National Renewable Energy Laboratory 

Innovation for Our Energy Future 

A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

NREL is operated by Midwest Research Institute ● Battelle Contract No. DE-AC36-99-GO10337 

Green Energy Options for 

Consumer-Owned Business 

Co-opPlus of Western Massachusetts 

Greenfield, Massachusetts 

Subcontract Report 

NREL/SR-560-39465 

May 2006 
Green Energy Options for 

Consumer-Owned Business 

Co-opPlus of Western Massachusetts 

Greenfield, Massachusetts 

NREL Technical Monitor: Holly Thomas 

Prepared under Subcontract No. ZAT-4-33658-01 

Subcontract Report 

NREL/SR-560-39465 

May 2006 

National Renewable Energy Laboratory 

1617 Cole Boulevard, Golden, Colorado 80401-3393 

303-275-3000 • www.nrel.gov 

Operated for the U.S. Department of Energy 

Office of Energy Efficiency and Renewable Energy 

by Midwest Research Institute • Battelle 

Contract No. DE-AC36-99-GO10337
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Preface 

Engaging in the business development process to create a community-owned biodiesel 

production facility was the central focus of this National Renewable Energy Laboratory 

contract. It forms the backbone of the business structure that allows Co-op Power to bring a 

wide range of sustainable energy products to its members and affiliates. There is tremendous 

excitement throughout its region moving this process along. 

Many people contributed to the underlying research reflected in this report. First of all, we 

thank the 2,000 members of Co-opPlus, who supported this development effort. We thank 

Congressman Olver, the National Renewable Energy Laboratory, the Department of Energy, 

and the United States Department of Agriculture, which assisted us in securing funding for 

initial business planning and development. We thank Tom Leue, who began this venture 

based on the 10,000 gallons of biodiesel he produced at his farm. Tom led the early feasibility 

research that showed this could be a viable option for the cooperative. We thank Lynn Di 

Tullio for her work on the cogeneration feasibility study. We thank Lawrence Union for his 

dedication and thoroughness while working through each iteration of the pro forma and 

overseeing our business development efforts for our biodiesel production facility. And we 

thank Shaine Tyson and Wes Berry for their assistance reviewing technology options and 

their business development support. 

It’s been a very exciting and rewarding project, one we trust will bring significant value to our 

region. 

Lynn Benander 

Greenfield, Massachusetts 

November 2005 

iii 
iv 
Contents 

List of Figures .......................................................................................................................................vi 

List of Tables.........................................................................................................................................vi

1 Goals and Results.........................................................................................................................1

2 Accomplishments .........................................................................................................................2 

2.1 Task 1: Technical Feasibility and Economic Viability Assessment for 

Renewable Energy Products and Services for Either Onsite or Central 

Distributed Energy Resources.................................................................................. 2 

2.2 Task 2: Assessment and Evaluation of Education and Outreach Materials............. 6 

2.3 Task 3: Development of an Onsite Distributed Generation Implementation 

Plan for a Consumer-Owned Cooperative Business................................................ 7 

2.4 Task 5: Development of Centralized Renewable Energy Generation Fuel 

Production With a Plan for Cogeneration for a Consumer-Owned 

Cooperative Business Model.................................................................................. 10 

2.5 Implementation Plan Summary.............................................................................. 19 

 

Appendix A. Business Plan ............................................................................................................... A-i 

Appendix B. Biodiesel Production Facility Business Plan............................................................. B-i 

Appendix C. Study of Cogeneration Feasibility for Northeast Biodiesel LLC.............................. C-i 

v 
List of Figures 

Figure 1. Scoring overview........................................................................................................ 5 

Figure 2. Touchstone Energy market consumer research results............................................. 17 

List of Tables 

Table 1. Mission-Related Evaluation Criteria............................................................................ 3 

Table 2. Business-Related Evaluation Criteria .......................................................................... 4 

Table 3. Criteria for Fit With Cooperative Platform.................................................................. 4 

Table 4. Ranking Overview Matrix ........................................................................................... 4 

Table 5. Pro Forma for a Recycled Vegetable Oil Collection Service .................................... 13 

Table 6. Comparison of Legal Structures for Group-Based Businesses.................................. 15 

vi 
1 Goals and Results 

The goal of this project was to define, test, and prototype a replicable business model for 

consumer-owned cooperatives. The result is a replicable consumer-owned cooperative 

business model for the generation, interconnection, and distribution of renewable energy that 

incorporates energy conservation and efficiency improvements. 

The objective of the project was to assess, analyze, and evaluate interconnected renewable 

energy technologies to identify options for interconnected renewable-sourced electric power 

and renewable fuels that are technically successful, economically viable for the co-op’s needs, 

and efficient. 

The outcomes of the project are: 

• A technically feasible and economically viable implementation plan for a consumerowned, renewable-sourced energy business 

• A procedural process to advance energy conservation and efficiency improvements 

and the generation of renewable energy 

• A process for working with the local utility to interconnect solar energy systems with 

a networked grid. 

Co-opPlus has supported renewable energy technologies and programs. For example, it has: 

• Successfully developed a solar installation program for its members. More than 600 

members are in the pipeline for installation, and more than 50 have installed or are in 

the process of installing a solar energy system. 

• Supported the GreenUp program in Massachusetts Electric Co.’s territory. One 

hundred two of its members purchase the green electricity product. 

• Built a new regional cooperative, Co-op Power, to serve as a vehicle for building 

sustainable energy resources across the region. A member equity share costs $975, and 

there are discount programs for low-income people, farmers, and Co-opPlus members. 

More than 100 people have joined. Co-op Power now offers a biodiesel blend for 

home heating that is priced lower than petroleum heating oil. It sells waste vegetable 

oil burners and offers a discount for products and services on the Energy Federation 

International Web site. Soon, it will provide a solar hot water kit at a deep discount to 

its members. 

• Built a biodiesel production facility and signed a contract for 75% of its output. Co-op 

Power is the majority owner of this renewable fuel plant, which is scheduled to begin 

construction in November 2005. It will begin with a production capacity of 4.5 million 

gallons a year and expand to 10 million gallons a year in 2008. 

1 
2 Accomplishments 

Co-opPlus of Western Massachusetts completed the assessments, feasibility analyses, and 

evaluations described in the following tasks and provided reports and deliverables that 

constitute a detailed business model for consumer-owned cooperative distributed energy 

resources. 

2.1 Task 1: Technical Feasibility and Economic Viability Assessment for 

Renewable Energy Products and Services for Either Onsite or Central 

Distributed Energy Resources 

In this task, Co-opPlus assessed, analyzed, and evaluated the technical feasibility and 

economic viability of various renewable energy technologies for onsite or central distributed 

energy resources for a consumer-owned cooperative business model in four counties of 

Western Massachusetts. This task was accomplished through the following subtasks. 

2.1.1 Subtask 1.1 

Co-opPlus assessed the technical feasibility and economic viability of the following 

renewable energy products and services: 

• Solar electricity systems 

• Solar hot water systems 

• Biodiesel fuel energy 

• Fuel cells 

• Wind power 

• Cogeneration with renewable fuel. 

It also researched the feasibility of developing a renewable energy investment fund to bring 

local ownership to renewable energy projects. 

2.1.2 Subtask 1.2 

Co-opPlus assessed the technical feasibility and economic viability of onsite energy 

generation and grid interconnection, central energy production, and a combination of 

these approaches for each of the products and services listed in Subtask 1.1. The 

assessment determined: 

• The technical requirements of installing and integrating these products or services 

under a consumer-owned cooperative business model 

• The most sustainable economic options for a consumer-owned cooperative business 

model. 

2 
2.1.3 Subtask 1.3 

Using the assessment results, Co-opPlus evaluated and rank-ordered the renewable energy 

products and services with respect to their technical development; feasibility, including their 

potential for grid interconnection; purchase cost; and applicable use under a consumer-owned 

cooperative business model. It also assessed economic factors—such as bulk purchases, group 

contracts, and financial support through incentives, energy-related financing, and other 

subsidies—with respect to usefulness, applicability, and potential effect on a consumer-owned 

cooperative business model. 

The Co-opPlus Task One report detailed its findings on the technical feasibility and economic 

viability of renewable energy products and services to meet the energy needs of a consumerowned cooperative business. The following is a summary of the criteria used for decision 

making and the findings. 

2.1.3.1 Assessment Criteria 

The feasibility research used the criteria listed in tables 1, 2, and 3 to evaluate sustainable 

energy products and services based on the needs and interests of members and basic 

business principles. 

Table 1. Mission-Related Evaluation Criteria 

Criteria Description 

Green impact • Achieves greatest possible increase in sustainable energy resources 

• Increases energy security (Members are specifically focused on decreasing 

the reliance on foreign oil.) 

Local benefit • Creates or retains jobs and contributes to the local economy 

Educational value • Educates the community about sustainable energy resources and practices 

Social benefit • Makes energy more affordable 

• Benefits low- and middle-income households 

3 
Table 2. Business-Related Evaluation Criteria 

Criteria Description 

Economic potential Provides ongoing revenue, profit, and return on investment 

There is no explicit economic goal beyond break-even; however, sound 

business practices require some profit for savings or re-investment in the 

business. This evaluation criterion also includes competitive 

considerations related to defensibility of new business initiatives and 

confidence in long-term success. 

Low technology risk Does not take technology risks beyond products that are commercially 

available or otherwise guaranteed to perform at such a level 

This includes ongoing maintenance risk. 

Low marketing risk Accommodates low threshold of adoption for members and is easy to 

understand and use 

This is seen as key to the success of any program. 

Low development risk Offers a short timetable from the development of an idea to the completion of 

a business plan to the successful implementation of a renewable energy 

initiative. 

The cooperative considers itself relatively constrained in terms of 

manpower and operational bandwidth. Therefore, there is a premium on 

ideas that can be developed and realized relatively easily. 

Table 3. Criteria for Fit With Cooperative Platform 

Criteria Description 

Cooperative fit Positively builds on the four distinctions of a consumer-owned cooperative: 

(1) The main goal is to meet the needs of members. 

(2) The cooperative can afford low margin business. 

(3) The cooperative has high trustworthiness. 

(4) There is a possible reduction in marketing and transaction costs. 

2.1.3.2 Feasibility Results 

Product options were scored on a scale of 1 to 10, where 10 is the best score for each criterion 

(i.e., it fits the criterion most closely). 

Table 4. Ranking Overview Matrix 

Mission Related Evaluation Criteria

Green 

impact Local benefit

Educational 

value

Social 

benefit

Economic 

potential

Low 

technology 

risk

Low 

development 

risk

Low 

Business Related Evaluation Criteria

Rank Total 

Score Cooperative Fit marketing 

risk

Biodiesel 1 65 7 9 8 6 9 5 6 7 8

Cogeneration 2 56 7 5 5 5 8 4 6 9 7

Wind Power 3 55 8 5 7 6 7 6 2 6 8

Solar Hot Water 4 53 6 5 7 4 6 7 7 6 5

Solar Electric Systems 5 46 2 6 7 2 2 7 8 7 5

Fuel Cells 6 30 2 2 8 2 1 1 2 5 7

4 
70

60

50

40

30

20

10

0

Solar WVO Wind Solar Hot Fuel Biodiesel Electric Cogen Power Water Systems

Cooperative Fit 8 7 8 5 5 7

Low marketing risk 7 9 6 6 7 5

Low development risk 6 6 2 7 8 2

Low technology risk 5 4 6 7 7 1

Economic potential 9 8 7 6 2 1

Social benefit 6 5 6 4 2 2

Educational value 8 5 7 7 7 8

Local benefit 9 5 5 5 6 2

Green impact 7 7 8 6 2 2

Cells

Figure 1. Scoring overview 

Biodiesel production returned the highest score, which indicated it was most feasible. (See 

Figure 1.) This result is based on its strong economic potential, significant local benefits, and 

educational value. As a consequence, Co-opPlus initiated the development of a full business 

plan to move this project forward. 

Cogeneration represents potential if it is based on waste vegetable oil (WVO) or biodiesel 

directly. A number of technical and development risks remain for this technology, but if they 

can be managed up front, it stands a good chance of implementation after the biodiesel 

production facility is up and running. 

5 
A community wind project remains high on the agenda of Co-opPlus members. Many feel 

that wind technology is under-represented in the U.S. energy supply. The Massachusetts 

Technology Collaborative has established a Community Wind Collaborative, and Co-opPlus 

intends to support future wind projects as they emerge. As with solar technologies, there is a 

chance that the context for developing a wind project could change positively. These will 

continue to be monitored. Even without change, Co-opPlus members will continue to look for 

a local community with a wind site interested in a wind project that the cooperative could 

throw its energy behind. 

Co-opPlus has already succeeded in promoting solar electric systems and solar hot water 

systems. This program will continue based on a series of marketing agreements with local 

installers. However, a number of factors could change Co-opPlus involvement in these 

technologies. Such factors may include: 

• Further renewable incentives or subsidies 

• Grant opportunities 

• Higher electricity prices 

• Increased value of renewable energy credits 

• Lower system costs. 

If any of these factors change in a positive direction, Co-opPlus is in a good position to 

expand its involvement. This could be by developing systems that are cooperatively owned 

and locating them at decentralized locations or in one central location (e.g., at a school or the 

biodiesel facility). 

The Co-opPlus feasibility research on a Renewable Energy Investment Fund that would bring 

large investors together with small local community investors was well received by the 

Massachusetts Renewable Energy Trust and the Massachusetts Department of Energy 

Resources. The Massachusetts Renewable Energy Trust and the Massachusetts Department of 

Energy Resources are following through with the development of this fund, and Co-opPlus 

decided to focus on the development of a vehicle for channeling local investment in 

renewable energy projects through a cooperative membership program. 

2.2 Task 2: Assessment and Evaluation of Education and Outreach Materials 

In Task 2, Co-opPlus: 

• Developed education and outreach materials about the products and services assessed 

in Task 1 

• Defined the most effective education and outreach approaches 

• Conducted pilot public meetings to affirm applicability to consumer-owned 

cooperative businesses. 

6 
2.2.1 Subtask 2.1 

Co-opPlus developed and conducted a survey to identify the renewable energy products 

and services of most interest to consumer owners and determine their requirements for 

interconnection. 

2.2.2 Subtask 2.2 

Co-opPlus developed education and outreach materials tailored to the knowledge 

requirements of consumer-owned cooperative business organizations regarding the 

availability and characteristics of products and services related to renewable energy resources. 

To develop such materials, Co-opPlus took advantage of available materials, such as those by 

other entities, whenever possible. Some materials were modified to meet the specific needs of 

cooperative members and consumer owners. 

2.2.3 Subtask 2.3 

Co-opPlus developed and conducted several pilot public meetings to test and evaluate the 

education and outreach materials and establish a baseline of the knowledge requirements of 

consumer-owned cooperative businesses in the Western Massachusetts region. Based on the 

results, Co-opPlus refined the education and outreach materials related to the distribution of 

“green” energy from renewable energy resources. 

2.3 Task 3: Development of an Onsite Distributed Generation Implementation 

Plan for a Consumer-Owned Cooperative Business 

Task 3 used the results of the Co-opPlus assessment of renewable energy products and 

services, in general, and solar energy resources, in particular. Co-opPlus researched and 

developed a tactical and strategic implementation plan for renewable energy-based onsite 

distributed generation and applied that plan to a pilot study of onsite distributed generation 

from solar energy systems. 

Co-opPlus researched and developed the project management and implementation tools 

necessary for a consumer-owned cooperative business to establish and sustain onsite 

distributed generation using renewable energy products and services. Co-opPlus identified, 

developed, and recorded the necessary steps to achieve renewable energy-based onsite 

distributed generation. These steps included siting, permitting, installing (including 

establishing contractual arrangements with certified installers), and interconnecting onsite 

distributed generation systems. 

2.3.1 Subtask 3.1 

The first task determined requirements related to siting, interconnecting with the power grid, 

and the utility serving the consumer-owned cooperative business. Co-opPlus collaborated 

with PV Squared and local utilities to identify, develop, and record: 

• Siting and equipment requirements 

• Grid effects and how they were be addressed 

• Factors necessary to meet the requirements of IEEE 1547 and other standards 

• Detailed cost estimates for each of the implementation steps. 

7 
2.3.2 Subtask 3.2 

In accordance with Co-opPlus’ agreement with the Massachusetts Technology Collaborative, 

it initiated and conducted a pilot study of onsite distributed generation using solar energy 

products and services. Co-opPlus tested and evaluated the tactical and strategic 

implementation plan through practical application of actual installation projects. PV Squared 

completed the installation, permitting, and interconnection of solar energy systems for 

distributed generation. Co-opPlus then used the results of the pilot study to refine its onsite 

distributed generation implementation plan. No federal funds were used for the acquisition of 

equipment or property for the pilot study. 

The result of Task 3 was an onsite distributed generation implementation plan that is 

generally replicable to solar energy installations and specifically tailored to consumer-owned 

cooperative businesses. The pilot study was successful in all aspects of implementation and 

provided a significant learning experience to build on. More than 600 members are in the 

pipeline for inclusion, and more than 50 are in the process of completing a system or have a 

completed system. The pilot study increased the number of solar electric systems in 

Massachusetts by more than 10%. 

The success of the pilot study indicated that more than one installer partner was necessary, so 

a second formal relationship was developed, and the process was adapted to handle 

collaboration with two business partners. Also, the volume of data and interactions required 

the transition to an electronic database for tracking and management reporting. 

Some surprises came up. For example, the town of Greenfield has a network configuration for 

its local utility grid. This is highly unusual, so the first member-customer in the area had to 

exert some effort to educate and collaborate with the local utility. However, once the first 

system was installed, the road was paved for subsequent systems. No significant challenges in 

this domain are expected today. 

The education required to lead potential customers through the pipeline continues to be 

significant, although an improvement has been achieved. The general level of knowledge in 

the region has increased among contractors, electricians, inspectors, and utility personnel. 

Given the number of systems already installed, there also are typically several systems nearby 

that can provide examples of what a system looks like and facilitate the assessment of 

aesthetic impact and other issues. In addition, more and more Web sites have detailed, wellcrafted information. 

To further the triage of opportunities, Co-opPlus is considering requiring upfront payment 

from potential customers for at least part of the cost of a site visit. This would offset some of 

the costs of the development work but, more importantly, would require that potential 

customers “put some skin in the game” (i.e., get fully vested in the efforts to assess the 

feasibility of a solar system). 

8 
Salmon Fall Land Association is an interesting example of a member customer. It has 

demonstrated what could be a model for residential homeowners to collaborate to save money on 

energy. Four households collaborated to build a small co-housing community based on 

sustainable energy principles. They are building four homes that go beyond ENERGY STAR 

standards to minimize the energy each will use. They also set up one common residential utility 

connection with individual submeters. Payment of the utility bill is coordinated independently 

among the households. This allowed significant savings through the installation and net metering 

of a single common solar system, rather than four individual systems. 

The group installed a 600-A electricity service and had it classified by Western Massachusetts 

Electric Co. for a residential rate. It installed a 4-kW AC solar array to provide electricity for 

the four homes. The 4-kW system was connected to the 600-A common service. The group 

built a utility shed to house the inverters and meters, with space for other renewable energy 

resources when they become available and affordable. The 4-kW system cost $34,000 before 

incentives. Four 1-kW systems would have cost $40,000 or more before incentives. 

Salmon Fall Land Association was an “early adopter,” and its system has proved a valuable 

demonstration site to give potential customers a first-hand impression of the components of a 

solar system. This proved a valuable tool for convincing customers to invest time and effort in 

their own education and to make the decision to install a system. 

This example is captured here because it also provides a direct indication of the economic 

potential of aggregation. This could be a group of households or a small town that aggregate to 

get one service and provide their own submetering, which allows installation and net-metering 

of one central system. Co-opPlus intends to engage in further research on this subject. 

Secondarily, other forms of volume aggregation are also recommended for further research. 

These include developing a standard solar “kit” that could fit 75% of interested customers, 

buying parts in bulk (possibly directly from manufacturers), and contracting with installers for 

volume installation in specific geographic areas. 

Although solar electric technology has been around for many years, it is not yet a mainstream 

product. The pilot study provided first-hand experience of the education and individual 

attention to each customer that is required. However, Co-opPlus believes the development of 

a solar “kit” is the next step in the logical evolution of solar electric systems, and it plans to 

offer a product in the near future. 

Task 4 was deleted from the project and, therefore, is not reported on in this report. 

9 
2.4 Task 5: Development of Centralized Renewable Energy Generation Fuel 

Production With a Plan for Cogeneration for a Consumer-Owned 

Cooperative Business Model 

In Task 5, Co-opPlus researched and developed a tactical and strategic implementation plan 

for biodiesel fuel production, including plans for co-generation, which is distributed 

generation. Co-opPlus is now applying the implementation plan to a pilot study of biodiesel 

fuel production with future cogeneration. Using the biodiesel fuel production facility as a 

model, Co-opPlus has researched and developed the project management and implementation 

tools necessary for a consumer-owned cooperative business to establish and successfully 

sustain renewable fuel production. 

This application model will generate biodiesel fuel that can be used to run a grid-tied 

microturbine or other distributed power generation option—any power system compliant with 

the IEEE 1547 interconnection standard—to displace part of the electrical demands of the 

biodiesel facility. In this way, the project will be an example of combining renewable energy 

production with distributed generation co-generation. Co-opPlus identified, developed, and 

recorded the necessary steps to achieve renewable energy generation or fuel production and 

developed a plan for siting, permitting, installing, and interconnecting a co-generation system 

for the consumer-owned cooperative business model. 

2.4.1 Subtask 5.1 

In this task, Co-opPlus determined the requirements for siting the biodiesel-powered system, 

interconnecting with the grid, and satisfying the utility serving the consumer-owned 

cooperative business. Co-opPlus identified, developed, and recorded: 

• Siting and equipment requirements 

• Grid effects and how they will be addressed 

• Factors necessary to meet the requirements of IEEE 1547 and other standards 

• Cost estimates for project implementation. 

2.4.2 Subtask 5.2 

In this task, Co-opPlus initiated and conducted a pilot study of renewable fuel production. It 

tested and evaluated the tactical and strategic implementation plan developed through the 

practical application of an actual installation project. 

Co-opPlus completed siting and design of a renewable fuel production plant. Permitting 

applications have been submitted. It used the results of this pilot study to refine the renewable 

fuel production implementation plan. Federal funds from NREL were not used for the 

acquisition of equipment or property necessary to implement the pilot study. 

10 
2.4.3 Subtask 5.3 

In this task, Co-opPlus evaluated renewable energy resource acquisition for renewable fuel 

production from a regional resource base. Co-opPlus: 

• Defined strategies for resource acquisition 

• Compared the viability of each strategy 

• Recommended the most viable resource acquisition strategy. 

The cost of recycled vegetable oil is approximately 60% of total production cost and the 

largest cost component of the biodiesel production process. Co-opPlus identified more than 

5,000 sources of recycled vegetable oil within a 60-mile radius of Greenfield, Massachusetts, 

with 399 restaurants in the locally accessible four-county region. 

National studies have demonstrated that about 1.1 gallons of collectable recycled vegetable oil 

is generated in restaurants per person in a local population per year. Because the Northeast 

has a population of 54.4 million people, nearly 60 million gallons of recycled vegetable oil 

can be collected annually. The biodiesel production facility would require 12 million gallons 

per year of recycled vegetable oil when it ramps up to production of 10 million gallons a year. 

Co-opPlus identified the following strategies for resource acquisition: 

• Direct collection from restaurants and cafeterias in the region, direct collection 

through independent contractors hired by the biodiesel production facility, or direct 

collection through farmers transporting recycled vegetable oil on return from 

deliveries to Boston and New York City 

• Deliveries from municipal or corporate collection 

• Deliveries under contract with a recycled oil collector 

• Deliveries under contract with a rendering company. 

2.4.3.1 Direct Collection 

Co-opPlus’ door-to-door survey of 97 local restaurants showed they were willing to contract 

for vegetable oil recycling services. Recycled vegetable oil could also be collected by 

independent contractors or farmers back-hauling barrels of grease from Boston and New York 

City. At first, Co-opPlus considered using flat bed pickup trucks or livestock or vegetable 

delivery trucks. They would deliver the oil to the Co-opPlus receiving station for a fixed price 

per gallon. 

Co-opPlus initially intended to use a standard, open-topped 55-gallon drum collection system. 

This would allow it to obtain inexpensive, standardized containers that could be handled by 

one person, cleaned thoroughly, and distributed easily. Such containers are commonly used in 

the industry. 

11 
The independent contractors and back-haul farmers would make agreements with restaurants, 

schools, and other sources of recycled vegetable oil for the collection service. These 

contractors would set their own price structure with customers. Generally, the cost of a drum 

of oil picked up was planned at around $20. This is competitive with other service vendors in 

the region, which average around $38/drum picked up. The independent contractors could 

adjust their pricing upward if they obtained a sufficient customer base. They would truck a 

minimum, if using a pickup truck, of six filled drums per trip to the refinery or more 

(approximately 20 filled drums) if they used a flatbed or livestock delivery truck. The 

contractors could obtain revenue from the waste generator and a fluctuating unit fee from the 

refinery for delivered oil. Co-opPlus assumed the biodiesel production facility would pay 

$0.30–$0.40/gallon for contaminate-free delivered oil. 

Co-opPlus did not pursue this strategy for the following reasons: 

• It wanted to focus its resources on producing high-quality biodiesel, not on developing 

a collection business. 

• It was not sure this strategy could produce a dependable supply of feedstock. 

• It estimated a cost of $250,000 to construct an automated receiving line to receive, 

empty, and clean the 55-gallon drums. 

2.4.3.2 Municipal or Corporate Collection 

Municipalities or corporations could contract with the biodiesel production facility to deliver 

recycled oil in exchange for a 20% biodiesel blend. They would receive 0.83 gallons of 

biodiesel for each gallon of recycled oil at $0.35 less than their contracted price for diesel 

fuel. Municipalities could make agreements with restaurants, schools, and other sources of 

recycled vegetable oil in the region. Corporations or other businesses that generate a large 

volume of recycled vegetable oil could arrange to transport their oil to the biodiesel 

production facility. Pick-up services average around $38/55-gallon drum. 

12 
Table 5. Pro Forma for a Recycled Vegetable Oil Collection Service 

Annual Estimated Revenue 

Gallons of Used Cooking Oil Provided 481,928 602,410 722,892 963,855 1,204,819

Equivalent 55-Gallon Drums 

Collected/Month 730 913 1,095 1,460 1,825

Per-Gallon Discount for B100 $0.35 less than contracted #2 distillate cost 

Petroleum Diesel (Gallons) 1,600,000 2,000,000 2,400,000 3,200,000 4,000,000

Biodiesel (Gallons) 400,000 500,000 600,000 800,000 1,000,000

 Annual Total Gallons of Fuel B20 2,000,000 2,500,000 3,000,000 4,000,000 5,000,000

Annual Fuel Savings $140,000 $175,000 $210,000 $280,000 $350,000

Annual Collection Revenue 

($/Month/Restaurant) $15 $65,717 $82,147 $98,576 $131,435 $164,294

(Assumes 2 Drums/Month/Restaurant 

Average) 

Annual Surplus From Operations 

(Including Depr Cost) ($20,456) $30,973 $82,402 $185,261 $288,120 

Capital Investment Payback (Years) 0.00 7.07 2.66 1.18 0.76

2.4.3.3 Contract With Recycled Oil Collector and Rendering Companies

Co-opPlus’ biodiesel production facility could also purchase recycled vegetable oil from 

existing regional rendering companies or existing waste collection companies such as 

SalCorp, which picks up more than 75,000 gallons/week of WVO from restaurants and sells 

“untreated” WVO. This is the more expensive source of WVO, but the cash flow analysis 

shows positive values under even the worst-case scenario of purchasing mostly from these 

established sources. 

Regional rendering companies include: 

• Western Mass Rendering – Southwick, Massachusetts 

25 miles from Greenfield; approximately $0.03/gallon transportation cost 

• Baker Commodities – North Billerica, Massachusetts, and Albany, New York 

100 miles from Greenfield; approximately $0.07/gallon transportation cost 

• Darling International – Newark, New Jersey 

150 miles from Greenfield; approximately $0.10/gallon transportation cost 

• Corenco – Tewksbury, Massachusetts 

100 miles from Greenfield; approximately $0.07/gallon transportation cost 

13 
Waste collection companies include: 

• SalCorp – Queens, New York 

WVO from restaurants in New York City; preferred source, currently negotiating 

supply contract for all bulk requirements through 2007; 130 miles from Greenfield; 

approximately $0.07/gallon transportation cost 

• Corcom Commodities – Elora, Ontario 

WVO from Canada; embargo on shipments of WVO from Canada expected to be 

lifted March 2005; proposed 3-year supply contract currently under investigation 

• American Byproducts – Boston, Massachusetts 

Collects fryolator grease in greater Boston area 

Co-opPlus decided to contract with a small, independent collector that was not tied to a 

rendering operation. The renderers want to sell their rendered product, which is more 

expensive ($1.30/gallon). The collection companies charge $0.30–$0.75/gallon. 

2.4.4 Subtask 5.4 

In this task, Co-opPlus researched the legal and accounting structures for the consumer-owned 

cooperative business. Co-opPlus reviewed incorporation options, including a standalone 

cooperative structure and cooperative ownership of a limited liability corporation. Co-opPlus: 

• Identified corporate structure options 

• Analyzed the pros and cons of each option 

• Made a recommendation of the most appropriate structure. 

This group of consumers could have legally organized as any kind of corporate entity. The 

group worked with several lawyers, including several that specialize in cooperative law, to 

analyze the options. It considered the benefits and opportunities that each of the following 

corporate structures provides: 

• Limited liability corporation 

• Cooperative 

• For-profit C corporation 

• For-profit S corporation 

• For-profit association 

• Tax-exempt nonprofit. 

14 
Co-opPlus required that the legal structure: 

• Facilitate ownership and control by the members 

• Accommodate a large number of members 

• Preclude taxation at both the individual and the corporate level 

• Allow Co-op Power to collect member equity from many people inexpensively to 

invest in products and services 

• Allow Co-op Power to distribute excess profits back to members. 

Table 6. Comparison of Legal Structures for Group-Based Businesses 

Limited 

Liability 

Corporation 

Cooperative For-Profit C 

Corporation

For-Profit S 

Corporation

Nonprofit 

Association

TaxExempt 

Nonprofit

Easy for 

members to 

own and 

control? 

Yes Yes No No No No 

Number of 

members 

Best for 15 

or fewer 

Unlimited Unlimited Unlimited Unlimited Unlimited 

Taxation of 

profits at 

corporate and 

individual 

levels? 

No No Yes Generally, 

no 

No No 

Can many 

members 

contribute 

$1,000 and 

receive a 

share of the 

profits 

inexpensively? 

Yes Yes No No No No 

The primary benefits of the cooperative structure are: 

1. Capital formation 

As a group of consumers seeking to secure access to sustainable energy resources, the 

cooperative is the only structure that would allow Co-op Power to raise capital from 

its members inexpensively. A nonprofit corporation would have required members to 

make donations and would not have allowed return of benefit to members because all 

benefits in a nonprofit must stay within the nonprofit. A for-profit corporation would 

have required registration of a securities offering (at a cost of $300,000 or more) or a 

preferred-share offering to a small number of large investors (at a cost of $10,000–

$15,000). 

15 
There is a long history in the United States of consumers using a cooperative structure 

to pool resources to secure access to products and services. 

• Electricity generation, transmission, and distribution 

More than 37 million consumers in the United States own the 900 rural electric 

cooperatives that provide electricity to more than 75% of the landmass. 

Member equity in these cooperatives is used to build generation, transmission, 

and distribution cooperatives that provide low-cost electricity to the members. 

• Wholesale food distribution 

Consumers in the United States own more than 500 grocery cooperatives that 

provide food for their members. Member equity in these cooperatives has been 

used to build regional food distribution warehouses to help the cooperatives 

secure access to quality foods at affordable prices. 

• Wholesale financial services 

More than 80 million people are members of the 10,000 credit unions in the 

United States. Credit unions are cooperatively owned financial institutions. 

They have built a significant infrastructure to provide affordable financial 

products and services. 

• Phone service infrastructure 

Two hundred seventy telephone cooperatives provide phone service to more 

than 2 million people. Member equity is used to build and maintain phone lines 

and phone service infrastructure. 

• Housing 

Six thousand four hundred housing cooperatives provide housing to more than 

1.5 million households. Member equity is used to build and maintain housing. 

2. Marketing, market penetration, and member communication 

A significant body of market research has documented consumer attitudes toward 

cooperatives and locally owned businesses. Consumers aware of cooperatives believe 

cooperatives are a more trustworthy source of information, have their interests in 

mind, and deliver quality products and services at affordable prices. In studies 

repeated across industry sectors, approximately 90% of consumers report they would 

prefer competitively priced products if they bore the co-op label.1

 

1

 Gallup Poll, 1994; Penn & Schoen Survey, 1996; MACRO International, 1999. 

16 
0 10 20 30 40 50 60 70

Being involved in the communtiy

Being responsive to customers

Keeping up-to-date technologically

Keeping rates reasonable

Running things efficiently

Providing quality service

A Co-op does a: Worse Job Better Job

0 10 20 30 40 50 60 70 80

My electric co-op has my best interest at heart

My electric co-op is responsive to my needs and concerns

It is important that my provider is locally based

I feel I have a say in how my co-op does business

It is important that my provider is a co-op

Disagree Agree

Figure 2. Touchstone Energy market consumer research results2

Rural electric cooperatives have developed a common brand called Touchstone 

Energy. This organization has conducted extensive market research over the past 5 

years and found that consumers have confidence in its cooperatives. Touchstone 

Energy Services also discovered that consumers believe it is important that their 

energy provider is a locally owned cooperative that is responsive to their needs. 

The second chart shows that 82% of respondents indicated it was important that their 

energy provider is locally based. This finding has been repeated in many studies and 

shows consumers are interested in purchasing products from businesses in which 

decisions are made nearby, customer service representatives understand their area, 

profits are distributed within the community, and the company contributes back to the 

local community. 

 

2

 Touchstone Energy Services, 1999. 

17 
The sustainable energy industry is still in its infancy. People are unfamiliar with 

biodiesel as a fuel for home heating and transportation. Renewable energy certificates 

appear to some to be a shell game. People find renewable energy installations 

complex, expensive, and daunting. A cooperative dedicated to their needs can serve 

effectively as a source of trustworthy information by assisting consumers in making 

the transition to new energy resources. 

The consumer owners of this energy cooperative are focused on securing regional 

access to sustainable energy products and services; therefore, the business is focused 

on product development and sound financial health rather than on maximum return on 

profit. Because consumers understand that this business structure focuses on their 

needs, they have more trust in the business. With increased trust, the cooperative will 

be able to open the market for sustainable energy products and services more 

successfully and less expensively than alternative business structures. Marketing and 

market development efforts will be carried out as member education and membership 

development programs and will use volunteers and low-cost materials. 

Co-op Power incorporated as a cooperative because it is the only legal structure that met its 

criteria. It provides a structure that is easy for members to own and control, allows for an 

unlimited number of members, is taxed either at the corporate or individual level but not both, 

and allows members to invest $975 in member equity and receive a share of the excess profits 

without requiring an expensive securities filing. 

Co-op Power incorporated the biodiesel production facility as a limited liability company to 

bring in the outside capital needed. 

2.4.5 Subtask 5.4 

In this task, Co-opPlus researched renewable fuel production location and building options. It: 

• Researched location and building options 

• Developed criteria for location and building selection 

• Made a recommendation for the most appropriate location/building. 

The ultimate biorefinery site must meet these basic requirements: 

• A minimum of 10,000 ft2

 of production space and 1,000 ft2 of office space 

• A production space expandable to 20,000 ft2

• A location in the four-county area (Franklin, Hampshire, Berkshire, and Hamden) of 

Western Massachusetts 

• Two loading docks 

• Easy access for tractor trailers and oil trucks 

• City water (a minimum 12-inch water main) and sewage 

• 480-V three-phase power 

• Industrial zoning 

• A satisfactory 21-E environmental assessment. 

18 
Other site considerations include: 

• Rail spur availability 

• Existing boilers 

• State and local economic development assistance qualification 

• Existing storage tanks (that are adaptable for oil and grease). 

The possible locations were: 

 

• Wells Street Furniture Manufacturing Facility 

• Turners Falls Industrial Park 

• Greenfield Industrial Park 

• Deerfield Oil Dealer Site 

• Industrial zone lots in Whately, Hatfield, and North Hatfield. 

Only two of these sites (The Wells Street site and the Greenfield Industrial Park) had sewer 

access. The Wells Street site cost $500,000; the Greenfield Industrial Park cost $80,000 for 

the site and $130,000 for site improvements (ledge removal). The biodiesel production facility 

is planned for the Greenfield Industrial Park property. 

The result of Task 5 is a biodiesel fuel production implementation plan—which includes a 

plan for the acquisition of resources, a legal structure recommendation, and location/building 

selection criteria—that is generally replicable for a renewable fuel production facility and 

specifically tailored to the requirements of a consumer-owned cooperative business. An 

executive summary of the current implementation plan follows. 

2.5 Implementation Plan Summary 

Biodiesel is the rising star of the alternative transportation fuel industry. It is a renewable fuel 

with significant environmental benefits. It is safe and biodegradable, and it reduces air 

pollutants such as soot, particulates, carbon monoxide, hydrocarbons, and carcinogens. A 

1998 NREL study concluded that the use of 100% biodiesel reduces carbon dioxide emissions 

by more than 75% over petroleum diesel and a blend of 20% biodiesel reduces carbon dioxide 

emissions by 15%. The stress on landfills and incinerators is reduced also because recycled 

vegetable oil is removed from the waste stream. In addition, using biodiesel reduces 

dependence on foreign oil and supports community and regional economies. Because of its 

recycled materials, clean air performance, impressive net energy balance compared with other 

fuels, and aesthetic cache, the demand for biodiesel is rising in the Northeast faster than it can 

be supplied. 

2.5.1 Plant Production Capacity and Sales Growth 

A 4.5 million-gallon biodiesel production facility that uses recycled vegetable oil as the 

primary feedstock will be built in Greenfield, Massachusetts. Sales are expected to reach 

$10.9 million in 2007 and rise to $24.7 million in 2008 with a production capacity expansion 

to 10 million gallons/year. 

19 
The planned production start-up is February 2006. Production will then ramp up through the 

addition of a third shift in September 2006 and an additional production line in January 2008 

to reach 85% capacity of 8.5 million gallons/year production. 

2.5.2 Financing 

The biodiesel production facility initially requires approximately $5.53 million in financing. 

The project has assumed an initial financing debt and equity structure of 50.3% debt and 

49.7% equity. The initial equity ($750,000) is from Co-op Power. The balance of the equity 

($2 million) will come from qualified private investors, some of whom have already been 

identified. Debt financing includes a business loan of $863,091, a real estate loan of 

$1,266,110, and working capital of $655,000. The planned 2008 expansion to 10 million 

gallons/year will require an additional $5.5 million in capital, $4.1 million in long-term debt, 

and $1.4 million in equity. 

