Waste Cooking Oil: Closing the Loop

Final write-up: Alex Cameron, Arnau Gallard-Agusti, Henning Huenteler, Natalia Rialucky, Shan Wang

 

Problem statement

Every year 180 million metric ton cooking oil is used globally across residential, commercial and industrial purposes[i]. What happen in most emerging countries where recycling is not common is families and small-scale businesses just throw the waste cooking oil in the drainage. This causes water and soil contamination, clogging of pipe and drainage system and potentially harm to aquatic ecosystem[ii]. Research suggest that one litre of waste cooking oil can contaminate up to 1,000 litres of water. Not to mention that the residual grease in the pipe eventually hardens and clog the water flow in the pipe. Regarding food safety, it is also unsafe to repeatedly use cooking oil, since it will increase the production of Free Fatty Acid content.

Meanwhile if recycled properly, not only reduce environmental issue but can be useful to create (1) biodiesel, (2) soaps and (3) lubricating oil. Conversion to biodiesel is the most commonly used use-case for waste cooking oil recycling. With the task of tackling climate change and converting from an oil-based economy, it seems to make sense to produce biodiesel from waste cooking oil, especially to win over the debate of food crops. Based on the chart below we can see that the cost of pure biodiesel (B99/B100) is still higher than gasoline, diesel or biodiesel mix (B20)[iii]. Waste cooking oil-based biodiesel will fall under the B20-equivalent price category, thus ideally should be at par with diesel & gasoline price. This pricing point should be cheap enough (or at par) for end users to think about switching to biodiesel and should be attractive enough for a producer or (‘pro-sumer’, i.e. producer and consumer).

Recycling the waste cooking oil to biodiesel happens through esterification process, in which a chemical is required to neutralize the Free Fatty Acid in the oil and separate the content within the cooking oil into biodiesel. The process itself happens in two steps; (1) pre-treatment of the waste cooking oil, primarily to understand the level of Free Fatty Acid and to see how much neutralizer required for the purification process, and the (2) purification of the biodiesel[iv]. These processes can be done in home-industry level or as a larger plant or at a municipal level.

In most emerging countries, such recycling is not done yet, leaving the potential circular economy of making value out of waste to be an open loop. For instance in Indonesia alone, 32 million ton of cooking oil is produced every year with no existing recycling process. Key reasons for this are (1) low economies of scale of doing small / home scale recycling, (2) high costs of pooling scattered source of waste cooking oil, and (3) the variability in the quality of cooking oil that may hinder the modularity of the purification process since different degrees of Free Fatty Acid may require different levels of neutralizer.

Pooling is especially complicated due to the multi-agent and long value chain of cooking oil distribution in Indonesia. In Jakarta alone, there can be up to 7 agent-layers for a cooking oil to reach from the producer to the consumer[v]. The challenge is who in this distribution and value chain would be the best player to pool such waste cooking oil, what would be the incentive do so and how to effectively develop a closed loop system for cooking oil.

Closed-Loop Process and Sustainability Goals

Customers and businesses are increasingly recognizing the importance of sustainability. The restaurant industry is no exception and needs to create efficiencies across the board. Traditional disposal of used cooking oil is costly, difficult and even dangerous. A high-level version of the traditional economy is summarized below.

However, through an effective oil management process, recycling used cooking oil into productive outputs (e.g. biodiesel) can create incremental value in the form of 1) revenue, 2) positive environmental impact and 3) new job creation in the field. The circular economy is summarized below with the specific loop for recycling cooking oil boxed in red.

 

 

 

The sustainable recycling loop includes the following steps and benefits:

Step in Loop	Step Description	Benefits
#1	Collection and pooling of used cooking oil in tanks	Environmental benefits Recycling oil prevents it from being disposed of in a landfill where it could seep into groundwater and affect local environment Bulk collection eliminates need for extra packaging (cardboard and plastic waste) since holding tanks are used Reduction in blocking and deterioration of sewage system Safety benefits May reduce oil-related injuries, spills, burns since oil always contained
#2	Mass Processing	Efficient use of energy processing
#3 and #4	Convert waste into resource and sell or re-use	Generates additional revenue Output can sustain process (e.g. biodiesel for collection trucks) Tax deduction benefits for restaurants
#5	Empty tanks filled with new oil and dropped off at restaurant during collection	Reliable and efficient process helps drive consistency and freshness of oil available Customers willing to pay more to companies committed to positive environmental and social impact (Source: Nielsen)

