Bio-Fueling the Birth of a Market

The EU is thriving in the area of biodiesel production because of its mandate to include renewable resources to diversify energy consumption. According to the International Energy Agency’s (IEA) Tracking Clean Energy Progress 2017 report, the revised Renewable Energy Directive of the EU has received proposals to strengthen advanced biofuel policy support by stipulating an increase in the advanced biofuel share of transport energy demand from 0.5 percent in 2021 to 3.6 percent by 2030. It is an example that illustrates where Mexico could be with the right incentives, says José Domenech, Director of Reoil International, a Mexican company focused on the production of biofuels from used vegetable oil.

“Mexico is now at the market stage Europe was at 25 years ago,” Domenech says. “We hope Mexico can reach a market magnitude similar to the European market, but for that we need to see similar incentives implemented.” He explains that most of Europe’s biodiesel plants did not surpass 30 tons of waste managed per month at the time the continent was creating its biofuels industry.

Local regulations and market competition to acquire and use Used Cooking Oil (UCO) are behind the country’s lagging biofuel market, Domenech adds. “Mexican norms allow for a mixture composed of up to 10 percent biofuels and the rest fossil fuels, but using this mixture is banned in metropolitan areas,” says Domenech. “Biorefineries cannot compete on price against a farming industry that feeds animals with UCO, and where most of this input is integrated into animal food.”

He explains that the amount of biofuels in the mix can reach up to 50 percent in the US and Europe. Mexico City, Guadalajara and Monterrey are among the urban areas where the mixture is prohibited. “This is understandable,” says Domenech, “because these areas have a huge ozone problem and burning biofuels slightly increases ozone, even when biofuels eliminate nonburned hydrocarbons and particulates.”

On the other hand, European regulation prohibits the integration of UCO into animal food and Domenech says that, as a consequence, a large quantity of UCO finds a natural path toward the biodiesel industry. “The fact that most UCO in Mexico is used for animal food, which is allowed by law, means biorefineries are competing on an unlevel playing field.”

Europe’s efforts to pave the way toward an increased usage of UCO for the creation of biodiesel were not mere campaign promises but were turned into action. As a result of this agenda, the European Commission has a project under development called RecOil to create an Intelligent Energy Europe. The project aims to assess the UCO-tobiodiesel chain best practices through household surveys, industry expertise and the cooperation of local authorities to develop an online decision-making guide so that industry stakeholders have information to reinforce the creation of value chains adjusted to local needs.

As a supplier of UCO for the fabrication of biodiesel, Reoil International does not foresee the necessary conditions to warrant building a refining plant for biodiesel. “To be economically viable, the production size of a biofuel refining plant must be about 40,000 tons/year at a minimum,” says Domenech. “There is no way to reach that number with the UCO we gather at the moment or the amount we will gather in the near term.”

He explains that Reoil International’s business model is based on providing UCO to European biodiesel manufacturers and other oil brokers with waste oil according to certifications such as ISSG EU.

Domenech says that biodiesel made in Europe with UCO emits 83 percent less Greenhouse Gases (GHG) when burned compared to petro-diesel, while biodiesel made with unused vegetable oil reduces emissions only by 20- 30 percent. “This shows just how important it is to take full advantage of the potential of biofuels.”

Although he is not closed to the idea of installing a biodiesel plant in Mexico eventually, Domenech does not believe the market has the rules, incentives or conditions to allow it yet. “If someone comes along with a business plan that has proper financial projections illustrating the economic viability for a biodiesel plant, we will look for a way to install it,” he says.