2.5.3 Competition 

Although the Department of Energy projects U.S. biodiesel production to grow by nearly 40% 

this year, the biodiesel production facility will be one of the first operational production 

systems within 300 miles at the time of its projected opening. Existing or soon-to-be opened 

biodiesel production facilities are located hundreds of miles west or south of the proposed 

location—in Cincinnati, Ohio; at Griffin Industries in Kentucky; at the World Energy site in 

Lakeland, Florida; and at the Mid-Atlantic Biodiesel Co. facility in Clayton, Delaware. The 

biodiesel production facility will have a slight cost advantage for 1 or 2 years at most. The 

biodiesel production facility will have this advantage because of its low-cost feedstock for the 

first 3 years. To stay competitive, it will reduce its costs and increase its efficiency by 

increasing its production capacity to 10 million gallons/year by October 2008. 

2.5.4 Recycled Vegetable Oil – Primary Feedstock 

The biodiesel production facility has a highly competitive product because recycled vegetable 

oil is a lower-cost feedstock than virgin oil. It has executed a supply agreement with a waste 

vegetable oil collector that will provide 100% of the first 2 years of used vegetable oil and 

75% of the expanded (10 million gal/year) requirements in 2008. The used vegetable oil will 

be collected from restaurants, cafeterias, and other food processors in the New York City and 

Philadelphia areas. The cost of the used vegetable oil feedstock is a primary determinant of 

the profitability of the operation. The recycled vegetable oil supply agreement ensures a 

competitive production cost. 

2.5.5 Wholesale Sales 

The recycled base material will appeal to energy- and resource conservation-aware customers. 

One of the challenges will be to address concerns about the use of recycled vegetable oilbased biodiesel in the Northern climate. Concerns arise from the use of 100% biodiesel in 

cold weather. The strategy to focus regional sales on 2%–5% blends will help minimize any 

negativity directed at a recycled vegetable oil-based product. 

20 
A sales agreement for three-fourths of the anticipated production for the first 3 years has been 

negotiated with a national distributor. The remaining quarter of anticipated production will be 

sold to heating oil dealers and diesel fuel distributors in the region, which will, in turn, blend 

their product with conventional No. 2 distillate (2%–3% blends) as a product differentiator. 

2.5.6 Technology 

The process technology for biodiesel production is well established; the production of methyl 

esters has been happening for more than 150 years. The biodiesel production facility has 

selected Rocky Mountain Biodiesel Consulting to design a batch-type process that uses 

recycled vegetable oil. Rocky Mountain Biodiesel Consulting has partnered with Process 

Technology Associates for this project. The team has more than 17 years of biodiesel 

experience in design and engineering, construction, production, management, start-up, shake 

down, problem solving, analytical support, feedstock analysis, marketing, research, regulatory 

analysis, feasibility assessment, business planning, and other strategic business activities. The 

team will provide custom biodiesel technology design and turnkey development as well as 

construction oversight and start-up support. In addition, it has engaged the services of a local 

firm that is experienced in the construction of chemical plants to provide construction and 

construction management services. 

2.5.7 Glycerin 

The biodiesel production facility is looking for outlets to use the glycerin byproduct from its 

biodiesel manufacturing. It has not yet entered into any agreements, primarily because the 

chemical makeup of the glycerin that will be produced from the used cooking oil-based 

biodiesel manufacturing process is not known. Glycerin produced as a biodiesel byproduct 

may contain impurities, some of which can affect its value. Once the production facility is up 

and running and there is a better understanding of the quality of glycerin produced, the facility 

will be able to better access the opportunities for sale of that byproduct. 

There have been preliminary discussions with two parties regarding the glycerin byproduct. 

However, a deal cannot be finalized until the chemical composition of the glycerin byproduct 

is known. 

2.5.8 Location 

The biodiesel production facility has negotiated a purchase and sale agreement for a 25-acre 

lot in the Greenfield Industrial Park for $80,000. Five acres are “buildable;” 20 are protected 

wetland. The town of Greenfield has been helpful in getting the facility set up and moving 

through the permitting process. No blocks are anticipated because the industrial park has been 

established to support businesses such as the biodiesel production facility. 

21 
2.5.9 Management 

Strong management is key to any start-up venture. The biodiesel production facility has hired 

a president and chief executive officer who holds a Master of Business Administration in 

finance and an engineering degree. He brings extensive experience in renewable energy, 

manufacturing, and start-up business management. Shaine Tyson and Wes Berry of Rocky 

Mountain Biodiesel are providing the core expertise in biodiesel production. They will design 

and oversee the installation of the production line. Ms. Tyson and Mr. Berry bring extensive, 

successful national biodiesel expertise. A production manager and plant manager will be hired 

once capital has been secured. The production manager will have extensive biodiesel 

production experience. 

The board of managers currently includes the chief executive officer plus five representatives 

from Co-op Power, the majority owner of the biodiesel production facility. 

2.5.10 Co-Generation 

The biodiesel production facility plans to build a co-generation plant to generate electricity in 

January 2008. 

2.5.11 Conclusion 

The biodiesel production facility is poised to provide an essential renewable energy product 

for the Northeastern United States with a significant margin. The risks have been identified 

and addressed. Being the first plant up and running in the region and a strong cost advantage 

will ensure the biodiesel production facility performs well in the early years. The planned 

expansion to 10 million gallons/year will help the biodiesel production facility maintain a 

competitive position in the marketplace by lowering its cost of production. 

The technology plan allows the biodiesel production facility to build in the highestperforming production line components and take advantage of low-cost, basic used 

equipment. A 5 million-gallon/year plant in Delaware is being built for $10 million. This 4.5 

million-gallon/year plant is being built for $5.5 million dollars. This significant difference in 

capital expenditures should ensure the plant’s long-term financial viability. 

The board has a great deal of confidence in the management. The chief executive officer has 

proved his ability to launch successful businesses, build successful manufacturing lines, and 

communicate effectively about the value of renewable energy. Ms. Tyson and Mr. Berry have 

proved their ability to get plants up, running, and producing quality biodiesel. 

Several vendors have offered to purchase 100% of the biodiesel production facility’s planned 

production. Although securing a sales contract to date for only 75% of output does leave some 

risk on the table, it also allow the biodiesel production facility to build direct relationships 

with the home heating oil and diesel distributors in the region and earn slightly higher 

margins—both essential for ongoing business success. 

The biodiesel production facility is now reaching out to potential investors to secure the $2 

million in equity required for launch by the end of October 2005. Once this is secured, the 

biodiesel production facility will break ground for this valuable venture.

22 
Appendix A. Business Plan 

A-i 
A-ii 
A-iii 

Table of Contents 

Table of Contents..................................................................................................................................iii

List of Figures ........................................................................................................................................v 

List of Tables.........................................................................................................................................vi

1 Why Co-op Power Is Important Now.............................................................................................1

2 Why a Cooperative? .......................................................................................................................3

3 Mission ............................................................................................................................................7

4 Similar Business Entities...............................................................................................................8 

4.1 Other Consumer-Owned Cooperatives .................................................................... 8 

4.2 Consumer Purchasing Groups.................................................................................. 8

5 Co-op Power Values and Principles .............................................................................................9

6 Co-op Power Membership ...........................................................................................................10 

6.1 Membership Profile................................................................................................ 10 

6.2 Membership Qualifications.................................................................................... 10 

6.3 Member Commitment ............................................................................................ 11 

6.4 Membership Benefits ............................................................................................. 11 

6.5 Community Benefits .............................................................................................. 12 

6.6 Member Risks ........................................................................................................ 12

7 Legal Structure .............................................................................................................................13 

7.1 Democratic Governance......................................................................................... 14 

7.2 Regional Structure.................................................................................................. 15

8 Co-op Power Products and Services..........................................................................................16

8.1 Biodiesel Bulk Purchasing Program ...................................................................... 18 

8.2 Biofuel Product Program ....................................................................................... 19 

8.3 Renewable Energy Certificate Program................................................................. 19 

8.4 Green Product Resale............................................................................................. 19 

8.5 Solar Bulk Purchasing............................................................................................ 19 

8.6 Market Research Services...................................................................................... 20 

8.7 Annual Meeting and Expo ..................................................................................... 20 

8.8 Innovative Volunteer Programs ............................................................................. 20 

8.9 Sustainable Energy Education and Public Policy Advocacy ................................. 20 

8.10 Regional Meetings ................................................................................................. 20 

8.11 Innovative Information Technology ...................................................................... 20

9 Key Goals ......................................................................................................................................25 

9.1 Goals for 2005........................................................................................................ 25 

9.2 Goals for 2006........................................................................................................ 25 

9.3 Goals for 2007 and Beyond ................................................................................... 25

10 How Co-op Power Will Benefit the Biodiesel Production Facility ...........................................26
11 Outreach Strategy for Enrolling New Members.........................................................................27 

11.1 Core Message......................................................................................................... 27 

11.2 Audiences............................................................................................................... 28 

11.3 Outreach Materials................................................................................................. 28 

11.4 Resource Packets.................................................................................................... 29

12 Outreach Activities for Western Massachusetts.......................................................................30 

12.1 Co-op Power Tabling ............................................................................................. 30 

12.2 Co-op Power Outreach Events............................................................................... 30 

12.3 Phoning .................................................................................................................. 32 

12.4 House Parties.......................................................................................................... 32 

12.5 Presentations at Churches, Synagogues, and Other Religious Organizations ....... 32 

12.6 Presentations for Other Organizations................................................................... 32

13 Media Plan.....................................................................................................................................33 

13.1 Press Releases........................................................................................................ 33 

13.2 Radio Interviews.................................................................................................... 34 

13.3 Feature Stories........................................................................................................ 34 

13.4 Newsletter Announcements ................................................................................... 35

14 Key Partnerships ..........................................................................................................................36

15 Regional Chapter and Membership Development ....................................................................37 

15.1 Regional Events ..................................................................................................... 37 

15.2 Potential Outreach Partners to Contact .................................................................. 38

16 Staffing ..........................................................................................................................................39

17 Pro Forma Financials ...................................................................................................................42 

17.1 Grant Funding ........................................................................................................ 42 

17.2 Pro Forma Income Statement................................................................................. 42 

17.3 Pro Forma Balance Sheet....................................................................................... 43 

17.4 Pro Forma Member and Community Benefits....................................................... 44

18 Co-op Power Interim Management .............................................................................................46 

18.1 Lynn Benander, Interim Manager, Co-op Power................................................... 46 

18.2 Christian Lagier, Interim Manager, Co-op Power ................................................. 46

19 Co-op Power Board of Directors.................................................................................................48

A-iv 
List of Figures 

Figure 1. Touchstone Energy market consumer research results............................................... 5 

Figure 2. Relationship between Co-op Power and Northeast Biodiesel Co. ........................... 13 

Figure 3. Conceptual graphic outline of Co-op Power home page.......................................... 22

A-v 
List of Tables 

Table 1. Comparison of Legal Structures for Group-Based Businesses.................................... 3 

Table 2. Press Release Schedule .............................................................................................. 33 

Table 3. Pro Forma Income Statement..................................................................................... 42 

Table 4. Pro Forma Balance Sheet........................................................................................... 43 

Table 5. Pro Forma Member and Community Benefits........................................................... 44 

A-vi 
1 Why Co-op Power Is Important Now 

Co-op Power is a grassroots vehicle to counter political and social trends that compromise the 

environment and economy. Locally owned group-based businesses can anchor capital and 

build community in ways few other business structures can. 

To address the energy needs of the Northeast, Co-op Power is developing renewable energy 

resources. The first project is a biodiesel production facility that uses recycled vegetable oil to 

make a regionally produced, regionally owned renewable fuel for home heating and 

transportation. Co-op Power will also support community wind projects to provide regionally 

produced, regionally owned renewable energy-based electricity. 

Next, Co-op Power will build an online infrastructure with which members can purchase 

energy products and services though bulk purchasing discounts negotiated by the cooperative. 

Products and services will include biodiesel for home heating and transportation, diesel 

vehicle leases, green electricity certificates, solar energy installations, waste oil furnaces, and 

energy-efficient doors and windows. 

To anchor capital in the Northeast, Co-op Power is developing renewable energy resources that 

are owned by a large group of people who live in the region. If one person or a small group of 

people owned these resources, they would be free to cash them in when they stood to profit. By 

retaining majority ownership of these businesses, Co-op Power is more likely to ensure the 

jobs, capital, and renewable energy resources continue to benefit the region. 

To develop and retain majority ownership of these businesses, Co-op Power must amass 

significant capital. To that end, the board and members have established that each member 

will pay $975 for a membership share. 

This business plan shows how Co-op Power plans to address the energy needs of the region, 

root capital in area towns and cities, and build environmentally and economically 

sustainable communities. 

To build environmentally and economically sustainable communities, Co-op Power must 

educate and organize people in the region to use less energy, use renewable and regionally 

produced energy, and vote with their dollars for democratically owned, group-based 

businesses that permanently anchor capital in the region. 

Residents of the region are interested in developing renewable energy products and services. 

A 2002 survey, conducted by Opinion Dynamics, of 125 adults in Western Massachusetts 

found that 91% favored increased use of renewable energy. In addition, 52% said they would 

pay more for renewable energy, and 33% of these said they would pay $15 or more per month 

for 100% renewable electricity. Finally, 76% favored the idea of consumer aggregation 

organizations buying “green” or renewably generated power less expensively. 

A-1 
Co-op Power will manage a significant ownership stake in the biodiesel production facility, 

oversee investments in community wind power, provide consumer-members with sustainable 

energy resources, and make available resources for a vibrant online community. This business 

plan describes how Co-op Power will become a successful and financially viable 

organization, launch sustainable energy projects and initiatives, secure membership access to 

renewable energy products and services, achieve environmental goals, educate the public, and 

support local communities in the region. 

A-2 
2 Why a Cooperative? 

This group of consumers could have legally organized as any kind of corporate entity. The 

group worked with several lawyers, including some that specialize in cooperative law, to 

analyze options. It considered the benefits and opportunities that each of the following 

corporate structures provides: 

• Limited liability corporation 

• Cooperative 

• For-profit C corporation 

• For-profit S corporation 

• For-profit association 

• Tax-exempt nonprofit. 

Co-opPlus required that the legal structure: 

• Facilitate ownership and control by the members 

• Accommodate a large number of members 

• Preclude taxation at both the individual and corporate levels 

• Allow Co-op Power to collect member equity from many people inexpensively to 

invest in products and services 

• Allow Co-op Power to distribute excess profits back to members. 

Table 1. Comparison of Legal Structures for Group-Based Businesses 

Limited 

Liability 

Corporation 

Cooperative For-Profit C 

Corporation

For-Profit S 

Corporation

Nonprofit 

Association

TaxExempt 

Nonprofit

Easy for 

members to 

own and 

control? 

Yes Yes No No No No 

Number of 

members 

Best for 15 

or fewer 

Unlimited Unlimited Unlimited Unlimited Unlimited 

Taxation of 

profits at 

corporate and 

individual 

levels? 

No No Yes Generally, 

no 

No No 

Can many 

members 

contribute 

$1,000 and 

receive a 

share of the 

profits 

inexpensively? 

Yes Yes No No No No 

A-3 
The primary benefits of the cooperative structure are: 

1. Capital formation 

For a group of consumers seeking to secure access to sustainable energy resources, 

the cooperative is the only structure that would allow Co-op Power to raise capital 

from its members inexpensively. A nonprofit corporation would have required 

members to make donations and would not have allowed return of benefit to 

members because all benefits in a nonprofit must stay within the nonprofit. A forprofit corporation would have required registration of a securities offering (at a cost 

of $300,000 or more) or a preferred-share offering to a small number of large 

investors (at a cost of $10,000–$15,000). 

There is a long history in the United States of consumers using a cooperative structure 

to pool resources to secure access to products and services. 

• Electricity generation, transmission, and distribution 

More than 37 million consumers in the United States own the 900 rural electric 

cooperatives that provide electricity to more than 75% of the landmass. 

Member equity in these cooperatives is used to build generation, transmission, 

and distribution cooperatives that provide low-cost electricity to the members. 

• Wholesale food distribution 

Consumers in the United States own more than 500 grocery cooperatives that 

provide food for their members. Member equity in these cooperatives has been 

used to build regional food distribution warehouses to help the cooperatives 

secure access to quality foods at affordable prices. 

• Wholesale financial services 

More than 80 million people are members of the 10,000 credit unions in the 

United States. Credit unions are cooperatively owned financial institutions. 

They have built a significant infrastructure to provide affordable financial 

products and services. 

• Phone service infrastructure 

Two hundred seventy telephone cooperatives provide phone service to more 

than 2 million people. Member equity is used to build and maintain phone lines 

and phone service infrastructure. 

• Housing 

Six thousand four hundred housing cooperatives provide housing to more than 

1.5 million households. Member equity is used to build and maintain housing. 

A-4 
2. Marketing, market penetration, and member communication 

A significant body of market research has documented consumer attitudes toward 

cooperatives and locally owned businesses. Consumers aware of cooperatives believe 

cooperatives are a more trustworthy source of information, have their interests in 

mind, and deliver quality products and services at affordable prices. In studies 

repeated across industry sectors, approximately 90% of consumers report they would 

prefer competitively priced products if they bore the co-op label.1

0 10 20 30 40 50 60 70

Being involved in the communtiy

Being responsive to customers

Keeping up to date technologically

Keeping rates reasonable

Running things efficiently

Providing quality service

A Co-op does a: Worse Job Better Job

0 10 20 30 40 50 60 70 80

My electric co-op has my best interest at heart

My electric co-op is responsive to my needs and concerns

It is important that my provider is locally based

I feel I have a say in how my co-op does business

It is important that my provider is a co-op

Disagree Agree

Figure 1. Touchstone Energy market consumer research results2

Rural electric cooperatives have developed a common brand called Touchstone 

Energy. It has conducted extensive market research over the past 5 years and has 

found that consumers have confidence in its cooperatives. Touchstone Energy 

Services also discovered that consumers believe it is important that their energy 

provider is a locally owned cooperative that is responsive to their needs. 

 

1

 Gallup Poll, 1994; Penn & Schoen Survey, 1996; MACRO International, 1999. 

2

 Touchstone Energy Services, 1999. 

A-5 
The second chart shows that 82% of respondents indicated it was important that their 

energy provider be locally based. This finding has been repeated in many studies and 

shows consumers are interested in purchasing products from businesses in which 

decisions are made nearby, customer service representatives understand their area, 

profits are distributed within the community, and the company contributes back to the 

local community. 

The sustainable energy industry is still in its infancy. People are unfamiliar with 

biodiesel as a fuel for home heating and transportation. Renewable energy certificates 

(RECs) appear to some to be a shell game. People find renewable energy installations 

complex, expensive, and daunting. A cooperative dedicated to their needs can serve 

effectively as a source of trustworthy information by assisting consumers in making 

the transition to new energy resources. 

The consumer owners of this energy cooperative are focused on securing regional 

access to sustainable energy products and services; therefore, the business is focused 

on product development and sound financial health rather than on maximum return on 

profit. Because consumers understand that this business structure focuses on their 

needs, they have more trust in the business. With increased trust, the cooperative will 

be able to open the market for sustainable energy products and services more 

successfully and less expensively than alternative business structures. Marketing and 

market development efforts will be carried out as member education and membership 

development programs and will use volunteers and low-cost materials. 

Co-op Power incorporated as a cooperative because it is the only legal structure that met its 

criteria. It provides a structure that is easy for members to own and control, allows for an 

unlimited number of members, is taxed either at the corporate or individual level but not both, 

and allows members to invest $975 in member equity and receive a share of the excess profits 

without requiring an expensive securities filing. 

A-6 
3 Mission 

Co-op Power is a consumer-owned cooperative organized to create and maintain an 

economically, environmentally, and socially sustainable energy future. It is locally rooted and 

responsive to the needs of its members and communities across the Northeast. Co-op Power 

harnesses the buying power of its members to secure access to products and services that reduce 

dependence on foreign oil, are environmentally sustainable, and benefit the local economy. 

Co-op Power performs the following core functions: 

1. Bulk purchasing programs and business development activities 

to secure access to renewable energy and energy efficiency products and services with 

economic benefit for members 

2. Online and in-person exchanges

through which members share experiences, collaborate, access resources, and build 

consensus on co-op action 

3. Market research

to provide feedback to manufacturers and installers to support development and 

introduction of new energy products and services 

4. Sustainable energy education, public policy advocacy, volunteer programs, and 

community building initiatives.

A-7 
4 Similar Business Entities 

Co-op Power is a consumer-owned cooperative. Its members are the people that use the 

products and services it sells. The consumer-members own and control the business. They 

contribute the equity required, benefit from the business activities, and share in the profits. 

The following sections provide examples of organizations that have elements similar to those 

of Co-op Power. 

4.1 Other Consumer-Owned Cooperatives 

Credit unions, housing cooperatives, electric cooperatives, day care cooperatives, and grocery 

cooperatives ask members to invest in a membership share. Members purchase financial 

services, housing, electricity, day care, or food from the cooperative, sometimes with a 

member discount. Profits are distributed based on the money members spend at the 

cooperative (not on the money members have invested in the business). Members elect a 

board of directors and vote at membership meetings. The board oversees management. 

Mad River Glen ski area (www.madriverglen.com) in Vermont is a unique example of a 

consumer-owned cooperative. The ski area has sold almost 2,000 equity shares at $1,750 each 

to members of the local community. An equity share is associated with a $200 annual 

purchasing requirement. Members receive a (minor) discount on annual passes and products 

in the ski area store. Its bylaws are similar to those of Co-op Power, although there are some 

points that reflect the differences between Massachusetts and Vermont cooperative law. There 

is no “pay back” incentive to join, but there is a strong community incentive to support a 50-

year-old ski resort run by the community for the community. 

4.2 Consumer Purchasing Groups 

Consumer purchasing groups give discounts to members but do not extend ownership, 

control, or profit sharing to members. 

DirectBuy furniture (www.directbuy.com) is a business that signs on members for a 

significant fee, which covers its fixed costs. It then sells them consumer goods at wholesale 

prices. BJ’s and Sam’s Club require more modest annual fees and give discounts to members. 

A-8 
5 Co-op Power Values and Principles 

Co-op Power is a cooperative, which is defined as “an autonomous association of persons 

united voluntarily to meet their common economic, social, and cultural needs and aspirations 

through a jointly owned and democratically controlled enterprise.” 

Co-op Power is based on the values of self-help, self-responsibility, democracy, equality, 

equity, and solidarity. In the tradition of the founders of the cooperative movement, Co-op 

Power members believe in the ethical values of honesty, openness, social responsibility, and 

caring for others. 

Co-op Power uses the following seven principles from the International Cooperative Alliance 

as guidelines for putting its values into practice: 

• First principle: Voluntary and open membership 

Cooperatives are voluntary organizations that are open to all persons able to use their 

services and willing to accept the responsibilities of membership, without gender, 

social, racial, political, or religious discrimination. 

• Second principle: Democratic member control 

Cooperatives are democratic organizations controlled by their members, who actively 

participate in setting their policies and making decisions. Men and women who serve 

as elected representatives are accountable to the membership. 

• Third principle: Member economic participation 

Members contribute equitably to, and democratically control, the capital of their 

cooperatives. Members allocate surpluses for any or all of the following purposes: 

developing the cooperative, by setting up reserves, part of which would be indivisible; 

benefiting members in proportion to their transactions with the cooperatives; and 

supporting other activities approved by the membership. 

• Fourth principle: Autonomy and independence 

Cooperatives are autonomous, self-help organizations controlled by their members. 

• Fifth principle: Education, training, and information 

Cooperatives provide education and training for their members, elected 

representatives, managers, and employees so they can contribute effectively to the 

development of the cooperative. 

• Sixth principle: Cooperation among cooperatives 

Cooperatives serve their members most effectively and strengthen the 

cooperative movement by working together through local, national, regional, 

and international structures. 

• Seventh principle: Concern for community 

While focusing on member needs, cooperatives work for the sustainable development 

of their communities through policies accepted by their members. 

A-9 
6 Co-op Power Membership 

6.1 Membership Profile 

Co-op Power members are residential and business energy consumers in the northeastern 

United States who agree to support the following priorities: 

1. Use less energy. 

2. Use energy from renewable and other sustainable resources. 

3. Strengthen the local economy. 

4. Engage in sustainable energy education, public policy advocacy, and communitybuilding initiatives. 

Co-op Power is being launched by Co-opPlus. Co-opPlus is a consumer cooperative based in 

Western Massachusetts. This cooperative has more than 1,400 members, who have indicated a 

strong interest in renewable energy. According to a recent survey, 40% of the members are 

ready to purchase solar hot water installations, 49% are ready to purchase conservation and 

efficiency services, and 92% are ready to purchase renewable electricity. 

Co-op Power’s membership comes first from Massachusetts and then from New England and 

New York. Across Massachusetts, consumers strongly favor the increased use of renewable 

energy. Market research conducted by the Massachusetts Renewable Energy Trust of the 

Massachusetts Technology Collaborative in February 2002 found that 90% favored increased 

use of renewable energy. Eighty-seven percent believe people can reduce their reliance on 

fossil fuels, which contribute to air pollution and global warming. Eighty percent believe 

fossil fuel power plants in the United States are responsible for emitting pollutants that cause 

asthma. Eighty-three percent believe the country is still very dependent on foreign sources of 

energy and that it needs domestic energy sources. 

6.2 Membership Qualifications 

Membership is open and voluntary without gender, social, racial, political, or religious 

discrimination. Any person or legal entity that declares itself interested in the co-op’s 

objectives and purpose; that agrees to be a patron of the co-op and abide fully by its articles of 

incorporation, bylaws, rules, and regulations; that executes a membership agreement and 

remits the required membership fee; and that meets such other qualifications as prescribed by 

the board of directors is eligible to become a member of the co-op. 

 The board of directors or its delegate approves applications for membership, and any 

application for membership may be rejected at the sole and absolute discretion of the board of 

directors or its delegate. Member status (“membership”) is effective as of the time the 

membership share is purchased. 

A-10 
6.3 Member Commitment 

Members make the following commitments when they join Co-op Power: 

• Members commit to supporting the co-op’s mission, letting Co-op Power know when 

the co-op is meeting or exceeding expectations, and otherwise making suggestions. 

• Members commit to participating in the democratic process, directly or by proxy, 

and taking part in an annual meeting to build consensus on how to move the 

cooperative forward. 

• Members commit an equity share in Co-op Power of $975; annual membership dues 

are $25. 

Once a sound financial basis has been established for the cooperative, member equity 

shares are refundable if a member leaves the cooperative. 

In addition: 

• Co-opPlus and Pioneer Valley Biodiesel Cooperative members have been invited to 

join Co-op Power at a reduced equity share. 

Until July 30, 2005, people who were members of Co-opPlus or the Pioneer Valley 

Biodiesel Cooperative as of March 28, 2005, can pay $750 in equity and have the first 

year’s $25 annual fee waived because of the effort these organizations have put 

forward to establish Co-op Power. 

• Anyone under 18 who would like to become a member of Co-op Power must have a 

parent or guardian sign the member application form. 

• Members can spread their equity share payment over 24 months by authorizing 

automatic withdrawals from their bank accounts. Members on these monthly payment 

plans begin enjoying member benefits when they have paid one-third of the equity and 

as long as they are current with payments. 

6.4 Membership Benefits 

Members will have access to: 

• Biodiesel and other sustainable energy products and services at significant discounts 

• Co-op Power’s online energy resources 

• Reliable information about sustainable energy 

• A share of Co-op Power’s distributed profits 

• Member-only offerings 

• A vote in membership meeting decisions 

• Education and community-building events 

• Opportunities for volunteer work on committees and projects to build sustainable 

energy resources in the region. 

Membership shares are not like investments in a for-profit corporation. They do not increase 

in value over time. They do not provide an equity return or dividends. 

A-11 
Membership shares entitle member-owners access to Co-op Power’s products, services, and 

programs. When people join a housing cooperative, they purchase a member equity share and 

receive a place to live. When people join a food cooperative, they purchase a member equity 

share and receive food. In the same manner, when people join Co-op Power, they purchase a 

member equity share and receive energy products and services. 

In the ’30s and ’40s, people were unable to get electricity if they lived in rural areas. Under 

Roosevelt’s guidance, the U.S. government funded the development of rural electric 

cooperatives, which brought electricity to 75% of the landmass of the United States. Those 

rural electric cooperatives invested in generation and transmission cooperatives to bring 

electricity to their members. In the ’70s, people could not buy organic or natural foods in 

regular grocery stores, so they came together to build natural food cooperatives to secure 

access to natural foods. Those food stores also invested in the creation of natural food 

warehouses to procure food to sell to their members. 

Today, people don’t have access to the sustainable energy resources they need. The first job 

of Co-op Power is to invest in the development of renewable energy products and services for 

its members. Co-op Power is investing in the biodiesel production facility company to secure 

access to biodiesel. In addition, it will support bulk purchasing of solar energy systems to 

make them affordable, and it will support bulk purchasing or leasing of diesel vehicles to 

make them more accessible and affordable. Co-op Power is also researching ways to support 

community wind projects in the Northeast. 

6.5 Community Benefits 

• Co-op Power will bring the region better options for energy products and services. 

• Co-op Power’s sustainable energy programs will decrease emissions that cause global 

warming and air pollution. 

• Co-op Power will increase community awareness of the effects of its energy use, 

energy security, and energy options. 

• Co-op Power will secure public policies that build sustainable energy resources. 

• Co-op Power will provide quality jobs and anchor capital in the region. 

6.6 Member Risks 

Although many risks are associated with new business development, and there is the 

possibility that the biodiesel production facility and Co-op Power may not succeed, the 

members of Co-op Power are at financial risk for only the amount of their equity investment. 

The board of Co-op Power believes this cooperative has a high likelihood of success. 

A-12 
7 Legal Structure 

Co-op Power is a cooperative business that is owned and controlled by its consumermembers. It is a corporation that is organized according to Chapter 157 of the Massachusetts 

General Laws. It is authorized to engage in the purchase, sale, and resale of energy products 

and energy-related goods and services to members and non-members. 

Co-op Power has formed a limited liability corporation for the biodiesel production facility to 

secure access to biodiesel fuel for its members. Co-op Power plans to engage in bulk 

purchasing arrangements, joint ventures, and other business start-up activities to secure other 

products and services for its members. 

 

Northeast Biodiesel Co., 

a for-profit limited liability corporation 

(Co-op Power is the founder; Co-op 

Power will share ownership with other 

equity investors who bring in the 

additional $2 million needed for launch.) 

Co-op Power, 

a consumer-owned 

cooperative 

Figure 2. Relationship between Co-op Power and Northeast Biodiesel Co. 

Two classes of stock are authorized in the Co-op Power articles of organization filed on Dec. 

30, 2004. 

Shares of Class A common stock are designated as “membership shares,” and holders of Class 

A common stock are designated as “members.” Each member is entitled to one vote on any 

matter, regardless of the number of shares held. Ownership of Class A common stock is nontransferable, except by the corporation, and the books and records of the corporation constitute 

the sole proof of ownership. All other powers and rights of Class A common stock 

shareholders are established by the bylaws and by the board of directors of the corporation. 

The board has not authorized the sale of Class B preferred stock at this time. Requirements for 

the issuance and ownership of Class B preferred stock shall be established by the bylaws and 

the board of directors of the corporation. If issued in the future, Class B stockholders will not 

be entitled to vote on any matter before the members. Ownership of Class B preferred stock 

will be non-transferable, except by the corporation, and the books and records of the 

corporation will constitute the sole proof of ownership. All other powers, preferences, and 

rights of Class B preferred stock shareholders will be established by the bylaws and by the 

board of directors of the corporation. 

The cooperative is operated on a service-at-cost basis for the mutual benefit of its members. 

The cooperative will accumulate only such capital, reserves, and other financial assets as are 

determined by the board to be necessary and prudent to the ongoing operation of the 

cooperative’s business. 

A-13 
Within a reasonable time after the end of each fiscal year, the board will determine the net 

earnings of the cooperative for that fiscal year. The net earnings of the cooperative for that 

year from all the business of the cooperative, other than business done with or for members or 

patrons, may be retained by the cooperative as unallocated reserves or surplus. In setting aside 

funds for reasonable reserves for necessary purposes of the cooperative, the board must first 

set aside such net earnings. 

If there are no net earnings on such business, or if such net earnings are insufficient to provide 

for reasonable reserves for necessary purposes of the cooperative, as determined by the board, 

then reasonable reserves may be set aside by the board from the net earnings on business done 

with or for members or patrons. 

The board will adopt an annual budget for the operation of the business and will monitor and 

review spending performance on this budget on at least a quarterly basis. The board will also 

adopt a capital plan, which will be reviewed at least annually thereafter, to establish and 

provide for the capital needs of the cooperative. The capital plan will provide for establishing 

and maintaining capital in an amount sufficient to maintain the cooperative’s facilities and 

real property owned by the cooperative and to secure access to products and services for 

members. Each member will contribute capital as required by the capital plan. The 

cooperative will record all capital contributions made by each member to that member’s 

individual capital account. If capital is accumulated in excess of the amount provided for in 

the capital plan, such excess shall be returned to members on an equitable basis. 

If available, patronage refunds (patronage dividends) will be declared and paid from net 

earnings (net margin) at the end of each fiscal year, as required in the bylaws. Each year, the 

cooperative will be obligated to account for and pay on a patronage basis to all members all of 

the cooperative’s net earnings (net margin) over and above the cost of providing services to 

members, after paying all costs and making reasonable additions to capital and reserves and 

redeeming capital credits. 

All members will be treated equitably, and patronage refunds will be paid in proportion to and 

based on the volume or value of products and services purchased by each member from the 

cooperative. Patronage refunds to members will be paid in cash or the equivalent or by an 

appropriate credit to a member’s capital account or in both forms of distribution, as may be 

determined by the board. 

7.1 Democratic Governance 

Members own and control the cooperative. They elect the board of directors. Membership 

policies guide the board’s actions. The board of directors hires a manager, who oversees the 

cooperative between board meetings. Board policies guide the manager’s actions. 

A-14 
At an annual meeting, the members of the cooperative will elect directors, receive reports on 

the operations and fiscal affairs of the cooperative, and transact other business. Members can 

participate in the meeting in person, by proxy, or by alternate. Fifty percent of the current 

members must participate in a membership meeting to satisfy quorum requirements. The 2005 

annual meeting was held April 16, 2005, by the founding members. The next annual meeting 

will be held in the spring of 2006. To encourage participation in the 2006 Co-op Power annual 

meeting, the membership fee will be waived for members who attend in person. 

The cooperative has a board of directors of not less than five and not more than 11 directors, 

who are elected by the members. Each director elected must be a member in good standing of 

the cooperative. 

Co-op Power board members are: 

• Sally Wright, chair 

• Lynn Di Tullio, vice chair 

• Erik Hoffner, treasurer 

• David Biddle, clerk 

• Tim Rice. 

7.2 Regional Structure 

Developing sustainable energy resources requires a regional approach because a large market 

with sufficient capital to support expensive infrastructure development is required. As Co-op 

Power expands to other states, a representative structure will be developed to ensure Co-op 

Power is responsive to the needs of the members in each state. Board representation by each 

regional group will be ensured to fairly direct Co-op Power’s activities and investments. 

Membership meetings will be held in each state. As groups join in this effort, the board will 

engage in dialogue to determine the best strategy for developing this regional structure. 

Co-opPlus, serving Western Massachusetts, is the first regional group to affiliate with Co-op 

Power. 

A-15 
8 Co-op Power Products and Services 

Co-op Power will establish bulk purchasing programs and engage in business development 

activities to secure renewable energy and energy efficiency products and services for its 

members. It will provide infrastructure to support member bulk purchasing and negotiate 

volume deals on attractive products. This will be done in the form of marketing agreements, 

retail bulk purchasing agreements, or direct distributorship to members. 

Return on investments in sustainable energy projects by Co-op Power, such as the biodiesel 

production facility, should be thought of in terms of product (and not as a cash dividend paid 

out to Co-op Power). Given Co-op Power’s cooperative legal status, its main revenues are 

required to come from product sales to members. For example, the biodiesel production 

facility will return biodiesel, and a wind project will return value in the form of RECs that Coop Power can then resell to members (with a possible discount or patronage refund benefit) or 

the public at full price. 

The product offerings of Co-op Power will follow a staged rollout. 

Phase 1: Start-Up (2005) 

Co-op Power is developing a handful of products to offer members. These include: 

• Solar hot water and solar electric systems 

• Green power 

• Biodiesel for home heating (and maybe transportation) 

• 5- and 55-gallon containers with B100 for degreasing or self-blending 

• Selected green products with a more significant discount, such as biofuel heaters 

and boilers, attic fans, and Kill-a-Watt meters, which measure the electricity 

appliances use 

• Green building materials, efficient light bulbs, and efficient doors and windows 

• Message products such as T-shirts, bumper stickers, coffee mugs, and caps. 

Bulk purchasing agreements will secure an economic benefit for members when they 

purchase from one of Co-op Power’s partners. Those partners will pay a marketing fee back 

to Co-op Power to cover the operating costs of this service. 

Bulk purchasing agreements are relatively easy to establish. They will give members a range 

of products and services to choose from because not all members are in a position to purchase 

biodiesel or wind certificates. Typical discounts will range 1%–5%. Co-op Power will launch 

with bulk purchasing agreements for biodiesel, solar energy systems, green power, and waste 

oil furnaces and will add other products as quickly as possible. 

A-16 
Phase 2: Ramp-Up (2006) 

To increase economic potential, Co-op Power will further develop bulk purchasing programs 

and take on the distribution of specific products. Member demand will guide Co-op Power in 

the development of new products and services. The product portfolio will grow; there are 

more types of products and more choices for each product type. For example, more biodiesel 

blends will be available from more places. Membership discounts and profit shares will 

gradually increase. 

• The solar program will move from marketing agreements to actual bulk purchases 

and design. By coordinating purchases, Co-op Power can further reduce the price of 

solar power. 

• More gas stations in the region will carry biodiesel. 

• More biofuel products will be available. 

• Wind farm RECs will help members become net-zero fossil fuel users. 

The first investment in a local wind farm project will happen quickly. The dividend payment 

will come back to Co-op Power as RECs. Co-op Power will resell these certificates to 

members with a discount or patronage refund. 

Phase 3: Maturity (2007 and Beyond) 

The product portfolio will be significant. 

• More biodiesel options are available. 

• The biofuel product range is expanded. 

• RECs are available from multiple local projects that 

members support. 

• Many more green products are available through an easy-to-access online catalog. 

• Additional discounts are available on services that can be purchased through 

Co-op Power. 

• Financing of efficiency work and solar projects may be available. 

• A clean vehicle bulk purchasing or leasing program exists. 

Investments in the biodiesel production facility and local wind farms from earlier years are 

now returning significant dividends. Co-op Power receives dividends in the form of 

renewable energy products (i.e., biodiesel and RECs). These products are provided to Co-op 

Power members at significant savings. They will also generate revenue that will provide 

direct financial support to local sustainability-focused groups around the Northeast and to new 

sustainable energy projects. Membership discounts and patronage refunds combined can, in 

some cases, reach 20%–40%. 