As part of this process, sustainability goals help to ensure the cycle is reducing its environmental footprint and providing a net benefit. Proposed goals include:

• Environmental:
  • Divert 50% of back-of-house operational waste generated by half of all restaurants in Indonesia by the end of 2025
  • 100% of collection/drop-off fleets use biodiesel generated from the used cooking oil (reduces greenhouse gas emissions by 90% or more)
  • Eliminate groundwater contamination caused directly by cooking oil (difficult to measure and identify cause)
  • Eliminate 6 million plastic containers and 6 million cardboard containers from landfills each year, saving 4.8 million cubic feet of landfill space[vi]
  • Current energy consumption represents ~25% of total carbon footprint[vii]; reduce total greenhouse gas emissions by at least 50% by 2025
  • Reduce traditional means of biodiesel production by decreasing use of animal fat and crops by at least 25% by 2025
• Safety:
  • Reduce cooking oil-related injuries by 80% by 2020
• Economic:
  • Increase the number of jobs relative to the restaurant industry by 10% by 2020

 

Existing Use Cases and Impact

The chemical processes to convert cooking fuel into biodiesel are not complicated and can easily be replicated around the world. Once company that already uses the technology is Alpha Biofuels that utilizes the cooking oil from the Raffles City Shopping Mall in Singapore[viii]. However, the difficult aspect is the supply chain to collect the oil from distributed sources.  For the commercial collection of waste cooking oil, several different business model innovations could be useful.

1)   Pooling for collection: With a distributed small-scale supply of cooking oil from restaurants and street cookers, the oil collection needs to be pooled for two reasons:

1.  Pooling collections would realize cost reductions. The supply is distributed throughout the country, and concentrated in areas with dense populations. Collecting the oil in regional collection stations allows the company to combine shipments from many restaurants and vendors into larger tanks.
2.  Because the cooking oil is a waste product for the restaurants and food stalls, the quality of the oil is inconsistent. By pooling the supply from many different vendors, and blending them together, a stable supply of oil could be guaranteed. As the esterification of oil is a sensitive chemical process, this would allow the engineers to better tune and optimize the biodiesel plant.

To reduce risk and allow a lean management process of the distributed supply, the collection could be outsourced to local entrepreneurs. In this case, a basic training needs to be provided by the company to instruct the partners on the desired quality of the oil. By working with local partners, the company could tap into local networks and creativity, that would allow it to develop dense and distributed supply chains.

2)   Incentive alignment: A key issue for the success of the oil collection network is a strong incentive alignment. Paying providers based on volume or weight does not seem to be a promising approach: The purity of the oil that ultimately determines the quality of the biodiesel is of crucial importance. Impurities like solids and water not only increase volume without increasing weight, they also disrupt the esterification process.

Therefore, a payment model based on the purity of the oil needs to be developed. A fast and simple test on water content and a mechanical filter process might align the incentives of the farmers. However, the filtering and testing before the weighing is time-consuming and inefficient. By paying a premium on very pure oil deliveries, the providers might be incentivised to pre-filter and dry the oil before delivery to the factory.

The company could train its collection partners in water-oil separation techniques, especially the chemical separation, in which glycerine is used to chemically separate oil and water. Since glycerine is a waste product of the esterification of the oil, it could be provided by the company.

Environmental Impacts: The business generates two positive environmental impacts. Firstly, it provides an alternative to disposing waste cooking oil directly into the environment. Secondly, by converting recycled cooking oil into biodiesel, the business reduces demand for traditional diesel fuel.

Social Impacts: The business can also provide one easily-identifiable social benefit. Currently, some used cooking oil is sold on the black market, where it is filtered, repackaged and re-sold. If the oil is not properly strained and cooled, bacteria feeds on food particles in the used oil. This can lead to serious health issues for anyone who consumes food prepared in the re-used oil, with studies linking used oil to botulism and cancer.

 

Risk and Reward

The social and environmental outcomes generated by the business are likely to combine with economic and potentially regulatory incentives to create a positive feedback loop that accelerates the expansion of the business and the market. This feedback loop is driven fundamentally by a reduction in the unit cost of producing biodiesel as the business grows. The following paragraphs outline this process in further detail.

There are two relevant economic considerations that will influence the speed with which this business can achieve its social and environmental impact. The first is economies of scale; the more customers that the business has, the more efficient it can be in scheduling both the collection of used cooking oil and the delivery of biodiesel. Similarly, larger volumes of used cooking oil collected will justify establishing larger and more efficient processing facilities, which can produce inputs increasingly cheaply at scale. Accordingly, as the business scales up, it is reasonable to assume that the cost of producing biodiesel will decrease.

