirement.
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A 2006 biodiesel study prepared for the Canola Council of Canada determined that a two percent federal mandate would support three, 150 million litre plants, one in each prairie province.
Last week, Canadian Bioenergy Corp. became the first large-scale biodiesel facility to put a shovel in the ground. The 225 million litre per year facility is expected to be in production by June 2009.
If just two other proposed Alberta facilities live up to their stated intentions, there will be enough biodiesel to fill the entire federal mandate, with plenty of leftover product for export.
Dominion Energy Services plans to have a 379 million litre facility near Innisfail, Alta., in production by June 2009. Construction of Biostreet Canada’s 175 million litre plant in Vegreville, Alta., is scheduled to begin in early 2008 with a late 2009 completion date.
Combined, the three Alberta plants would have the capacity to produce 779 million litres of biodiesel. That would add to the 97 million litres of existing capacity, largely based in Ontario and Quebec.
“Obviously the announcements are way above the mandate and the needs for Canada,” said JoAnne Buth, president of the Canola Council of Canada.
Oversupply could be even more of an issue if petroleum companies work out the kinks with hydrocracking, a new refinery technology that would allow diesel producers to meet their renewable fuel obligations by mixing vegetable oil directly with crude oil at the refinery, bypassing the need to add the expensive blending and transportation infrastructure associated with biodiesel.
One oil industry executive said the technology could be in place as early as 2010, two years before the federal mandate kicks in.
Buth doesn’t believe all of the biodiesel announcements will result in concrete being poured. Neither does Doug Hooper, chief executive officer of Canadian Bioenergy Corp.
“There is a situation that is ripe for oversupply if everybody built,” he said.
But at today’s commodity prices he doesn’t see that happening. Some proposed projects will scrap their plans after plugging canola oil and biodiesel prices into their business models.
Buth said the projects that do proceed will likely be ready for production well in advance of the 2012 mandate. And the industry should have the proof Ottawa requires that biodiesel works under Canadian conditions by mid-2008, so there’s no reason the mandate couldn’t be bumped up to coincide with the launch of the five percent ethanol mandate.
“We think that people are going to be ready to go by 2010, so we’re pushing for 2010,” she said.