A-17 
8.1 Biodiesel Bulk Purchasing Program 

The biodiesel product will initially be the most important area of economic activity for Co-op 

Power. All members of Co-op Power will have access to biodiesel at a discount. Furthermore, 

these purchases will qualify members for a patronage refund when Co-op Power turns a profit 

and members decide to distribute it. A household bulk purchasing agreement will become 

standard for members. There will be a maximum quantity that caps how much each member 

will be able to buy under this standard agreement. However, there will be add-on bulk 

purchasing agreements for larger quantities. Over time, after up-front discounts and patronage 

refunds, Co-op Power expects the end price of biodiesel to be quite favorable. 

Co-op Power will secure biodiesel for its members through heating oil and diesel fuel 

distribution partners. Tim Rice of Rice Oil in Greenfield and Steve Chase of Alliance Energy 

in Holyoke have agreed to provide biodiesel to Co-op Power’s members. Pre-purchase 

agreements for heating oil with a blend of 3% biodiesel are under discussion for the fall of 

2005. Other distribution partners will be secured as Co-op Power’s membership grows. 

Members will sign annual purchase agreements with, and make payments to, Co-op Power. 

Co-op Power will contract with the biodiesel production facility for wholesale biodiesel and 

with the distribution companies for diesel fuel, biodiesel handling, mixing, and distribution. 

An economic advantage for Co-op Power members will be guaranteed through 

two mechanisms: 

1. Economies of scale are ensured through bulk purchasing and pre-payment. 

2. Co-op Power will receive a significant supply of biodiesel each year as its investment 

dividend. This biodiesel will be included in supply volumes distributed to members. 

Co-op Power will expand the number of home heating oil distributors that offer biodiesel as 

membership grows. Today, it is defining a pilot program for this year’s heating season. The 

more members who join Co-op Power and sign up for a biodiesel product, the bigger the 

member savings will be. Co-op Power asks new members how much biodiesel they would 

like to purchase. Then, based on member location and quantity desired, Co-op Power makes 

agreements with distributors. 

The market for biodiesel-blended home heating oil is the first priority for Co-op Power. The 

market is predictable, and fueling locations can be established. One distributor agreement can 

cover a large geographic region. Although the market for retail biodiesel for transportation is 

less transparent and predictable, Co-op Power will present product offerings for potential 

customers. 

A-18 
8.2 Biofuel Product Program 

As a natural extension of Co-op Power’s biodiesel program, the Co-op will resell a range of 

products catering to the “Grease Economy” (i.e., products that support the expansion of use of 

both biodiesel and recycled vegetable oil). Discussions are ongoing regarding a product range of 

“waste oil” heaters and boilers and even an air conditioning unit that uses biodiesel or recycled 

oils. Co-op Power is in an early stage of negotiating specific terms with a selected manufacturer. 

The product line will first add a 5-gallon B100 product (in collaboration with Tom Leue of 

Homestead Inc.) and then a 55-gallon B100 drum product and various implements to support 

the use of biodiesel and recycled vegetable oils (e.g., pumps, hoses, and measuring devices). 

Over time, Co-op Power will work with members to test and “certify” new products and 

services and then bring them to a mass market. 

8.3 Renewable Energy Certificate Program 

An REC is the “green” part of green power; it’s the 100% renewable, clean attribute of power 

that comes from wind farms, solar installations, and other clean power generation technologies. 

One REC is equal to the green attribute of 1 kWh of power. An excellent REC overview and 

price information is available on the Web site of the Massachusetts Technology Collaborative 

(http://www.cleanenergychoice.org/big_picture.htm). 

The objective of the REC program is to allow members, and the public, to support projects in 

which they have an interest and receive a benefit in the form of RECs. Co-op Power pools this 

interest into the volume acquisition of RECs (via investment or purchase) from these projects. 

Co-op Power will resell RECs to members (with a possible discount or patronage refund 

benefit) and to the general public at full price. 

Co-op Power will weigh the benefits of supporting wind developers with equity investments 

or long-term REC purchase agreements. The business plan assumes that Co-op Power will 

take a direct ownership stake and have dividend returned in the form of RECs. 

8.4 Green Product Resale 

Co-op Power will build a significant online catalog of green products and services for resale 

to the public (or to members with a discount or patronage refund). Members will determine 

the products selected for inclusion. The first products will be simple items such as bumper 

stickers and T-shirts, but the catalog will quickly expand to include green building materials, 

solar flashlights, and similar items (as determined by member demand). 

8.5 Solar Bulk Purchasing 

Co-op Power’s solar program is based on member savings secured through marketing 

agreements with local dealers. The savings on a solar electric system is well above one-third of 

the cost of a Co-op Power equity share. Given that such systems are expensive, Co-op Power 

will reduce the overall system cost through volume transactions and design efficiencies. 

A-19 
8.6 Market Research Services 

Co-op Power will develop a market research service for energy product manufacturers and 

installers. This service will allow members to support the development of sustainable energy 

products and services. They will be able to provide feedback on marketing plans, product 

ideas, business plans, pricing, and product design. Co-op Power will provide a specialized form 

of market research services to businesses interested in the “green” consumers of the Northeast. 

8.7 Annual Meeting and Expo 

Co-op Power will hold an annual meeting and sustainable energy expo to educate members 

and the public about sustainable energy products and services. 

8.8 Innovative Volunteer Programs 

Co-op Power will organize a volunteer team to work with Nueva Esperanza in Holyoke to 

develop programs that promote energy conservation and efficiency in 40 apartment buildings. 

This will be followed by similar work in other low-income neighborhoods. Co-op Power will 

support fundraising efforts that enrich renewable energy resources in these communities. The 

purpose is to reduce energy costs and protect the environment. In later years, after the 

economic foundation of Co-op Power has been built, there will be money in the budget to 

fund such activities directly. 

8.9 Sustainable Energy Education and Public Policy Advocacy 

Co-op Power will provide energy education and public policy advocacy resources for its 

members online, through events, and through print materials. These efforts will promote 

energy conservation and efficiency and renewable energy. 

8.10 Regional Meetings 

Regional member meetings will allow members to meet in person, share ideas, and build 

consensus on direction for the co-op. Meetings will also help organize members’ volunteer 

efforts (e.g., educational activities or the development of energy resources in low-income 

communities) to support the co-op mission. Staff will develop a calendar of events for 

education, training, and informal discussion. 

8.11 Innovative Information Technology 

The heart of Co-op Power is its bond with its members. Co-op Power will use an innovative 

information technology structure that gives members 24/7 access to: 

• Their accounts 

• Co-op Power’s products and services 

• Information about the cooperative, sustainable energy, public policy initiatives, and 

one another. 

The product purchasing and member account infrastructure is being built on 

PurchasingInfo.com. PurchasingInfo’s flagship purchasing automation software provides a 

secure platform for online purchasing. Co-op Power can post deals negotiated with vendors 

and easily track marketing fees and membership discounts. Members will be able to easily 

monitor their purchases. 

A-20 
A Web site will provide information to the public about sustainable energy resources and a 

wiki resource section will allow members to access and edit information about related topics. 

An online forum is being built on Cooperative Life’s open source software platform, which is 

written in Plone. The online community will provide the primary vehicle for member 

communication and relationship building. It will be used to build consensus on the 

cooperative’s vision and mission, the products and services to be offered, and other 

membership benefits. Members will be able to access and contribute to information about 

sustainable energy and organize support for new sustainable energy projects. It will be a place 

to ask questions, find answers, see announcements, share ideas, build co-op consensus, and 

find help. A member directory will link members with one another. 

Figure 3 is a conceptual graphic outline of what the Co-op Power home page could look like. 

A-21 
Renters – CLICK HERE 

Homeowners, builders, and 

remodellers – CLICK HERE 

You live in the Northeast 

You want to do the right thing for the 

environment and are interested in 

supporting your 

local community

Here is where to go! 

Want to do the right thing? 

TOP 10 

‘Do-it-now’ List 

GreenFair 

2005 

ARE YOU A BUSINESS? 

Become a member! List yourself as a vendor if you have products and services for our members. 

Contact us for more information about advertising opportunities and market research services. 

Green Power

- Buy renewable energy for your home 

or business 

Directory 

- Vendors, testimonials, links

Co-op Power 

“Community Power with Purpose”

Member Forum - Green & local buzz 

- Learn & share 

- Brainstorms & dialogue 

Notice Board 

- Buy, sell, exchange, find a job

Energy Conservation - Save and save

Biodiesel 

- Get it here!

The Aggregator!

- Save through bulk purchases with other 

members 

Solar Hot Water - Use the sun to make hot water 

Solar Electric Panels 

- Make your own green power

Figure 3. Conceptual graphic outline of Co-op Power home page 

A-22 
The topics to be represented on the Co-op Power Web site include: 

• Green power and green tags 

o Information about one or more pre-negotiated, economically favorable 

co-op deals 

o Educational information and links to relevant Web resources 

o Testimonials from members who have signed on for one of the packages 

• Solar electric panels 

o Information about one or more pre-negotiated, economically favorable co-op 

arrangements 

o An “incentive alert” that announces opportunities for financial support 

o Educational information about why and when solar electric panels make sense 

and links to relevant Web resources 

o Testimonials and pictures from members with photovoltaic installations 

o A Web form that collects information for co-op support 

• Solar hot water 

o Information about one or more pre-negotiated, economically favorable co-op 

arrangements 

o An “incentive alert” that announces opportunities for financial support 

o Educational information about why and when solar hot water makes sense and 

links to relevant Web resources 

o Testimonials and pictures from members with solar hot water installations 

o A Web form that collects information for co-op support 

• Biodiesel for vehicles and home heating 

o Information about one or more pre-negotiated, economically favorable co-op 

arrangements 

o An “incentive alert” that announces opportunities for financial support 

o Educational information and links to relevant sites 

o Specific information about retail availability and the use of biodiesel 

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• Energy conservation 

o Information about one or more pre-negotiated, economically favorable co-op 

deals 

o An “incentive alert” that announces opportunities for financial support 

o Educational information and links to relevant resources on the Web 

• Community wind 

o Co-op Power will negotiate investment terms with community wind projects in 

the region to secure RECs for members and provide financing for 

development. 

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9 Key Goals 

9.1 Goals for 2005 

The goals for 2005 are to: 

• Establish a model for cooperative ownership by consumers of significant sustainable 

energy assets in the Northeast 

• Enroll 425 members to establish sufficient capital to support Co-op Power’s launch 

and secure the biodiesel production facility’s start 

• Construct a building using the $250,000 U.S. Department of Agriculture Renewable 

Energy grant and lease it to the biodiesel production facility 

• Establish biodiesel distribution relationships with heating oil dealers and diesel 

distributors in the region 

• Invest in a community wind project and sell RECs to members 

• Establish Co-op Power with two employees, an office, and a business infrastructure 

• Negotiate discounts with suppliers on bioheat.com, renewableenergyaccess.com, and 

other sustainable energy online vendors. 

• Launch the larger Co-op Power Web site, including the online forum and education 

resources 

• Establish regular community meetings and other infrastructure for democratic 

participation in Co-op Power and to help members. 

9.2 Goals for 2006 

The goals for 2006 are to: 

• Deliver the first locally produced biodiesel to members 

• Expand membership benefits 

• Expand membership coverage across the Northeast by enrolling an additional 1,000 

members 

• Establish a platform for a democratic process online to support co-op decisionmaking. 

9.3 Goals for 2007 and Beyond 

Future goals are to: 

• Add 10% more members each year 

• Foster a vibrant cooperative membership that decides the direction of the next 

sustainable-energy products and services to be built 

• Initiate work on the second significant sustainable energy project. 

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10 How Co-op Power Will Benefit the Biodiesel Production 

Facility 

Co-op Power formed the biodiesel production facility. The relationship between the two will 

be enhanced by the flow of benefits from Co-op Power to the biodiesel production facility as 

described below. 

• Co-op Power has invested $375,000 in biodiesel production facility development. The 

board has pledged another $125,000 in equity in the next 6 months. In 16 months, Coop Power will add another $800,000 in equity to support the biodiesel production 

facility expansion to 10 million gallons/year in production. 

• Co-op Power members will open the consumer market for biodiesel by working with 

their heating oil dealers and diesel distributors to encourage them to offer a biodiesel 

blend. Members will sign pre-purchase agreements for their biodiesel each year. Coop Power members will turn NIMBY (not in my backyard) to WIMBY (where in my 

backyard) by encouraging friends, neighbors, colleagues, the press, and public 

officials to promote biodiesel. 

• Co-op Power is preparing to purchase the land and construct the building for the 

biodiesel production facility and then lease it to the biodiesel production facility to 

support overall financing for this important business start-up project. 

A-26 
11 Outreach Strategy for Enrolling New Members 

11.1 Core Message 

The goal is to make the availability of sustainable energy a reality for the community—an 

objective that is shared with people across Europe and Canada, who have made impressive 

progress in this area. 

Renewable energy resources are complex and expensive. It takes $2 million–$3 million to 

build a community wind project and several million dollars to build a biodiesel production 

facility. If these resources are to be community-owned, the community needs to invest in 

them now. 

Securities laws make community ownership difficult in the US. It is not easy for everyday 

folks to pool their money and build big things. Although they may not be able to pool money 

for investments, the cooperative structure allows them to pool money to secure access to 

products and services they want to use. 

Co-op Power is a way for community ownership to make a difference. Co-op Power will 

allow members to pool money to secure access to sustainable energy products and services. 

• Co-op Power will build the biodiesel production facility to produce a home-heating 

and transportation fuel that is biodegradable, clean-burning, and made from recycled 

vegetable oil. Blended with petroleum-based diesel, it can be used in any oil burner or 

diesel engine without modification. 

• Co-op Power will invest in local wind projects to secure access to RECs. 

• Co-op Power will secure access to a host of other sustainable energy resources, 

including solar attic fans and other solar energy systems, waste vegetable oil burners, 

and efficient windows and doors. 

• After 3 years, it is anticipated that Co-op Power will give $0.15–$0.20 back on each 

dollar spent on its energy products and services. 

• After 5 years, Co-op Power is expected to generate more than $250,000 a year 

in development funds for the building of new sustainable energy resources in 

area communities. 

Joining Co-op Power means: 

• Investing $975 for a membership share and $25 for an annual membership fee 

• Potentially earning back $1,000 of benefits within 6–7 years (if the member purchases 

some of Co-op Power’s energy products and services) 

• Earning $1,000 dollars back sooner if the member buys an item such as a solar hot 

water system or a furnace that burns waste vegetable oil. 

A-27 
Member equity will be held in trust until there are enough members to launch. If a 

membership is cancelled, the equity portion will be refundable once the business has become 

established. 

The goal is for 425 people across New England and New York to join Co-op Power by 

October 2005 and for 1,000 to join by the summer of 2006. 

11.2 Audiences 

The four groups most likely to join Co-op Power, in priority order, are: 

• The Carbon Reduction Group 

People concerned about global warming, committed to energy conservation/efficiency 

and clean energy sources, and committed to sustainable development 

• The Energy Security Group 

People concerned about U.S. dependence on foreign oil, interested in local energy 

resources, and concerned about how long oil resources will be affordable and available 

• The Air Quality Group 

People concerned about respiratory health, committed to reducing air pollution, and 

interested in clean energy sources

• The Local Economy Group 

People interested in local economic development, local jobs and consumer cost 

savings, and—for some—sustainable development. 

11.3 Outreach Materials 

Co-op Power has developed the following handouts to support its outreach efforts: 

• “Steps You Can Take to Reduce Air Pollution and Greenhouse Gases” 

Gives specific recommendations for individuals 

• “There Is a Different Way ...” 

Gives an overview of the vision of Co-op Power and how it wants to make a 

difference in the world 

• “Join Co-op Power” 

Gives a sense of the benefits of joining Co-op Power 

• “Member Sign Up” 

Provides forms (both the standard version and versions for special discount groups). 

In addition, Co-op Power has developed “Join Co-op Power,” a PowerPoint presentation. 

A-28 
11.4 Resource Packets 

Co-op Power has developed resource packets for each significant area in which it is working, 

including: 

• Biodiesel 

• Wind 

• Solar 

• Community asset ownership. 

A-29 
12 Outreach Activities for Western Massachusetts 

A rigorous outreach campaign has been designed to sign on 425 members by the end of 

October 2005 and 1,000 members by the end of 2006. 

12.1 Co-op Power Tabling 

A table with information about Co-op Power and sustainable energy demonstrations will be 

staffed in the following locations: 

• Greenfield Farmers Market 

Held at the Town Common, located on Main St. in Greenfield, Saturdays 8 a.m.–12:30 

p.m. 

• Orange Farmers Market 

Held at Butterfield Park, located on East River St. in Orange, Thursdays 3–6 p.m. 

• Ashfield Farmers Market 

Held Saturdays 8:30 a.m.–12:30 p.m. on Route 116 in the center of Ashfield

• Greenfields Market 

Held Saturdays 

• McCuskers Market 

Held in Shelburne Falls 

• Third Friday at the Falls 

Held throughout Shelburne Falls the third Friday of each month 5–8 p.m. and 

featuring art openings, live music, food, special events and artisan demonstrations 

• Thursday Coop Concerts 

Held in the Greenfield Energy Park, located at the end of Miles St. in Greenfield, 

Thursdays 6–8 p.m. 

• Co-op Power Northampton office.

12.2 Co-op Power Outreach Events 

A table with information about Co-op Power and sustainable energy demonstrations will be 

staffed on the following dates and in the following locations: 

• July 8: Classic Day at Northeast Sustainable Energy Association in Greenfield 

• July 15–16: Solar Fest in Vermont 

• July 22–24: Annual Yankee Doodle Days, Charlemont's Hometown Fair 

• July 29: Last Fridays, Critical Mass Bike Rides, 5:30 p.m. (ride at 6 p.m.), Pulaski 

Park, Main St., Northampton 

• July 30: Salmon Falls Land Association promotes the launch of Co-op Power and 

other cooperative efforts in Western Massachusetts, 4 p.m., 127 Main St., Shelburne 

Falls, Massachusetts 

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• July 30: Community Against Hate Open Mic, 9:30 p.m., Latin Flava Café, 1677 Main 

St., Springfield 

• July 31–August 6: Center for Popular Economics Annual Summer Institute, Amherst 

• July 31: Last Sundays, Northampton Community Resource Center potluck, 6 p.m., 

Northampton Community Resource Center located in the basement of First Churches, 

Center and Main streets, Northampton 

• Aug. 4–7: Grassroots Radio Conference and Valley Free Radio Barn Raising, Florence 

and Northampton 

• Aug. 6: Amy Goodman performance, 8 p.m., John M. Greene Hall, Smith College, 

Route 9, Northampton 

• Aug. 19–21: Annual Heath Fair, fairgrounds on West Hosmer Road, Heath 

• Aug. 19–21: 46th Annual Montague Old Home Days, the common in Montague 

Center, Friday 6–10 p.m. and Saturday 8 a.m.–10 p.m. 

• Aug. 27: Annual Shelburne Grange Fair, Fellowship Hall, off Route 2, Shelburne 

Center, 9 a.m.–4 p.m. 

• Sept. 8–11: 157th Annual Franklin County Fair, Franklin County Fairgrounds, 

Wisdom Way, Greenfield 

• Sept. 16–Oct. 2: The Big E – Eastern States Exposition, exposition grounds, West 

Springfield, daily 8 a.m.–10 p.m. 

• Sept. 17–18: 7th Annual North Quabbin Garlic and Arts Festival – The Festival That 

Stinks, Forster's Farm, 60 Chestnut Hill Road, Orange, 10 a.m.–5 p.m. 

• Sept. 25: 3rd Annual 1794 Meetinghouse Musicfest, 1794 Meetinghouse on the 

common, New Salem, noon–7:30 p.m. 

• End of September: Biodiesel bus tour 

• Oct. 2: 44th Annual Conway Festival of the Hills 

• Oct 8: 1st Annual Amherst Energy Fair, Amherst South Common, 10 a.m.–3 p.m. 

• Oct. 8–10: Annual Pumpkin Festival, Route 2 and Tower Road, Charlemont, 10 a.m.–

4 p.m. 

• Nov. 5: The Cornucopia Auction, The Academy, 359 Route 2, Charlemont, 7–10 p.m. 

• Nov. 5–6: 11th Annual Apple and Cider Day, various locations in Franklin County, 10 

a.m.–4 p.m. 

A-31 
12.3 Phoning 

Phone lists of Co-opPlus members, community leaders in Western Massachusetts, and 

regional leaders will be used to organize phone-a-thons. The 1,400 household members of CoopPlus will be called at the end of July to encourage membership sign-up before the 

discounted equity offer expires. Community leaders in Western Massachusetts will be called 

in early August. Regional leaders will be called mid-August. 

Phone-a-thons will be scheduled at the Greenfield office and will include a phone list with 

space to indicate the outcome of the call and follow-up required, a script, and answers to 

frequently asked questions. Volunteers will have a brief training before calls begin and will 

participate in a debriefing session following their calls. The coordinator will monitor call lists, 

follow-up required with individual members, and outcomes. 

12.4 House Parties 

Members will sign up to host parties at their houses with friends and neighbors. 

12.5 Presentations at Churches, Synagogues, and Other Religious 

Organizations 

Presentations will be given and announcements will be posted in the newsletters of churches, 

synagogues, and other religious organizations, including: 

• Northampton Synagogue 

• Greenfield Synagogue 

• All Souls Unitarian in Greenfield 

• Springfield Unitarian 

• Second Congregational in Greenfield 

• Mount Toby Quaker Meeting 

• Interfaith Council in Greenfield 

• Charlemont Federated. 

12.6 Presentations for Other Organizations 

Information will also be shared with other organizations, including: 

• The Greenfield Landlords Association 

• The Traprock Peace Center 

• The American Friends Service Association 

• The Shelburne Falls Area Business Association 

• The Rocky Hill Cohousing Community 

• Chambers of commerce 

• Rotaries 

• The Post Carbon Council 

• The Northeast Sustainable Energy Association. 

A-32 
13 Media Plan 

Plans for media outreach to support the outreach efforts are described below. 

13.1 Press Releases 

The schedule outlined below will be followed. 

Table 2. Press Release Schedule 

News 

Estimated 

Date 

Launch of membership drive July 20 

Signing of the purchase and sale agreement for the land for the biodiesel production 

facility 

July 28 

First 50 members of Co-op Power Aug. 2 

Contract signed between Alliance Energy and Rice to provide biodiesel for home 

heating 

Early August 

Co-op Power’s online community launched, member testimonials of the value it 

brings 

Mid-August 

$2 million in equity secured for the biodiesel production facility Mid-August 

Co-op Power breaks 100 members, compelling story of why the 100th member 

joined 

Mid-August 

$1.8 in debt secured for the biodiesel production facility End of August 

Co-opPlus announces $10,000 returned to members for solar installations Early 

September 

Co-op Power enrolls more than 200 members, has “#” gallons of biodiesel under 

contract 

Mid-September 

Co-op Power enrolls more than 300 members, has discount on waste heat burners End of 

September 

Co-op Power enrolls more than 400 members, innovative Web site launched to 

make member bulk purchasing easy 

Early October 

Co-op Power launches, “Community Ownership Makes a Difference” testimonial Mid-October 

Groundbreaking for the biodiesel production facility, press conference End of October 

The biodiesel production facility begins production End of 

February 

Co-op Power enrolls more than 750 members, has members in all seven Northeast 

states 

End of March 

Co-op Power enrolls more than 1,000s member, holds barbecue with Willie Nelson 

performing 

Summer 2006 

A-33 
For each release, the following activities will be completed: 

• Write press releases 

• Send releases out 

• Follow up with calls to media outlets 

• Build relationships with reporters/writers and cultivate feature stories 

• Use local stories to get to the Associated Press, Green Living, Utne Reader, and CoOp America 

• Use regional stories to get to the Globe and New York Times. 

13.2 Radio Interviews 

For radio interviews, the following activities will be completed: 

• Develop a few people to do radio spots and practice to get the sound bites clear 

• Develop a list of shows to target 

• Secure radio interviews 

• Send background information to show hosts 

• Get speakers to the shows 

• Tape the shows. 

Talk shows will give updates on what Co-op Power is doing and why and talk about the value 

of community ownership, the value of biodiesel and wind and solar energy, and how 

innovative online technology can bring people together to learn and save money. 

Radio stations/shows that will be targeted include: 

• Valley Free Radio 

• WRSI 

• WAMC – Regional Roundtable with Susan Arbetter and Joe Donahue 

• WAMC – Living on Earth (national) 

• WFCR 

• WHAI 

• WAQY. 

13.3 Feature Stories 

Co-op Power will work with editors at the Greenfield Recorder, Springfield Republican, 

Hampshire Gazette, Progressive Voice, the Associated Press in Springfield, Orion, Green 

Living Magazine, Channel 40, Co-op America, Globe Magazine, and the New York Times 

Magazine to develop feature stories. 

A-34 
Some feature story ideas are: 

• Christian Lagier’s story (growing up in Denmark, managing Co-op Power, and the 

history of Danish investment in community power) 

• Larry Union’s story (growing up in Fleet, Michigan; working for General Motors; 

managing the Connecticut Energy Cooperative and now the biodiesel production 

facility, and comparing corporate alternatives) 

• Sally Wright’s story (supporting community wind from the University of 

Massachusetts Renewable Energy Laboratory and Co-op Power’s unique role in the 

development process) 

• Biodiesel and the importance of community ownership of alternative fuel sources 

• Biodiesel use in local school bus fleets 

• Kay Cafasso’s film about sustainable energy and sustainable agriculture 

• Tom Leue’s story about the making of biodiesel from waste vegetable oils. 

13.4 Newsletter Announcements 

Co-op Power will work with partner organizations to encourage their people to join by 

including announcements and information in their newsletters, in mass e-mails to their 

mailing lists, and in their outreach activities. 

A-35 
14 Key Partnerships 

As a regional organization, Co-op Power has developed collaboration partnerships with key 

local and regional organizations. These include: 

• Massachusetts Renewable Energy Trust, The Connecticut Clean Energy Fund, and 

renewable energy trusts in other Northeast states 

• Center for Ecological Technology 

• Northeast Sustainable Energy Association 

• Pioneer Valley Sustainability Network 

• Pioneer Valley Photovoltaic Cooperative 

• Nueva Esperanza 

• Rural Development Inc. 

• Mass Energy 

• Permaculture Guild 

• Sustainable Step New England 

• Rocky Mountain Institute 

• Solar Partners 

• Photovoltaic electric vehicle users group 

• Biodiesel@easymailings.com 

• Northeast Organic Farming Association – Massachusetts Chapter 

• Farmers Exchange 

• Community Involved in Supporting Agriculture 

• Citizen Action Network 

• Franklin County Landlords Association 

• American Friends Service Committee 

• Traprock Peace Center 

• All Souls Unitarian Church 

• Greenfields Market 

• River Valley Market. 

These organizations may assist with product and service development as well as membership 

development. These relationships will be expanded over time. 

A-36 
15 Regional Chapter and Membership Development 

Over the past 10 years, communities across the Northeast have assessed the opportunities for 

developing energy cooperatives. These communities include people in membership 

organizations committed to sustainable energy and represent more than 2 million. They 

included groups from Rochester, Ithaca, Syracuse, New York City, and Albany, New York; 

Providence, Rhode Island; Boston and Cape Cod, Massachusetts; Western Massachusetts; and 

regions of New Hampshire, Maine, Connecticut, and Vermont. 

Co-op Power will build on the energy cooperative development network in the region. It will 

make calls to build relationships and hold a workshop in early September to bring together 

key stakeholders in other parts of the region to discuss opportunities for partnership. It will 

share its business plan and legal structure to see if any are interested in joining or replicating 

parts of what Co-op Power is doing to build a strong network and capitalize on the 

development of sustainable energy resources in the region. Development plans need to be put 

in place to support other Co-op Power “chapters” in the region and define decision making 

and governance participation. The Co-op Power proposal is for Co-op Power “chapters” to 

receive core operating funds and support for local development efforts once they have 200 

members signed up in their region. 

The goal of reaching 1,000 members requires a successful regional outreach strategy. 

15.1 Regional Events 

Co-op Power plans to participate in the following regional events: 

• Northeast Organic Farming Association Conference, Hampshire College 

• Pre-Conference on Biodiesel, Aug. 11–12 

• Northeast Organic Farming Association Summer Conference, Aug. 13 

• Common Ground Fair 

• Blue Hill Fair 

• Northeast Sustainable Energy Association events. 

A-37 
15.2 Potential Outreach Partners to Contact 

Potential outreach partners include: 

• Northeast Sustainable Energy Association 

• Food cooperatives 

• Energy cooperatives 

• Heating oil companies 

• Peak oil groups 

• Fleets and municipalities that use biodiesel already 

• Frontier 

• Mass Energy 

• Center for Ecological Technology 

• Vermont Energy Investment Corp. 

• Katadin Center 

• Southern New Hampshire University Community Economic Development Program 

• Cornell University 

• University of Vermont. 

A-38 
16 Staffing 

Christian Lagier and Lynn Benander are providing interim management services to Co-op 

Power during its launch phase. 

To execute the programs noted above, Co-op Power will initially require two fulltime positions. 

The manager will be responsible for: 

• Product development 

o Define new product development goals in consultation with members. 

o Develop new products, features, and options. 

o Develop new vendor relationships, as needed. 

o Negotiate member discounts and Co-op Power marketing fees. 

• Product management 

o Maintain strong vendor relations. 

o Adapt agreements, as needed. 

o Track member satisfaction. 

o Surface problems and correct them. 

o Ensure purchased products reach their destinations. 

o Monitor quality assurance. 

• Marketing and sales 

o Define marketing and sales goals for membership and sales growth. 

o Research target market. 

o Develop a marketing and sales strategy to reach the target market. 

o Implement strategy. 

o Monitor progress toward goals. 

• Renewable energy project development 

o Define new investment and development goals in consultation with members. 

o Develop new projects. 

o Monitor progress toward the goals established in the planning process. 

• Fundraising for education programs and renewable energy development activities 

o Develop fundraising plan. 

o Submit proposals. 

o Monitor implementation. 

o Provide reports as needed. 

o Monitor overall progress toward the goals established in the fundraising plan. 

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• Technology development and maintenance 

o Define the technology infrastructure required to support member education, 

networking, resource sharing, purchasing, and decision making for Co-op 

Power’s membership. 

o Create a plan to phase in technology resources. 

o Implement the plan and monitor progress to achieve goals. 

• Financial management 

• Board reporting and support for the board’s work 

• The biodiesel production facility plant management 

• Office and human resource management. 

A membership coordinator will be responsible for: 

• Membership service 

o Sign up and orient new members. 

o Solicit member input. 

o Respond to member inquiries. 

o Organize member volunteer activities. 

o Support member participation in governance. 

o Organize member events. 

• Online community moderation. 

o Monitor member participation in online discussions. 

o Participate in discussions. 

o Initiate activities when needed. 

Bookkeeping and accounting will be outsourced. 

Market research services will not be provided until staff or consultants can be hired to define 

the research goals of the renewable energy company client, create research instruments for 

use with members online, gather data, analyze data, and create reports for clients. 

Co-op Power’s volunteer board and outsourced services will provide accounting, technical, 

and legal help for the two full-time employees. 

A full-time purchasing director will be hired in 2008 to negotiate contracts and develop new 

sustainable energy products and services with economic benefit for members. This person will 

expand the bulk-purchasing program and the direct marketing and fulfillment aspects of the 

cooperative. 

A-40 
In 2010, Co-op Power will hire a lawyer to serve as the community project developer. This 

full-time person will assist communities in the region in the development of sustainable 

energy projects. He or she will be an integral part of the “WIMBY” program. The lawyer will 

have business planning and project finance experience. He or she will also provide legal 

counsel to Co-op Power. 

A-41 
17 Pro Forma Financials 

17.1 Grant Funding 

Co-op Power has secured (through Co-opPlus) a $250,000 U.S. Department of Agriculture 

Renewable Energy grant for the biodiesel production facility’s building. Co-op Power will 

also generate other revenues from government or foundation grants to support public 

education, member education, and the development of new sustainable energy projects. 

17.2 Pro Forma Income Statement 

Table 3. Pro Forma Income Statement 

Revenue 2005 (6 months) 2006 2007 2008

Value of biodiesel dividend from Northeast Biodiesel $ 112,500 - $ $ 137,500 $ 212,500

Revenue from biodiesel bulk purchasing & resale $ - $ 96,916 $ 108,609 $ 147,173

BioFuel product program revenues $ 5,752 $ 35,527 $ 77,821 $ 126,881

Green products resale $ - $ 10,000 $ 15,000 $ 20,000

Wind farm REC dividend & resale revenues $ - -$ 80,938 $ $ 80,938

Northeast Biodiesel expansion investment $ - -$ -$ 187,500 $ 

Solar bulk purchasing program $ - $ 1,763 $ 18,750 $ 18,750

Green power program $ - $ 800 $ 800 $ 800

Market Research Services $ - $ 10,000 $ 15,000 $ 20,000

Annual Meeting & Expo $ - $ 15,000 $ 18,750 $ 23,438

Notice Board (classifieds) $ - $ 1,200 $ 1,500 $ 1,875

Directory $ - $ 5,400 $ 6,750 $ 8,438

Advertising/Sponsorship $ 15,000 $ 18,750 $ 23,438 $ 29,297

Grant funding $ 37,500 $ 56,250 $ - -$ 

Membership fees $ 12,250 $ 35,000 $ 38,500 $ 42,350

Total Revenues $ 70,502 $ 399,105 $ 543,355 $ 919,938

Expenses 2005 (6 months) 2006 2007 2008

Biodiesel CGS, sales & distribution $ - $ 72,971 $ 88,305 $ 108,484

BioFuel product program CGS, sales, marketing $ 10,447 $ 32,685 $ 70,817 $ 114,396

Green products - cost of goods sold $ - $ 8,500 $ 12,750 $ 17,000

Solar bonus paid to members $ - $ 705 $ 7,500 $ 7,500

Pre-launch budget $ 129,750

Marketing & sales expenses $ 12,000 $ 32,000 $ 40,000 $ 75,000

Member services $ 5,000 $ 5,000 $ 15,000 $ 15,000

Board of directors $ 1,000 $ 1,000 $ 5,000 $ 5,000

Outsourced services $ 22,020 $ 23,520 $ 35,040 $ 35,040

Salaried staff $ 158,270 - $ $ 163,018 $ 247,709

The "WIMBY" Project - Supporting Local Groups $ - $ 10,000 $ 30,000 $ 80,000

Rent $ - $ 4,000 $ 4,000 $ 4,000

Telephone & Utilities $ 1,500 $ 1,500 $ 1,500 $ 1,500

Supplies & technology $ 1,700 $ 3,700 $ 1,700 $ 1,700

Software Licenses $ 1,900 $ 2,090 $ 2,299 $ 2,529

Miscellaneous expenses $ 8,000 $ 12,000 $ 15,000 $ 17,000

Total Expenses $ 193,317 $ 367,940 $ 491,929 $ 731,857

Gross Profit (loss) before taxes $ (122,815) $ 31,165 $ 51,425 $ 188,081

Taxes $ - -$ -$ -$ 

Profit (loss) before patronage refunds $ (122,815) $ 31,165 $ 51,425 $ 188,081

Patronage refund $ - $ - -$ $ 94,041

Net profit (loss) $ (122,815) $ 31,165 $ 51,425 $ 94,041 

A-42 
17.3 Pro Forma Balance Sheet 

Table 4. Pro Forma Balance Sheet 

Assets Balance at Launch 2005 (6 months) 2006 2007 2008

Current assets 

Cash $ 771,375 $ 73,560 $ 444,600 $ 58,025 $ 113,640

Reserve fund $ - $ - $ - $ - $ -

NREL grant $ 375,000 $ - $ - $ - $ -

Short-term investments $ - $ - $ - $ - $ -

Accounts receivable $ - $ - $ - $ - $ -

Inventory - Biodiesel product dividend $ - $ - $ 112,500 $ 137,500 $ 212,500

Inventory - Wind farm REC product dividend $ - $ - $ - $ 62,500 $ 62,500

Prepaid expenses and other current assets $ - $ - $ - $ - $ -

Total current assets $ 1,146,375 $ 73,560 $ 557,100 $ 258,025 $ 388,640

Other assets

Northeast Biodiesel $ - $ 950,000 $ 950,000 $ 950,000 $ 950,000

Support of local wind project $ - $ - $ 250,000 $ 250,000 $ 250,000

Northeast Biodiesel expansion investment $ - $ - $ - $ 750,000 $ 750,000

Other clean energy projects $ - $ - $ - $ - $ 250,000

Deferred income taxes $ - $ - $ - $ - $ -

Total other assets $ - $ 950,000 $ 1,200,000 $ 1,950,000 $ 2,200,000

Total assets $ 1,146,375 $ 1,023,560 $ 1,757,100 $ 2,208,025 $ 2,588,640

Liabilities & Equity Balance at Launch 2005 (6 months) 2006 2007 2008

Liabilities 

Long-term debt $ - $ - $ - $ -

Income taxes payable $ - $ - $ - $ - $ -

Accrued retirement and profit-sharing contributio $ - $ - $ - $ - $ -

Long-term debt $ - $ - $ - $ - $ -

Deferred income taxes $ - $ - $ - $ - $ -

Deferred credits and other liabilities $ - $ - $ - $ - $ -

Total liabilities $ - $ - $ - $ - $ -

Equity

Common stock $ 771,375 $ 1,146,375 $ 1,736,250 $ 2,048,250 $ 2,259,825

NREL grant $ 375,000 $ - $ - $ - $ -

Retained earnings $ (129,750) $ (122,815) $ (91,650) $ (40,225) $ 53,815

Biodiesel product dividend $ - $ 112,500 $ 137,500 $ 212,500

Wind farm REC product dividend $ - $ - $ - $ 62,500 $ 62,500

Other $ - $ - $ - $ -

Total equity $ 1,016,625 $ 1,023,560 $ 1,757,100 $ 2,208,025 $ 2,588,640

Total liabilities & equity $ 1,016,625 $ 1,023,560 $ 1,757,100 $ 2,208,025 $ 2,588,640

IMPORTANT NOTICE: Now that the base structure of the business plan is complete, we are doing detailed work on validating and solidifying 

assumptions. Also, we have several parts we want to add more detail to. This document gives a good indication of what, how, and how much, and it will 

be improved over time. Updates will be posted on www.cooppower.coop. 

A-43 
17.4 Pro Forma Member and Community Benefits 

Table 5. Pro Forma Member and Community Benefits 

Community Benefit 2005-06 2007 2008 2009 2010

Accumulated investment in Northeast Biodiesel, Greenfield, MA $ 950,000 $ 1,700,000 $ 1,700,000 $ 1,700,000 $ 1,700,000

Accumulated investment in community wind farms or other sustainable projects $ 250,000 $ 250,000 $ 500,000 $ 1,000,000 $ 1,500,000

Money spent specifically on education, outreach and community building each year: $ 79,000 $ 104,727 $ 142,919 $ 176,146 $ 204,411

Total funds given directly to local chapter groups to support sustainable development $ 10,000 $ 30,000 $ 80,000 $ 160,000 $ 250,000

We're building an engine for sustainable development rooted in our community. Please consider joining today!

And help sign on new members in the next few months!

