What’s My Feedstock Worth? A primer for measuring bio-value

Market Price vs Fuel Value

Naturally, developers are looking for opportunities where feedstock pieces are well below their fuel value. But, there are rampant examples where the market price for the fuel does not approach the theoretical value. Sadly, in renewable fuels, that’s the standard case.

For example, in our value model above, some may have wondered why we give a higher value for oxygen than for hydrocarbons, when hydrocarbons carry the energy value. That has to do with octane, which oxygenated fuel molecules like ethanol have more of. Octane boosters are more valuable in the market then fuel, if you look at the data, here.

But, you can’r sell unlimited amounts of octane boosters molecules. Once you have raised octane of gasoline from 85 to 87 (which you do with 10 percent ethanol blends), you’ve covered the spread between the 854-85 octane fuels that refineries like to make and the 87-octane fuels that drivers need to drive. The baseline market for octane-boosting molecules in the United States becomes a buyers market at around 14 -15 billion gallons, depending on how may customers buy premium fuels, and prices will plunge.

Non-price Market barriers

All kinds of non-price barriers exist between fuels and consumers, all of which erode fuel prices even when the value is high.

For example, you may have a wonderful fuel that ASTM hasn’t got a category for. You may have a fuel that does not drop-in to existing engines and you have blend limits if you can use them at all. You may have to distribute fuels through competitors, who wish you dead and will do anything to undersell your molecule so that they can oversell theirs. You may have a wonderful feedstock and no affordable way to aggregate it, store it or transport it to a refinery that can use it.

For instance, there’s lot of grease in every city sewer system, and cities hate it — it literally gums up the works, and costs money to extract, treat and deal with. Municipal grease has great fuel value, but there are few processes that can handle it (has to do with the free fatty acid levels, which are too high for conventional processing), and almost no one aggregates the stuff.

The Bottom Line

There’s value in that feedstock, and you can analyze it, and analyze the barriers that stand between you and valorizing your feedstock at full value. If you start with the fuel value and the carbon value, you might well find that there is a gigantic spread between the price of the feedstock (to grow it, or acquire it) and the market value — worth taking on all the supply chain, R&D and non-price barriers and challenges.