The second relevant economic consideration is the idea that the supply chain could reach an economic tipping point. Currently, producers of biodiesel cannot afford to buy used cooking oil and instead rely on donations. However, the production costs of biodiesel are falling. Accordingly, the tipping point will occur when biodiesel becomes cheaper than regular diesel and biodiesel producers can afford to pay for used cooking oil. In some markets, for example South Africa, these market conditions are starting to appear. In this case, the firms that produce waste cooking oil have an economic incentive as well as social and environmental incentives to convert their used cooking oil into biodiesel. This situation would lead rapidly to near 100% conversion of used cooking oil into biodiesel.

In addition to the economic processes, it is also worth highlighting that the power of this business model is significantly enhanced by favourable environmental legislation, as is demonstrated by the United Kingdom and Singapore, among others. In these states, the government forbids the disposal of used cooking oil and conducts regular inspections to ensure compliance. This means that all firms that generate used cooking oil must dispose of the oil with a licensed cooking oil collector.

There are some risks associated with this business model. Most notably, the business depends on the ability to convert used cooking oil to biodiesel economically. This means sourcing the used cooking oil, managing the collection of biodiesel and conducting the conversion process effectively. In addition, the business is handling toxic used cooking oil, so it faces the risk of damaging the environment or the health of its employees in the case of any accidents. In addition to the operational risk, the business requires a significant upfront capital costs to establish the production facility. The operational costs are also material; collecting and processing the used cooking oil.

 

Game Changing Initiatives to Realize Closed-Loop

Changing current behaviors regarding oil disposal will maximize the environmental and social benefits of this venture. Four key steps to modify behaviors are:

Facilitate oil collection: Restaurants and street vendors have no place to safely dispose their cooking oil and lack incentives to do so. Making oil disposal practical and effortless would reduce ground disposal. Collection could be done through local collection points in high transit areas where restaurants owners and street vendors could easily dispose the oil. Alternatively, oil could be collected directly from businesses by appointed people. One option would be to hire informal waste collectors. This would have an additional social inclusion benefit, bringing informal workers into a job sector that has social and environmental utility, and allows them to participate in the formal sector.

Engage public authorities: Getting the support from government officials would enhance the effectiveness of any campaign to change social patterns. Municipalities would be a potential strong ally, as they see the negative effects of the current situation and would benefit from the new system directly. Public authorities could provide support in educational campaigns, establishing supportive regulations, and providing economic incentives.

Communicate benefits: Lack of awareness of the negative effects of oil disposal needs to be addressed through outreach campaigns. The population needs to become conscious of the importance of oil recycling. Awareness efforts should explicitly present the health and environmental benefits of recycling, as well as increase public recognition of biodiesel. Ideally, campaigns should focus on individual behaviors. Pilot projects could foment best practices demonstrating the benefits on local communities and stakeholders that could influence larger groups. Facilitating programs with the collaboration of schools could be a cheap and effective tool to easily educate children and youth, and engage families in the process.

Offer economic incentives: Monetary rewards could be a strong incentive to mould new behaviors. Cash could be paid after each oil disposal. Alternatively, if public support was given, direct financial or tax rewards could be provided for disposing oil in the designated centers. Negative incentives could also be established, by either inflating costs of traditional oil sales (for example adding a cost to the containers or bottles) or fixing heavier taxation on traditional oil over clean oil. Similar actions could be taken regarding biodiesel produced through this recycling system.

 

[i] https://www.statista.com/statistics/263937/vegetable-oils-global-consumption/

[ii]  http://www.thenational.ae/uae/environment/residents-urged-to-safely-dispose-of-waste-cooking-oil

[iii]  https://www.afdc.energy.gov/fuels/prices.html

[iv] http://www.jocpr.com/articles/biodiesel-production-from-waste-cooking-oil.pdf

[v] https://www.bps.go.id/website/pdf_publikasi/Distribusi-Perdagangan-Komoditas-Minyak-Goreng-di-Indonesia-2016.pdf

[vi]  https://www.rti-inc.com/close-the-loop-2

[vii]  http://luckypeach.com/the-carbon-footprint-of-eating-out/

[viii]  http://www.straitstimes.com/singapore/environment/recipe-to-turn-used-cooking-oil-into-fuel