Member Benefits

 

5.0% 10% 774,992 $ $ 1,299,628 $ 1,550,559

2006 2007 2008 2009 2010

If each year you spend: $ 200 $ 200 $ 200 $ 200 $ 200

Your discount would be worth: $ 11 $ 22 $ 22 $ 22 $ 22

and your patronage refund would be: no refund no refund $ 24 $ 25 $ 22

For total savings of: $ 11 $ 22 $ 46 $ 47 $ 44

In other words, the percent of actual savings is: 5% 11% 23% 24% 22%

Over the five years your clean energy spending would total: $ 1,000

and the value of your savings would be: $ 170

or, an average savings per year of: $ 17% 34

If each year you spend: $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000

Your discount would be worth: $ 53 $ 111 $ 111 $ 111 $ 111

and your patronage refund would be: no refund no refund $ 121 $ 124 $ 108

For total savings of: $ 53 $ 111 $ 232 $ 235 $ 219

In other words, the percent of actual savings is: 5% 11% 23% 24% 22%

Over the five years your clean energy spending would total: $ 5,000

and the value of your savings would be: $ 851

or, an average savings per year of: $ 17% 170

If each year you spend: $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000

Your discount would be worth: $ 556 $ 556 $ 556 $ 556 $ 556

and your patronage refund would be: no refund no refund $ 607 $ 622 $ 541

For total savings of: $ 556 $ 556 $ 1,162 $ 1,177 $ 1,097

In other words, the percent of actual savings is: 11% 11% 23% 24% 22%

Over the five years your clean energy spending would total: $ 25,000

and the value of your savings would be: $ 4,548

or, an average savings per year of: $ 18% 910

If each year you spend: $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000

Your discount would be worth: $ 2,778 $ 2,778 $ 2,778 $ 2,778 $ 2,778

and your patronage refund would be: no refund no refund $ 3,034 $ 3,108 $ 2,707

For total savings of: $ 2,778 $ 2,778 $ 5,811 $ 5,886 $ 5,485

In other words, the percent of actual savings is: 11% 11% 23% 24% 22%

Over the five years your clean energy spending would total: $ 125,000

and the value of your savings would be: $ 22,738

or, an average savings per year of: $ 4,548 18%

Your member benefits will be based on how much you use the products and services Co-op Power provides. The more you use, the more you'll benefit.

(1) As a general rule, you will get a discount on products & services you buy through Coop Power. Once we get over the start-up phase, our goal is an average of a 10% discount . 

Some products will be less, some will be more. This is a up-front benefit at the time of purchase. Below, we are using an assumption of 5% average discount in 2006 and 10% each 

year thereafter.

(2) ALSO, since you own the cooperative, you decide through the democratic membership process how profits should be used. Members can decide to reinvest co-op profits in 

projects they care about, or distribute all or a part of profits as patronage refunds paid out to members buying products or services through the cooperative. 

Here are some of the key numbers from the business plan. This is money kept in our community because Co-op Power and Northeast Biodiesel are locally-owned - owners and 

workers live in our community - jobs and profits are here and stay here. This is money not going to support foreign oil:

In the business plan we are assuming members decide to pay out 50% of profits as patronage refund. The refund is proportional to how much you have bought through the 

Based on these assumptions, here is how much you approximately would save at various levels of spending on clean energy products & services offered by the co-op:

Spend $200 per year

Save an average of $34 per year

Spend $1,000 per year

Save an average of $170 per year

Spend $5,000 per year

Save an average of $910 per year

Spend $25,000 per year

Save an average of $4,548 per year

A-44 
Specific Examples 2006 2007 2008 2009 2010

Buying Renewable Energy Certificates to be a net-zero energy user

If your monthly electricity bill is approximately: $ 50.00

You probably use around this many kWh monthly: or per year: 5,040 420 kWh

If each REC is 2.5c, this would cost you: $ or per year: 11 $ 126

If we do the calculation on this annual spending: $ 126 $ 126 $ 126 $ 126 $ 126

You'd save approximately this much in discount: $ 6.30 $ 6.30 $ 6.30 $ 6.30 $ 6.30

And could get this much back in patronage refund: $ - $ - $ 15 $ 16 $ 14

For total savings of: $ 6 $ 6 $ 22 $ 22 $ 20

5.0% 5.0% 17.1% 17.4% 15.8%

Buying a home solar electric (photovoltaic) system

Let's say you buy a PV system from one of the local installers we have agreements with already today:

If you buy a 2kW solar system, you would pay upfront: 19000

But, right now, the state would give you an incentive of approximately: 7000 (the incentive will be less over time - act now!)

So, you actually only would pay: 12000

Your Coop Power discount on top of that would be: 380

Buying biodiesel for your diesel vehicle

Let's say you use this many gallons of diesel per year: 500

This is equivalent to this many miles: miles 20,000 at this mileage: 40 miles per gallon

or miles 10,000 at this mileage: 20 miles per gallon

or miles 5,000 at this mileage: 10 miles per gallon

2006 2007 2008 2009 2010

Gallons of biodiesel bought: 500 500 500 500 500

Let's say this is the market price at the time for the blend you buy: $ 2.50 $ 2.60 $ 2.70 $ 2.80 $ 2.90

That is, total market price of: $ 1,250 $ 1,300 $ 1,350 $ 1,400 $ 1,450

However, you'd save approximately this much in discount: $ 63 $ 130 $ 135 $ 140 $ 145

And could get this much back in patronage refund: $ - $ - $ 164 $ 174 $ 157

For total savings of: $ 63 $ 130 $ 299 $ 314 $ 302

5.0% 10.0% 22.1% 22.4% 20.8%

Buying biodiesel for your home heating oil furnace

If you're an average household, maybe you use around this many gallons per year: 800 800 800 800 800

Let's say this is the market price at the time for B5 or B10: $ 2.30 $ 2.40 $ 2.50 $ 2.60 $ 2.70

That is, total market price of: $ 1,840 $ 1,920 $ 2,000 $ 2,080 $ 2,160

However, you'd save approximately this much in discount: $ 92 $ 192 $ 200 $ 208 $ 216

And could get this much back in patronage refund: $ - $ - $ 243 $ 259 $ 234

For total savings of: $ 92 $ 192 $ 443 $ 467 $ 450

5.0% 10.0% 22.1% 22.4% 20.8%

Note: The numbers here reflect the base offer we already have in place today, but, if you read the business 

plan, you will see that we have ideas for how to further improve the savings for members installing solar 

systems. We think the membership benefit will be higher. However, what we show here, is what we can 

guarantee from the start.

To entirely offset this electricity use, you would buy an equivalent number of RECs from Co-op Power, directly supporting a given wind farm, solar project, or other

By installing a solar system, you would 

immediately earn back more than a third 

of the cost of your membership sign-up

A-45 
18 Co-op Power Interim Management 

18.1 Lynn Benander, Interim Manager, Co-op Power 

lbenander@cooplife.coop, (413) 552-6446 

Lynn Benander provides interim management services to three–four cooperative development projects each year by providing start-up 

management services. She is the chief executive officer of Cooperative 

Life, the Northeast’s Federation for Cooperatives. Cooperative Life works 

with cooperative leaders and community-based organizations to build the 

cooperative economy in New England and New York. She has a passion 

for building member-owned and -controlled businesses that strengthen 

local economies. She has supported the development of consumer-, 

producer-, and worker-owned cooperatives in the region, primarily in the 

energy and food industries. Working with a strong staff, Ms. Benander has raised more than 

$16 million in development grants and financing for cooperative development and provided 

strategic planning and technical assistance support to hundreds of cooperative development 

projects in the Northeast. 

She has lead the development of national cooperative education and training programs such as 

Marketing Our Cooperative Advantage, Effective Board Leadership, Making Cooperative 

Membership Meaningful, and A Technical Course on Cooperative Development for people 

interested in starting a cooperative. Ms. Benander developed and ran a national professional 

development certificate training program for cooperative development centers in the United 

States for 4 years. She has developed a Web resource for building democracy within 

cooperatives and assisted groups with online facilitation. She has served on numerous 

cooperative and community boards and on her town’s finance committee. 

18.2 Christian Lagier, Interim Manager, Co-op Power

clagier@cooppower.coop, (413) 268-7009 

 

Christian Lagier has an established track record in entrepreneurship, sales, 

and strategic business development in the United States and Europe. He has 

particularly valuable experience related to the energy sector and renewable 

energy. Christian Lagier is passionate about the values and benefits of 

cooperative ownership structures. Today, he applies his broad experience to 

helping cooperatives in the northeastern United States expand their 

membership base and reach multiple bottom-line goals. He is especially 

focused on developing and executing new cooperative business ideas. 

A-46 
Until recently, Mr. Lagier worked for Northern Power Systems of Vermont, the oldest 

renewable energy company in the United States. He opened the San Francisco office and 

established operational infrastructure and pursued new strategic goals for Northern Power 

Systems, primarily related to the development of solar, wind, cogeneration, and hydrogen 

projects. During his time with Northern Power Systems, Mr. Lagier also supported strategy 

development for Distributed Energy Systems Corp. and Proton Energy. 

Prior to Northern Power Systems, Christian Lagier served as director for Proxicom, a leading 

consulting partner for Global 1000 companies. He was an important contributor to Proxicom’s 

growth from 15 to 1,500 employees, negotiated contracts up to $10 million, grew the Energy 

Practice working for clients such as Pacific Gas and Electric, and established the Paris office. 

He worked for the international Management Consulting Group of TRW Inc. before joining 

Proxicom. Mr. Lagier began his entrepreneurial and consulting career 15 years ago in 

Denmark, the land of co-ops and wind turbines. He speaks six languages and completed his 

business administration studies in Denmark, Brussels, and France. He has a master’s degree in 

economics and business administration from Copenhagen Business School.

A-47 
19 Co-op Power Board of Directors 

David Biddle (chair) of Hatfield is a founder of the Pioneer Valley Biodiesel 

Cooperative. He has a doctorate in Arabic and Middle Eastern History; is 

fluent in Spanish, French, and Arabic; and was a professor at the University 

of Massachusetts until 1976. He then worked in the field of artificial 

intelligence for 15 years. David is now involved in construction, real estate 

management, and renewable energy.

Lynn Di Tullio (clerk) is a consultant on renewable power and energy 

efficiency. Prior to forming her consultancy, The WinterGreen Group, she was 

president of Ewing Controls Inc., an engineering firm that specializes in 

customized controls and electrical interconnection switchgear for distributed 

power generation. Prior to that, she was president of Trigen Ewing Power, an 

integrator of steam turbine-driven power generation systems, in Turners Falls, 

Massachusetts. Since 1987, she has been involved in the development of 

industrial and commercial power generation systems. Lynn is a registered 

professional engineer in Massachusetts and has published articles on energy 

efficiency and steam turbine cogeneration for industry journals.

Erik Hoffner (treasurer) is trained as a photographer, educator, and organic 

farmer. He has worked in the environmental field throughout the western United 

States and is currently a writer and outreach coordinator for Orion magazine, 

“America’s finest environmental magazine” (Boston Globe), and overall winner 

of the 2004 Independent Press Awards. As chair for the Pioneer Valley 

Biodiesel Cooperative, he guided the formation of the biodiesel production 

facility.

Tim Rice is the third generation of the Rice family to run Rice Oil, a familyowned local distributor of energy products that employs 250 people in New 

England. Tim Rice was schooled in Greenfield. He spent 2 years at Northfield 

Mount Hermon and completed college at Colby College. Prior to coming to 

Rice, Tim worked for 5 years at Codex Corp., a subsidiary of Motorola Inc. in 

Mansfield, Massachusetts. He has been married to Elise for 16 years.

Sally Wright is a licensed engineer with more than 10 years of experience in 

power engineering. Her focus is renewable electricity and energy conservation. 

She currently provides technical support to Massachusetts’ communities that 

want to own community-scale wind power. She works at the Renewable Energy 

Research Laboratory at the University of Massachusetts at Amherst.

A-48 
Appendix B. Biodiesel Production Facility Business Plan 

B-i 
B-ii 
“The use of vegetable oils for engine fuels may seem insignificant today, but such oils may 

become, in the course of time, as important as petroleum and the coal-tar products of the 

present time .... 

“Motive power can still be produced from the heat of the sun, always available, even when 

the natural stores of solid and liquid fuels are completely exhausted.” 

— Rudolph Diesel, inventor of the diesel engine, in a speech on April 13, 1912 

B-iii 
Acronyms 

CEO chief executive officer 

EPAct Energy Policy Act 

FOB free on board 

HHO home heating oil 

NDA non-disclosure agreement 

RVO recycled vegetable oil 

B-iv 
Executive Summary 

Co-op Power is building and operating a biodiesel production facility in Western 

Massachusetts that will initially produce 2 million gal/yr and expand to 10 million gal/yr by 

October 2006. This facility will be the first of its kind in the Northeast. The initial phase of 

this project is to develop a medium-scale, modular production facility that uses locally 

available feedstock to serve the needs of the Northeast’s heating oil and diesel fuel markets. 

The expanded facility will most likely use production methodologies prevalent in larger-scale 

facilities. The planned initial production start-up is September of 2005, with a 3-month ramp 

to an initial full capacity of 85% (1.7 million gal/yr) of installed annual capacity. We will 

begin the expansion project in June 2006, with a target production start of October 2006. 

This business will be launched with an initial capital structure of $2.5 million of equity and 

$1.1 million of long-term debt for a total capitalization of $3.6 million. This will provide the 

required capital for site acquisition, any required site improvements, and equipment purchase 

and installation as well as $450,000 of working capital. The planned 2006 expansion to 10 

million gal/yr will require an additional $8 million in capital, $6 million in long-term debt, 

and $2 million in equity. The base-case plan shows that the business will be operated at a 

profit beginning with the second year of operations (2006), with a “total” return on average 

equity through 2009 of more than 30%. 

The basic launch strategy is to focus on wholesale supply of biodiesel (95% of production 

capacity), targeted primarily, but not exclusively, to home heating oil dealers that will, in turn, 

blend our product with conventional No. 2 home heating oil (2%–3% blends) as a product 

differentiator. This strategy has been adopted to: 

1. Minimize marketing cost 

A large portion of plant capacity can be sold to a few (20–30) large home heating oil 

dealers with a direct sales approach. 

2. Minimize production volume variability 

Selling annual supply contracts to large-volume users provides more predictability of 

capacity use. 

3. Minimize product quality risks. 

Targeting low-percentage blends eliminates weather and batch-to-batch variability 

issues in the early stages of operation. 

Entry into the on-road diesel fuel market is predicated on the June 2006 implementation of 

extra-low-sulfur content requirements for diesel fuel. The home heating oil and on-road 

diesel fuel markets for the Northeast are 5.2 billion and 4.2 billion gal/yr, respectively. The 

biodiesel production facility’s planned production capacity represents the following 

percentages of Northeast markets for home heating oil and on-road diesel fuel at 2%–3% 

blends: 

B-v 
Biodiesel Market Penetration Requirements 

(at initial production capacity of 1.7 million gal and expanded capacity of 8.5 million gal) 

Home Heating Oil Market 

Northeast 1% of initial capacity 

(Within 300-mile radius) 5.4% of expanded capacity 

Massachusetts 6% of initial capacity 

(Within 100-mile radius) 32% of expanded capacity 

 

On-Road Diesel Fuel Market 

Northeast 2% of initial capacity 

(Within 300-mile radius) 7% of expanded capacity 

 

Massachusetts 21% of initial capacity 

(Within 100 mile radius) 71% of expanded capacity 

We have planned a small retail pilot strategy, with 5% of production capacity targeted at onroad and off-road diesel-powered vehicles. This pilot retail operation is designed to identify 

the most appropriate market segments, marketing channels, and distribution methodologies 

for successful implementation of a larger retail strategy. The pilot retail operation will 

develop a packaged product offering that consists of 55-gal and 5-gal containers for 

distribution by local retailers (e.g., marine supply stores such as West Marine; hardware stores 

such as Aubuchons, Ace Hardware, and Home Depot; and farm supply stores). 

The facility size was based on an assessment of available feedstock and our assessment of our 

ability to penetrate the Northeast’s home heating oil and diesel fuel markets. Our proposed 

production facility will initially require 1.8 million gal of feedstock annually, which 

represents 28% of the used vegetable oil disposed of in Massachusetts and 3% of the used 

vegetable oil disposed of in the Northeast within a 300-mile radius of Greenfield, 

Massachusetts. The capacity expansion will multiply the feedstock requirements by a factor of 

five, which represents more RVO than is currently available in Massachusetts and 15% of the 

available RVO in the Northeast. 

Used vegetable oil will be collected from restaurants, cafeterias, and other food processors. 

The cost of the used vegetable oil feedstock is a primary determinant of the profitability of the 

operation. Three strategies are proposed to obtain the required feedstock quantities: 

1. Local farmers back-haul RVO from Boston and New York City.| 

2. Grease is collected by independent contractors (36% dropping to 27% of 

requirements). 

3. Bulk “untreated” RVO is collected by collection companies (64% growing to 73% of 

requirements). 

B-vi 
Grease collection by independent contractors and back-hauling from Boston and New York 

City are the most cost-effective collection strategies. Given that the infrastructure for these 

strategies does not exist, our plan contemplates growth over time for these efforts, with the 

primary focus on the farmer back-haul strategy. These farmers have been looking for a costeffective way to get produce, livestock, and other goods to the more lucrative markets in 

Boston and New York City. If they back-haul grease, we believe the economics of delivering 

to these markets will become attractive to Western Massachusetts farmers. 

We expect that grease farming will be significantly difficult, and therefore, our primary 

strategy will be focused on bulk purchases. The strategies for bulk purchases are to: 

1. Buy bulk “untreated” RVO from existing collection companies 

2. Develop a virgin oil distribution business in which the biodiesel production facility 

retains ownership of the soy or canola oil and leases its use to the foodservice 

industry, thus providing a guaranteed source of RVO. (This strategy is under 

development and is not reflected in this version of the plan.) 

The biodiesel production facility will select a biodiesel production technology that satisfies 

our criteria of cost-effectiveness, flexibility, and schedule requirements. Our choice of process 

technology will provide a medium-scale plant that uses used vegetable oil as a feedstock. 

Biodiesel is a locally produced, renewable fuel that has significant environmental benefits. It 

is safe and biodegradable, and it reduces serious air pollutants such as soot, particulates, 

carbon monoxide, hydrocarbons, and air toxins. A 1998 National Renewable Energy 

Laboratory study concluded that the use of 100% biodiesel reduces carbon dioxide emissions 

by more than 75% over petroleum diesel. Using a blend of 20% biodiesel reduces carbon 

dioxide emissions by 15%. The stress on landfills is also reduced as recycled vegetable oil is 

removed from the waste stream. Using biodiesel also reduces dependence on foreign oil and 

supports local economies. 

B-vii 
B-viii 
Table of Contents 

List of Figures ......................................................................................................................................xi 

List of Tables ......................................................................................................................................xi

1 Introduction ...................................................................................................................................1 

1.1 Objectives.............................................................................................................. 3 

1.2 Keys to success ..................................................................................................... 3

2 Financial Analysis.........................................................................................................................5 

2.1 Ratios .................................................................................................................... 5 

2.2 Uses of Financing.................................................................................................. 5 

2.3 Sources of Funding ............................................................................................... 6 

2.4 Assumptions.......................................................................................................... 6 

2.5 Break-Even Analysis............................................................................................. 7 

2.6 Critical Factors...................................................................................................... 7 

2.7 Profit and Loss...................................................................................................... 8 

2.8 Cash Flow ............................................................................................................. 8

3 Company Summary ......................................................................................................................9 

3.1 Company History .................................................................................................. 9 

3.2 Company Ownership............................................................................................. 9 

3.3 Company Locations and Facilities...................................................................... 10 

3.4 Management Structure ........................................................................................ 10

4 Sourcing of Feedstock ...............................................................................................................11 

4.1 Recycled Vegetable Oil....................................................................................... 11 

4.2 Methyl Alcohol ................................................................................................... 13 

4.3 Caustic Lye ......................................................................................................... 14 

4.4 Sulfuric Acid ....................................................................................................... 14

5 Competitive Comparison............................................................................................................15

6 Sales and Marketing Strategy....................................................................................................16 

6.1 Sales/Distribution Strategy ................................................................................. 16 

6.2 Markets and Marketing Strategy......................................................................... 18 

6.3 Wholesale B-100 Product Pricing....................................................................... 23 

6.4 Retail Pricing....................................................................................................... 24 

6.5 Future Products................................................................................................... 24

7 Site Requirements.......................................................................................................................25

8 Technology ..................................................................................................................................26 

8.1 Technology Choices............................................................................................ 26 

8.2 Pre-Process.......................................................................................................... 30 

8.3 Process ................................................................................................................ 31 

8.4 Quality Control and Quality Assurance Program ............................................... 31

B-ix 
9 Regulatory and Policy Assessment..........................................................................................34 

9.1 Taxes for Biodiesel ............................................................................................. 34 

9.2 Potential Tax Credits........................................................................................... 34 

9.3 Department of Energy: EPAct ............................................................................ 35 

9.4 U.S. Environmental Protection Agency.............................................................. 36 

9.5 U.S. Department of Agriculture.......................................................................... 37 

9.6 Massachusetts Department of Environmental Protection ................................... 37 

9.7 Fire Codes........................................................................................................... 37 

9.8 Local Zoning ....................................................................................................... 38 

9.9 Legal Implications: Liability Considerations...................................................... 38

Attachment 1: Business Development Timeline .............................................................................39 

Attachment 2: Financials ...................................................................................................................40 

Attachment 3: Population of New England, New York, New Jersey, Pennsylvania ....................52

Attachment 4: Recycled Vegetable Oil Resources (Restaurants and Cafeterias Within 

a 60-Mile Radius of Greenfield, Massachusetts) ....................................................53 

Attachment 5: Plant Job Descriptions..............................................................................................54 

Attachment 6: Regulatory Requirements.........................................................................................60 

B-x 
List of Figures 

Figure 1. The biodiesel production facility organizational chart............................................. 10 

List of Tables 

Table 1. Ratios ........................................................................................................................... 5 

Table 2. Break-Even Production................................................................................................ 7 

Table 3. Feedstocks Purchased From Collecting Companies or Rendering Companies......... 13 

Table 4. Home Heating Oil Market in Gallons/Year (as Estimated by Local HHO Dealers). 19 

Table 5. Home Heating Oil Usage in Gallons per Year (based on EIA data).......................... 20 

Table 6. No.2 Transportation Fuel in Gallons/Year................................................................. 21 

Table 7. Potential Fleet Fuel Market Based on Existing Usage............................................... 22 

Table 8. Projected Average Wholesale Price/Gallon............................................................... 23 

Table 9. Projected Average Retail Price/Gallon On-Road....................................................... 24 

Table 10. Commercial Biodiesel Technologies Available, 2004............................................. 28 

Table 11. Technology Choice Decision Matrix ....................................................................... 30 

Table 12. Detailed ASTM Requirements for Biodiesel (B-100) D-6751 ................................ 32 

Table 13. Process Control Tests............................................................................................... 33 

B-xi 
B-xii 
1 Introduction 

Biodiesel is a new fuel, and the public is still learning about its qualities and uses. With a new, 

multi-million-dollar national marketing campaign initiated by the National Biodiesel Board, it 

is rapidly gaining acceptance and market share in the Northeast despite its high price. Like 

premium gasoline, biodiesel is a premium fuel that offers good value for the incremental cost. 

Biodiesel is a remarkably versatile fuel that is quite unlike anything else in common use. Its 

inherently safe nature, high flash point, low toxicity, biodegradability, and stability make it 

safer than other fuels or solvents. Biodiesel is appropriate for all diesel cars and trucks that 

have been properly modified and superior in almost every aspect to petroleum diesel fuel. It 

can also be used as an off-road fuel to yield marked improvements in the environmental 

acceptability of construction and farming equipment. In addition, biodiesel works as a heating 

fuel in standard equipment, and it has excellent applications in marine use because of its 

markedly lower toxicity. 

Biodiesel can be used in any modified diesel engine in its pure form (i.e., “neat,” or B-100) or 

in unmodified diesel engines if it is diluted appropriately with petroleum diesel fuel. Biodiesel 

fuel goes into the standard fuel tank—unlike “grease conversions” that have been promoted 

locally. Minor modifications to the fuel system may be required if B-100 is used. 

Nationally, the most frequently sold form of biodiesel fuel is called B-20. It is made by 

mixing standard diesel fuel with 20% neat biodiesel by volume. This mixture has been 

demonstrated to have the fewest problems with clouding and solidifying in cold weather and 

other operational challenges. There are more than 250 retail locations for biodiesel in the 

United States. Distributors make this fuel available in most parts of the country. 

Biodiesel is perhaps the “greenest” of the liquid fuels available at this time. U.S. governmentcertified results show B-100 biodiesel reduces soot and unburned hydrocarbons by nearly 

60%, depending on the engine tested. In addition, global warming exhaust gasses are reduced 

by almost 90%, exhaust carcinogenicity is reduced by more than 90%, and acid rain-causing 

sulfur is reduced by almost 100%. 

The proposed production from the biorefinery will reduce carbon dioxide in the atmosphere 

by more than 20 million lbs/yr compared with standard diesel fuel. Biodiesel made from 

recycled vegetable oil (RVO) has all the benefits of standard biodiesel, and it has superior 

return on the energy invested and numerous other environmental benefits because of its 

recycled base material. Biodiesel use studies have documented reduced engine wear, 

increased lubricity of fuel, and reductions in engine noise. The overall engine performance in 

power output using B-100 is slightly less than No. 2 diesel fuel, reducing power, torque, and 

fuel economy by 8%. 

B-1 
Studies from the National Renewable Energy Laboratory and others demonstrate an energy 

return on the energy invested for biodiesel of 320%. This energy return on the energy invested 

is far better than that of any other liquid fuel. Because the proposed biorefinery will itself be 

biodiesel-operated (which effectively eliminates fossil fuel input requirements), our 

production facility will further improve on this value. 

The biodiesel industry is growing rapidly because of worldwide appreciation and acceptance 

of biodiesel’s qualities and its benefits over standard diesel fuel. In the United States, 21 

plants are producing biodiesel, but none of these is within the Northeastern United States or 

Canada. This is largely due to the predominance of virgin soybean oil as a feedstock in 

biodiesel production in the Midwest and far West to date. This is not economically attractive 

in the Northeast or Canada. 

In New England, there is an abundance of RVO from restaurants, which currently pay to 

dispose of this waste. Biodiesel from RVO is equivalent to biodiesel made from other source 

materials and is superior in performance in terms of tailpipe emissions and product stability 

(Mustafa 2003; National Biodiesel Board). 

National production of biodiesel grew from 1 million gal/yr in 1997 to 7 million gal/yr in 

2000 and 25 million gal/yr in 2003. The U.S. Department of Energy projected sales to 

increase to more than 35 million gal/yr in 2004—a 40% increase. In 2002, World Energy 

Corp., a distributor based in Chelsea, Massachusetts, reported sales of 600,000 gal in New 

England. 

The biodiesel production facility will use recycled fryer oil, known as “yellow grease” or 

RVO. This feedstock will provide several benefits to the community. It will: 

1. Reduce landfill waste 

2. Reduce disposal costs for restaurant owners 

3. Decrease illegal disposal 

4. Increase local employment by providing high-paying manufacturing jobs 

5. Reduce demand for petroleum to be drilled, transported, and imported. 

It keeps more money circulating in the local community and country while restoring 

manufacturing jobs for the area. Using locally produced waste, the biorefinery can reduce 

dependence on fossil fuels and displace approximately 1,615,000 gal of petroleum at the 

proposed initial operating level. 

Based on price factors and the availability of regional feedstocks, RVO is the only option that 

can make a biorefinery of this scale profitable in the Northeast. RVO is currently less than 

half the cost of virgin soybean oil on the open market and about one-third less than animal fatbased feedstock. Although the proposed biorefinery design can convert virgin vegetable oil 

and other potential feedstocks such as brown grease or tallow, the economics of those options 

indicate they will not be a large part of the initial plan for operation. 

B-2 
Proposed biodiesel refineries in North America are incorporating a growing percentage of 

RVO in their development plans, but they may be limited by the availability of this resource 

in their areas. Sufficient RVO appears to be available in the Northeast, with significant 

resources within a 60-mile radius of the plant (see Attachment 4: Recycled Vegetable Oil 

Resources). The National Renewable Energy Laboratory reported in the “Urban Waste Grease 

Resource Assessment” that there is approximately 1.1 gal of collectable RVO per person per 

year.1

 According to the National Renewable Energy Laboratory study, approximately 6.5 

million gal of RVO are generated in Massachusetts yearly. 

If only about one-third of the regional RVO resource is collected for biorefinery operation in a 

given area, it will require a population of just less than 5 million people to produce sufficient 

feedstock for our initial production. If collection constraints and competition with other RVO 

collectors prevents us from securing all our feedstock within Massachusetts, there is sufficient 

RVO produced within a 130-mile radius of our facility to meet production demands (see 

Attachment 3: Population: New England, New York, New Jersey, Pennsylvania). The relevant 

issue is price. 

1.1 Objectives 

The objectives of the biodiesel production facility are to: 

• Establish a Western Massachusetts-based biorefinery to provide biodiesel fuel to local 

New England markets 

• Develop a business and production model for community ownership of a biorefinery 

• Grow the markets for biodiesel in the Northeast 

• Expand this concept into Mid-Atlantic and Southeastern markets. 

1.2 Keys to success 

There are five keys to success for this project. The keys are to: 

1. Meet ASTM D6751 standards 

Meeting ASTM D6751 standards for the output of the production facility is essential. 

Meeting ASTM standards is a pre-requisite of validating our product for all potential 

customers. This is an area of risk for the project, and it is being precluded by 

contracting for the purchase of already proven technology that has demonstrated 

compliance with ASTM D6751. 

 

1

 “Urban Waste Grease Resource Assessment.” NREL/SR-570-26141. National Renewable Energy Laboratory: 

Golden, CO. November 1998. 

B-3 
2. Speed production ramp-up time 

Production ramp-up time is a key success factor because: 

• We are pre-selling product; therefore, a faster production ramp-up allows us to 

meet our initial sales commitments with greater certainty. 

• Our unit cost, and therefore margins and profitability, are production volumedependent. 

3. Obtain planned market penetration levels 

The success of our sales and market efforts will determine whether we can increase 

the capacity of our production facility and therefore reduce our unit cost in 

anticipation of potential new and larger facilities being constructed in the Northeast. 

4. Manage feedstock availability and cost 

At 65%–70% of the cost of goods sold, feedstock is the single largest component. Our 

success in building the “grease farmers” and negotiating long-term supply agreements 

with rendering companies will ultimately determine the success or failure of this 

project. Our primary advantage over the competition is our planned use of “raw” RVO 

collected from restaurants and cafeterias and collected by rendering companies under 

contract (rather than the use of bulk purchases of processed RVO from rendering 

companies). 

5. Obtain feedstock market penetration rates. 

Obtaining feedstock market penetration rates is critical because supply availability 

will be crucial as new players enter the market and our ultimate production capacity is 

limited by feedstock supply. 

B-4 
2 Financial Analysis 

The pro forma financials for the proposed RVO-based biodiesel production biorefinery 

indicate potential for profitable operation with strong cash flow. Attaining profitability is 

highly dependent on the our ability to reach scale in terms of production capacity and procure 

increasing amounts of yellow grease at an affordable cost. Sustained profitability is projected 

to occur the second year of operations. Although the business will require working capital 

(approximately $450,000) for credit support during its start-up period, projections indicate a 

strong cash flow once the business is established. Cash flow and profitability should be strong 

enough to offer a dividend to members or equity investors within 3 years of start-up. 

2.1 Ratios 

Equity investment = $2.5 million initially + $2.0 million in 2006 

Payback on initial investment < 3 years 

Total return on average equity = 34.79% through 2009 

Table 1. Ratios 

2005 2006 2007 2008 2009

Debt/Equity 47% 131% 52% 31% 20% 

Gross Margin -14% 40% 44% 43% 43% 

Net Margin -134% 24% 34% 32% 33% 

Return on Avg. Equity - 36% 24% 38% 18% 14% 

Return on Invest Capital -19% 57% 127% 100% 104% 

Asset Turnover .18 .47 .64 .48 .39 

Debt Serv Coverage(Cash) N/A 1.17 6.02 5.70 5.72 

2.2 Uses of Financing 

The project initially requires approximately $3.6 million in financing. Approximately $1.5 

million is for purchase and construction costs of the processing plant. The remaining $2.1 

million includes the projected costs for the site, site improvements, and the equipment 

required for the automated collection and drum-cleaning system as well as start-up costs, 

working capital, an a 15% contingency.2

 The working capital required is based on the cash 

required for supplier credit support (letters of credit or bonds) at 80% of maximum monthly 

feedstock cost. 

 

2

 Capital cost estimates are based on published equipment vendor estimates of equipment cost per gallon of 

production capacity, project development budgets, and working knowledge of the cost of the equipment required 

in a manufacturing operation. 

B-5 
2.3 Sources of Funding 

The project has assumed an initial financing structure debt-to-equity ratio of 40%. This 

provides the business with sufficient working capital for the start-up period. The initial equity 

($750,000) is projected to come from Co-op Power and includes a United States Department 

of Agriculture grant of $250,000. The balance of the equity (Class B preferred stock) will 

come from qualified private investors, some of whom have already been identified. Dividend 

payments of 21.5% per year are planned by the third year of operation. At that time, the value 

of the business will have increased. It is contemplated that the biodiesel production facility 

will call the Class B preferred stock in the years 2011–2015. 

2.4 Assumptions 

The assumptions used in the financials are detailed in Attachment 2. Costs of goods are based 

on past experience. All other fixed cost estimates are based on the author’s general knowledge 

of the requirements of start-up operations. Further refinement may be needed. 

Because the facility, the business, and the product are all new to the New England 

marketplace, we believe we have assumed sufficient management for the business. This 

includes the following staffing requirements: 

• One full-time president and general manager (see Attachment 5 for job description) 

• One full-time vice president of operations (see Attachment 5 for job description) 

• One full-time production/quality manager (see Attachment 5 for job description) 

• One full-time production assistant 

• One full-time RVO receiving assistant 

• One half-time customer service and clerical support person. 

 

Marketing, advertising, legal, and accounting services are all expected to be subcontracted. 

The facility/land lease or purchase will be for approximately 10,000 ft2

 in an industrially 

zoned space. Several appropriate spaces have been identified in the region. 

The wholesale selling price used in this business plan has been established as the lesser of 

$2.10/gal or total cost (fixed and variable) plus a $0.65/gal markup. This pricing strategy will 

yield a competitive wholesale price in Year 1, 2005, at $2.10/gal and provide significant 

pricing flexibility thereafter with the $0.65/gal markup strategy. The discount from the current 

lowest cost on the East Coast has been established to (1) provide an incentive for distributors to 

buy from us and (2) address the market perception that RVO biodiesel is somehow less 

desirable that virgin vegetable oil biodiesel. We expect that this bias will disappear with greater 

acceptance and widespread use of RVO biodiesel. Although increased availability of biodiesel 

in the northeast could lower prices, we believe that concerns about fuel supply and public 

health issues associated with petroleum diesel as well as the incentives for renewable fuels will 

allow prices to remain at these levels or higher for the foreseeable future. 

B-6 
2.5 Break-Even Analysis 

The varying costs and availabilities of feedstock result in different levels of “break even” at 

different production capacities. The break-even analysis (see Attachment 2: Financials) 

assumes availability of up to 1.7 million gal of grease-farmed feedstock. Break-even 

production with these assumptions (two batches per day, 5 days per week) is shown at various 

production volumes in Table 2. 

Table 2. Break-Even Production 

Capacity 

Level 

Production 

Volume 

% 

Grease-Farmed/ 

Back-Hauled Feedstock 

Break-Even 

Wholesale Price 

60% 1,248,000 50.4% $1.54 

Planned - 85% 1,768,000 45.9% $1.38 

100% 2,080,000 44.3% $1.32 

The break-even analysis shows break-even calculations for various other scenarios (e.g., a 6-

day week, 10 million gal/yr, and one batch per day). 

2.6 Critical Factors 

Sensitivity analyses were conducted for scenarios with varied sources of feedstock, higher and 

lower prices, full wholesale sales, increased retail sales, varied service charges for collection, 

royalty fees to technology suppliers, and higher loan rates. 

The biggest factor affecting profitability and the return on investment is the cost and 

availability of the used grease feedstock. The facility proposes to use three methods to collect 

grease: 

1. Independent contractors and farmer partners collect and deliver of grease at an 

estimated cost of $0.30/gal (“grease farming”). 

2. Rendering companies and others sell “cleaned” grease from at an estimated cost of 

$0.80/gal delivered. 

3. Farmers back-haul grease from Boston and New York City after making their 

deliveries. 

The financial projections require the development and growth of a number of independent 

contractors, or “grease farmers,” to supply the production center. This grease farming industry 

is projected to initially supply 7,000 gal of recycled grease per month. This is expected to 

grow to more than 150,000 gal per month 3 years after start-up. 

B-7 
Although the market information and National Renewable Energy Laboratory studies suggest 

the ready availability of this quantity of grease in the region, it remains to be seen whether our 

projected economics for a subcontracted collection service are sufficient to induce 

participation among potential independent contractors, farmers, restaurants, and cafeterias. 

For this reason, we have prepared a worst-case profit-and-loss scenario (see Attachment 2: 

Financials). 

The worst-case scenario has three basic assumptions: 

• Grease farming does not occur at the projected levels (or one-half of the projected 

level) 

The business will be obligated to purchase larger quantities of feedstock from 

rendering companies. An alternative approach is to tie the increases in production to 

the availability of collected and farmed grease, thereby reducing the need to purchase 

the more expensive rendered grease, but this limits profitability. 

• The price for purchases from rendering companies is projected at $1.21/gal. 

• Production start-up is delayed until January 2006. 

The worst-case scenario still indicates that, given the planned volumes and our pricing 

methodology, the business is profitable beginning in 2007. 

2.7 Profit and Loss 

The operation is projected to reach profitability in the fifth month following production startup (January 2006). However, we have assumed the need to quickly scale up both collection 

and production over the start-up period. Over time, this allows the cost of goods sold to drop 

from an initial 114% of sales to 57%. Net profit is projected to grow to 33% by 2009. In the 

worst-case scenario, the cost of goods sold is obviously higher but drops at a similar rate. 

However, net profit by 2008 is projected at only 17% of sales. 

We have assumed the availability of a credit from the United States Department of 

Agriculture for increased production. We used a rate of $0.25 for each new gallon of 

production, which, based on current data, is conservative and is based on credits available in 

past years (as high as $1.50/gal). The actual value of the credit may be greater or less than our 

estimates. Because the credit is only for increasing production, it has significantly less effect 

once the facility is operating at scale. 

2.8 Cash Flow 

Once the operation establishes itself and its markets, cash flow is quite healthy. By the 

beginning of 2006 (i.e., 5 months after start-up), monthly operating disbursements are about 

71% of monthly receipts. Although some re-investment will undoubtedly be required for the 

planned expansion, cash flow will be able to make regular dividend payments starting in 2008. 

B-8 
3 Company Summary 

3.1 Company History 

Co-op Power and the biodiesel production facility have been developed through the efforts of 

several cooperating entities: Co-opPlus of Western Massachusetts, Pioneer Valley Biodiesel 

Cooperative, Homestead Inc., Thomas Leue, and the Cooperative Development Institute. 

