G-Diesel: Is the race for drop-in, parity-priced, low emission alt-fuels over just as it begins?

October 19, 2010 |

GDiesel – the “G” is short for “Gunnerman,” as in the family behind a blend of conventional ultra-low sulfur diesel (ULSD) and natural gas, which is manufactured by Reno, Nevada-based Advanced Refining Concepts.

In August, GDiesel received formal certification as an “alternative fuel” from the Nevada Division of Environmental Protection.

The blend ratio is 2-1 — two gallons of diesel to one gallon of natural gas, blended using proprietary catalysts, which according to customers offers improvements in fuel economy, gains in emissions and is available at the same price as conventional diesel.

That’s an emission gain at parity pricing, for a drop-in alternative to diesel fuel. It raises the question as to whether an answer to conventional diesel is on the way, or is already at hand? Is the race for a suitable, commercially viable alternative transportation fuel over? Is it a biofuel at all?

To explore the potential and realities of GDiesel, the Digest spoke with GDiesel CEO Peter Gunnerman this week.

BD: Where did GDiesel come from?

GD: We have been as a family in alt fuels for going on 40 years, worked as a family and as a partnership starting with wood pellet technologies. We were partners in biomass power plant, made emulsified fuel. Most recently did ultrasonic upgrading. We are still major shareholders in. By 2007 my father and I had left that company, we had nothing to do we had a but a series of ideas. We thought there was room for a new fuel that could live without infrastructure or government subsidies. Based that idea, and free time, we went in to the lab to make a a new generation fuel.

BD: What did you come out of the lab with?

GD: Using methane -passing methane through the ULSD, as part of our process – using some of the carbon or hydrogen and introducing those into the fuel.

BD: GDiesel recently received some new patent protection. How does that change your options?

GD: I have a different view on patents. In reality it allows you to stay in the field. People will find a way to write around powerfully valuable claims. But it really spells out the uniqueness of the product and process.

BD: Where are you today?

GD: We opened our first scale, which can make up to 100,000 gallons per day of G-diesel. At start-up we are making 30-50,000 gallons per day.

BD: What’s the business model?

GD: There are 3 ways we make money. One, with huge purchases of ULSD base feedstock, we can buy at a lower price. When we sell our G diesel fuel – we make money on those economies and selling bulk and a higher margin. The other is timing – traditional buy low and sell high – there’s hedging involved – very similar to any fuel distributor. The third way is that our clear refining process is upgrading the fuel at low temp and pressure and using natural gas, we cover our operating cost and make some margin there too.

BD: And no grants or subsidies?

GD: No grants, no subsidies. We financed this venture – its our family’s money, there’s no outside investment, we have $17.5 million into it, that’s a highly significant amount for us. We are not saints – we do see a business benefit to it, but one of the things that makes us do it is that there are alternative fuels that can produce lower emissions.

BD: Pricing?

GD: We are gallon for gallon price competitive with diesel.

BD: Verification?

GD: We have completed third party verification with anindependent lab and are now authorized as an alternative fuel here in Nevada and are distributing to clark county for their fleet vehicles. We provide reductions in NOX, smoke, CO. It’s hard to put a number on it, it depends on engine driver habits, but we see consistent emission reductions reductions better than B5, materially better. The other qualifying altertnative fuels are  biodiesel CNG LNG and we are the most cost effective solution.

BD: Outside of government fleets in Nevada?

GD: Our next step is 3 new major categories – local distributors, truck stops, and smaller and larger diesel fleets. We have not approached anyone except market in NV. There’s plenty of market here for the 100,000 gallons per day we can produce, or even at phase two where we produce 200,000 gallons per day. At that point we would probably approach the mining industry, in the Elko area. There’s no reason that we can’t sell every drop of Gdiesel at the same price.

BD: Timing on phase two?

GD: To get the plant completed – the equipment, piping, building – would take 60 days to get that running – double to 200,000 per day

BD: Why so fast and easy?

GD: The product is a natural replacement -  a gdiesel refinery does not have the large cracking towers ofg a diesel facility, it’s not capital intensive. There are no emissions, and the capital call is $5-$7 million vs $200M for traditional diesel market refinery.

BD: So you start with ULSD. From where?

GD: ULSD we purchase directly off the local rack or through a distributor – as any other large use from the KM – we are price competitive – if I am buying 50,000 gallons, and selling at low-rack plus 10-20 cent, I can cover my costs in that margin.

BD: So you use natural gas today. What about price volatility?

GD: My feeling is that the forward market will stay low compared to diesel because of all the discoveries. But if natural gas trends trends up , oil is likely to go up too. Worst case scenario, we don’t upgrade for a while, we become a diesel distributorship until prices normalize.

BD: Why not use renewable sources of gas?

GD: Absolutely. The genesis of our project was using wastewater treatment gas as opposed to flaring or venting it. But as we got into process, we discovered certain components that are damaging to a fuel product . So, for now, instead of biting off six challenges, we are proving the business model, and in a later stage we will inject a component of biogas.

BD: Does this work with other fuels?

GD: On experimental basis we have developed gjet, an upgraded jet fuel, and gpetrol, an upgraded gasoline. We are not commercial with those today – we are working through the research now.

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