California’s wine country isn’t the first place you’d look to find a biodiesel operation. But in the town of Temecula, a new cooperative has begun operating with the goals of providing local farmers and vintners with ways to cut energy costs and add value to their products, while simultaneously advancing the development of alternative energy sources.
Promethean Biofuels cooperative may be relatively modest in size, but it is the largest biodiesel operation on the West Coast. Unlike most other biodiesel production coops, the co-op members include farmers, restaurants looking for an outlet for waste cooking oil, consumers and even people who want to make their own biodiesel (but need a little help).
The co-op was started by local entrepreneur Todd Hill. He started the cooperative after his previous business, an electronics-recycling firm employing 60 people, went out of business.
“I wanted to encourage the development of alternative energy sources, create markets for local farmers and create employment without having to maximize short-term profits at the expense of long-term sustainability. And I also wanted to encourage other people who want to expand opportunities.”
The cooperative is named after Prometheus, the titan of Greek mythology who stole fire from the gods to give to humans, and was then chained to a rock.
The facility began running in April with a capacity of 2.25 million gallons per year. Hill says that the plant is designed to be profitable running at about half that pace, giving the coop a bit of leeway for expansion. Currently, it’s producing at a rate of about 1.5 million gallons per year, using restaurant grease and oil from other local sources. “Right now, the availability of feedstock is our limiting factor,”he says. With a large number of vintners in the area, Hill sees grape seed as a potential major source of feedstock, which would give wine growers a new value-added source from a byproduct. Both employees and customers are members of the cooperative, which operates on a full-service, business-to-business model. Oil is purchased from producer-members and collected from restaurants—which are also members —and finished biodiesel is made available for their operations at a substantial discount from market rates for petroleum diesel.
Only members may buy the co-op’s products, and they receive a share of any profits. The cooperative also uses its market power to supply ingredients of production —such as methanol and caustic chemicals—at a discount to “home-brewers,”members who prefer to produce their own biodiesel. The co-op also provides an outlet for them to market their surplus.
The main byproduct of biodiesel production, raw glycerin, can be a problem for small producers to dispose of. The co-op can also take care of that.
Technical help is also available from the co-op. An in-house laboratory provides research and development services to members. Home-brewers dealing with fuel-quality problems can also get help. All such assistance is free to members.
The cooperative bylaws recognize three kinds of members: founders, who invested a total of $500,000 toward start-up costs; employee-members; and consumer-members. Employees vote to establish work rules. Wages, hiring and promotions are overseen by Hill, in his position as manager.
Consumers pay $50 annually for their shares in the co-op. The bylaws give them voting rights on issues affecting distribution of the product.
Founder-members have limited input into management decisions until their contributions have been repaid.
The board of directors consists of three of the five founders, Hill (as the managing principal) and an open spot for an attorney. Hill wants to see the founders paid back with a “reasonable”return on their investment.
Hill says that most of the consumer members are actively involved in running the cooperative beyond the roles laid out by the bylaws. “They're enthusiasts,”he says. “They enjoy helping the cooperative to succeed.”The cooperative structure allows for regular distribution of profits to the consumer-members, as well.
Grower-member makes own biodiesel
One of those consumer-members is Isaac Moore, the proprietor of Morningstar Ranch. Moore grows grapefruit, avocados, persimmons and organic produce for local retailers. He makes his own biodiesel using a 200-gallon reactor and used oil collected free from local restaurants.
Moore buys his methanol and caustic chemicals from the cooperative at a discount. He says he finds the co-op’s glycerin-disposal service very helpful. “It works really well,”he says.
He’s exploring the idea of growing his own oilseeds as a winter crop, which the cooperative would crush for him to extract the oil. “I'm looking forward to expanding our relationship. You know, you don’t go into business, you grow into it.”
Hill would like to see Promethean’s full-service approach expanded into what he calls “full-circle integration.”
“We have local restaurants that make a point of supporting local farmers,”he says. “I'd like to see the cooperative supply cooking oil to the restaurants at a discount brokered by the co-op, then collect the used oil to make biodiesel, some of which would be used by the farms to run their equipment. The profits would be distributed to the members.”He says that some major fast-food chains already use a similar system.
The cooperative is currently working toward meeting the certification requirements of both the ISO 9000 standard —which addresses product quality and meeting customer needs—and the ISO 1400 standard, which sets environmental performance goals.
“When we’ve got those certifications,”he says, “they'll support continuity in the organization when we have personnel changes. We’ll have a foundation of standards that’ll help us maximize value to our members.”
Getting the cooperative up and running posed special problems, including more legal and regulatory issues than he had imagined, as well as his own inexperience in the field.
“Biodiesel has been around for 100 years,”he says, pointing out that Rudolph Diesel originally saw his invention as allowing farmers to grow their own fuel. “I thought that it would be something you could set up like a McDonald’s. After all, they were doing this kind of stuff in the 1940s during the war.”
In fact, he discovered that each biodiesel plant is unique, with a bewildering number of variables affecting the final design. “That really affected our budgeting,”he says. “We went over budget by maybe 150 percent.”
Although the city of Temecula agreed to accelerate the granting of permits, challenges still cropped up. Plans had to be approved by the fire department and environmental standards also had to be met. The expiration of the federal tax credit for manufacturers of biodiesel is another concern, although Hill says the operation can survive without it.
“We have to get out of the ‘build’mode and into the ‘how do we service our members’mode,”he says. Meanwhile, the co-op is looking for more members who want to be part of the biodiesel movement.