Pioneer Valley Biodiesel Cooperative is an informal group of consumers who initiated the 

feasibility study for this business and who continue to organize bulk purchases of biodiesel, 

primarily to fuel their diesel vehicles. Representatives from the Pioneer Valley Biodiesel 

Cooperative are incorporating Co-op Power to serve as the majority owner of the biodiesel 

production facility. 

Co-opPlus of Western Massachusetts is an energy cooperative owned by 1,400 households in 

Western Massachusetts dedicated to the development of renewable energy resources. 

Co-opPlus is providing technical assistance in the form of business planning and interim 

management and providing Co-op Power with its $750,000 of initial equity. 

These entities worked together with support from the Cooperative Development Institute, a 

non-profit economic development agency, to create Co-op Power and the biodiesel production 

facility. Professional biofuels and financial experts have also extensively reviewed the 

feasibility of the primary elements of this plan in an effort to include the best and most 

efficient technologies. 

3.2 Company Ownership 

Co-op Power Inc. is the majority owner of the biodiesel production facility. There will be 

other major equity participants that will have minority ownership interests. 

Co-op Power is a new Massachusetts consumer-owned cooperative. It is headquartered at 277 

Federal St., Greenfield, Massachusetts, and is dedicated to developing renewable energy 

resources for Western Massachusetts. 

The equity classes of the limited liability company are: 

• Class A 

o Co-op Power and its members – $750,000 in cash equity 

o $400,000 in expenses paid during the first year, plus $100,000 in member 

equity contributed over a 9-month period after completion of the business plan 

o $250,000 United States Department of Agriculture grant for building 

improvements and equipment 

• Class B 

o Other investors – $1.75 million in cash equity 

B-9 
The structure of an additional $2 million in equity required for the October 2006 expansion to 

10 million gal/yr has not yet been developed. 

3.3 Company Locations and Facilities 

The biodiesel production facility is currently co-located with Co-op Power and Co-opPlus of 

Western Massachusetts at 277 Federal St., Greenfield, Massachusetts, 01301. This business 

plan contemplates the purchase of a production facility and office space in the Western 

Massachusetts area. 

3.4 Management Structure 

During the organizational phase of the project, Lynn Benander and Larry Union, 

representatives of Co-opPlus, have filled the role of general manager on an interim basis. 

Thomas Leue has acted as the plant manager. The biodiesel production facility expects to hire 

the full-time general manager in February 2005 and the balance of the management team 

subsequent to that. The permanent operational management of the biodiesel production 

facility will consist of the president and chief executive officer (CEO) and the vice president 

of operations (see Attachment 5 for job descriptions). These two individuals will be 

responsible for the day-to-day operations of the company. 

Board of Directors

President and CEO 

Customer Service/Clerical Support

Production Assistant

Receiving Assistant

Vice President of Operations

 QA/QC Manager

Figure 1. The biodiesel production facility organizational chart 

B-10 
4 Sourcing of Feedstock 

It takes four primary components to produce biodiesel fuel: RVO (yellow grease), methyl 

alcohol (methanol), caustic lye (NaOH), and sulfuric acid (H2SO4). The sources of these 

components (with alternatives for each) have been identified. 

4.1 Recycled Vegetable Oil 

Seven years have been invested in the identification of sources of RVO in the region. The cost 

of RVO is approximately 60% of total production cost and the largest cost component of the 

biodiesel production process. There is an abundance of this resource available at a reasonable 

cost by direct pickup by contracted individuals. We have identified more than 5,000 sources of 

RVO within a 60-mile radius of Greenfield, Massachusetts (see Attachment 4: Recycled 

Vegetable Oil Resources); of these, 399 restaurants are in the locally accessible four-county 

region. Based on door-to-door surveys of 97 local restaurants, we are confident that contracted 

supply is readily obtained. National studies have demonstrated about 1.1 gal of collectable 

RVO are generated in restaurants per person in the local population per year. Our project needs 

are 1.8 million gal/yr. As stated earlier, if only about one-third of the regional RVO resource is 

collected for biorefinery operation, it will require a population of just fewer than 5 million 

people to produce sufficient feedstock. That population is easily found in the Northeast (see 

Attachment 3: Population: New England, New York, New Jersey, Pennsylvania). 

Our RVO supply will be collected by “grease farmers,” who are either independent 

contractors or farmers back-hauling barrels of grease from Boston and New York City. They 

will be equipped with a standard pickup truck, a flat-bed pickup truck, or a livestock or 

vegetable delivery truck. They will deliver the oil to our receiving station for a fixed price per 

gallon. An initial poll of possible vendors for this service showed a high level of interest and a 

likelihood of this market being successful. 

The grease farmers will make agreements with restaurants, schools, and other sources of RVO 

for collection service. The grease farmers will set their own price structure. Generally, the 

cost of a drum of oil picked up is planned to be around $20. This is very competitive with 

other service vendors in our region; they currently average around $38/drum picked up. The 

independent contractors may adjust their pricing upward when they obtain a sufficient 

customer base. They will truck a minimum, if using a pickup truck, of six filled drums per trip 

to the refinery for our use and more—approximately 20 filled drums—if they use a flatbed or 

livestock delivery truck. The grease farmers will obtain revenue from the waste generators 

and a fluctuating unit fee from the refinery for delivered oil. The initial fee paid will be 

$0.30/gal for delivered oil, based on contaminate-free oil. Fees will be paid monthly via 

check. The grease farmers will pick up the cleaned, empty drums from the biodiesel 

production facility. The drums will remain the property of the refinery. 

B-11 
The independent contractors will face competition from existing rendering companies and 

local grease collection services. This will likely put downward pressure on the price of 

$20/drum picked up. We believe this will influence restaurants to switch to these independent 

contractors. We believe there is a significant number of restaurants that do not have a pickup 

service or that are illegally dumping RVO (based on our survey of restaurants within 60 miles 

of Greenfield). These establishments will be attracted to the initial lower pickup cost and 

provide sufficient opportunity for the independent contractors to secure accounts in the face of 

competition from existing service providers. 

We have identified several individuals who are interested in providing this service. Although 

none of the identified program participants currently has contracts with restaurants for RVO 

pickup, our restaurant surveys indicated substantial demand for a more cost-effective RVO 

pickup service. We are working with the Cooperative Development Institute to develop the 

farmer back-haul strategy. The Cooperative Development Institute plans to use its extensive 

network of relationships with local farmers, in addition to an already established back-haul 

operation (fish farm deliveries to Boston), to develop this strategy. Finally, we are working 

with Mass Energy, located in the Boston area. It has agreed to assist the City of Boston in 

setting up an RVO collection service. 

In the first 3 years of development, any shortfall in RVO supplies will be made up on the open 

market by purchasing this commodity from existing regional rendering companies that have 

agreed to sell the materials to the biorefinery or from existing waste collection companies 

such as SalCorp, which currently picks up more than 75,000 gal of RVO a week from 

restaurants and sells “untreated” RVO. This is the more expensive source of RVO, but our 

cash flow analysis continues to show positive values under even the worst-case scenario of 

purchasing mostly from these sources. 

The regional rendering companies are: 

• Western Mass Rendering – Southwick, Massachusetts 

o 25 miles from Greenfield 

o Approximately $0.03/gal transportation cost 

• Baker Commodities – North Billerica, Massachusetts, and Albany, New York 

o 100 miles from Greenfield 

o Approximately $0.07/gal transportation cost 

• Darling International – Newark, New Jersey 

o 150 miles from Greenfield 

o Approximately $0.10/gal transportation cost 

• Corenco – Tewksbury, Massachusetts 

o 100 miles from Greenfield 

o Approximately $0.07/gal transportation cost. 

B-12 
The waste collection companies are: 

• SalCorp – Queens, New York 

o RVO from restaurants in New York City 

o Preferred source 

o Currently negotiating supply contract for all bulk requirements through 2007 

o 130 miles from Greenfield 

o Approximately $0.07/gal transportation cost 

• Corcom Commodities – Elora, Ontario 

o RVO from Canada 

o Embargo on shipments of RVO from Canada expected to be lifted in 

March2005 

o Proposed 3-year supply contract currently under investigation 

• American Byproducts – Boston, Massachusetts 

o Collects fryolator grease in the greater Boston area. 

Table 3. Feedstocks Purchased From Collecting Companies or Rendering Companies 

2005 2006 2007 2008 2009

64% 81% 87% 78% 73% 

We will be using a standard open-topped, 55-gal drum-based collection system. This allows 

us to obtain inexpensive, standardized containers that can be handled by one person, cleaned 

thoroughly, and distributed easily. In addition, this is a commonly used system in the industry. 

Our drums will be labeled to distinguish our service from other services. 

The service provider, the customer volume, the regional price structure, and the type of 

service provided set pricing of the collection service. By using three drums per customer, our 

service agreement will maintain sufficient capacity for the RVO generator. This yields 

approximately 100 gal of vegetable oil per site visit. Education and the pricing structure 

provided by the independent contractors will encourage customers to avoid significant 

quantities of water in the drums, although some water is inevitable. All significant 

contaminants will be removed in the factory-based oil receiving system. 

4.2 Methyl Alcohol 

Anhydrous methanol is available from several regional chemical supply houses. Methanol is 

bulk shipped to Selkirk, New York, and New Haven, Connecticut. This offers the opportunity 

for competitive pricing. The price of methanol closely follows natural gas pricing and 

represents about 12% of our product cost. Full excess methanol recovery systems will 

minimize the cost and use of this chemical. 

B-13 
Methanol is priced according to the volume of deliveries. The best prices are obtained with 

full-truckload deliveries of 7,000 gal. Our receiving tank will have 10,000 gal of capacity. 

Designed according to the National Fire Protection Association fire code, this system will be 

located in a protected area with a berm, nitrogen gas blanket, and fire control systems. Since 

January 2002, methanol prices have risen from $0.375/gal to $0.95/gal3

 at the Houston, 

Texas, rack. The price of methanol is expected to remain high for the foreseeable future. Our 

price delivered from Selkirk, New York, or New Haven, Connecticut, will include an 

additional $0.07–$0.10/gal transportation cost. 

4.3 Caustic Lye 

Caustic lye (NaOH) is used as a catalyst and is less than 1% of the product cost. It, too, is 

available from several regional vendors in bulk. 

We will evaluate the use of pre-mixed sodium methoxide because it is easier to handle a 

liquid than a hand-carried solid. In addition, the liquid has been shown to be up to four times 

as effective of a catalyst as the solid, site-mixed chemical. 

4.4 Sulfuric Acid 

Sulfuric Acid (H2SO4) is used as a neutralizer and is also less than 1% of the product cost. It 

is available from several regional vendors in bulk. 

 

3 Methanex Regional Posted Contract Prices: Valid through Dec. 31, 2004. 

B-14 
5 Competitive Comparison 

Biodiesel is the rising star of the alternative transportation fuel industry. Because of its 

recycled base materials, clean air performance, impressive net energy balance, and aesthetic 

cache, demand is rising in the Northeast faster than it can be supplied. As of this writing, large 

areas of Vermont, Connecticut, and Western Massachusetts have no local sources of supply. 

For these and other reasons, biodiesel is about 10% more expensive in the Northeast than in 

other parts of the United States. 

By every measure, the biodiesel production facility will have a highly competitive product. 

The pricing projected to meet our goals is less than any other regional source, and potential 

customers have termed it extremely competitive. The recycled base material will appeal to 

energy- and resource conservation-aware customers, especially when it is compared with 

Midwestern sources that use a virgin soy oil base. One of our challenges will be to dispel any 

negative connotations that an RVO-based biodiesel may have relative to being used in a 

Northern climate. Our strategy to focus on 2%–5% blends will help minimize any potential 

negativity directed at an RVO-based product. 

As the first commercial biodiesel production facility in the Northeast, we expect to obtain 

contracts for bulk sales in advance of project initiation up to 95% of our anticipated 

production. The balance of production will be reserved for initial retail sales developments, a 

portion that is expected to grow yearly. 

Current regional sources of biodiesel are located hundreds of miles west or south of our 

proposed location (e.g., in Cincinnati, Ohio; at Griffin Industries in Kentucky; and at the 

World Energy site in Lakeland, Florida). Future competitive production systems have been 

announced for suburban Montreal, Ontario. Canadian systems have not announced plans to 

export biodiesel to the United States. Others new production centers are in early development 

stages. These include facilities near New York City and Philadelphia and in West Virginia, 

North Carolina, Georgia, and Delaware. However, announced systems may precede actual 

production systems by years or longer. We will likely have a slight cost advantage for only 1 

or 2 years. It is imperative that we work to reduce our cost and increase our efficiency. Our 

plan to increase capacity to 10 million gal/yr by October 2006 is a direct response to the 

perceived competitive landscape. 

Although the Department of Energy projects U.S. biodiesel production to grow by nearly 40% 

this year, the biodiesel production facility will be the only operational production system 

within more than 500 miles of our location at the time of our projected opening. Our early 

entry into the market will help us develop distribution networks and build customer loyalty. 

Because our pricing structure is planned to be less than the current regional average price for 

biodiesel, we expect to rapidly gain market share. 

B-15 
6 Sales and Marketing Strategy 

6.1 Sales/Distribution Strategy 

6.1.1 Wholesale Sales 

Initial sales will focus on biodiesel as an additive for home heating oil (HHO) dealers 

throughout the Northeast. The biodiesel production facility also anticipates providing bulk 

biodiesel to regional diesel fuel distributors for mixing blended fuel in various ratios. Written 

agreements for these business relationships are currently in development. These agreements 

will detail the volume, price, delivery conditions, and biodiesel-to-diesel fuel ratios of the 

products developed. These agreements will also include branding rights and responsibilities 

so the ultimate users will be assured of biodiesel quality. 

Sales of biodiesel as a blending agent with standard or low-sulfur HHO to produce a green 

alternative will be initiated for late fall of 2005 deliveries. This use of biodiesel will help sell 

the first year’s production before all of the required registrations for road fuel are in place. 

This will be the preferred market focus for the first 3–5 years. Introductions of this product in 

Maine, near Boston, and in Holyoke have been sustainable, and these programs are expanding 

next year. For example, Alliance Energy of Holyoke, Massachusetts, has announced it will 

add 3% biodiesel to all fuel it sells in 2004. 

The HHO market presents many challenges, not the least being its inherent seasonality. To 

minimize the business effect of seasonality, as government mandates and incentives come into 

play for diesel fuel and we meet the appropriate standards of the major oil companies and 

insurance providers, we expect that our sales focus will shift more to the lubricity additive and 

blended fuel markets for diesel fuel. 

The sales effort for our wholesale product will be carried out primarily by the general 

manager of the biodiesel production facility. A direct sales strategy will be targeted at the 

operational heads of the heating oil dealers and regional diesel fuel distributors. 

6.1.2 Retail Sales 

Our program also includes a retail component early in our development plans. This will take 

the form of packaged “private label” biodiesel. 

Packaged “red-dyed” biodiesel will be sold as private-labeled B-20 in 5- and 55-gal packages. 

Two package plans will be initiated. 

• Fifty-five-gal drums of biodiesel will be sold for use on farms, construction sites, and 

residences. With these drums will be user information about use and safe handling. 

The drums will be deposit-valued and refillable. 

B-16 
• Five-gal fuel containers manufactured for diesel storage are a convenient and attractive 

means of selling fuel for off-site use. These packages may be refilled after purchase. 

Similar to the “coffee club” programs operated by convenience stores, customers may 

pay a premium for the initial filled container and then receive a modest discount on 

subsequent refillings. Refilling can take place at participating retailers such as auto 

parts stores, garages, and food cooperatives. An attractive label with handling 

information would promote brand loyalty. This also offers a distinct advantage for users 

who mix a percentage of biodiesel with standard fuel in their tanks by leading to 

improved costs performance and reducing winter cold weather operation problems. 

6.1.3 Distribution 

6.1.3.1 Bulk 

Biodiesel may be handled with any equipment suitable for handling petroleum fuel. Biodiesel 

may be sold “free on board” (FOB) in the purchaser’s trucks or delivered by a contracted 

carrier at $0.03/gal for local deliveries and as much as $0.10/gal for deliveries to the outer 

edges of our Northeastern service territory. Biodiesel-blended fuel, such as B-02 or B-20, is 

normally prepared by loading B-100 into a carrier vehicle already pre-loaded with the 

petroleum base fuel. The base plan is to have local customer’s fuel trucks pre-loaded with 

HHO or diesel fuel arrive at our site and be topped off with the appropriate volume of B-100 

to achieve the desired biodiesel ratio. For more remote customers, we will negotiate with the 

Springfield-, Boston-, Albany-, New Haven-, New York City-, and New Jersey-based “racks” 

to have B-100 distributed to customers there. The product will need to be stored on site in 

heated and insulated storage tanks to avoid clouding that may occur in cold weather. 

6.1.3.2 Private Label Packaged Product 

All packaged biodiesel will be dyed “red” to avoid Internal Revenue Service issues regarding 

off-road and heating oil use. Several additional vendor locations are willing to sell a privatelabeled product. The following locations have expressed interest in retailing packaged 

biodiesel at some time in the future. These locations are given as examples of the types of 

retail operations that would be appropriate. 

• Foskett Equipment 

Rt. 171-S, Woodstock, CT 06281 

Contact: Harold Foskett 

Type of sales: Agricultural Equipment 

• John Deere 

P.O. Box 432, Sanford, ME 04073 

Contact: Tom Swan 

Type of sales: Agricultural Equipment 

• General Truck 

I-91, Exit 5, Westminster St., VT 

Contact: Bodie 

Type of sales: Construction Equipment 

B-17 
It is anticipated that many more such retail vendors will be identified as soon as we have 

product available. The plan for distribution will be to service established private-label 

accounts with the outward-bound travel of the grease collectors. This will minimize costs and 

allow us to directly collect feedback. Examples of other retailers we expect to approach are 

West Marine and other retail marine outlets; big box hardware retailers and automotive chains 

such as PEP Boys, Autozone, Home Depot, Aubuchon, ACE Hardware, and Sears/Kmart. 

Fifty-five-gal packages are standard drums available for a low cost from drum recyclers 

locally. There would be a deposit on each drum of fuel sold and a cleaning charge for the 

returned drums. 

Five-gal packages consist of U.S. Department of Transportation- and state fire marshalapproved yellow plastic diesel fuel containers. These are available for approximately $5 each 

from the Internet. These containers have the advantage of being safe and convenient for 

customers to dispense as they see fit, which helps them achieve the desired B-XX dilution at 

the lowest cost and greatest convenience. When empty, the customer can return the container 

to the store for a deposit return and pick up a filled container. These containers would include 

a laminated attached label that includes required Department of Commerce information, brand 

information, and user guidance. 

 

6.2 Markets and Marketing Strategy 

The biodiesel production facility will focus its sales and marketing efforts in the wholesale 

markets as it seeks to establish its presence in the New England marketplace. Simultaneously, 

a smaller retail effort will be initiated at the biorefinery to serve the local transportation 

market and visitors. This balance between retail and wholesale will be adjusted as the retail 

market grows. Initial expectations are for 95% of the product to be sold wholesale and 5% of 

the product to be sold retail at full operating capacity. 

We have budgeted $60,000/yr for marketing expenses. For fiscal year 2005, we anticipate 

spending those dollars as follows: 

Collateral – Wholesale (brochure designed to hand out or mail) $15,000 

 Retail (basic hand-outs) $ 3,000 

Postage $ 2,000 

Travel – General manager making sales calls throughout Northeast $20,000 

Advertising – Trade magazines (heating oil, diesel equipment, restaurants) $20,000

 Total $60,000 

Although marketing cost might be expected to decline over time as repeat customers are 

established, it is our expectation that our annual marketing cost will remain at this level 

because of competition from new market entrants. We also expect to shift our marketing focus 

to different segments from time to time as part of our market growth strategy. 

B-18 
We plan to initially provide two basic wholesale products and a basic retail product. 

• Wholesale products (95% of steady-state capacity) 

o Bulk B-100 FOB for HHO distributors – 80% 

o Bulk B-100 FOB for diesel fuel distributors and fleets – 20% 

• As a lubricity additive 

• For blending up to B-20 

• Retail products (5% of steady-state capacity) 

o B-20 (5- or 55-gal containers) 

6.2.1 Home Heating Oil (80% of Wholesale Sales) 

The HHO market in the Northeast (New England, New York, New Jersey, and 

Pennsylvania) is very competitive, with more than 500 independent dealers in 

Massachusetts alone. In 2002, HHO sales in the Northeast were 5.2 billion gal.4

 Biodiesel 

offers these dealers the ability to differentiate their product from their competition’s by its 

renewable content, its reduced dependence on foreign oil, or both. HHO in a 2%–5% 

dilution of biodiesel provides an alternative fuel that does not require any special handling, 

equipment upgrades, or weather-related adjustments with only a slight increase in price 

(estimated at $0.05–$0.10/gal more by local heating oil dealers). Thus, biodiesel is an ideal 

product for this very large and diverse market in the Northeast. Our plan is to initially focus 

most of our marketing and sales efforts on this segment. We believe that this market 

segment offers the best likelihood of initial success. 

Our first approach to estimating the biodiesel HHO market was to interview local HHO 

dealers. These conversations indicate that if 10% of customers in just two local counties were 

to switch to biodiesel, it would create a sufficient market to consume 8% of our planned 

wholesale sales. 

Table 4. Home Heating Oil Market in Gallons/Year (as Estimated by Local HHO Dealers) 

Data from local HHO dealers 

HHO Market 

Approximate Annual 

Conventional Fuel 

Usage 

Percentage That 

Might Switch to 

Biodiesel 

Gallons/Year 

of B-3 

Translated into 

Gallons/Year 

of B-100 

HHO in Franklin 

and Hampshire* 45 million gal 10% 4.5 million 135,000 

An alternate way to estimate the market is to analyze total HHO usage in the Northeast and 

Massachusetts. For example, data from the Energy Information Administration for 2002 

indicate that Massachusetts homes used 892,689,000 gal of No. 2 heating oil. Western 

Massachusetts (which includes Berkshire and Hampden counties in addition to Franklin and 

Hampshire counties) is 12.5% of the population of Massachusetts. Therefore, Western 

Massachusetts uses about 111,586,125 gal of No. 2 heating oil a year. 

 

4 Energy Information Administration. Fuel Oil and Kerosene Sales 2002. 

B-19 
It is clear that the HHO markets in Western Massachusetts alone will not support our sales 

plans. Assuming that we convert 48% of the market is highly unlikely and unrealistic. It is 

clear that the HHO market in the entire state of Massachusetts and the Northeast as a whole 

is more than sufficiently large enough to support our plans without yielding to unrealistic 

market penetration assumptions. Table 5 shows market penetration levels for 100% of our 

wholesale plan. We actually are only targeting 80% of the wholesale plan for the HHO 

market.

Table 5. Home Heating Oil Usage in Gallons per Year (based on EIA data) 

Data from the Energy Information Administration for 2002 

HHO Market Total Usage Gallons/Year B-100 

at 3% Blend 

Market Penetration Required 

for 100% Wholesale Plan 

2 Million Gal/Year/ 

10 Million Gal/Year 

Northeast 5,200,000,0001 156,000,000 1.035% / 5.4% 

Massachusetts 892,689,0001 26,780,670 6.03% / 32% 

Western Massachusetts 

(12.5% of the population of 

Massachusetts) 

 111,586,125 3,347,583 48.2% / < 100% 

6.2.2 On-Road Diesel Fuel (20% of Wholesale Sales) 

The biodiesel production facility’s on-road diesel fuel market is composed of three segments: 

1. Lubricity additives 

2. On-road B-20 

3. Fleets. 

The combination of these three market segments seems to substantiate our assumption of 

being able to sell 20% of our wholesale plan here. 

The market growth for B-02 nationally is primarily due to pending regulations (effective June 

2006) for lower sulfur-content diesel fuel that will require lubricity additives. Because B-02 is 

less subject to cold weather or price concerns, the biodiesel production facility expects that 

this will become a primary market in future years. 

B-20 
The market potential for lubricity additive given the total amount of diesel fuel sold in 

Massachusetts alone is 7,964,340 gal/yr (at a 2% mixture). Several chemical additives can 

deliver the required lubricity performance. Using biodiesel, however, provides the advantages 

of renewable resources and local availability. This makes it a viable overall solution as an 

additive. Although B-100 may be slightly more expensive than the other proposed additives 

(before any tax incentives), because of the relatively low mixture percentages, price 

differential on a per-gallon basis is minimal. 

The 20% initial wholesale production target will provide the lubricity additive for the 

following annual retail sales of diesel fuel: 

• 0.39% of Northeast retail sales 

• 4.2% of Massachusetts retail sales 

• 33.7% of Western Massachusetts retail sales. 

Given the above required market penetration level, we expect that contracts with two or three 

local fuel distributors in each of the Northeastern states for 10,000–15,000 gal/yr or more is a 

reasonable and attainable initial target. 

Table 6. No.2 Transportation Fuel in Gallons/Year 

Total Usage Gallons/Year B100 at 2% Blend 

Market Penetration 

Required for 100% of 

Wholesale Plan 

2 Million Gallons/Year/ 

10 Million Gallons/Year 

Northeast 4,271,735,0001 85,434,700 1.9% / 10% 

Massachusetts 398,217,0001 7,964,340 21% / > 100% 

Western Massachusetts 

(12.5% of the population of 

Massachusetts) 

49,777,125 995,542 >100% 

Data from the Energy Information Administration for 2002 

The overall market for B-20 is growing but is still relatively small in the Northeast. It will 

take considerable time and effort to develop this market; however, we believe our beginning 

assumption of 20% (335,920 gal/yr) of our wholesale sales targeted at diesel fuel distributors 

and fleets is reasonable given the interest that we have already seen from the New England 

market. 

Biodiesel helps clean up emissions for a biodiesel-diesel fuel mixture in larger amounts than 

its proportion in any mix. Because the Northeast has recently been termed a non-compliance 

area for air quality, we expect biodiesel to gain widespread acceptance for fleets that must 

reduce pollution levels. Biodiesel fulfills the mandates of the Energy Policy Act (EPAct), the 

federal requirement for energy alternatives for federal, state, and some utility fleets. We are 

cataloging the mandated fleets and plan to partner with diesel fuel distributors to bid for 

contracts for B-20 fuel. 

B-21 
B-20 has been shown to be the lowest-cost method of EPAct compliance for diesel fleet users. 

Our research shows there are 29 EPAct communities in Western Massachusetts mandated to 

use alternative fuels for their fleets. We plan to initially focus on Western Massachusetts 

municipal fleets; federal fleets, including the post office; and electric, cable, and water utility 

fleets. These will likely yield better sales because of familiarity and will help build the local 

reputation of the biodiesel production facility in the rest of the region. 

Table 7. Potential Fleet Fuel Market Based on Existing Usage 

Vehicle Fuel 

Market 

Current B-20 or 

Diesel Use 

(Gallons/Year) 

Add Other 

Similar Markets 

Potential 

Gallons/Year 

of B-20 

Potential 

Gallons/Year 

of B-100 

Municipalities 

such as Keene, 

New Hampshire 

50,000 

Municipalities 

such as 

Amherst, 

Massachusetts 

5,000 

Northampton, 

Greenfield, 

Springfield, 

Holyoke, 

Massachusetts 

Assume all at 

modest amount 

of 5,000 gal/yr = 

25,000 gal/yr 

5,000 

Colleges such 

as University of 

Massachusetts, 

Amherst, Keene 

State 

4,000–7,000 

Smith, Mount 

Holyoke, 

Amherst, 

community 

colleges 

Assume all at 

3,000 gal/yr each 

= 18,000 

3,600 

Off-road uses 291,640,000 Assume 1% 2,916,400 58,328 

Total: 66,928 

The City of Keene and Keene State College switched all their diesel vehicles to B-20, but they 

were subsidized by the state of New Hampshire for the additional cost of biodiesel over 

petroleum diesel for the first 2 years. This state support has since dried up, but they have kept 

biodiesel usage at the same levels, although with difficulty. Given current state and local 

fiscal constraints, usage more similar to that of Amherst, Massachusetts, is used for future 

projections. Municipal use of B-20—based on the Amherst, Massachusetts, experience—is 

approximately 0.1 gal/person. This demonstrates potential sales of 80,000 gal of B-20, or 

16,000 gal of B-100, per year to Western Massachusetts cities and towns. 

Our B-100 will be marketed at competitive rates to the regional biodiesel distributors that 

purchase from Midwestern sources. Contract purchasers—such as higher education, 

municipal, and certain corporate customers—may choose our product based on lower costs, 

regional production values, and superior performance. We will sell bulk biodiesel via 

contracted carriers in 3,000- and 7,500-gal lots throughout the Northeast. 

B-22 
6.3 Wholesale B-100 Product Pricing 

According to the Alternative Fuel Index (www.altfuelsindex.com) published by the New 

York-based Energy Management Institute (www.energyinstitution.org), prices for B-100 have 

ranged from a low of $2.074 on Oct. 16, 2003, to a high of $2.540 on Dec. 16, 2004, during 

the past 14 months. Diesel prices have ranged from a low of $0.910 on Dec. 3, 2003, to a high 

of $1.646 on Oct. 21, 2004, in that same time period. 

Generally, across this nation, B-100 biodiesel is priced at a minimum of $1/gal more than the 

price of wholesale petroleum diesel fuel, and the price fluctuates with that commodity. 

Figure 2. Biodiesel and diesel prices 

The biodiesel production facility’s wholesale price of B-100 biodiesel is currently calculated at 

the lower of $2.10 or a $0.65/gal mark-up on our total cost (fixed and variable). This pricing 

methodology results in our price being a “minimum” of ~$0.18/gal less than current 

distributor prices in the Northeast (estimated at $2.28/gal or more) and as much as $0.44/gal 

less if current market prices are carried out to 2009. Given current market pricing norms for B100, our base-case plan yields significant price competitiveness for the biodiesel production 

facility. Our base-case plan is to use this advantage to assist in meeting our market penetration 

goals. Obviously, we will weigh the benefits of increased market penetration against higher 

margins as we gain initial insight into our ability to sell our product. 

Table 8. Projected Average Wholesale Price/Gallon 

2005 2006 2007 2008 2009 

Average wholesale price/gal $2.10 $2.041 $1.962 $1.945 $1.924 

B-23 
6.4 Retail Pricing 

Packaged pricing is based on the wholesale price plus a retail mark-up. Package product 

will be sold at retail and original equipment manufacturer partner sites. We will develop a 

strategy for retail sales of package product at partner sites based on additional research and 

market testing as part of our retail pilot. 

Table 9. Projected Average Retail Price/Gallon On-Road 

2005 2006 2007 2008 2009 

Average retail price/gal on-road $ 2.804 $ 2.745 $ 2.666 $ 2.649 $ 2.628 

6.5 Future Products 

Biodiesel, as produced by this facility, is useful in a variety of ways. Without changing the 

basic product, except for the addition of possible perfumes or dyes, biodiesel may be used as a 

very effective and cost-competitive degreasing compound for garage-type parts washers. 

Priced at a premium above road fuel, this degreaser would be available at approximately onehalf of the current degreasing compound prices. In addition, unlike the standard compounds, 

this degreaser would provide superior performance and be easy on hands, non-toxic, and 

disposable in recycled oil burners. Test marketing of Yellow Brand Biodiesel gained 

acceptance as a preferred alternative to the standard degreaser. Marketing plans include the 

expansion of piloted programs. For example, one garage may be selected to put on a 

demonstration in which regional garage owners are invited to bring a random engine part for a 

free cleaning. Where this has been tried, the only cost to the biorefinery is the use of 

approximately 10 gal of biodiesel and a few dollars for refreshments. 

Other applications of biodiesel for niche users include: 

• Adhesive remover 

• Aircraft fuel 

• Asphalt cleanup agent 

• Crop adjuvant 

• Graffiti remover 

• Hand cleaner 

• Metal working lubricant 

• Mold release agent 

• Oil spill clean-up and bioremediation agent 

• Corrosion preventative 

• Paint and resin cleanup 

• Parts cleaner and degreaser 

• Screen printing ink remover. 

To explore these options, test marketing will be conducted in appropriate markets. This will 

be facilitated by donations of small packages of biodiesel to key users for testing and 

feedback. 

B-24 
7 Site Requirements 

The ultimate biorefinery site must meet our basic requirements for a production facility. 

These include: 

• A minimum of 10,000 ft2

 of production space and 1.000 ft2 of office space 

• A production space expandable to 20,000 ft2

• A location in the four-county area of Western Massachusetts (Franklin, Hampshire, 

Berkshire, or Hamden counties) 

• Two loading docks 

• Easy access for tractor trailers and oil trucks 

• City water (a minimum 12-inch water main) and sewage 

• 480-volt three-phase power 

• Industrial zoning 

• A satisfactory 21-E environmental assessment. 

Other site considerations include: 

• Rail spur availability 

• Existing boilers 

• Qualified for state and local economic development assistance 

• Existing storage tanks (adaptable for oil and grease). 

B-25 
8 Technology 

8.1 Technology Choices 

Fourteen vendors of biodiesel processing technology have been identified and compared. 

Seven of these are continuous processors that have some drawbacks for our operation and 

skill set. Our plan calls for an initial production capacity of approximately 2 million gal/yr 

and growing to 10 million gal/yr. This initial-size facility was chosen to match our perceived 

ability to obtain the RVO and deliver the profitability required. The continuous-process 

technologies were eliminated from consideration because a 1–2-shift, 5-days-per-week 

operation is a better fit for how we feel we can operate the facility in our community. As the 

need for increased production capacity or space limitations arise, we may need to take another 

look at continuous-processing technology. 

Of the seven batch or plug-flow processors, single-stage processors do not appear to be 

appropriate for our demanding RVO and processing requirements. Also, several of the larger 

system vendors are not fabricating processors sized for our goals of less than 5 million gal of 

product per year. This reduces the known options to a few potential technologies. 

From a cost standpoint, the prices quoted by vendors do not include funds for a collection 

system, oil pretreatment and storage, product storage and dispensing, office systems, spare 

parts, training, advertising, or contingencies. Our capital and start-up budget is an estimate 

based on discussions, interviews, and budgetary quotes with vendors. We believe that our cost 

estimates, including contingencies, are sufficient to complete the project. 

We thus identified four technology vendors as providers of similar batch processing 

equipment for comparisons. These were: 

• Biodiesel Industries of Santa Barbara, California 

• Biodiesel International of Austria 

• Imperial Western Products Inc. of Coachella, California 

• Fitzsimmons Systems Co. (a new technology source under evaluation). 

All of the comparison technologies described meet ASTM standards, currently have facilities 

in operation, and come with some level of manufacturer warranty. In addition, our evaluation 

team visited facilities that use the technologies of these vendors. 

Biodiesel Industries’ technology is a modular batch process, with each module of production 

fitting into a standard 40 ft x 8 ft footprint. Biodiesel Industries has four commercial 

production facilities in operation. These are located in Rutherford, Australia (10 million 

gal/yr); Las Vegas, Nevada (3 million gal/yr); Longmont, Colorado (3 million gal/yr); and 

Port Hueneme, California (150,000-gal/yr operation run by the Navy). This technology is 

designed to operate using a variety of feedstocks. All of the currently operating facilities are 

producing to ASTM standards except the one in Longmont, Colorado, which is still in start-up 

mode. There is a 3-month lead time for this equipment. 

 

B-26 
Biodiesel International’s processing systems are built in Germany and shipped in roll-off 

containers. Tankage is usually purchased and installed locally. They offer a batch-type system 

for processors up to 5 million gal/yr and batch-continuous systems in sizes larger than that. 

Delivery time is estimated at about 9 months. The system has an acid-base type of conversion 

system. Their systems are reported to be able to produce ASTM-quality product within 1 

week of start-up. The technology appears to be well-developed and well-supported. There are 

no royalty fees, but the non-disclosure requirements keep the proprietary technology 

secret. There are fully commercialized facilities throughout Europe. In the United States, one 

is owned and operated by Griffin Industries, located in Cold Springs, Kentucky. 

Imperial Western Products Inc.’s technology is a two-stage, acid-base batch system process 

facility. There is only one facility in operation. It produces 10 million gal/yr. It is unclear 

whether this technology can be scaled down to meet our capacity requirements, although the 

company claims it can. The output of this facility also meets ASTM standards. Imperial 

Western Products Inc.’s package for a stated cost of $100,000 includes a list of drawings that 

would constitute the core of any new plant. These include: 

• Process flow diagrams for methyl ester production, glycerin production, and methanol 

distillation and recovery 

• Piping and instrumentation for the above 

• Electrical one-line drawings 

• A typical plant layout 

• An equipment list 

• A laboratory equipment list 

• Laboratory procedures for quality control 

• Production formulas 

• A cost calculator. 

Equipment sizing and specifications for all major components would be included. Because the 

drawings will likely be schematic, only some detailed drawings would need to be added to 

have a complete construction set, and such drawings would be relatively easy to obtain from 

any non-specialized engineering firm. However, the system designed for a 7-million-gal/yr 

facility will need to be downsized to meet our needs. 

Imperial Western Products’ package also includes a list of recommended laboratory 

equipment and full lab procedures, including biodiesel recipes for recycled oil feedstocks with 

various characteristics. It also includes a cost program that can quickly evaluate the 

processing cost of biodiesel made from a batch of recycled oil with a particular set of 

characteristics. Imperial Western Products tests every load of recycled oil before it will accept 

it, and this program helps it make that decision. 

These programs and procedures seem to constitute Imperial Western Products’ experience 

base in handling a variety of recycled oils over the past few years and could be quite valuable 

to a start-up such as ours. Finally, laboratory and process training at their plant is included. 

B-27 
At $100,000, Imperial Western Products’ price is a good value because typical engineering 

plans are 6% or so of installed cost. Lead-time for the documentation set is 6 weeks. 

Additional consulting at our site or by phone is available at $100/hour. 

Table 10. Commercial Biodiesel Technologies Available, 2004 

Imperial Western 

Products Inc. Biodiesel Industries Biodiesel International 

Contact Curtis Wright, P.E. 

86600 Avenue 54 

Coachella, CA 92236 

760-398-0815 

cwright@imperialwesternprodu

cts.com 

Russell Teall 

435-1/2 El Sueno Road 

Santa Barbara, CA 93110 

805-689-9008 

rteall@aol.com 

Wilhelm Hammer 

Ges.m.b.H, Parkring 

18 

A-8074 

Grambach/Graz 

+43 316 4009 100 

bdi@biodieselintl.com 

Technology Batch plant No information, 40-ft 

container modulars 

Batch or batchcontinuous 

processors 

Status Commercial Commercial Commercial 

Feedstock Oils or yellow grease; up to 

40% free fatty acids; moisture, 

impurities, and unsaponified 

materials <2% 

Vegetable oils and animal 

fats 

Vegetable oils and 

animal fats, free fatty 

acids more than 20% 

Pretreatment Filter and H20 reduction Unlimited free fatty acids or 

moisture, impurities and 

unsaponified materials; 

pretreatment depends on 

feedstock quality 

Proprietary 

Processing 

costs 

$0.40–$0.80/gal, depending on 

volume 

To be provided as part of 

feasibility study and subject 

to non-disclosure 

agreement (NDA) 

Subject to NDA 

Capacity Up to 10 million gal/yr 3-million-gal/yr modular 

units, scaleable 

5-million-gal/yr batch, 

larger with batchcontinuous 

Capital costs $0.20–$0.50/gal To be provided as part of 

feasibility study and subject 

to NDA 

Not available 

Lead time 3 Months 3 months delivery, site 

footprint and tankage 

required in addition to 

modular 

9 months 

Products ASTM biodiesel, 90% glycerin ASTM biodiesel, glycerin 

quality subject to feasibility 

study and NDA 

ASTM biodiesel, 80% 

glycerin, other 

products include a 

potassium phosphate 

solid fertilizer 

Yield 98%+ To be provided as part of 

feasibility study and subject 

to NDA 

Subject to NDA 

Warranties Performance warranty Manufacturer 

warranty ranges from 1–10 

years 

Undetermined 

B-28 
Capital cost comparison (processing facility only, does not include collection system or 

installation cost): The collection system and installation cost will be similar for all systems. 

