Bioheat Heats Up

1
Bioheat Heats Up

• National Biodiesel Conference Expo 2005
• Ft. Lauderdale, Florida

2
Our Track Agenda

• Opening remarks, Paul Nazzaro, NBB Petroleum
  Liaison
• John E. Batey, PE, Energy Research Center, Inc.,
  Technical Project Review
• Industry Panel Discussion
• Questions Answers

3
National Oil heat Research AllianceMission
Statement

• Product and Service Offerings
• Change the publics perception of oilheat, from
  a dirty, inefficient, and environmentally
  damaging fuel source, to a clean environmentally
  friendly, versatile, efficient and cost
  competitive fuel (page 11, Strategic Goals,
  10-01)
• Environmental Improvements
• Develop a clean fuel specification by 2002, and
  make it available to dealers by 03
• Reduce sulfur from oil burning to .05 by 2006,
  and to .005 by 2010
• Commercialize low-NOx burners by 2006 (page
  11, Strategic Goals, 10-01)
• Growth in Market Share
• Distribution System Improvements
• Enhanced Customer Base
• Equipment Improvements

4
A Consumers Perspective Of Oil

• Dirty, sooty and smelly
• Higher maintenance cost than gas
• Environmentally unfriendly
• Linked to Big Oil
• Inefficient and undependable equipment
• Unpredictable relating to long-term supply of oil
• Fuel spills and oil tank leaks ready to happen
• An air quality emission nightmare

5
Petroleum Industry

• What exactly is biodiesel and bioheat?
• Is it ready for use in heating oil?
• What is B2, B5 B20?
• How do biodiesel emissions compare to diesel and
  heating oil?
• Can biodiesel help mitigate global warming?
• Is special storage and handling equipment
  required?
• Can it be used in existing burners?
• What are legitimate and reputable supply sources
  today?
• What is the most reliable and dependable source
  of information relating to biodiesel?
• How do I get involved?

6
Biodiesel Myths

• Only an experimental fuel?
• Economics not workable?
• Cold weather nightmare?
• Premature filter plugging?
• Seal gasket issues?
• Quality standards?
• Stability issues?
• Whats up with warranties?
• Infrastructure challenges?
• Petroleum industry uncomfortable?
• Questionable supply?

7
Biodiesel Highlights

• History
• Production
• Legislation
• Economics
• Demand
• Distribution
• EPACT
• Specifications
• Emissions
• Physical properties
• OEMs
• Cold Weather
• Infrastructure
• Outreach Education

8
Biodiesel Cost Information

• The cost of B100 is based on the chosen
  feedstock, (soybean oil) plus a processing cost
  (transesterfication) and transportation to the
  market.
• The final price can be reduced by the Bioenergy
  (CCC) program which is sponsored by USDA and the
  blenders tax credit currently under IRS review

9
Economics

• Pricing benchmarks established for biodiesel at
  this time, DTN Alternative Fuels Index and OPIS
  (Oil Price Information Services).
• Raw soy oil traded on CBOT
• Cost structure, CBOT (soy oil per lb. x 7.3
  (biodiesel density) processing value (refining
  value) of .50 per gallon FOB cost of ASTM D
  6751 biodiesel, 2.23 gallon on average pre-CCC
  production credits or proposed 1.00 per gallon
  blenders tax credit, (pending IRS approval)

10
Example

• Soybean oil (CBOT) January 18, 2005 .19 lb.
• Density of soybean oil 7.3 lbs. per gallon
• Formula 7.3 x .19 lb 1.387 .50 1.887
  FOB, USA
• Differential between B100 and heating oil today,
  1.40 per gallon (January 18, 2005-February
  Contract Value)

11
Hedging

• Because soybean oil is traded on CBOT as heating
  oil is traded on NYMEX hedging strategies could
  be developed to offer fixed priced programs on
  biodiesel and blends.
• Supplier hedging will allow fixed price forward
  contract of B100

12
Blend Rate of B100 Heating Oil

• The incremental cost is .10 cents per gallon for
  5 of B100 blended into home heating oil.
• Recent USDA fuel dealer survey revealed dealers
  tolerance would be ..0360 for a domestically
  produced lower emission fuel.
• This equates to a maximum 5 blend of B100 into
  2 heating oil (500 ppm or 2000 ppm).

13
Dealer Survey Results

• To ascertain a fuel dealers knowledge of
  biodiesel as well his/her willingness to become
  involved near term.
• 78 were aware of recent studies on biodiesel,
  only 23 could list specific environmental
  factors that would be attributed to bioheat use.
• 78 of respondents said they would be willing to
  market bioheat but said 95 of their customers
  were not aware of the environmental attributes of
  bioheat.
• Pricing tolerances appear to be .03 - .04 per
  gallon more for a lower sulfur fuel (500 ppm) and
  .03 06 more for bioheat.

14
A Dealers Perspective

• Market differentiation, fulfilling an immediate
  need
• Environmental and Industry Leadership
• Expand our environmental product lines
• Delivered public relations benefits
• A genuine flexible, value added product
• Enabled us to comply with tomorrows clean fuel
  technologies today
• Was an immediate liquid fuel technology option
  for our customers

15
Technical Projects 2005

• Flame Safety
• Long-Term Fouling Tests
• Testing B2 to B10 blends
• Documenting Odor Reductions
• Cold Flow (Handling Protocols)
• Stability

16
Outreach Communications - 2005

• Fuel Dealer Education
• Train The Trainer Programs
• Consumer Awareness Campaign
• Bioheat Marketing Literature
• OEM Outreach
• Industry Leadership Intervention

17
Bioheat Market Potential

• Reduced sulfur emissions
• Reduced maintenance costs
• Reduced CO2
• Reduces air toxics and carcinogenic compounds
• Reduces distillate odor
• Renewable and domestically produced
• Biodegradable and non-toxic
• Safer to store and handle
• Enables the industry to offer consumers a clean,
  efficient and environmentally safe fuel.

18
Panel Discussion

• Ray Albrecht, New York State Energy Research
  Development Authority
• Michael Devine, President, Devine Brothers
  Incorporated
• Ed Burke, Dennis K. Burke
• Bob Warren, Mass Bio Heat
• Michael Ferrante, President, Massachusetts Oil
  heat Council
• John Batey, PE, Energy Research Institute

19
Ask Ben
20
For More Information

• National Biodiesel Board
• 3337 A Emerald Lane
• Jefferson City, MO 65110
• 800-841-5849
• www.biodiesel.org
• info_at_biodiesel.org

• Paul Nazzaro
• 978-664-5923 office
• advancedfuel_at_comcast.net

This material brought to you by the USDA
biodiesel education program