Ketchup With Your Fries? No, Just The Grease.
"The french fry [is] ...almost sacrosanct for me. Its preparation a ritual to be followed religiously." - Ray Kroc, Founder of McDonald's.Four decades later, the "holy" french fry endures as a beloved greasy indulgence among many.Today the french fry serves an entirely new function.At this very moment, ambitious entrepreneurs are literally brewing their own biodiesel in their backyards.While the majority of the world continues to fill up its vehicles with dirty fossil fuels, owners of "grease cars" are happily driving almost exclusively on vegetable oil. As in the very same oil that McDonald's dumps out of its fryers on a daily basis.How? By collecting grease from local restaurants and mixing it with methanol, water, and a catalyst such as sodium hydroxide. Biodiesel, simply speaking, is an alternative source of fuel made from vegetable oil or animal fat. However, one cannot simply pull up to a gas station and request fryer grease. Yet.Vegetable Oil: Revolutionized
On a larger scale, companies of the likes of McDonald's are transforming vast amounts of leftover cooking oil into biodiesel. A "grease" car, running almost entirely on biodiesel, has a unique engine. Do not attempt to put fryer grease into a regular diesel engine. If you have ever noticed "B5" or "B20" at the pumps, this refers to petroleum blended with 5% or 20% biodiesel, respectively. Ordinary diesel engines can operate efficiently with a 5-20% mix of biodiesel. In other words, there may actually be a small amount of french fry grease running through the very car you are driving today.
A biodiesel "grease car" emits approximately 70% less greenhouse gas than a diesel car. Although "grease cars" emit nitrogen oxide and carbon monoxide, a grease car is carbon neutral: the vegetables harvested for cooking oil absorb more carbon dioxide than is emitted when a car burns this oil for energy.
The beauty of what McDonald's is accomplishing is that the excess cooking oil being transformed to biodiesel would have been simply thrown out. We can also applaud a multitude of efforts worldwide, such as Disneyland's fleet of biodiesel trains and Nova Scotia's local bus system running on fish-oil.
Closed-Loop vs. Open Loop:
McDonald's, Disneyland, Nova Scotia, and the ambitious entrepreneurs are all operating a closed-loop system: the owners of the fleet are producing the fuel.
An open-loop system presents challenges. For starters, supply. Similar to a Tesla owner's struggle of finding a nearby Super Charger station, a grease car driver must have sufficient access to grease. Leftover cooking oil has yet to appear on McDonald's Happy Menu, albeit given the company's financial struggles over the past year, perhaps this is not such a bad idea.
Plunging Oil Prices Detrimental To Grease Demand
As if there were not enough challenges to the widespread implementation of biodiesel, the drastic decline in oil prices may be the final nail in the coffin.
Crude oil has plummeted about 60% in six months. The processing cost of biodiesel is approximately $1.00 per gallon. When the price of gas was $3.50/gallon at the pumps, biodiesel companies were able to pay restaurant owners 50 cents per gallon of grease. At today's gas lows of around $2.00/gallon, biodiesel companies are struggling to offset losses in revenues and some may soon be forced to shut down. While consumers are rejoicing at the pumps, the plunge in oil is catastrophic for every form of alternative energy, including biodiesel.
Government Action EssentialThe biodiesel industry is dependent on government subsidies until economies of scale can be reached. Not surprisingly, inconsistent government action and support coupled with a weary concern of future unclear policies hinders private investment. Although the Obama administration provided short-term loans in 2013, we have not witnessed a "re-up".America's love affair with shale oil has put alternative fuel on the back burner.The reality is that the shale oil boom is short-lived. Shale oil wells tend to be expensive relative to their output due to high lifting costs and high decline rates. Shale oil well decline can exceed 50% per annum, in contrast to a 5-10% decline for traditional wells. The Energy Information Agency projected a 2020 peak in shale production when crude oil was $100 a barrel. At $50 a barrel, this peak estimation has been revised to 2016. Just last week, Baker Hughes announced the shuttering of 74 rigs in one week, leaving just around 1,676 active rigs for drilling in the United States. For context, this is the largest weekly decline in rig use since 2009, and the third largest since 2000.So what?
If the world is to truly embrace alternative energy and halt depletion of nonrenewable resources, a consistent national energy policy is imperative. Support for biodiesel, algae, or any renewable alternative must withstand both economic price cycles as well as political cycles. Without government resolve, the private sector will continue to be suspicious of short-lived government programs. And why shouldn't one be suspicious? The government's inconsistent policies cause one to invest and then subsequently go bankrupt after a sudden change in said policy. History doesn't rhyme, but it repeats...and thus business remains wary of governments' "desire to help".
Unless we see a tremendous surge in activity from ESG Vigilantes or massive improvement in technologies, it begs one to wonder: without government support is widespread implementation of alternative energy just a dream?