Biodiesel Industries and Biodiesel International capital cost are estimated to be approximately 

$1/gal of annual production. 

2,000,000 gal * $1.00/gal = $2,000,000 

Imperial Western Product capital cost is approximately $0.50/gal of annual production. 

2,000,000 gal * $0.50/gal = $1,000,000 

We have not chosen a specific technology provider for our project. However, our technology 

choice will be based on the following considerations: 

1. The capital costs must be competitive with the other batch-processing technologies 

available. Imperial Western has the lowest capital cost; however, whether it can scale 

down its technology at the capital cost its has quoted is an issue. 

2. Given our aggressive timeline for project completion, Imperial Western and 

potentially Fitzsimmons Systems give us the best opportunity to meet our schedule 

requirements 

3. The plant manager has to feel comfortable with the chosen technology, and, therefore, 

the choice has to be the technology that requires the least amount of time for him to 

become technically familiar. Although we will be conducting a search to permanently 

fill the plant manger role, Tom Leue’s familiarity is an important factor, and Tom has 

recommended Imperial Western. 

4. The plan is to choose a technology that has economies that make it cost-competitive 

with any licensed technology available. These should include: 

• A modular nature that starts with two parallel processing trains and allows the 

future addition of more capacity as resource and market expansion allow 

• A process that is not licensed by any particular interest (this may be difficult to 

accomplish) and a technology in the public domain 

• A process that is demonstrably flexible for our feedstock 

• A process technology that is similar to systems used by several U.S.-based 

biodiesel processors and can be supported by consulting experts 

• Main components that are potentially available used from the chemical 

processing industry, further lowering costs. 

B-29 
Table 11. Technology Choice Decision Matrix 

Parameter Biodiesel 

Industries 

Griffin Industries BioDiesel 

International 

Imperial Western 

Products 

Laboratory support 2 3 4 

Capital cost 1 2 4 

Support services 4 3 2 

Feedstock handling guidance 3 2 4 

Length of experience 3 4 4 

System capacity 2 3 4 

Written documentation 2 3 3 

Design flexibility 2 4 5 

Order to completion 4 4 3 

Assistance with collection setup 3 3 4 

Plants up and running with 

good references 

3 4 2 

Ability to invest 4 1 1 

Other fees 2 4 4 

Totals: 35 40 44 

8.2 Pre-Process 

Oil receiving is designed for both 55-gal drum handling and occasional bulk truck deliveries. 

Because of the solidification of oil in cold weather, special heating systems are required. 

Using the low-cost hot water system, this heating requirement is not a large expense for the 

biorefinery. Bulk deliveries come in 7,000-gal trucks, which will be off-loaded to a heated 

receiving trough. Bulk oil should be de-watered and pre-cleaned so it may be transferred to 

bulk storage after simple straining. Drum receiving will use a loading dock built for this 

purpose. It is expected that drum deliveries will range from pickup-sized trucks to larger 

flatbed trucks. An adjustable-height loading ramp will accommodate these vehicles. Drums 

will be handled with an electric overhead hoist on a track to pick each drum individually and 

transfer the drum to an automated drum handling and cleaning system inside the adjacent hot 

room. The hot room will accommodate up to 150 drums and will be maintained at 

approximately 100° F through radiation and insulation. Drums will acclimatize overnight to 

melt the more saturated oils, such as palm oil, that would otherwise be solid at room 

temperature. 

B-30 
The receiving station will be operated full time by the receiving assistant. The automated 

drum handling and cleaning system will take each opened drum and place it on an inverter 

over an open, heated vat. Oil will be drained first through a coarse screen. The residuals will 

be removed for disposal. The oil will then be further heated to thin its consistency while 

allowing the water to coalesce and fall to the container bottom. This water layer will be 

periodically released to a grease trap before ultimately going to the public sewer. The cloudy 

oil above the water level will be circulated through a filter press before being sent to bulk 

storage. The upper level of oil can be used with a recirculating pump to provide a warm oil 

stream to clean any remaining materials in the inverted drums. Drums are then drained and 

placed in storage for reuse. 

Each drum is expected to take about 5 minutes to empty and clean. Ninety drums per day are 

processed for the daily resource requirement (no bulk purchases, no inventory). This will take 

about 7.5 hours of the available time of the receiving assistant. 

Bulk storage of the cleaned vegetable oil is in five 12,000-gal mild steel tanks in a warmed 

storage room or in existing outside steel tanks that have been heated with a hot water coil and 

insulated. These tanks will have a floating draw-off system to always dispense the best 

available oil that is as clean and dry as is available. These tanks will undergo continuous 

sedimentation, and any accumulated water and crumb will be removed off the bottom. 

In summary, feedstock pretreatment consists of RVO receiving, preheating, screening, dewatering, filtering, and bulk storage for further sedimentation. Side streams include 

wastewater disposal and crumb and particle disposal. Drum containers will be processed for 

reuse. Record keeping will be required for payments to grease farmers and for bulk deliveries. 

8.3 Process 

Our process will use the industry-standard acid-base, two-stage method. Production goals will 

be met with eight batches per week. Two batches will be produced per 8-hour day. All fluid 

handling will be by semi-automated batching systems. An onsite laboratory will be used for 

pre-and post-process quality control testing. Verification and calibration of process quality 

will be by testing and certification of selected batches by a laboratory qualified to do the 

series of ASTM tests. 

Final processing of the product will consist of water wash, flash vaporization for drying, and 

final filtering. Byproduct handling consists of methanol recovery through distillation and then 

use of this material for process heat production in a specially designed boiler. 

8.4 Quality Control and Quality Assurance Program 

A quality assurance/quality control program is at the center of the proposed biodiesel 

production program. This document is an initial draft that is being prepared to answer 

particular questions about testing plans. This document will be expanded and adjusted 

frequently as this program is further developed. 

B-31 
8.4.1 Product Certification 

A nationally recognized laboratory capable of conducting all the tests should conduct 

certification of biodiesel fuel. We have established a relationship with Magellan Analytical 

(1090-A Sunshine Road, Kansas City, Kansas 66115; 913-621-3603). 

Table 12. Detailed ASTM Requirements for Biodiesel (B-100) D-67515

Property Test Method6 Limits Units Cost

Flash point (closed cup) D 93 130.0 min °C $43 

Water and sediment D 2709 0.050 max % volume $67 

Kinematic viscosity, 40°7

 D 445 1.9–6.0 C mm2/s $69 

Sulfated ash D 874 0.020 max % mass $83 

Sulfur8

 D 5453 0.05 max % mass $60 

Copper strip corrosion D 130 No. 3 max $48 

Cetane number D 613 47 min $156 

Cloud point D 2500 Report9

 °C $40 

Carbon residue10 D 4530 0.050 max % mass $53 

Acid number D 664 0.80 max mg KOH/g $43 

Free glycerin D 6584 0.020 % mass $89 

Total glycerin D 6584 0.240 % mass Incld. 

Phosphorus content D 4951 0.001 max % mass $45 

Distillation temp, atmospheric 

equivalent temp., 90 % D 1160 360 max °C $267 

recovered 

 Total Cost: $1,063 

To this should be added the cost of containers, shipping, and handling, or approximately 

$85 additional, for a total of $1,150. A complete set of tests will be run to establish 

process effectiveness. 

This test series is required to certify the fuel. There is no expiration on this test, but it may be 

questioned if it is more than 1 year out of date. It is recommended that it be repeated at least 

annually. 

Some of the ASTM tests are not effective for quality control purposes. These are the tests that 

are most important for process control: 

 

5 To meet special operating conditions, modifications of individual limiting requirements may be agreed upon 

among purchaser, seller, and manufacturer. 

6 The test methods indicated are the approved referee methods. Other acceptable methods are indicated in 5.1. 

7 See X1.3.1. The 6.0 mm2/s upper viscosity limit is higher than petrodiesel and should be taken into 

consideration when blending. 

8 Other sulfur limits can apply in selected areas of the United States and in other countries. 

9 The cloud point of biodiesel is generally higher than petrodiesel and should be taken into consideration when 

blending. 

10 Carbon residue shall be run on the 100% sample (see 5.1.10). 

B-32 
Table 13. Process Control Tests 

Property Test Method Limits Units Cost

Water and sediment D 2709 0.050 max % volume $67 

Kinematic viscosity, 40° D 445 1.9–6.0 C mm2/s $69 

Sulfur D 5453 0.05 max % mass $60 

Cloud point D 2500 Report °C $40 

Free glycerin D 6584 0.020 % mass $89 

Total glycerin D 6584 0.240 % mass Incld. 

Acid number D 664 0.80 max mg KOH/g $43 

 

 Total Cost: $368 

To this should be added the cost of containers, shipping, and handling, or approximately $85 

additional, for a total of $450. Repeated testing service will reduce these costs at least 10%, or 

to a budget of about $400 per set. 

These tests provide valuable information about operational effectiveness. It is recommended 

that they be repeated every 10 days or for 5% of the batches. 

8.4.2 In-House Testing 

Testing needs to be conducted in-house on each batch of biodiesel prepared. This testing will 

analyze: 

• Free fatty acids 

• Suspended solids 

• Water 

• Color 

• Kinematic viscosity, 40° 

• Cloud point 

• Soap 

• Specific gravity. 

A correlation between these test results and the laboratory results allows us to calibrate the inhouse testing results and ASTM requirements. For example, with the most critical 

parameter—the completion of the transesterification reaction—De Filippis et al’s 

“Transesterification Processes for Vegetable Oils: A Simple Control Method for Methyl Ester 

Content” demonstrates the ability to judge overall reaction quality using these simplified tests. 

The requirement is to establish quality standards for the simplified instruments based on 

laboratory tests. Through repeated laboratory testing, we will do this until we are assured we 

have adequate in-house controls in place. 

Our budget for quality testing is $0.03/gal, or about $51,000/yr. This budget allows for all the 

testing as outlined above. 

B-33 
9 Regulatory and Policy Assessment 

 

9.1 Taxes for Biodiesel 

Any biodiesel sold or bartered that does not contain a red dye is subject to federal use taxes. 

Dyed heating fuel and off-road fuel are not subject to any taxes at the wholesale level at this 

time, although sales taxes will apply for retail sale. Biodiesel is subject to the same taxes as 

standard diesel fuel, both on the state and federal level, minus special tax credits, if any. Other 

uses, such as biodiesel as a degreasing compound, are subject to sales taxes. 

Massachusetts state road taxes are paid on each gallon sold wholesale or retail at the current 

rate of $0.21/gal. This is paid monthly with the Massachusetts Department of Revenue form 

SFT-3, after obtaining an annual special fuel producers license. The license, surprisingly, is 

still available for a fee of $1/yr. 

In Vermont, B-100 is exempt from state road taxes, but any dilution of biodiesel, such as B20, is not tax exempt. This is of moderate help, but the market for B-100 is limited in 

Vermont, and the tax exemption leaves a significant premium cost for that product. 

Federal road taxes are paid at the rate of $0.244/gal and are paid by the ultimate vendor of the 

fuel at the location where it is placed in the fuel tank. Therefore, wholesale distribution does 

not require a tax event for federal taxes but is required for retail sales. It is possible to sell 

bulk fuel to the ultimate user without collecting federal road tax if the buyer signs an Internal 

Revenue Service form to take responsibility for the applicable taxes. The first 400 gal of fuel 

per calendar quarter are exempt from reporting requirements. All payments need to be made 

electronically under new Internal Revenue Service rules. 

9.2 Potential Tax Credits 

In October 2004, President Bush signed into law the Foreign Sales Corporation and 

Extraterritorial Income Exclusion bill, also known as the “Jobs bill,” which will go into effect 

at the beginning of 2005. We have not yet incorporated this into our financials. This is the 

breakdown, as best as we can interpret: 

• Although it is often referred to as an “excise tax” credit, this doesn’t tell the whole 

story. The excise tax in question is a $0.244 federal tax imposed on every on-road gal 

of biodiesel. The “excise” portion of the law really only affects blends. It is a $0.01/% 

biodiesel tax credit for “oil seed” biodiesel and $0.005/% biodiesel for RVO biodiesel. 

This portion of the bill brings down pump prices on blends. Thus, a B-50 gets a 

$0.50/gal rebate if it is made from oil seed B-100 or a $0.25/gal rebate if it is made 

from RVO B-100. The rebate applies to the distributor’s entire tax bill and is not 

limited by the federal tax per gallon. 

B-34 
• The income tax credit portion of the bill affects sellers and business users of biodiesel. 

It does reward B-100 use, to the tune of $0.50/gal of recycled biodiesel and $1/gal of 

soy biodiesel. This reward is attained as a tax credit and will not result in a refund if 

the credit is bigger than the taxes owed. For example, a customer who uses 1,000 

gal/yr of recycled B-100 will get $500 taken off of that year’s taxes, assuming there is 

at least $500 taxes owed. Although the seller is allowed to take this credit instead of 

the customer, the net effect would be less. Accordingly, the income tax credit portion 

of the bill cannot literally be seen as bringing down the price at the pump, although it 

is definitely a wonderful incentive for customers to take advantage of. Additionally, 

this portion of the bill directly benefits traditionally less-taxed or non-taxed users (e.g., 

agriculture). 

Vermont and Maine recently provided tax credits for fuel generated in-state, and a concerted 

effort could be initiated to enact similar legislation in Massachusetts. This is being explored 

by the Massachusetts Department of Energy Resources. It is recommended that an effort to 

develop such legislation be discussed with one or more state senators. A coordinated effort 

should be enacted to identify coalitions and stakeholders that can be organized for greater 

effect. Alliance Energy reports it has initiated an effort to develop legislation for the reduction 

of Massachusetts’ road taxes on biodiesel fuel. This project should assist in that effort. 

9.3 Department of Energy: EPAct 

EPAct was passed in 1992 to accelerate the use of alternative fuels in the transportation 

sector. The U.S. Department of Energy’s primary goals are to decrease the nation’s 

dependence on foreign oil and increase energy security through the use of domestically 

produced alternative fuels. 

Compliance is required by state government and alternative fuel provider fleets that operate, 

lease, or control 50 or more light-duty vehicles within the United States. Of the fleet vehicles, 

20 or more must be operated primarily within a metropolitan statistical area with a population 

of at least 250,000 people. The vehicles must also be centrally fueled or capable of being 

centrally fueled. 

Fleets meeting all three of these requirements must make a certain percentage of their new 

vehicle purchases alternative fuel vehicles. EPAct recognizes the following alternative fuels: 

methanol, ethanol and other alcohols; blends of 85% or more of alcohol with gasoline; natural 

gas and liquid fuels domestically produced from natural gas; biodiesel; liquefied petroleum 

gas (propane); coal-derived liquid fuels; hydrogen; and electricity. 

B-35 
Regarding the use of biodiesel to meet EPAct requirements, the Energy Conservation 

Reauthorization Act of 1998 allows federal, state, and alternative fuel provider fleets who 

must comply with EPAct and Executive Order 13149 to meet up to 50% of their light-duty 

alternative-fueled vehicle purchase requirements with biodiesel. The biodiesel fuel use credit 

gives fleets and covered persons that are otherwise required under EPAct to purchase 

alternative fuel vehicles the option of purchasing and using 450 gal of biodiesel in vehicles in 

excess of 8,500 lbs. gross vehicle weight instead of purchasing an alternative fuel vehicle. 

Fleets must purchase and use the equivalent of 450 gal of pure biodiesel in a minimum of a 

20% blend to earn one alternative fuel vehicle credit. 

In our area, Hampshire, Hampden, and part of Franklin counties are within designated 

“metropolitan statistical areas.” However, we have only one state entity that falls under EPAct 

requirements: the University of Massachusetts. The other large federal installation in our area 

that might be concerned is Westover Air Force Base in Chicopee; however, law enforcement, 

emergency, and military and military tactical vehicles are exempt from this requirement. 

9.4 U.S. Environmental Protection Agency 

Biodiesel sold for over-the-road use (i.e., in cars and trucks) must meet the federal 

Environmental Protection Agency (EPA) requirement. This is essentially limited to a 

registration process, which, in turn, requires compliance with 40 CFR 79, Registration of 

Fuels and Fuel Additives. This requires health effects testing compliance, which can be an 

expensive and burdensome process that costs more than $1 million by Environmental 

Protection Agency estimate. There is an exemption for “small producers” with annual fuel 

sales less than $10 million, whereby the Tier 2 tests are not required, which potentially 

reduces the test costs to approximately $100,000. To date, only the National Biodiesel Board 

has completed all of these tests. The Environmental Protection Agency requirements may also 

be met by demonstrating the rights to use the National Biodiesel Board testing have been 

purchased from the National Biodiesel Board. This is accomplished most effectively by 

joining the National Biodiesel Board. See the Section on the National Biodiesel Board under 

Legal Implications. The Environmental Protection Agency does not test fuel or fuel 

production facilities. 

Undertaking in-house Tier 1 tests using both private and public funds may also further the 

development of a biorefinery franchise system and yield a large return on the investment. 

Further information is available upon request. 

B-36 
9.5 U.S. Department of Agriculture 

Environmental Protection Agency-registered biodiesel producers are eligible to register with 

the U.S. Department of Agriculture for Commodity Credit Program payments. This is a onetime credit for increases in biodiesel production from the previous quarter. The payment 

amount may vary; in 2004, first -quarter payments amounted to $1.558/gal of new production. 

Small additional payments are being made on base production for biodiesel, but these 

amounts are set to decline rapidly to just $0.15/gal in 2005 ($300,000 for our project) and to 

disappear after that. Future payments are not guaranteed beyond 2006, and in 2006, only 

payments for capacity expansion are allowed. These credits will provide substantial cost 

recovery for the capital expenditure, after the system is operational and the program 

requirements are met. Payments are made on a quarterly basis and would be used to offset 

debt. 

New U.S. Department of Agriculture Bio-Based Procurement Rules, issued in draft as of Feb. 

17, 2004, require federal government agencies to purchase fuel additives using biodiesel 

whenever available, upon recommendation of the secretary of the department. Final 

guidelines have not been formulated for this policy but are likely to further promote the use of 

biodiesel for federal agencies. 

9.6 Massachusetts Department of Environmental Protection 

The Department of Environmental Protection is the regulator of air emissions, water 

discharge, and site environmental protection. 

• Air emissions: Initial calculations show a positive return on the use of a biodieselfired co-generator for both electric and hot water production. The proposed size of 

approximately 30 kW is below regulatory concern. No open chemical storage keeps 

volatile organic compounds from being an issue. 

• Water discharge: Discharge of process wastewater to the sewer does not appear to 

require permits or pre-treatment, according to a conversation with Sandy Shields at the 

Greenfield Wastewater Treatment Plant. 

• Site protection: The bulk storage of biodiesel will be in bermed storage areas or in 

double-walled tanks to avoid the possibility of release into the environment. All 

chemical storage will be in compliance with applicable regulations. 

9.7 Fire Codes 

Fire codes are implemented by the local fire marshal, using the National Fire Protection 

Association and state codes as guidelines. Biodiesel is classified as a Class IIIc combustible 

liquid. The National Fire Protection Association fire code does not include Class IIIc fuels but 

is limited to the more restrictive IIIb codes for more flammable liquids. However, the Class 

IIIb codes are used as a ceiling to the most restrictive conditions likely to be imposed. These 

are the standards for complying with fire codes, and they are not expected to be burdensome 

or costly for this construction and operation project. 

B-37 
9.8 Local Zoning 

The proposed biorefinery would be classified as a light industry in most municipalities. An 

ideal property for development would be one that previously was used for petroleum 

distribution. It is economically important to have permits for retail sales of biodiesel. The 

zoning is usually denominated as general industrial or special industrial and appears to be 

consistent with the intentions of the proposed biorefinery. 

Local zoning officials may need careful education about biodiesel. Based on ignorance, some 

may think it is not a good neighbor. Unlike rendering companies, a biorefinery has no odor 

emissions or water or air pollution, does not have any chemical emissions, and is safer than 

the storage of petroleum in terms of fire hazards. The chemicals stored on site, lye and 

alcohol, do not exceed Community Right to Know Law threshold quantities. 

9.9 Legal Implications: Liability Considerations 

Biodiesel fuel that meets the ASTM D-6751 standard works in any unmodified diesel engine. 

Engine manufacturers do not provide warranty coverage for biodiesel or any other fuel, but its 

use in engines decreases wear on engine components such as injector pumps and piston rings 

and does not void warranties. Most engine manufacturers are variously recommending a 

maximum percentage of B-05, B-10, or B-20. Some states, such as Minnesota, mandate an 

increasing percentage of biodiesel fuel in every gallon of diesel fuel statewide; this is also the 

situation throughout Europe. Current mandates are usually B-02, and they will be rising up to 

B-20 by the year 2020. 

B-38 
Attachment 1: Business Development Timeline 

Timeline Anything shaded is an assumption. 

Weeks Required Started On Completed By 

Obtain location 4 1-Nov-04 29-Nov-04

Obtain permits 26 29-Nov-04 30-May-05

Secure financing 13 1-Nov-04 31-Jan-05

Equipment ordered and delivered 13 31-Jan-05 2-May-05

Installation 6 2-May-05 13-Jun-05

Testing 2 13-Jun-05 27-Jun-05

Production start 1 27-Jun-05 4-Jul-05

At “full” production capacity 13 4-Jul-05 3-Oct-05

B-39 
Attachment 2: Financials 

B-40 
B-41 
B-42 
B-43 
B-44 
B-45 
B-46 
B-47 
B-48 
B-49 
B-50 
B-51 
Attachment 3: Population of New England, New York, New 

Jersey, Pennsylvania 

State Population 

Connecticut 3,483,372 

Massachusetts 6,433,422 

New York 10,190,115 

New Hampshire 1,287,687 

Vermont 619,107 

Maine 1,305,728 

Rhode Island 1,076,164 

Pennsylvania 12,365,455 

New Jersey 8,638,396 

Total 54,399,446 

RVO produced per person: 1.1 gal/yr 

RVO produced in the Northeast: 59,839,391 gal/yr 

B-52 
Attachment 4: Recycled Vegetable Oil Resources 

(Restaurants and Cafeterias Within a 60-Mile Radius of 

Greenfield, Massachusetts) 

Food (5,936 listings) 

• American restaurants (58) 

• Bar and grill restaurants (68) 

• Bars and pubs (126) 

• Chinese restaurants (244) 

• Family restaurants (86) 

• Fast food restaurants (323) 

• Fast foods and carry-out (41) 

• Fine dining restaurants (39) 

• Italian restaurants (89) 

• Japanese restaurants (23) 

• Mexican restaurants (29) 

• Pizza restaurants (946) 

• Pubs (10) 

• Restaurants (3767) 

• Seafood restaurants (49) 

• Sports bars (16) 

• Steak and barbecue restaurants (21) 

• Steak and seafood restaurants (1) 

Schools with cafeterias (2,302 listings) 

• Child care centers (102) 

• Colleges and universities (1023) 

• Elementary and secondary 

education (238) 

• Elementary schools (349) 

• High schools (3) 

• Preschools and kindergartens (265) 

• Private schools (11) 

• Schools (124) 

• Business colleges (5) 

• Business education (69) 

• College preparatory schools (1) 

• Culinary schools (5) 

• Engineering schools (2) 

• Graduate and professional schools 

(3) 

• Industrial and trade schools (2) 

• Law schools (2) 

• Medical laboratory schools (2) 

• Medical schools (1) 

• Montessori schools (2) 

• Schools for the deaf (29) 

• Vocational education (31) 

B-53 
Attachment 5: Plant Job Descriptions 

The Biodiesel Production Facility 

President and CEO Job Description 

 

Job Title: President and CEO 

Reports To: Board of Directors 

FLSA Status: Exempt 

Prepared By: Lynn Benander 

Prepared Date: August 16, 2004 

Approved By: Board of Directors 

Approved Date: October 29, 2004 

 

SUMMARY 

Directs and coordinates activities of biodiesel production facility to obtain optimum efficiency and 

profitability by performing the following duties personally or through subordinate employees. 

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be 

assigned. 

Plans, develops, and implements organization policies and goals within policies established by the 

Board of Directors. 

Coordinates activities such as operating, manufacturing, engineering, planning, sales, maintenance, or 

research and development to effect operational efficiency and economy. 

Secures recycled vegetable oil. 

Directs and coordinates promotion of products manufactured or services performed to develop new 

markets, increase share of market, and obtain competitive position in industry. Sells annual plant 

output. 

Oversees and directs treasury, budgeting, audit, tax, accounting, purchasing, real estate, long-range 

forecasting, and insurance activities for the organization. Ensures adequate accounting controls are in 

place. 

Appraises the organization’s financial position and issues periodic reports on organization’s financial 

stability, liquidity, and growth. 

Analyzes operational issues affecting the company and determines their financial impact. 

Confers with administrative personnel and reviews activity, operating, and sales reports to determine 

changes in programs or operations required. 

Confers with technical personnel and reviews activity, operating, and quality control reports to 

determine changes in programs or operations required. 

Directs preparation of directives outlining policy, program, or operations changes to be implemented. 

B-54 
Promotes organization in the community and in industry, with regulatory bodies, and in manufacturing 

or trade associations. 

SUPERVISORY RESPONSIBILITIES 

At launch, the General Manager will supervise the VP of Finance and Operations and the 

Administrative Assistant. 

QUALIFICATIONS 

To perform this job successfully, an individual must be able to perform each essential duty 

satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability 

required. Reasonable accommodations may be made to enable individuals with disabilities to perform 

the essential functions. 

EDUCATION and/or EXPERIENCE 

REQUIRED: Business degree and 3 years management experience or 10 years management 

experience with full profit and loss responsibility for more than $2 million in annual sales 

PREFERRED: MBA; start-up or turn-around experience; experience in wholesale and retail marketing 

and sales; experience in manufacturing management; experience with biodiesel production technology 

or chemical processing; engineering degree; participatory management experience. 

B-55 
The Biodiesel Production Facility 

Vice President of Finance and Operations Job Description 

 

Job Title: Vice President of Finance and Operations 

Reports To: President and CEO 

FLSA Status: Exempt 

Prepared By: Lynn Benander 

Prepared Date: February 21, 2005 

SUMMARY 

Directs and coordinates technical activities of biodiesel production facility to obtain optimum 

efficiency and economy of operations, produce high quality fuel, and maximize profits; and directs the 

organization’s financial planning and accounting practices as well as its relationship with lending 

institutions and shareholders by performing the following duties personally or through subordinate 

managers. 

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be 

assigned. 

Coordinates activities such as operating, manufacturing, engineering, planning, maintenance, and 

research and development, to effect operational efficiency and economy. 

Directs activities of engineering personnel engaged in preparing plans, designs, cost estimates, and 

specifications for production facility to determine most feasible approach to biodiesel production. 

Oversees fabricating, installing, and modifying equipment to ensure that critical standards are met. 

Oversees biodiesel production processes and makes modifications or changes. Ensures biodiesel 

processing equipment is well-maintained. Oversees workers engaged in constructing, operating, 

controlling, and improving equipment to carry out biodiesel production. Oversees equipment to 

control movement, storage, and packaging of products and by-products. 

Analyzes operating procedures and equipment and machinery functions to increase product quality 

and reduce processing time and cost. 

Oversees quality control program and practices. Designs and plans measurement and control systems 

for production process based on data collected in laboratory experiments, pilot plant operations, and 

process evaluations. Applies principles of chemical engineering to produce high-quality biodiesel. 

Ensures safety protocols are implemented and that workers are trained in safety practices. 

Ensures plant meets all regulatory requirements. 

Determines most effective arrangement of operations, exercising judgment to compromise among 

process requirements, economic evaluation, operator effectiveness, and physical and health hazards. 

Confers with the President and reviews activity, operating, and product quality reports to determine 

changes in operations required. Analyzes, consolidates, and directs all cost accounting procedures 

together with other statistical and routine reports. 

Oversees and directs treasury, budgeting, audit, tax, accounting, purchasing, real estate, long-range 

forecasting, and insurance activities for the organization. 

B-56 
Oversees procedures and computer application systems necessary to maintain proper records and 

afford adequate accounting controls and services. 

Appraises the organization’s financial position and issues periodic reports on organization’s financial 

stability, liquidity, and growth. 

Coordinates tax reporting programs and investor relations activities. 

Oversees and directs the preparation and issuance of the corporation’s annual report. 

Directs and analyzes studies of general economic, business, and financial conditions and their impact 

on the organization’s policies and operations. 

Evaluates and recommends business partnering opportunities. 

Establishes and maintains contacts with stockholders and financial institutions. 

SUPERVISORY RESPONSIBILITIES

At launch, the VP of Finance and Operations will supervise the Quality Control Manager, Production 

Assistant, and Receiving Assistant. 

QUALIFICATIONS 

To perform this job successfully, an individual must be able to perform each essential duty 

satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability 

required. Reasonable accommodations may be made to enable individuals with disabilities to perform 

the essential functions. 

EDUCATION and/or EXPERIENCE 

REQUIRED: MBA or finance degree; Engineering degree and 3 years chemical manufacturing 

management experience or 6 years chemical manufacturing management experience; supervisory 

experience 

PREFERRED: Start-up manufacturing plant management experience; experience with biodiesel 

production technology; business or engineering degree; participatory management experience. 

B-57 
The Biodiesel Production Facility 

Production and Quality Technician Job Description 

Job Title: Production and Quality Technician 

Reports To: VP of Finance and Operations 

FLSA Status: Exempt 

Prepared By: Lynn Benander 

Prepared Date: February 21, 2005 

SUMMARY 

Produces quality biodiesel, tests and inspects biodiesel at various stages of production, and compiles 

and evaluates statistical data to determine and maintain quality of biodiesel by performing the 

following duties. 

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be 

assigned. 

Supports activities of engineering personnel engaged in preparing plans, designs, cost estimates, and 

specifications for production facility to determine most feasible approach to biodiesel production. 

Prepares charts, sketches, diagrams, and flow charts and compiles and records engineering data to 

clarify design details or functional criteria of chemical processing and physical operation units. 

Participates in fabricating, installing, and modifying equipment to ensure that critical standards are 

met. 

Tests equipment and formulates standard operating procedures. 

Operates biodiesel production processes and makes modifications or changes. 

Performs preventive and corrective maintenance of biodiesel processing equipment. 

Designs, plans layout, and oversees workers engaged in constructing, operating, controlling, and 

improving equipment to carry out biodiesel production. 

Analyzes operating procedures and equipment and machinery functions to increase product quality 

and reduce processing time and cost. 

Designs equipment to control movement, storage, and packaging of feedstocks, biodiesel, and byproducts. 

Interprets engineering drawings, schematic diagrams, or formulas and confers with management to 

determine quality and reliability standards. 

Selects products for tests at specified stages in production process and tests products for chemical 

characteristics. 

Records test data, applying statistical quality control procedures. 

Evaluates data and writes reports to validate or indicate deviations from existing standards. 

B-58 
Recommends modifications of existing quality or production standards to achieve optimum quality 

within limits of equipment capability. 

Prepares graphs or charts of data or enters data into computer for analysis. 

Designs and plans measurement and control systems for production process based on data collected in 

laboratory experiments, plant operations, and process evaluations. 

Applies principles of chemical engineering to produce high-quality biodiesel. 

Designs and implements safety protocols; trains workers in safety practices. 

Ensures plant meets all regulatory requirements. 

Determines most effective arrangement of unit operations exercising judgment to compromise among 

process requirements, economic evaluation, operator effectiveness, and physical and health hazards. 

Confers with management personnel and reviews activity, operating, and product quality reports to 

determine changes in operations required. 

SUPERVISORY RESPONSIBILITIES 

None 

QUALIFICATIONS 

To perform this job successfully, an individual must be able to perform each essential duty 

satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability 

required. Reasonable accommodations may be made to enable individuals with disabilities to perform 

the essential functions. 

EDUCATION and/or EXPERIENCE 

REQUIRED: 3 years chemical manufacturing experience or 3 years manufacturing quality control 

experience 

PREFERRED: Chemical engineering degree; experience with biodiesel production technology 

B-59 
Attachment 6: Regulatory Requirements 

U.S. Department of Transportation 

• Oil Spill Prevention Plan 40 CFR 130 

o Communication Requirement 40 CFR 130.11 

o Containers 40 CFR 130.21 

o Written Response Plan 40 CFR 130.31 

U.S. Department of Environmental Protection 

• Oil Spill Prevention and Countermeasures Plan 40 CFR 112 

• Risk Management Plan 

o Clean Air Act Section 112(r): Prevention of Accidental Releases 

Massachusetts Department of Environmental Protection 

• Ambient Air Quality 310 CMR 6.00 

o Particulate matter standards 

o NOx standards 

• Air Pollution Control 310 CMR 7.00 

o Vegetable oil and glycerin burner 

o RVO storage tanks 

o Methanol storage tank 

o Dispensing Motor Vehicle Fuel 310 CMR 7.24(6) 

• Wetland Protection 310 CMR 10.00 

o Wetlands delineation 

o Wetlands mapping 

• Hazardous Waste Regulations 310 CMR 30.00 

o Hazardous waste management plan 

• Massachusetts Contingency Plan 310 CMR 40.00 

B-60 
Massachusetts Board of Fire Prevention 527 CMR 14.00 

• Flammable Liquids, etc. 

o Class IIIC liquid with flash point >300° F 

o Laboratory documentation 

o Storage tank requirements 

• Tank Storage Chapter 148 Section 37 

o Fire marshal permit for storage 

Town of Greenfield 

• Solid waste disposal permit 

• Greenfield Fire Marshal 

o National Fire Protection Association Code 30 Flammable and Combustible 

Liquids 

• See Summary in Feasibility Study 

o Alarms systems permit 

o Chimney installation 

Greenfield Wastewater Treatment Plant 

• Sewer service 

o BOD5 testing 

• Grease trap plan 

Internal Revenue Service 

• F.I.D. 

• Excise tax form 720 

o Quarterly filing and payment 

B-61 
Massachusetts Department of Revenue 

• Special Fuels Producer License 

o Annual renewal 

• Supplier’s Tax Return – Special Fuels 

o Monthly filing and payment 

Occupational Safety and Health Administration 

• Confined Space 29 CFR 1910.146 

o Labeling and signage 

o Permits for confined space entry 

o Written procedures 

• Rescue plan 

• Access plan 

• Training 

o Safety equipment 

• Four gas meter 

• Rescue harness 

• Rescue winch 

• Ventilation system 

• Personal protection 

• Hazard Communication 29 CFR 1910.1200 

o Right-to-know requirements 

• Material safety data sheet for each chemical 

• Container labeling 

• Employee training 

o Chemical handling procedures 

o Personal protective equipment 

o First aid systems 

o Emergency response plans 

o Pipe labeling 

• Respiratory Protection 29 CFR 1910.134 

o Medical certification 

o Fit testing 

o Respiratory maintenance 

o Cartridge selection 

B-62 
• Electrical Safety 29 CFR 1910 Subpart S 

o Lock Out/Tag Out 29 CFR 1910.147 

• Equipment 

• Training 

• Written program 

o National Electrical Code 

• Emergency disconnects 

• Ground fault protection 

• Egress/Fire Protection 29 CFR 1910 Subpart E & L 

o Emergency Egress 

• Aisles and signage 

o Emergency Action Plan 29 CFR 1910.38A 

• Training 

o Fire Protection 29 CFR 1910.38B 

• Fire extinguishers 

• Training 

• Response team 

• Alarm systems 

• Personal Protective Equipment 29 CFR 1900.132 

o Steel-toed shoes or boots 

o Gloves: nitrile or latex 

o Hard hats: required for bump hazard 

o Eye protection: splash goggles 

o Protective clothing: aprons 

• Walking and Working Surfaces 29 CFR 1910 Subpart D 

o Non-slip surfaces 

o Safety rails for tanks 

o Orderly and clean surfaces 

o Floor openings 

o Portable ladders 

o Fixed ladders 

• Fall protection system 

• Exposure to Hazardous Chemicals 29 CFR 1910.1000 

o Community Right to Know Law 

o Hazardous Waste Regulations 

B-63 
• Industrial Trucks 29 CFR 1910.178 

o Training 

o Curbs 

• Occupational Noise Exposure 29 CFR 1910.95 

o 85 db maximum 

o Noise (db) meter 

• Other Requirements 

o Ergonomics 

o Record keeping 

o Posters, notices 

B-64 
Appendix C: Study of Cogeneration Feasibility for Northeast 

Biodiesel LLC 

C-i 
List of Acronyms 

BACT best available control technology 

CHP combined heat and power 

DEP Department of Environmental Protection 

DOER Division of Energy Resources 

GIS generation information system 

IEEE Institute of Electrical and Electronics Engineers 

IV iodine value 

NOLS National Outdoor Leadership School 

PAH polycyclic aromatic hydrocarbon 

REC renewable energy certificate 

RME rape methyl ester 

RPS renewable portfolio standard 

SVO straight vegetable oil 

WVO waste vegetable oil 

C-ii 
Executive Summary 

The concept of in-plant cogeneration (producing electricity plus heat) at the proposed 

Northeast Biodiesel production facility is appealing because cogeneration saves energy and 

money and, in this case, would use a renewable fuel: waste vegetable oil (WVO) feedstock, 

which is also the raw material for biodiesel production. In this case, under the auspices of the 

Massachusetts Renewable Portfolio Standard (RPS), there is also an opportunity to provide 

renewable electrical power to the grid. 

The study examines the burning of straight vegetable oil (SVO) as well as biodiesel in a 

modified diesel engine generator system. The use of SVO, although still somewhat 

experimental, has been widely tried in both research and industrial settings. The use of 

biodiesel is widely established. However, very few examples of using either fuel in a 

stationary engine application exist. 

The diesel engine was originally designed by Rudolph Diesel to operate on vegetable oil fuel; 

however, the discovery and subsequent wide availability of petroleum fuel soon thereafter 

resulted in an almost complete shift away from vegetable-derived fuels. Engine and fuel 

system development since that time has focused almost exclusively on petrodiesel. Although 

there was some interest in returning to SVO fuel during World War II, both SVO and 

biodiesel re-emerged as diesel engine fuels only within the past 10 years because of interest in 

global warming and other eco-political concerns. The internet has played an important role in 

publicizing research, sharing technical know-how and experiences, and generally accelerating 

the use of biodiesel and SVO. 

The key issues involved in the examination of cogeneration feasibility are technical-, 

financial-, regulatory-, and feedstock source-related. This study considers how this business 

function fits into the primary business enterprise of Northeast Biodiesel. 

It is assumed that provisions for cogeneration will be installed during plant construction; 

however, actual the installation of cogeneration equipment and its operation is not expected to 

occur until the plant is fully operational at its target capacity of 10 million gallons per year 

(2007 or 2008). 

