April 1, 2008
enroute | Private Fleet Management

Fill 'er up … with biodiesel

fill 'er up … with biodiesel

Biofuels can be expensive, and the supply network is still under construction. But that's not stopping some of the largest fleet operators in the country from making the switch.

By John R. Johnson

If you shop at one of the nearly 1,200 Safeway grocery stores across the United States, you can do so with a clear eco-conscience. The products on Safeway's store shelves carry a smaller carbon footprint today than they did just a year ago.

It's not because Safeway has opted to sell only locally grown products, the latest feel-good way to reduce a grocery operation's carbon footprint. Instead, the chain has converted its entire fleet of more than 1,000 trucks to run on biodiesel fuel.

The Pleasanton, Calif.-based grocer is one of the largest retailers in the United States to commit its entire fleet to biodiesel, a fuel additive derived from animal fats or plant oil, typically soybeans. At a January news conference in Washington, D.C., Safeway officials said the move was part of the company's Greenhouse Gas Reduction Initiative, a program designed to manage the chain's carbon footprint, address climate change, and reduce air pollution.

Safeway is not alone in its interest in alternative fuels. Retail giant Wal-Mart is reportedly studying the benefits of biofuels. Last year, U.K.-based Tesco, one of the largest retailers in Europe, converted its 2,000 trucks in the United Kingdom to run on a 50-50 blend of biodiesel. The company is now studying the use of biofuels for its much smaller U.S. fleet, which supports the 43 stores Tesco recently opened on the West Coast.

As companies scramble to go green and decrease their carbon footprints, the use of alternative fuels is growing, although there are still pricing and availability issues to be resolved. At the fifth annual National Biodiesel Conference & Expo held in February, industry leaders predicted that the amount of biodiesel used in the United States would grow to a billion gallons a year over the next few years. By way of comparison, the National Biodiesel Board estimates that the industry produced 450 million gallons of biodiesel fuel in 2007.

A breath of fresh air
Like most biofuel users in this country, Safeway will be running its fleet not on pure biodiesel, but on B20, a blend of 20 percent biodiesel and 80 percent petroleum diesel. Unlike pure biodiesel, B20 can be used in nearly all diesel equipment and generally requires no engine modifications, according to the U.S. Department of Energy's Web site.

Though B20 contains 1 to 2 percent less energy per gallon than petroleum diesel, it has only a negligible effect on engine performance or fuel economy. But it can have a big impact on air quality. Safeway's shift to biodiesel from conventional diesel fuel will reduce carbon dioxide emissions by 75 million pounds annually, according to company spokeswoman Teena Massingill. That's the equivalent of taking nearly 7,500 passenger vehicles off the road each year.

Safeway expects to achieve those environmental benefits without any sacrifice in efficiency, Massingill adds. "[The switch to biofuel] has a positive impact on the environment, we are drastically reducing our carbon emissions, and it doesn't affect our overall fleet efficiency or its ability to deliver our products," she says.

But there is an added cost. The company will pay a few pennies more per gallon for the biodiesel mixture, says Greg Ten Eyck, a Safeway spokesman. At the Washington news conference, Safeway officials said that fleet vehicles operating in the Washington (D.C.), Baltimore, and Philadelphia region use about 975,000 gallons of fuel per year. At that rate of consumption, the additional expenditure on biodiesel would come to about $30,000 a year (at three additional cents per gallon) for that portion of the company's fleet.

Bio-technical difficulties
Though Safeway seems unfazed by the additional expense, it may be more the exception than the rule. Marc E. Althen, senior vice president of administration and facilities at Penske Truck Leasing, says many of his company's customers are hesitant to pursue biodiesel because it adds to fuel costs. Although some states provide tax incentives (the most generous program is offered by Illinois), those breaks are not universally available. "If you don't have an incentive from state or local authorities, it just won't pay for itself," Althen says. "We're seeing a few fleets exploring biodiesel, but the price point is such that they aren't embracing it as you might think."

Another stumbling block has been the establishment of a supply network. "I think some companies are dabbling with it, mainly in the private-fleet sector and mainly in warmer temperatures," says Chris Caplice, executive director of the Center for Transportation and Logistics at the Massachusetts Institute of Technology. "I don't see a huge rush to it because the distribution system isn't that great."

Two years ago, Caplice headed up a project to study what a biodiesel supply chain—as opposed to the petrochemical supply chain—would look like. While most petrochemicals are refined in Houston, biodiesel refineries need to be close to the original source. "Everything would have to be close to the farm for biodiesel because it's the bulk movement from the field to the first processor that has the most cost," he says.

But neither cost nor supply hassles have deterred Safeway, which has also outfitted all 300 of its refueling stations to run on wind-powered energy. "[Biodiesel] is slightly more expensive, but it's certainly a manageable expense," says Massingill. "So it still makes sense for us as a company to make the switch." She adds that for Safeway, the goodwill created by the initiative easily outweighs the slightly higher costs. "We're having a positive impact on the environment in the communities we operate in, and this is something that our consumers and neighbors are concerned about. We're trying to be a good corporate citizen, and people want to do business with a company that cares about the people it serves."

Green to gold
That's not to say that there isn't money to be made by greening transportation fleets. For evidence, look no further than Wal-Mart. The mega-retailer expects to reap savings of more than $300 million a year through an initiative to double the efficiency of its 7,000 fleet vehicles by 2015, according to data posted on its Web site. To reach that goal, Wal-Mart is working with truck manufacturers to develop diesel hybrid and aerodynamic trucks. The retailer began purchasing hybrids in 2003. It currently operates 300 and has plans to add 150 to its fleet each year.

In addition, Wal-Mart took delivery of four natural gasfueled Peterbilt 386 trucks at its Apple Valley, Calif., distribution center in January. The trucks are expected to help Wal-Mart reduce its fleet vehicles' greenhouse gas emissions by 20 percent and nitrogen oxide emissions by between 30 and 50 percent over their diesel equivalents.

The retail giant is also installing auxiliary power units (APUs)—small efficient diesel engines—on all of its trucks that make overnight trips. Drivers can turn off the truck engines and rely on APUs to heat or cool the cab while on breaks and during overnight stops. Wal-Mart says that in a single year, the change should eliminate about 100,000 metric tons of carbon dioxide emissions, reduce consumption by 10 million gallons of diesel fuel, and save the company $25 million.

Wal-Mart estimates that for every one mile-per-gallon gain in fuel efficiency, it can save over $50 million per year. That type of forward thinking has earned Wal-Mart accolades from the U.S. Environmental Protection Agency: In both 2006 and 2007, the retailer received Environmental Excellence Awards from the EPA's SmartWay Transport Partnership for its efforts to reduce energy consumption and greenhouse-gas emissions.

About the Author

John R. Johnson
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.

More articles by John R. Johnson

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