Technical Analysis 

This study does not review the technical aspects of burning biodiesel fuel in diesel engines. 

Such research is extensive and widely available. However, SVO fuel has not undergone the 

extensive testing that biodiesel fuel has, it has not been as thoroughly researched, and its 

actual use in engines is much less widespread. Therefore, this study reviews existing research 

on the use of SVO fuel in diesel engines. 

This experience indicates that SVO fuel lends itself to stationary engine application. As a new 

system, the engine can be optimized—particularly regarding the fuel injection system—in 

ways that will enhance its performance based on the experience of others burning SVO during 

the past 15 years. 

C-iii 
Financial Analysis 

Financially, the economics of all independent “power plants” below multi-megawatt utility 

size generally have two hurdles: 

1. The system must be sized at the average power usage of the plant because selling the 

power is often not worthwhile. (The utility price is too low.) 

2. The system’s waste thermal energy must have value (i.e., be used in the plant). The 

value of the thermal energy is key to making an in-plant power project economically 

attractive. 

The Massachusetts RPS, created by the state legislature in 1997 and in effect since 2003, has 

modified this paradigm. The RPS allows renewable power generators to sell power to the grid 

at a price that makes smaller systems more feasible than in the past. 

Right now, electricity made from renewable sources is in demand in Massachusetts; 

Renewable energy certificate (REC) values are at an all-time high, with 5-year contracts 

available from wholesalers. In addition, in support of the nascent renewable energy industry 

in Massachusetts, the Massachusetts Renewable Energy Trust’s Green Power Program will 

cover the remaining investment life of renewable power projects by taking on the 5–15 year 

long-term price risk. In light of issues such as rising petroleum prices and concerns about 

dependence on foreign oil, this is a particularly advantageous time to consider producing 

renewable power for sale to the grid. 

Emissions 

Emissions profiles of biodiesel engines are well established through extensive Environmental 

Protection Agency testing. However, determining the emissions from SVO- and WVO-fired 

engines is a work in progress. The undisputed advantages of SVO fuel lie in its sulfur-free 

emissions and reduced greenhouse gases (versus petrodiesel). However, studies completed 

domestically and internationally over the past 15 years indicate a wide variation in other 

emissions, both regulated and unregulated, that depends on fuel type, fuel pretreatment, 

engine type, operating cycle, and ambient temperature. 

Permitting 

Permitting to operate in Massachusetts includes two main elements: compliance with 

Department of Environmental Protection (DEP) emissions regulations and compliance with 

the RPS to sell RECs. Conversations with the Division of Energy Resources (DOER) indicate 

that an advisory ruling must be obtained from DOER that designates WVO as an accepted 

renewable fuel under the RPS. (Indications are that this should be fairly straightforward.) New 

DEP regulations likely to be in effect by the time this system is installed would require that 

the system comply with specific emissions limits for nitrogen oxide, particulate matter, 

carbon monoxide, and carbon dioxide. Depending on the DEP’s determination, BACT (best 

available control technology) may be prescribed in addition to a program of monitoring and 

testing. 

C-iv 
Feedstock Issues 

Survey and other data from the Northeast Biodiesel Feasibility Study and Business Plan 

indicate a potential capacity of 1–2 million gallons per year of WVO in the Western 

Massachusetts region (within about a 1-hour drive from the plant). However, Northeast 

Biodiesel is also considering buying feedstock from further afield. No collection system has 

yet been developed, so hard data are not available. The actual capacity available for collection 

remains to be seen and will be one of the key tasks of the new business. Purchasing WVO from 

area renderers is a last-choice option because of cost. Commodity WVO price has been volatile 

over the past several years because of a number of issues, and such volatility is likely to 

continue and be exacerbated by its new value as biodiesel feedstock in an emerging industry. 

Results 

The included financial projections show that the installation of a biodiesel- or WVO-fired 

power plant is an attractive option. However, if the waste engine heat is not used, regardless 

of the fuel, such a system is not feasible. The most critical factor is fuel availability of 

vegetable oil feedstock. 

The financial and strategic value of the WVO is a key issue. The WVO has not only an 

absolute cost (its cost of collection) but also a lost opportunity cost because the material is 

also the feedstock for the plant’s primary function, biodiesel production. The nature of REC 

contracts dictates long-term power availability at specified levels. This may not allow the 

plant the flexibility it may need in allocating WVO to production versus power generation as 

management simultaneously works to build markets and develop a collection system. 

C-v 
C-vi 
Table of Contents 

List of Figures .....................................................................................................................................viii

List of Tables.......................................................................................................................................viii

1 Introduction ...................................................................................................................................1

2 Technical Analysis........................................................................................................................3

2.1 Straight Vegetable Oil Versus Biodiesel.................................................................. 3 

2.2 Why Straight Vegetable Oil? ................................................................................... 3 

2.3 Burning Vegetable Oil in a Diesel Engine: Performance ........................................ 8 

2.4 Burning Vegetable Oil in a Diesel Engine: Emissions............................................ 9 

2.5 Fuel Pretreatment ................................................................................................... 13 

2.6 Engine Design and Duty Cycle Optimization for Straight Vegetable Oil Fuel.... 14 

2.7 Technical Analysis Conclusion.............................................................................. 17

3 Financial Analysis.......................................................................................................................18

4 Regulatory Analysis....................................................................................................................25

4.1 Eligibility for Renewable Energy Certificates....................................................... 25 

4.2 Emissions Permitting ............................................................................................. 27

5 Business Analysis.......................................................................................................................29

5.1 Effects on Base Business Resources...................................................................... 29 

5.2 Effects on Core Business – Strategic Risks........................................................... 29 

5.3 Replicability: Biodiesel- and Straight Vegetable Oil-Fueled Distributed 

Generation Systems................................................................................................ 31

Appendix. Pro Forma Financial Spreadsheets .................................................................................33

C-vii 
List of Figures 

Figure 1. WVO internal rate of return...................................................................................... 23 

Figure 2. Biodiesel internal rate of return ................................................................................ 24 

List of Tables 

Table 1. Biodiesel Plant Utility Consumption ......................................................................... 19 

Table 2. Contribution to Thermal Load by Cogeneration System........................................... 24 

Table 3. Cogeneration System Fuel Requirements.................................................................. 30

Table A-1. Capital Costs for Cogeneration System................................................................. 34 

Table A-2. Biodiesel Facility Biodiesel Cogeneration ............................................................ 35 

Table A-3. Biodiesel Facility Biodiesel Cogeneration Income Statement .............................. 37 

Table A-4. Biodiesel Facility Straight Vegetable Oil Cogeneration........................................ 39 

Table A-5. Biodiesel Facility Straight Vegetable Oil Cogeneration Income Statement.......... 41 

C-viii 
1 Introduction 

In recent years, many environmentally conscious motorists who feel strongly about avoiding 

petroleum fuels have obtained diesel vehicles and purchased biodiesel or biodiesel blends 

(usually going out of their way to do so). The most venturesome have converted their diesel 

vehicles to accommodate straight vegetable oil (SVO) by purchasing kits available over the 

Internet from domestic and international companies. These “green weenies” have created a 

mini-industry for conversion kit producers such as Neoteric Biofuels of California and 

Greasecar.com (in Florence, Massachusetts). SVO users obtain their own fuel (usually 

waste oil from restaurants) themselves, and the savings are a major incentive. 

The use of SVO as diesel engine fuel is well established historically. Rudolph Diesel’s 

innovative engine burned peanut oil when it was shown at the Paris Exhibition in 1900. In 

response to concerns about pollution, global warming, and dependency on foreign 

petroleum, the use of SVO in diesel engines has grown significantly world-wide within the 

past 15 years. SVO’s lack of sulfur means its emissions do not contribute to acid rain; 

similarly, because it is an agricultural product, burning it does not contribute to the 

greenhouse effect. Many studies indicate that particulate matter (or soot) is significantly 

reduced with SVO versus petrodiesel. However, data on engine wear and other important 

emissions is conflicting and incomplete. 

Interest in both researching and using SVO, as it is with biodiesel, is stronger in Europe. 

European SVO is often virgin oil rather than waste oil because, for example, tax treatment 

in Germany makes its price similar to that of petrodiesel. Germany reportedly has more than 

5,000 vehicles operating on SVO; the government even has a quality standard for canola oil 

fuel characteristics. (Canola oil is the dominant fuel used in Europe.) A fuel oil refining 

industry is in place that, together with government regulation, ensures high fuel quality. 

Although European SVO consumption is a fraction of European biodiesel consumption, it is 

clearly an emerging fuel that is acknowledged and regulated by at least some countries and, 

as such, is much further along than in the United States. 

The benefits of cogeneration are well established even in the United States, where fuel and 

power costs are lower than those overseas. Small cogeneration systems are widely available, 

and significant experience has accumulated over the past 20 years regarding operation and 

interconnection with the power grid. The main attraction of cogeneration (more commonly 

called CHP or combined heat and power) is the financial savings in power and heat. In 

addition, plants with in-plant power generation are insulated to some extent from grid 

outages—a feature seen as more and more valuable as power interruptions increase and 

distribution lines age. For end users, the main disadvantages of cogeneration are distraction 

from the core business and, sometimes, technical problems and lost savings because of 

improperly designed or operated systems. The latter has been less of an issue in recent years 

as the general depth of experience with cogeneration has increased. 

In general, cogeneration should be considered for any entity that requires significant process 

heating and particularly for organizations that are interested in being as energy-efficient as 

possible. 

C-1 
This study examines the financial, technical, regulatory, and business feasibility of 

incorporating a cogeneration business function into the proposed Northeast Biodiesel LLC 

production facility. The system being considered is a diesel engine generator set modified to 

burn SVO and produce power to be sold to the growing renewable energy and prime power 

market in New England. This study was carried out by The WinterGreen Group of West 

Whately, Massachusetts, and funded by Co-opPlus of Western Massachusetts via a 

subcontract administered by the National Renewable Energy Laboratory. 

C-2 
2 Technical Analysis 

2.1 Straight Vegetable Oil Versus Biodiesel 

Because petroleum diesel is a less viscous fuel than vegetable oil, using vegetable oil in a 

diesel engine requires either heating it or chemically altering it into biodiesel to make it thin 

enough to use in the diesel injection system. 

Biodiesel is derived from vegetable oil but is chemically different. In chemical terms, 

vegetable oil is a triglyceride. A triglyceride molecule is composed of three fatty acid 

molecules linked to a glycerol molecule. Converting vegetable oil to biodiesel is usually 

done by a process of transesterification. Transesterification breaks off the glycerin (soap) 

and attaches each fatty acid to an alcohol molecule. Processes vary in detail, but a common 

method follows. 

The first step involves breaking (or cracking) the ester-glycerin bonds. A catalyst—either 

sodium hydroxide or potassium hydroxide, both of which are also known as lye—is used for 

this step. Second, alcohol—either methanol or ethanol—is added to chemically bond with 

the fatty acid molecules and, essentially, make the oil thinner. The products of the reaction 

are alkyl esters (biodiesel) and glycerin. The main point of the transesterification process is 

to produce alkyl esters that will flow through, and combust properly in, modern diesel 

engines without damaging internal engine deposits. 

2.2 Why Straight Vegetable Oil? 

SVO fuel has many enthusiasts around the world, including individuals as well as 

organizations, university-based groups, and governmental bodies. These enthusiasts 

generally think biodiesel is fine, but they want to take a further step toward what they view 

as a sustainable, less processed, and—in the case of WVO—cheaper fuel. 

The German manufacturer Elsbett, which pioneered diesel engine design modifications to 

optimize the burning of SVO, describes the advantages of SVO as: 

• It has a high calorific value and high energy density. 

• It is liquid in form and thus easy to handle. 

• When burned, it emits less soot than petrodiesel. 

• When burned, it has high energy efficiency. 

• It is neither harmful nor toxic to humans, animals, soil, or water. 

• It is neither flammable nor explosive and does not release toxic gases. 

• It is easy to store, transport, and handle. 

• It does not cause damage if accidentally spilled. 

• Its handling does not require special care. 

• It is produced directly by nature; it does not have to be transformed. 

• It does not have adverse ecological effects when used. 

• It does not contain sulfur; it does not cause acid rain when used. 

• When burned, it is neutral in carbon dioxide; it makes no contribution to the 

greenhouse effect. 

C-3 
Although somewhat repetitive (and translated from German), the sentiment is clear. 

The following excerpt from Robert Beggs’ Web site, Neoteric Biofuels, provides a 

layperson’s introduction to using SVO as a diesel engine fuel. 

(Rudolf) Diesel’s first engines ran on peanut oil. Soon after, fossil oil 

(mineral oil) became widely available and inexpensive, and became the 

dominant fuel in the world. Engine and fuel system development for the 

diesel therefore became centered around “diesel fuel”—a less viscous fuel 

than vegetable oil. This is why we now have to use either the “heating” 

approach or the “biodiesel” approach to make vegetable oil thin enough to 

use in existing diesel injection systems.... We are adapting the fuel, rather 

than the engine or the existing fuel system. The (existing) fuel system 

remains intact, and the engine can use diesel fuel at any time. 

Despite the fact that vegetable oil was used in early diesels, its reappearance 

on the fuels scene is relatively recent, so from that standpoint, it is a 

relatively unknown and underutilized fuel. This is changing quickly—there 

are now literally thousands of engines using SVO and also many on WVO 

(waste vegetable oil). User experiences have been generally positive, but 

because SVO does not have the extensive testing of diesel fuel or even of 

biodiesel, any SVO system should be considered to be “experimental.” 

Following is an excerpt from a typical enthusiast’s Web site. In it, the National Outdoor 

Leadership School (NOLS, www.nols.edu/bus/bus_veggie.shtml) explains how it “took the 

plunge” and why. 

The NOLS bus is powered by a diesel engine, specially converted to run on 

vegetable oil gathered and filtered from restaurants and dining halls during 

the NOLS on the Road year-long tour. Vegetable oil offers similar gas 

mileage as petroleum diesel but with fewer polluting emissions. Veggie oil 

also leaves behind a more pleasant alternative to the black cloud of diesel 

engine smoke—instead of that gagging diesel smell, the bus leaves in its 

wake the unmistakable smell of Chinese food, popcorn or French fries! 

Converting a diesel engine to run on used veggie oil is easier than you’d 

think. It took NOLS about a week to do the conversion, which cost about 

$1,200. All the parts were ordered online, and anyone with a basic working 

knowledge of car engines can do the conversion. And when it comes time to 

fill up at the pump, the savings of using veggie oil really add up. Why? 

Because veggie oil is free! In fact, most restaurants and dining halls are 

happy to get rid of their unwanted, leftover oil in order to avoid having to 

pay to have it removed .... 

C-4 
Benefits of Vegetable Oil Fuel

When used in place of petroleum diesel, biodiesel and straight vegetable oil 

offer a wide range of environmental, health, economic and fuel security 

benefits. Vegetable oil burned as fuel does not emit sulfur dioxide (SO2), a 

main compound in diesel responsible for acid rain. In addition to this 100% 

reduction in SO2, vegetable oil fuel produces 78% less carbon dioxide 

(CO2), the dominant greenhouse gas responsible for global warming, 48% 

less carbon monoxide, a poisonous gas, 48% less asthma-causing particulate 

matter, and 80% less cancer-causing polycyclic aromatic hydrocarbons 

(PAHs) than petroleum diesel .... 

The reasons cited for using SVO fuel are compelling and typical of the SVO community. 

However, no references were found on the NOLS Web site for the emissions figures cited 

above. The SVO community also includes scientists and others who often express a need 

for more detail and who raise questions about pouring WVO “directly into a converted 

diesel engine.” 

To begin with, there is wide variation among vegetable oils. A study from Australia 

discusses chemical nature and attributes of various vegetable oils. 

A large amount of research has gone into examining Diesel’s dream of using 

raw vegetable oils as fuels .... In the late 1970s and early 1980s, research 

was undertaken at Murdoch University (Perth, Australia) into the use of 

eucalyptus and other plant oils as a fuel component. In New Zealand, there 

are considerable problems with the disposal of surplus tallow from the 

processed meat industry and a large amount of work was conducted in the 

early 1980s on the use of tallow as a fuel. 

Experience has shown that the use of unsaturated triglyceride oils as a fuel 

may cause significant problems that can affect the viability of their fuel use. 

But this is not always the case, and in many circumstances these problems 

can either be dealt with or are acceptable to the user. 

While power output and tailpipe emissions using plant or animal oils are in 

most cases comparable with those when running on petroleum diesel fuel, 

the main problem encountered has due to the higher viscosity of the 

triglyceride oils and their chemical instability. These can cause difficult 

starting in cold conditions, the gumming up of injectors and the coking-up 

of valves and exhaust. 

C-5 
The viscosity of plant and animal fats and oils varies from hard crystalline 

solids to light oils at room temperature. In most cases, these “oils” or “fats” 

are actually a complex mixture of various fatty acids triglycerides, often 

with the various components having widely varying melting points. This 

may give the oil or fat a temperature range over which solidification occurs, 

with the oil gradually thickening from a thin liquid, through to a thick liquid, 

then a semi-solid and finally to a solid. 

High melting points or solidification ranges can cause problems in fuel 

systems such as partial or complete blockage as the triglyceride thickens and 

finally solidifies when the ambient temperature falls. 

... Many vegetable oils and some animal oils are “drying” or “semi-drying,” 

and it is this [that] makes many oils such as linseed, tung, and some fish oils 

suitable as the base of paints and other coatings. But it is also this property 

that further restricts their use as fuels .... In the high temperatures commonly 

found in internal combustion engines, the process is accelerated, and the 

engine can quickly become gummed-up with the polymerized oil. With 

some oils, engine failure can occur in as little as 20 hours. 

The traditional measure of the degree of bonds available for this process is 

given by the “Iodine Value” (IV) .... The IV can be easily reduced by 

hydrogenation of the oil (reacting the oil with hydrogen), the hydrogen 

breaking the double bond and converting the fat or oil into a more saturated 

oil [that] reduces the tendency of the oil to polymerize. However, this 

process also increases the melting point of the oil and turns the oil into 

margarine. 

... Only coconut oil has an IV low enough to be used without any potential 

problems in an unmodified diesel engine. However, with a melting point of 

25° C, the use of coconut oil in cooler areas would obviously lead to 

problems. With IVs of 25–50, the effects on engine life are also generally 

unaffected if a slightly more active maintenance schedule is maintained such 

as more frequent lubricating oil changes and exhaust system decoking. 

Triglycerides in the range of IV 50–100 may result in decreased engine life 

and in particular to decreased fuel pump and injector life. However, these 

must be balanced against greatly decreased fuel costs (if using cheap, 

surplus oil), and it may be found that even with increased maintenance costs 

that this is economically viable. 

C-6 
... The differences amongst fats and oils, whether of animal or vegetable 

origin, relate mainly to the level of saturation in the carbon chain. Generally 

speaking, the lower the number of double bonds, the higher the melting 

point of the triglyceride and the greater the stability of the triglyceride to 

polymerization and spontaneous oxidation. From an engine use point of 

view, it is preferable to use saturated fats as fuels as they are more stable 

and less resistant to oxidation, particularly under the elevated temperatures 

and pressures as found in an engine environment. However, due to their 

higher melting points, difficulty may be encountered in starting the engine 

without pre-heating of the fat.1

Clearly, all vegetable oils are not equal. The above study refers to virgin oil, not to WVO, 

which is often a mix of vegetable oils with waste materials from the cooking process. The 

following discussion, aimed at the backyard SVO enthusiast, summarizes well the practical 

issues involved in the use of SVO as a diesel engine fuel: 

Does the SVO option work? Yes—If you go about it the right way. It’s not 

quite that simple a choice. For one thing, if you want to use waste vegetable 

oil, which is often free, you’re going to have to process it anyway, though 

less so than to make biodiesel. And it still might not be a very good fuel. 

But read on—you can run your diesel motor safely on straight vegetable oil; 

just put it in and go. There are pitfalls and provisos, but we’ll help you to 

steer your way through them. 

Diesel motors last a long time: Half a million miles or more is not unusual, 

and there are very few thorough, long-term studies of the effects of using 

straight vegetable oil in diesel motors. What is clear, however, is that using 

“any” diesel engine or “any” SVO is an exaggeration. 

• Some vegetable oils are more suitable than others. 

• Some diesel engines are more suitable than others. 

• Some injection pumps work better than others. 

• Some computerized fuel systems don’t like vegetable oil at all. 

• There are doubts about using vegetable oil in DI (Direct Injection) 

diesels. 

• There are also doubts about using waste vegetable oil 

 

1

 Calais, P.; Clark, A.R. “Waste Vegetable Oil as a Diesel Replacement Fuel.” Environmental Science, 

Murdoch University, Perth, Australia, pcalais@ieee.org. Western Australian Renewable Fuels Association 

Inc., ar.clark@bigpond.com. 

C-7 
The main problem is that vegetable oil is much more viscous (thicker) than 

conventional diesel fuel. It must be heated (thinned) so that it can be 

properly atomized by the fuel injectors. If it’s not properly atomized, it 

won’t burn properly, forming deposits on the injectors and in the cylinder 

head, leading to poor performance, higher emissions, and reduced engine 

life. 

This can also happen with unsuitable oils, for instance those with a high 

iodine value, such as linseed oil, which can form tough epoxy deposits. 

 

Waxes can clog up the fuel system, especially in cold weather. Untreated 

waste oils can contain acids that cause corrosion in the injector pump and 

impurities that can cause coking and further corrosion. 

Nonetheless, experience is showing that SVO systems are a practical 

proposition with a lot of advantages to offer, not least of all that using SVO 

can be cheaper than turning it into biodiesel and uses less energy than 

making biodiesel does. 

It’s vital to pay close attention to the quality and condition of the oil—much 

more critical with an SVO system than if you’re going to convert the oil into 

biodiesel. 

 

Then get a good conversion system matched to the right kind of engine with 

the right kind of injection pump, as well as to your climate, and you’ll be 

just fine, like thousands of others.2

Note the provisos with regard to type of oil, injection systems, and use of waste vegetable 

oil (WVO). Addison’s promotion of SVO is tempered by experience, and his site offers one 

of the best places to start for anyone considering SVO fuel use. 

2.3 Burning Vegetable Oil in a Diesel Engine: Performance 

A number of tests on SVO as a diesel fuel have been conducted over the past 20 years. 

However, SVO is not nearly as well tested as biodiesel, partly because of a lack of interest 

from large funders and partly because of the large number of variables (e.g., fuel, engine, 

and additive types) involved. As a result (as Robert Beggs of Neoteric Biofuel noted above), 

any SVO system should be considered experimental. 

Charles Peterson of the University of Idaho has done extensive work with SVO fuels in 

engines. The following excerpts are from two of his studies: 

 

2

 From Keith Addison's JourneytoForever.org Web site, on which is compiled substantial scientific research, 

testimonials, and anecdotal experience about SVO, biodiesel, and petroleum diesel fuel. 

C-8 
Most research with raw vegetable oils [has] shown reduced engine life due 

to polymerization in the ring belt area and, in some cases, lubricating oil 

thickening, reduced bearing life, or even sudden catastrophic failure ....3

When tested in long-term tests, (petrodiesel-biodiesel) blends above 20 

percent nearly always result in engine damage or maintenance problems 

.... Many researchers have been involved in testing programs designed to 

evaluate long-term performance characteristics. Results of these studies 

indicated that potential hazards such as stuck piston rings, carbon buildup 

on injectors, fuel system failure, and lubricating oil contamination (Pratt, 

1980) existed when vegetable oils were used as alternative fuels .... Engine 

tests showed that carbon deposits in the engine were reduced if the oil was 

heated prior to combustion. It was also noted that carbon deposit levels 

differed for oils with similar viscosities, indicating that oil composition 

was also an important factor. 4

The latter study concluded: 

Short-term engine testing indicates that vegetable oils can readily be used as a 

fuel source when the vegetable oils are used alone or are blended with diesel 

fuel. Long-term engine research shows that engine durability is questionable 

when fuel blends contain more than 20% vegetable oil by volume. More work is 

needed to determine if fuel blends containing less than 20% vegetable oil can be 

used successfully as diesel fuel extenders.6

2.4 Burning Vegetable Oil in a Diesel Engine: Emissions 

Achieving complete combustion with SVO is clearly still a challenge. Some studies 

performed over the past few years show increased hydrocarbon and carbon monoxide 

emissions (versus diesel fuel), many showed increased particulate matter (soot), and others 

showed decreased soot. Some studies showed increased nitrogen oxides; others showed a 

decrease or no difference. Unregulated emissions such as PAHs were sometimes measured, 

and these showed dramatic increases or no difference, depending on the engine tested.5

The Australian study mentioned above, “Waste Vegetable Oil as a Diesel Replacement 

Fuel” by Phillip Calais and A.R. (Tony) Clark, notes that: 

 

3 Use of Raw Vegetable Oils as Diesel Fuel Replacements. University of Idaho. 

http://www.uidaho.edu/bae/biodiesel/rawoils.html. 4

 Jones, S.; Peterson, C.L. Using Unmodified Vegetable Oils as a Diesel Fuel Extender: A Literature Review.

University of Idaho, September 2002. 

5 Biofuels Evaluation – Final Report of Test Programme to Evaluate Emissions Performance of Vegetable Oil 

Fuel on Two Light Duty Diesel Vehicles. United Kingdom Department for Transport, November 2003. 

C-9 
Nitrogen oxides (NOx) emissions would most likely be similar or slightly 

elevated by ~10% as compared to fossil diesel. In addition to atmospheric 

nitrogen, most vegetable and animal oils contain small quantities of nitrogencontaining proteins, which upon combustion, release various nitrogen oxides. 

Unburnt hydrocarbon emissions may or may not be increased. Previous research 

has shown that this is very dependent of the vehicle’s state of tune, age, and the 

specific properties of the oil.6

A literature review conducted by five scientists in 1996 and published by the Society of 

Automotive Engineers summarized published emissions measurements and compared 

results. The review begins with a discussion of engine testing procedures in the United 

States and the European Union, and the resulting variation in test results is based on 

different testing parameters. It indicates that, although SVO fuel produces greater 

hydrocarbons and carbon monoxide, it appears to produce the same level of nitrogen oxides 

and about half the soot. Results varied depending on whether the engine had a direct or 

indirect fuel injection system. Non-regulated emissions also appeared worse; however, the 

authors note that “PAH values reported in the literature are questionable.” The review noted 

that “the type of oil, how it is pretreated, type of engine, and operating duty cycle all have 

significant impacts on emissions.” 

This study also discusses the toxicological issues related to diesel engine emissions: 

The hydrocarbon emissions produced by motor traffic are either 

toxicologically of little relevance (alkanes, alkenes, as well as methane, 

ethane, or ethene) or can be carcinogenic (benzene, polycyclic aromatic 

hydrocarbons) .... The carbon monoxide emissions arising from engine 

combustion, aside from suffocation in closed rooms or garages, are 

insignificant in light of the other environmental problems caused by motor 

traffic .... 

Oxides of nitrogen contribute to the formation of acid rain. When combined 

with volatile hydrocarbons or aldehydes in the presence of sunlight, the 

concentration of ozone at low altitudes increases .... NO exhaust emissions 

are at a low enough concentration that they are not perceived as a health 

risk. In contrast, NO2 is a lung irritant that attacks the membranes of human 

lung alveoli, even in small doses 

... Polycyclic aromatic hydrocarbons (PAH) have become a known hazard 

for humans and the environment that must be taken seriously because of 

[their] carcinogenic and mutagenic properties. 

 

6 Waste Vegetable Oil As A Diesel Replacement Fuel, Phillip Calais, Environmental Science, Murdoch 

University, Perth, Australia, pcalais@ieee.org and AR (Tony) Clark, Western Australian Renewable Fuels 

Association Inc, ar.clark@bigpond.com 

C-10 
... Even more complex is the association between the induction of lung 

tumors and diesel engine emissions .... Not only the PAH compounds 

adsorbed to soot particles have a strong cancer-inducing potential, but the 

assumption can be made that the PAH-free soot also induces carcinomas. 

... Because PAH have a higher carcinogenic potential synergistically with 

soot particles than each component alone ... an estimation of the cancerinducing effect of exhaust gas is only possible when considering these 

compounds collectively.7

Such considerations may indicate why some pro-SVO sites mention soot, sulfur dioxides, 

and carbon dioxide reduction but do not discuss other emissions. The study concludes: 

The data were not uniformly distributed when unmodified rapeseed oil was 

used as fuel. PAH and particulate matter concentrations were less modified 

with the use of rapeseed oil. Mutagenicity tests similarly show strong 

fluctuations. 

At this time, research is still needed on the mutagenic and carcinogenic 

effects of particulate matter for both [biodiesel] and raw rapeseed oil. The 

continuing investigation on the influence of biofuels on soot particle size 

and concentration is also of importance. It should be reiterated that current 

knowledge indicates clear advantages for [biodiesel] regarding soot, 

particle, and PAH emission in conjunction with distribution of particles and 

mutagenic potential. Only non-uniform results were noted for raw rapeseed 

oil.8

A study completed in November 2003 for the British Department of Transport compared 

two diesel vehicles’ performance using SVO warmed to 80°C (170°F) with baseline United 

Kingdom ultra-low sulfur diesel fuel. One vehicle, a Peugeot 106, was equipped with 

indirect injection; the other, a Volkswagen Passat, had direct injection. Both vehicles 

showed significant increases in hydrocarbon and carbon monoxide emissions over ultra-low 

sulfur diesel.8

The following is from a study undertaken by a European consortium of research laboratories 

in July 2001. The study examined combustion mechanisms of oil spray and emissions 

characteristics for SVO, biodiesel (rape methyl ester or RME), and diesel fuel: 

 

7

 Krahl; Munack; Bahadir; Schumacher; Elser. “Review: Utilization of Rapeseed Oil, Rapeseed Oil Methyl 

Ester, or Diesel Fuel: Exhaust Gas Emissions and Estimation of Environmental Effects.” Krahl and Munack, 

Federal Research Center; Bahadir, Technical University; and Schumacher and Elser, University of Missouri, 

1996. 

8

 “Biofuels Evaluation – Final Report of Test Programme to Evaluate Emissions Performance of Vegetable Oil 

Fuel on Two Light Duty Diesel Vehicles.” United Kingdom Department for Transport, November 2003. 

C-11 
Operating characteristics and emissions A comparative evaluation of the 

operating characteristics as well as the determination of the regulated and 

non-regulated exhaust gas emissions was carried out, including an 

investigation of the conversion rates of an oxidizing catalyst. In addition, 

engine performance and emission behavior was characterized in terms of 

structural parameters relating to vegetable fuels. Finally, variations were 

made in the fuel injection system of the test engine used in order to reduce 

the specific disadvantages of vegetable fuels. Different vegetable fuels were 

used and compared to diesel fuel. 

... The emission results of unburned hydrocarbons, carbon monoxide, nitric 

oxides, and particulate matter confirm the advantages of RME in 

comparison to diesel fuel .... PAH emissions are distinctly better for all 

vegetable fuels, so there seems to be a much lower risk of cancer while 

using fatty acid methylesters as fuel. 

... All the data have been compared with those obtained with a classical 

diesel oil under the same burning. Results indicate that rapeseed oil seems 

an effective substitute for diesel oil since it produces less soot and similar 

amounts of other pollutants. The presence of alcohol in the rapeseed oil 

improves the fuel and allows reduction in the preheating temperature. 

... The chemical structure of the vegetable fuels has a great influence on 

engine performance and emission behavior. [Coconut and palm oil methyl 

esters] show best results concerning emissions of hydrocarbons, carbon 

monoxide, particulate matter, and PAH. RME gave the best results in terms 

of nitric oxides, power, and fuel consumption. The mixing of rape seed oil 

with non-vegetable substances leads to both negative and positive effects 

concerning different parameters. Variations of the fuel injection system of 

the diesel engine can lead to a clear reduction of the originally high NOx

emissions of vegetable fuels. 

... The overall combustion performance of the rapeseed oil is very 

satisfactory in comparison with the diesel fuel, while the rapeseed oil 

produces almost 40% less soot than diesel fuel. 

C-12 
... Fuel structure and characteristics have been shown to have great influence 

on engine performance and emission behavior. One of the most important 

parameters is the spectrum of fatty acids. Length of carbon chains and 

number of double bonds in the fuel molecules affect low temperature 

suitability, spray formation, and carbon residue. Net calorific value and 

density also affect the energy content of cylinder charge. Short-chained 

coconut and palm kernel oil methyl ester have distinct emission advantages 

in terms of hydrocarbons, carbon monoxide, particulate matter, and 

polycyclic aromatic hydrocarbons but disadvantages as far as nitric oxides 

are concerned.9

In conclusion, the undisputed advantages of SVO fuel are in its sulfur-free emissions and 

reduced greenhouse gases. However, studies completed to date indicate that SVO may cause 

the same or worse levels of other emissions versus diesel fuel. The wide variability in SVO 

fuels, diesel engines, and baseline fuels studied (i.e., diesel, ultra-low sulfur diesel, 

biodiesel, and variations on these with fuel additives such as alcohol) means that only a 

small portion of the potential test matrix has been explored to date. Comparison is difficult 

because so few variables have been tested, and commonality of test variables is rare. In 

addition, few studies have been done to evaluate long-term effects of SVO use on engine 

durability. Few studies have examined WVO fuel emissions and none have a wide range of 

fuels that would allow comparison. In addition, there are issues of engine life that have not 

been adequately addressed to date. 

2.5 Fuel Pretreatment 

Fuel quality is a more critical issue when putting WVO directly in an engine than when 

converting it to biodiesel. All WVO should be filtered and, if necessary, de-acidified. The 

fuel should not contain water or fryer contaminates such as salt or phosphorus. The engine 

should be equipped with multiple filters, at least to 10 microns but preferably to 5 or even 

lower. Some recommend filtering SVO fuel to 1 micron. (The final filter micron rating 

should be as specified by the manufacturer for the fuel injection system, as this affects 

injection pressure.) 

WVO has a tendency to have some free fatty acids. These have a tendency to cause soap to 

form instead of biodiesel when biodiesel is made from WVO. These free fatty acids may 

need to be removed. 

Oil from the brassica family (e.g., mustard and canola, high-lubricity oils) seems to be 

among the best (or, as Keith Addison notes, at least there are more results available on using 

them in SVO applications). 

 

9

 “Advanced Combustion Research for Energy From Vegetable Oils Project Final Report.” 1998. 

http://www.nf-2000.org/secure/Fair/F484.htm. 

C-13 
The following excerpt from a study undertaken in Thailand addresses issues related to 

pretreatment of SVO, including the tendency for some SVO enthusiasts to trumpet the 

“natural” characteristic of SVO in relation to biodiesel or diesel fuel: 

... Reliable facts on pollution and engine damage produced by crude 

vegetable oil ... experimentation are hard to come by due to the general 

enthusiasm of the proponent entrepreneurs who are naturally somewhat coy 

about discussing their failures. 

... That [SVO] is “untreated” is a myth—most oils have to be de-gummed, 

de-acidified, and usually winterized; [pretreatment] also involves chemical 

treatments, and there are centralized factories in Europe that do this for fuelgrade vegetable oil, much the same as for food-grade oils. Very few types of 

oil can go straight from the oilseed crusher to the fuel tank. 

... The engines worked just fine on refined palm oil. That is oil [that] has 

been de-gummed with phosphoric acid and had fatty acids removed by 

saponification with sodium hydroxide. Yes folks! Sadly, you do need some 

chemicals and simple process engineering to make most vegetable oils work 

.... The process of refining puts the finished product into a price category 

comparable with the retail price of petrodiesel (including some tax).10

2.6 Engine Design and Duty Cycle Optimization for Straight Vegetable 

Oil Fuel 

The evolution of the diesel engine from Diesel’s time to what it is today is based on 

petrodiesel fuel, whose properties are quite different from those of vegetable oil. A number 

of studies over the past 20 years have contributed much to our understanding of optimizing 

SVO combustion in modern diesel engines. One of the biggest advantages of designing a 

system from scratch (as opposed to using SVO in an existing vehicle) is that lessons learned 

can be more easily incorporated. 

Iowa State University’s biodiesel Web site references a number of studies of SVO and 

notes: 

 

10 Allen, M. “Straighter-Than-Straight Vegetable Oils as Diesel Fuels.” Message to the Biofuels-biz mailing 

list, Oct. 8, 2002. Michael Allen, visiting professor, Prince of Songkla University, Thailand. 

C-14 
... The best experience with using raw oils in engine seems to come from 

indirect-injection engines and using only 5%–10% blends of the oil in diesel 

fuel. Most of the problems associated with the use of raw oils in engines are 

caused by higher viscosity. It has been suggested that these problems can be 

addressed by heating the oil (usually with engine coolant) and starting and 

stopping the engine with regular diesel fuel. This approach has been used 

with some success, although long-term durability has not been proven.11 

The Advanced Combustion Research for Energy From Vegetable Oils study recommends 

the following: 

Engines operating on vegetable oil fuels, even with preheated vegetable oil, 

need to be operated at higher loads and rpm than is the usual case, with 

frequent full-load operation. Idling and low load operation should be 

avoided .... It is not clear whether the combination of preheating to ~70°C 

and blend with alcohol, diesel fuel, biodiesel, etc. would reduce or eliminate 

this problem, but since the emissions results are positive for this case, the 

further reduction of viscosity by combining preheating and blending might

also improve combustion at low loads and at idle. Be aware that methanol 

does not mix well with vegetable oil and can harm diesels. Ethanol is better, 

but blends of ethanol and vegetable oil, and other alcohol/vegetable oil 

blends, can separate in storage, including in the tank, and especially as 

temperatures reach freezing and below. Therefore, research into “cosolvent” 

blends ... is worthwhile, and some studies have been conducted by various 

researchers.12

Clearly, there is a need for more research into a number of scenarios if the resources and 

motivation can be found. 

In summary, the following system characteristics appear to improve the likelihood of 

success when burning SVO in a diesel engine: 

• Indirect fuel injection 

• Fuel preheated to 160°–180°F 

• Engine equipped with mechanical injection 

• In-line injection pump 

• Engine timing adjustment. 

Other, more involved engine modifications are possible but may not be cost-effective. 

 

11 From the Biodiesel Education page of Iowa State University's Web site. 

www.me.iastate.edu/biodiesel/Pages/A.html. 

12 “Advanced Combustion Research for Energy From Vegetable Oils Project Final Report.” 1998. 

http://www.nf-2000.org/secure/Fair/F484.htm. 

C-15 
In the 1970s, the innovative Elsbett Co. of Germany developed an engine specifically 

designed to run on vegetable oil. Although this engine was never able to find a market, 

Elsbett also offers conversion equipment for standard diesel engines as well as expertise. It 

should be noted that Elsbett will not warranty its engine conversion kit on vehicles that use 

WVO (although, apparently, it has many customers who have done it). 

It is recommended that the following (not meant to be a complete list) be consulted during 

the specification phase of any WVO engine genset and that appropriate modifications be 

incorporated into the final system design: 

• Elsbett Co. 

• Neoteric Biofuels 

• Greasecar 

• Charles Peterson of Iowa State University. 

Because the long-term effects of SVO fuel in diesel engines are not well known, as 

indicated in the research reviewed previously, more frequent and in-depth maintenance 

practices are recommended. These should include: 

• Regular injector inspection and cleaning, if indicated 

• Head removal and combustion chamber cleaning, if indicated 

• Regular lube oil sampling 

• Regular checking/changing of fuel filters. 

The starting and stopping fuel should be biodiesel or petrodiesel (high-quality), as the 

solvent properties of biodiesel and the additives in premium petrodiesel fuels can help 

remove any deposits that may form. In addition, the heat exchange and control system 

should be designed to ensure that no WVO is routed to the engine unless it is at the 

minimum desirable temperature. 

All studies appear unanimous in stating that constant operation at steady, full load is best to 

reduce maintenance issues, extend engine life, and reduce emissions. For example, Darren 

Hill’s Vegburner site states: 

C-16 
Engine carbon build-up can be a problem with diesel-fuelled engines [that] 

have not been run hard or hot enough. It is advisable to work diesel engines 

hard fairly regularly to burn this carbon from the engine, more so when 

running on vegetable oil. Extended periods at low engine load are best 

avoided when possible. Combustion is less complete from when the engine 

is first started until it reaches operating temperature as the piston rings do 

not seal as efficiently until the various engine components have expanded 

with the combustion heat. It is good practice to accelerate to rated load to 

bring the engine up to operating temperature as soon as possible. 

The SVO power plant is intended (and will be required by contract with electric power 

wholesalers) to run at rated power on a regular schedule throughout the year. Such steadystate operation should mitigate at least some of the maintenance issues noted above. 

2.7 Technical Analysis Conclusion 

Clearly, the use of SVO as diesel engine fuel is still somewhat experimental. However, 

enough experience exists to indicate that conditions can be optimized to reduce many of the 

factors that seem to cause problems. These include ensuring: 

• Engine optimization, particularly of the fuel injection system 

• Proper fuel pretreatment 

• Heating of the fuel 

• Starting and stopping with alternate fuels 

• Steady-state mode of operation at rated load. 

These elements lend themselves to optimization in a stationary, prime-power engine genset 

that is being purchased new. In addition, it is expected that the plant operating environment 

will promote better and more uniform fuel pretreatment. 

C-17 
3 Financial Analysis 

The attached financial pro forma examines the feasibility of the proposed WVO power 

plant. Key assumptions are: 

• Value of power sold

According to Larry Chretien of the nonprofit energy cooperative Mass Energy, 

which aggregates renewable power, the value of RECs is about $0.03/kWh for a 

small system. (Mass Energy would need to aggregate the system with others to meet 

the minimum size required by the wholesale power market.) Along with base power 

revenue of $0.038/kWh (based on wholesale power spot pricing), the total revenue 

for the first 5 years of the system could be $0.068/kWh. A fairly conservative 

assumption has been made as to the RECs value for ensuing years. Based on several 

industry representatives’ comments, the value of RECs in years six through 15 is 

assumed at $0.024/kWh, for a total of $0.063/kWh.13

Note that current REC contracts vary in length but generally are not as long as 

typical system life (for example, Mass Energy offered a 5-year contract). For this 

reason, the Massachusetts Renewable Energy Trust has implemented the Green 

Power program, which supports the long-term price risk for investors in renewable 

power systems.14 Under this program, the Massachusetts Renewable Energy Trust 

will enter into one of two types of contracts, both of which essentially commit to the 

purchase of RECs at a long-term price that allows renewable generators to seek 

financing on a better footing than present REC contracts allow. This program is open 

to any renewable fuel provider eligible for RECs under the RPS, but it is a 

competitive program. Nils Bolgen of the Massachusetts Renewable Energy Trust 

indicated that last year, the first year of the program, 11 proposals were received and 

six were awarded. System finances are based on a successful application to this 

program. 

 

13 Telephone conversation with Larry Chretien, Mass Energy, October 2004. 

14 Telephone conversation with Nils Bolgen, Green Power program director, Massachusetts Renewable Energy 

Trust, October 2004. 

C-18 
• Operating costs

Overall operating costs for an industrial-sized biodiesel plant have been forecast by 

the Energy Information Administration of the Department of Energy to be 

$0.16/gallon in 2005 and 2006.15 However, specific costs for electrical and thermal 

energy are necessary to determine the value of co-generated energy used in the plant. 

Such costs are often derived from very large plants; in addition, information is 

variable and conflicting. 

Table 1. Biodiesel Plant Utility Consumption 

Electrical Use/Gallon Thermal Energy/Gallon

Energy Information Administration16 0.083 kWh 38,300 Btu 

Crown Iron Works Co.17 0.059 kWh 3,074 Btu 

Study – Kansas State University18 0.082 kWh 5,990 Btu 

Note that the latter two sources do not include cooling water, process water, 

compressed air, or other ancillary utilities. In addition, the above figures are for large 

plants (12 million–40 million gallons per year), in which utility costs per gallon of 

product will be lower. Note the particular discrepancy between the Energy 

Information Administration thermal energy figure versus the others. Given these 

uncertainties, and to be conservative in forecasting the cost-effectiveness of the CHP 

system, the following figures were used: 

• Electrical use: 0.08 kWh/gallon 

• Thermal energy: 6,000 Btu/gallon. 

 

15 Energy Information Administration. “Annual Energy Outlook 2004.” Department of Energy/Energy 

Information Office 0383(2004). Washington, DC, January 2004. Table 3, “Industrial Gas and Electricity 

Prices.” 

16 Radich, A. “Biodiesel Performance, Costs, and Use.” Energy Information Administration. 17 Anderson; Masterson; et al. “Industrial Biodiesel Plant Design and Engineering: Practical Experience.” 

Crown Iron Works Co., Minneapolis, Minnesota, August 2003. 

18 Nelson; Howell; Weber. “Potential Feedstock Supply and Costs for Biodiesel Production” National 

Bioenergy Conference, 1994. 

C-19 
The proposed biodiesel refinery is expected to begin at 2 million gallons per year 

production capacity and ramp up to 10 million gallons per year by 2007 or 2008. It 

is assumed that provision for cogeneration will be installed during plant 

construction; however, actual installation of cogeneration equipment and its 

operation are not expected to occur until the plant is fully operational at its target 

capacity. 

• Value of co-generated energy used in-plant

The value of electricity used in-plant was derived from the Small General Service 

Schedule G–O of Western Massachusetts Electric Co. This is the rate the plant 

would fall under (less than 350 kW demand). The rate is broken into a number of 

sections. Assuming a reasonable peak demand for the plant, and not including the 

base charge, the conservative assumption for electrical savings for in-plant generated 

power is $0.08/kWh on average. (No separate credit for demand savings is 

assumed.) 

In the case in which thermal energy is valued, it is assumed that glycerin cannot be 

used and, therefore, WVO would be the boiler fuel. Therefore, the value of WVO is 

used in thermal savings calculations. 

• System cost

The price for the cogeneration system is based on quotations from suppliers of the 

engine-genset system and the interconnection switchgear. Most engine vendors will 

offer financing for their equipment, and that is also shown. System and maintenance 

costs were obtained from Caterpillar-Milton in Brockton, Massachusetts, and 

Highland Power Inc., an engine-genset supplier and maintenance contractor based in 

Bridgewater, Massachusetts. (Highland Power also owns and operates several 

independent power systems that operate on experimental fuels.) Controls and 

switchgear costs were obtained from Ewing Control Systems, a cogeneration 

controls specialist based in Greenfield, Massachusetts, that has provided equipment 

to successfully interconnect with more than 50 utilities. Note that all interconnection 

switchgear will be IEEE-1547 compliant. Startup is included, as is a generous 

allowance for engine modifications to an SVO engine (both versions include fuel 

pre-heating). Installation costs were added to the packaged equipment costs as 

shown in the financial spreadsheets 

C-20 
• Capital investment

A direct and modest investment of $20,000 is assumed; the balance of the capital 

cost is assumed to be financed by the engine supplier at 8% together with a bank or 

other typical source for the remainder of the cost not covered by the engine supplier. 

Bank finance rates are assumed at 10%. 

• Overhead and insurance

The incremental cost of insurance for the plant with a power generation system 

versus without has been assumed at $12,000 per year. In addition, $8,000 has been 

included to cover corporate overhead to cover maintenance of financials and 

contractual and generation information system (GIS) paperwork. 

• Maintenance

Maintenance per kilowatt-hour has been increased from the typical $0.01 for diesel 

engines to $0.012 to allow for more frequent maintenance and overhauls because of 

the experimental nature of SVO fuel. To be conservative, the same figure is retained 

for the biodiesel engine evaluation. Out-of-pocket costs of consumables such as 

filters and lube oil will average another $4,000–$7,000 per year, depending on 

system size. 

• Inflation

Inflation rates have been assumed at 2% for insurance and operation and 

maintenance costs. However, 1% has been assumed for the value of co-generated 

power and thermal energy. 

• Value of thermal energy

Biodiesel plants use substantial thermal energy for a number of functions, 

particularly for heating the vegetable oil feedstock to circulate it and for 

transesterification. Thermal energy can also be used for ancillary cooling functions 

via absorption technologies. As mentioned earlier, thermal value generally is the 

factor that makes a small-scale system such as this feasible. 

C-21 
Biodiesel plants also produce a significant waste product with heat energy: glycerin. 

This glycerin has market value only if it is purified at substantial expense. Some 

indications are that approximately 60% may not be purifiable (particularly if WVO 

is used as the feedstock, as is planned) and would need to be disposed of. Because 

glycerin production is 10% of plant biodiesel production, disposal costs and 

regulatory issues are not trivial. Some biodiesel producers have burned glycerin for 

thermal needs and indicate that, if properly handled, it can be burned in boilers 

within allowable emissions limits. Burning some of the glycerin for plant thermal 

needs is a reasonable alternative to consider and experiment with if the necessary 

resources can be devoted to this undertaking. 

If burning glycerin turns out to be undesirable, the boilers may be able to burn waste 

fatty acids or even low-quality WVO. Given the nature of the plant, there will likely 

be a usable waste fuel available at low cost to fuel the boilers. However, as long as 

the engine is operating, thermal energy will be available and, at times, may be the 

easiest approach. 

This evaluation assumes WVO as the boiler fuel being replaced by co-generated heat 

from the engine set. In the SVO engine application, the boiler fuel price varies to 

match each permutation calculated. In the biodiesel engine application, the current 

market price for WVO of $1.22/gal is used unless the biodiesel cost is lower. 

• Value of engine fuel

The value of biodiesel and SVO fuel is the key parameter in determining system 

feasibility. Various values are used based on current and projected figures available 

from the biodiesel industry and applicable literature as well as in-house generated 

figures. Note that per-gallon SVO costs include additional funds for pretreatment 

filtering and de-acidification. Also, given the slightly lower thermal value of SVO 

and biodiesel versus petrodiesel fuel and potential combustion inefficiencies, a 

generous factor of 1.2 has been used in the yearly fuel consumption calculation. 

• Results

The graphs below show the effect of biodiesel and WVO engine fuel price on the 

feasibility of cogeneration at the plant. Internal rates of return were calculated for 

four system sizes at various fuel prices. Project feasibility improves as generation 

system size increases for all fuel prices. Note that all system sizes appear attractive 

even at above-market-rate WVO pricing. 

C-22 
IRR for System kW vs. WVO Price/Gallon

0%

50%

100%

150%

200%

250%

300%

350%

100 150 300 500

System kW Size

IRR

$0.75

$1.00

$1.22

$1.50

The SVO-fired cogeneration system is clearly more attractive than the biodiesel 

system. However, operational risk is also higher (see discussion under Business 

Analysis). If such risk is acceptable, the SVO option could be an excellent addition 

to Northeast Biodiesel’s functions. 

Figure 1. WVO internal rate of return 

C-23 
IRR for System kW vs. Biodiesel Price/Gallon

0%

100%

200%

300%

100 150 300 500

System kW Size

IRR

$1.00

$1.30

$1.50

Figure 2. Biodiesel internal rate of return 

A biodiesel-fired engine set system appears less attractive but still quite positive if 

an incremental cost of production (instead of market rate) price is used. In-plant 

production costs projected by Northeast Biodiesel range from $2.65 at the start of 

plant operation to $1.27–$1.36 once the plant is stable and at target production 

levels. Clearly, plant size, and consequent production cost, is critical to cogeneration 

system feasibility. And as long as feedstock supplies are stable, cogeneration using 

biodiesel could be an excellent supplementary income to the plant. 

The following table describes the ratio of co-generated thermal energy to that 

required by a 10-million-gallon/year biodiesel plant. 

Table 2. Contribution to Thermal Load by Cogeneration System 

100 kW 150 kW 300 kW 500 kW 

9.6% 14.3% 28.7% 47.8% 

Note that even if co-generated heat is used in-plant (as it must be if the cogeneration 

system is to be cost-effective) a backup heating plant must be installed. However, 

this plant could be designed around the future installation of the engine-set, and 

costs could be minimized in that expectation. For example, a set of smaller boilers 

intended to operate in tandem could be purchased. One or more of them could then 

be turned off when the engine-set is operating. 

C-24 
4 Regulatory Analysis 

4.1 Eligibility for Renewable Energy Certificates 

The primary purpose of the power generation facility considered for Northeast Biodiesel is 

the income produced by selling power to the electricity market and, in particular, by selling 

the renewable attributes of this power via RECs. Eligibility for RECs is therefore critical to 

the success of this project. 

The Massachusetts legislation that enabled the move to competition in the electricity market 

also included an RPS and other policies that create demand for clean, renewable generation. 

In the case of the Massachusetts RPS, retail electricity providers in Massachusetts must 

include a modest but growing amount of new renewable supply in all product offerings to 

customers. To satisfy their RPS obligations, the large retail providers in Massachusetts will 

be purchasing power from qualifying renewable projects in New England. The vehicle for 

earning this premium is the assignment and sale of RECs. 

In New England, the market for renewable energy is facilitated by a regional GIS 

administered by APX Inc. under contract to the New England Power Pool. Any effective 

path to the market for renewable energy in New England requires effective participation in 

the GIS. 

The GIS is a sophisticated database that tracks all the power generated and sold in New 

England. This is accomplished by assigning each electricity generator as well as any imports 

into New England one GIS certificate for every megawatt-hour of electricity production. By 

agreement, all generators and retailers in New England maintain accounts in the GIS and 

use these certificates to describe the mix of generation (e.g., the fuel sources, air emissions, 

and vintage) in their possession. If a GIS certificate is assigned to a megawatt-hour of 

electricity generated from a renewable energy system, that certificate is known as an REC. 

GIS certificates are originally the property of the energy generators and are sold or traded to 

retail electricity providers that are actively controlling their mix of generators. When a 

renewable project owner sells its certificates to a retail electricity supplier or trader, the 

transaction is documented by the movement of certificates from the generator’s account to 

the retailer’s account in the GIS. Any certificates that are not specifically traded are 

automatically included by the GIS in the so-called residual mix and are allocated to all 

retailers based on their total customer load, losses, and active certificate purchases. 

C-25 
The GIS system officially went into service Jan. 1, 2002. Since then, power plant owners 

are required to register each of their generators in the GIS database. In addition to 

identifying the owner and location of each generator, registration includes defining the 

characteristics (e.g., fuel type and air emissions) of each unit. To take advantage of the new 

market opportunities for renewable resources, renewable power system owners must get 

their systems registered as generators in the GIS. The system registration can be done by the 

system owner, or it can be completed by a third-party green power marketer on behalf of the 

system owner. 

Retail electricity suppliers can acquire the certificates they need using purchase contracts 

that cover both the underlying power and certificates produced by the generator in a single 

combined transaction or through the purchase of certificates independent from the sale of 

power. 

The premium value of GIS certificates produced by renewable energy generators will be 

determined by market conditions, including the supply and demand of renewable certificates 

of various types, their resource type and vintage, and the terms and other conditions under 

which they are purchased. Green power marketers will generally take on this market risk 

and sign 1–5 year contracts with power system owners at fixed prices over the term of the 

contract for the RECs produced by their system.19

Biodiesel has been accepted as a renewable fuel under the RPS. However, if a WVO-fired 

engine set is to be considered, it is first necessary to determine whether WVO is an eligible 

renewable fuel under the RPS. The Massachusetts DOER is responsible for implementing 

the RPS. Howard Bernstein of the DOER indicated that, although “vegetable oil [was] 

definitely eligible” under the RPS, it would be necessary to obtain an “advisory ruling” 

from DOER to determine whether this generation unit would qualify as a “new renewable 

generation unit.” Advisory rulings have been sought for other biomass generation systems 

because biomass is cited as an eligible fuel only under 225 CMR 14.05 “Eligibility Criteria 

for New Generation Units,” which states under section (1) that “The generation unit shall 

use one or more of the fuels, energy resources, and/or technologies listed below.” Biomass 

falls under the sixth listing as: “Low-emission, advanced biomass power conversion 

technologies using an eligible biomass fuel.” This description leaves room for interpretation 

and this is why an advisory ruling is required for all biomass power conversion systems 

proposed in Massachusetts that intend to sell RECs. 

 

19 Renewable Generator Certificate Trading Handbook. Solar Energy Business Association of New England, 

December 2003. 

C-26 
The advisory ruling application should include a description of the proposed fuel and power 

generation system and include fuel attributes and justification of the ways it meets the 

requirements of and promotes the intent of the RPS. DOER indicated that, although 

obtaining an advisory ruling was a necessary step, a favorable ruling was likely. 

4.2 Emissions Permitting 

New DEP regulations [310 CMR 7.26 (40)–(44)] regarding engines that will affect 

permitting for this system will likely go into effect mid-2005. Current regulations exempt 

prime power systems such as this (“peaking power production units, load-shaving units, 

units in an energy assistance program”) if they are less than 3 million Btuh input (about 300 

kW) and if they are running prior to the date the new regulations take effect. However, Bob 

Donaldson of the DEP made clear that once the new regulations take effect, engines as 

small as 50 kW must comply with the new regulations. These require that such engines be 

certified that their emissions fall under specific limitations for nitrogen oxides, particulate 

matter, carbon monoxide, and carbon dioxide. This approach could be followed if biodiesel 

is used, as manufacturers now have published data on such emissions. As far as an SVOfired engine set is concerned, the DOER has asked the DEP to confer with it on a case-bycase basis to determine exactly what “low emissions” might mean for an “advanced biomass 

power conversion technology,” as described in state regulations. 

In this case, a “comprehensive plan application” that lists emissions estimates can be filed. 

This approach, which allows DEP to review new technologies on a case-by-case basis, may 

be the most likely path for an SVO-fired engine genset. Depending on DEP’s determination, 

BACT (best available control technology) might be prescribed in addition to a program of 

monitoring and testing. 

The experiences of other biomass plants that have gone through this process were examined. 

For example, the Biomass Energy Resource Center is a demonstration gasifier project 

proposed for Heyes Forest Products in Orange, Massachusetts. The gasifier would produce 

gas from the combustion of wood, and the gas would co-fire a diesel genset along with 

petrodiesel. According to the DOER advisory ruling on Heyes, although the diesel portion 

of the generated power will not be eligible for RECs, the cutting-edge aspect of the gasifier 

will allow the system to meet the “advanced technology” criterion of the RPS regulations. 

In addition, the ruling states: 

DOER also believes that biomass technologies should improve over time in 

response to the incentives created by the RPS, added to the other regulatory 

and market forces responsible for continued technological progress in the 

electricity generation sector generally. 

C-27 
This and other RPS criteria should be kept in mind when preparing the request for advisory 

ruling to DOER as well as the comprehensive plan application to DEP. 

C-28 
5 Business Analysis 

The decision to go into power generation as a business division supporting the core business 

has many implications. These include financial and resource allotment issues as well as 

diversion of management attention and effect on strategic direction/flexibility of the core 

biodiesel production business. 

5.1 Effects on Base Business Resources 

Base business resources include physical space, operating labor and costs, and management 

time. 

The power generation equipment itself requires approximately 1,000–1,500 ft2, including 

the engine-generator and switchgear, day tank, and filtering, heating, and pretreatment (deacidification) equipment. A large fuel storage tank would be part of the initial production 

facility. Ideally, the plant layout would be arranged to minimize piping distances. 

The power generation switchgear would ideally be integrated into the plant service entrance 

gear. This is the optimum arrangement and would minimize costs. The service entrance gear 

can be designed to easily accommodate a future breaker for the power production system. 

Management time will not be trivial. Initially, aside from equipment procurement and 

construction management, it will involve time spent setting up contracts with electricity 

brokers, certifying the system with the New England Power Pool’s GIS, registering with the 

Massachusetts Renewable Power System, and complying with all required paperwork to get 

the system up and running. On an ongoing basis, work will involve issuing quarterly 

metering and emissions reports and carrying on other required communication with the 

power aggregation broker, plus arranging for repairs, ordering parts, and allocating other 

required resources to deal with engine operation, maintenance, and repair. 

5.2 Effects on Core Business – Strategic Risks 

The effects of a renewable electricity generation system on the core biodiesel production 

business are twofold: financial and strategic. The financial effect, as shown in the attached 

pro forma spreadsheets, is quite positive, especially as system size increases. As discussed 

in the Financial Assessment section of this study, positive cash flow is based on key 

assumptions about feedstock availability and cost. However, the pro forma fuel prices 

shown indicate good chances for an excellent return. 

C-29 
The major strategic risk is feedstock availability at an acceptable price. This risk is 

compounded by the nature of RECs and wholesale power contracts, in which the company 

would be legally committed to generate a certain amount of power per unit of time. Should 

fuel costs exceed those expected, the effect on the business would be negative and hardly a 

support to the base business. 

Following are the annual cogeneration system fuel requirements based on system size. 

These figures are relatively low versus a 10-million-gallon/year horizon; however, they are 

substantial. Should WVO resources be lower than expected, or should the plant experience 

occasional feedstock shortages, the plant could be put into the uncomfortable and perhaps 

disastrous position of having to choose which contract to honor: the contracts with power 

brokers or with key biodiesel customers. This could have drastic effects on its attempt to 

build or expand the base biodiesel business. 

Table 3. Cogeneration System Fuel Requirements 

100 kW 150 kW 300 kW 500 kW 

69,000 gallons/year 96,000 gallons/year 209,700 gallons/year 339,000 gallons/year

Other risks include the vagaries of the wholesale power market and the likelihood of REC 

and base power prices increasing, remaining the same, or decreasing (as RECs are expected 

to do). Although still in the energy business, generating and selling power is a vastly 

different business from selling heating and vehicle fuel. 

SVO cogeneration appears more attractive from the point of view of fuel cost. However, the 

knowledge base surrounding biodiesel is at present much larger than that surrounding SVO. 

The uncertainties surrounding the burning of WVO in engines—including possible reduced 

engine life and maintenance intervals—and emissions uncertainties constitute further risks. 

Finally, and no small issue, is the potential for distraction. The base business of biodiesel 

production will require significant mental, emotional, and financial focus over a long period 

of time to be successful. Any ancillary business would have to offer significant positive 

rewards to outweigh the risks inherent in attempting to build two businesses simultaneously. 

Of course, additional financial resources could solve this particular problem. 

C-30 
In conclusion, installation of a biodiesel- or SVO-fueled cogeneration system at the 

Northeast Biodiesel production facility appears quite attractive once the plant is operating at 

a stable and profitable level. In considering either fuel, a venturesome spirit and strong 

desire for success will be required. However, because both are present in any entity entering 

today’s nascent biodiesel industry, the key question will be one of risk evaluation given the 

numerous other demands facing the biodiesel pioneer. 

5.3 Replicability: Biodiesel- and Straight Vegetable Oil-Fueled Distributed 

Generation Systems 

Installing biodiesel-fired cogeneration at other industrial plants or large commercial and 

institutional settings could be cost effective if: 

• Plant thermal and electrical load is substantial 

• Fuel can be obtained at an attractive price. 

These elements hold true for the evaluation of any cogeneration system, of course. In this 

case, however, the Northeast Biodiesel application has a major advantage that other plants 

will not: the availability of in-plant produced fuel at an “internal,” cost-of-production price. 

SVO-fired distributed generation is still further afield; only the most risk-tolerant would 

consider it. Given the perceived risk of even standard cogeneration, SVO-fired cogeneration 

is probably unlikely. If, however, someday there are vegetable fuel-oil refining plants in the 

United States similar to those in Europe, SVO power plants could be a standard element in 

distributed generation. 

As the market price of biodiesel declines, the situation could change drastically. Currently, 

fuel price is one of the main impediments to successful cogeneration with biodiesel-fired 

engines. However, it is not the only one. 

It is instructive to examine the market for one of the most successful models in this size 

range: natural gas-fired engine-based cogeneration. Currently, it is quite successful in the 

right circumstances (e.g., advantageous fuel contracts, larger system sizes, high thermal 

loads) and reasonable permitting environments. However, natural gas-fired CHP systems 

are not as widespread as the economics alone might predict. This is due to several factors: 

• Utility costs constitute a relatively low percentage of operating costs for most 

corporations, regardless of type. As a result, energy-reduction efforts tend to be off 

the corporate radar screen. 

• Scarce capital resources are most often devoted to core business functions rather 

than what is perceived as non-critical or sideline efforts such as CHP. This factor is 

lessened somewhat by the typical energy services company approach, in which no 

capital outlay is required and savings are shared. However, even with this approach, 

it is often difficult to get the attention of decision makers as support facilities (such 

as boiler plants) in general tend to suffer from “line versus staff” treatment from 

corporate leadership. 

C-31 
• Finally, most corporate leadership is reluctant to get involved in ventures they 

perceive as unrelated to the core mission. Many simply do not want to get 

involved in the business of electricity generation. It is not something they know, 

and it is often perceived as risky. Finally, they can buy all the electricity they 

want from the grid. 

In the absence of significant tax breaks (such as those put in place by California), the 

unfortunate result of the above factors is that distributed generation simply has not achieved 

widespread market acceptance. This is despite years of work by energy pioneers and 

government agencies. 

However, there has been significant progress since the energy crisis of the ’70s. CHP 

equipment works better, lasts longer, and is less expensive. A host of system variations are 

available, and new IEEE and Underwriters Laboratories standards have brought rationality 

to one of the most frustrating problems with DG: varying utility interconnection 

requirements and a general lack of key standards. 

CHP is extremely popular in Europe, and there is a simple reason: Fuel and energy costs are 

significantly higher than those in the United States. If and when national energy costs rise, 

interest in CHP and distributed generation of all types should explode. 

C-32 
Appendix. Pro Forma Financial Spreadsheets 

C-33 
C-34 

Table A-1. Capital Costs for Cogeneration System

kW Total Genset* Interconnection Switchgear Total System Cost 

500 $312,000 $42,000 $354,000

300 $188,000 $35,000 $223,000

150 $102,000 $28,000 $130,000

125 $88,000 $25,450 $113,450

100 $76,000 $25,450 $101,450

70 $68,000 $25,450 $93,450

* Costs include margin for consultation and engine modifications for these alternate fuels

Interconnection Switchgear: 

IEEE 1547-compliant 

Utility-grade protective relaying 

Interconnection circuit breaker 

Controls for synchronizing with grid 

Genset Package 

Engine generator on base plate with vibration isolation 

Muffler and sound enclosure 

Heat recovery systems (jacket water and exhaust gas) 

Lubrication system 

Controls 

Ventilation blowers 

Battery starting system 

Installation – $40,000, includes: 

Ventilation: Extension of system to building exterior 

Concrete work: Spill containment and engine foundation (difference from standard) 

Fuel system piping to plant tankage 

Heat Recovery: Balance of system, including circulator, expansion tank, and controls 
Table A-2. Biodiesel Facility Biodiesel Cogeneration 

Enter in yellow boxes: kW in Consumption, Engine System 

Fuel Cost: $1.300per gallon BIODIESEL 

Fuel Consumption: 8.6gal/hr 

Hours/Yr 8400 O&M /yr $ 12,39

Fuel Cost/yr $ 90,156 Incl. 1.2 factor KW 100 Corp OH $ 8,00

Uptime Factor 0.8 Insurance $ 12,00$/kWh $0.068 cat pmt $ 14,79

Rev/Yr. $ 2,285 other pmt 

Fuel Cost/yr $ 90,15

Total Exp. $ 146,95

Other Loans 

Engine Set Loan (80% Financed) 

Engine System Cost:

Total System Cost: 

Capital $ $60,650 $ 60,800 $76,000 $101,450 kW Total Genset Co

Int Rate/yr 10% 8% 500 312000 $

Term (yr) 10 5 Installed 300 188000 $

Period/yr 12 12 Cost: 150 $102,000 $

Payment/per. ($801.49) ($1,232.80) $141,450 125 $88,000 $

Payment/yr ($9,617.93) ($14,793.66) 100 $76,000 $

70 $68,000 $

Equity $ 20,000 

Eng Rating 100kW 

C-35 
Thermal Energy Produced: Thermal Energy Required: 

100kW rated 7,142,857Btuh 200kW Thermal (roughly) 2092.8in kW 

682,600In Btuh 60,000,000,000Btu per year 

5,733,840,000Btu per year $764,706Annual cost of WVO at Given va

6.69gph WVO at 85% efficiency

$1.22WVO $/gal Infl.Rate:$8.16Avoided cost/hr 0.01 Plant Costs for 0.

$68,581Savings per year heat and electricity NOT US

9.6%% thermal produced vs. load Total Cost per year $460,

Plant Electrical Consumption: Genset Fuel Consumption: 

Ave kW Use 95 kW:Gph (diese

Peak kW Need 300 30 

kWh/year 798,000 Infl.Rate 50 

Value $/kwh 0.08 0.01 70 

Value of kWh displaced: $63,840.00 100 

125 1

Rule of thumb: 95Ave kW usage 150 1

300 2500 4

C-36 
Table A-3. Biodiesel Facility Biodiesel Cogeneration Income Statement 

1 2 3 4 5 6 

kW Actual 100 100 100 100 100 100 

O&M $ 12,392 $ 12,516 $ 12,641 $ 12,767 $ 12,895 $ 13,024 

Insurance $ 12,000 $ 12,240 $ 12,485 $ 12,734 $ 12,989 $ 13,249 

Corp. OH $ 8,000 $ 8,160 $ 8,323 $ 8,490 $ 8,659 $ 8,833 

Engine Loan $ 14,794 $ 14,794 $ 14,794 $ 14,794 $ 14,794 Other Loan $ 9,618 $ 9,618 $ 9,618 $ 9,618 $ 9,618 $ 9,618 Fuel Cost $ 90,156 $ 90,156 $ 90,156 $ 90,156 $ 90,156 $ 90,156 

Total Expenses $ 146,959 $ 147,483 $ 148,016 $ 148,559 $ 149,111 $ 134,879 

$/kwh $ 0.068 $ 0.068 $ 0.068 $ 0.068 $ 0.068 $ 0.063 

Income from KWH Sales $ 2,285 $ 32,150 $ 32,150 $ 32,150 $ 32,150 $ 29,786 

Value of Thermal used internally $68,581 $ 69,267 $ 69,960 $ 70,659 $ 71,366 $ 72,080 

Value of kWh used internally $ 51,072 $ 51,583 $ 52,099 $ 52,620 $ 53,146 $ 53,677 

Gross Income $ 121,938 $ 153,000 $ 154,209 $ 155,429 $ 156,662 $ 155,543 

Net Income -$20,000.00 $ (25,021) $ 5,517 $ 6,192 $ 6,870 $ 7,551 $ 20,664 

C-37 
9 10 11 12 13 14 

100 100 100 100 100 100 

 $ 13,419 $ 13,553 $ 13,688 $ 13,825 $ 13,964 $ 14,10

 $ 14,060 $ 14,341 $ 14,628 $ 14,920 $ 15,219 $ 15,52

 $ 9,373 $ 9,561 $ 9,752 $ 9,947 $ 10,146 $ 10,34

 $ 9,618 $ 9,618 $ - $ - $ - $ - 

 $ 90,156 $ 90,156 $ 90,156 $ 90,156 $ 90,156 $ 90,15

 $ 136,625 $ 137,228 $ 128,224 $ 128,848 $ 129,484 $ 130,13

 $ 0.063 $ 0.063 $ 0.063 $ 0.063 $ 0.063 $ 0.063 

 $ 29,786 $ 29,786 $ 29,786 $ 29,786 $ 29,786 $ 29,78

 $ 74,264 $ 75,006 $ 75,756 $ 76,514 $ 77,279 $ 78,05

 $ 55,304 $ 55,857 $ 56,415 $ 56,979 $ 57,549 $ 58,12

 $ 159,354 $ 160,649 $ 161,958 $ 163,280 $ 164,615 $ 165,96

 $ 22,728 $ 23,421 $ 33,734 $ 34,431 $ 35,131 $ 35,83

C-38 
Table A-4. Biodiesel Facility Straight Vegetable Oil Cogeneration 

Enter in yellow boxes: kW in “EFuel Consumption, Engine Syst

Fuel Cost: $0.400per gallon SVO 

Fuel Consumption: 8.6gal/hr 

Hours/Yr 8400 O&M /yr $ 12,392 

Fuel Cost/yr $ 27,740Incl. 1.2 factor KW 100 Corp OH $ 8,000 

Uptime Factor 0.8 Insurance $ 12,000 $/kWh $0.068 cat pmt $ 14,794 

Rev/Yr. $ 2,285 other pmt $9

 Fuel Cost/yr $ 27,740 

Total Exp. $ 84,544 

Other Loans 

Engine Set Loan (80% Financed) 

Engine System Cost: 

Total System Cost: 

Capital $ $60,650 $ 60,800 $76,000 $101,450

k

W Total Genset Con

Int Rate/yr 10% 8% 500 312000 $42

Term (yr) 10

5 Installed 300 188000 $35

Period/yr 12 12 Cost: 150 $102,000 $28

Payment/per. ($801.49) ($1,232.80) $141,450125 $88,000 $25Payment/yr ($9,617.93) ($14,793.66) 100 $76,000 $25

70 $68,000 $25

Equity $ 20,000

Eng Rating 100kW 

C-39 
Thermal Energy Produced: Thermal Energy Required: 

100kW rated 7,142,857Btuh 200kW Thermal (roughly) 2092.8in kW 

682,600In Btuh 60,000,000,000Btu per year 

5,733,840,000Btu per year $235,294Annual cost of WVO at Given value 

6.69gph WVO at 85% efficiency

$0.40WVO $/gal Infl.Rate:$2.68Avoided cost/hr 0.01 Plant Costs for 0.0

$22,486Savings per year heat and electricity NOT US

9.6%% thermal produced vs. load Total Cost per year $460,0

Plant Electrical Consumption: Genset Fuel Consumption: 

Ave kW Use 95 kW:Gph (diesel) 

Peak kW Need 300 30 

kWh/year 798,000 Infl.Rate 50 

Value $/kwh 0.08 0.01 70 

Value of kWh displaced: $63,840.00 100 

125 1

Rule of thumb: 95Ave kW usage 150 1

300 2500 4

C-40 
Table A-5. Biodiesel Facility Straight Vegetable Oil Cogeneration Income Statement 

1 2 3 4 5 6 

kW Actual 100 100 100 100 100 100 

O&M $ 12,392 $ 12,516 $ 12,641 $ 12,767 $ 12,895 $ 13,024 

Insurance $ 12,000 $ 12,240 $ 12,485 $ 12,734 $ 12,989 $ 13,249 

Corp. OH $ 8,000 $ 8,160 $ 8,323 $ 8,490 $ 8,659 $ 8,833 

Engine Loan $ 14,794 $ 14,794 $ 14,794 $ 14,794 $ 14,794

Other Loan $ 9,618 $ 9,618 $ 9,618 $ 9,618 $ 9,618 $ 9,618 

Fuel Cost $ 27,740 $ 27,740 $ 27,740 $ 27,740 $ 27,740 $ 27,740 

Total Expenses $ 84,544 $ 85,068 $ 85,601 $ 86,143 $ 86,696 $ 72,464 

$/kwh $ 0.068 $ 0.068 $ 0.068 $ 0.068 $ 0.068 $ 0.063 Income from KWH Sales $ 2,285 $ 32,150 $ 32,150 $ 32,150 $ 32,150 $ 29,786 Value of Thermal used internally $22,486 $ 22,711 $ 22,938 $ 23,167 $ 23,399 $ 23,633 Value of kWh used internally $ 51,072 $ 51,583 $ 52,099 $ 52,620 $ 53,146 $ 53,677 

Gross Income $ 75,842 $ 106,444 $ 107,187 $ 107,937 $ 108,695 $ 107,096 

Net Income -$20,000.00 $ (8,701) $ 21,376 $ 21,586 $ 21,794 $ 21,999 $ 34,632 

C-41 
C-42 

9 10 11 12 13 14 

100 100 100 100 100 100 

 $ 13,419 $ 13,553 $ 13,688 $ 13,825 $ 13,964 $ 14,10

 $ 14,060 $ 14,341 $ 14,628 $ 14,920 $ 15,219 $ 15,52

 $ 9,373 $ 9,561 $ 9,752 $ 9,947 $ 10,146 $ 10,34

 $ 9,618 $ 9,618 $ - $ - $ - $ - 

 $ 27,740 $ 27,740 $ 27,740 $ 27,740 $ 27,740 $ 27,74

 $ 74,210 $ 74,813 $ 65,809 $ 66,433 $ 67,069 $ 67,71

 $ 0.063 $ 0.063 $ 0.063 $ 0.063 $ 0.063 $ 0.06

 $ 29,786 $ 29,786 $ 29,786 $ 29,786 $ 29,786 $ 29,78

 $ 24,349 $ 24,592 $ 24,838 $ 25,087 $ 25,337 $ 25,59

 $ 55,304 $ 55,857 $ 56,415 $ 56,979 $ 57,549 $ 58,12

 $ 109,439 $ 110,235 $ 111,040 $ 111,852 $ 112,673 $ 113,50

 $ 35,229 $ 35,422 $ 45,231 $ 45,419 $ 45,604 $ 45,78
REPORT DOCUMENTATION PAGE Form Approved 

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PLEASE DO NOT RETURN YOUR FORM TO THE ABOVE ORGANIZATION.

1. REPORT DATE (DD-MM-YYYY)

May 2006 

2. REPORT TYPE

Subcontract Report 

3. DATES COVERED (From - To)

 

5a. CONTRACT NUMBER

DE-AC36-99-GO10337 

5b. GRANT NUMBER

4. TITLE AND SUBTITLE

Green Energy Options for Consumer-Owned Business 

5c. PROGRAM ELEMENT NUMBER

5d. PROJECT NUMBER

NREL/SR-560-39465 

5e. TASK NUMBER

WW88.2002 

6. AUTHOR(S)

Co-opPlus of Western Massachusetts 

5f. WORK UNIT NUMBER

7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES)

Co-opPlus of Western Massachusetts 

324 Wells Street 

Greenfield, MA 01301 

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REPORT NUMBER

ZAT-4-33658-01 

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NREL 

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National Renewable Energy Laboratory 

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NREL/SR-560-39465 

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14. ABSTRACT (Maximum 200 Words)

The goal of this project was to define, test, and prototype a replicable business model for consumer-owned 

cooperatives. The result is a replicable consumer-owned cooperative business model for the generation, 

interconnection, and distribution of renewable energy that incorporates energy conservation and efficiency 

improvements. 

15. SUBJECT TERMS

renewable energy; cooperative; co-op; Massachusetts; Co-opPlus; Co-op Power; interconnection; National 

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