Make your own gas

NEW YORK (CNNMoney.com) -- Sick and tired of soaring gas prices? Now you can build your own alternative fuel plant and set your own limits.

It's not as farfetched as it seems.

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Orlando-based Xenerga is offering entrepreneurs a chance to get their own biodiesel production franchise, which can produce fuel for use in any diesel engine.

Biodiesel is an increasingly popular alternative fuel because it's made by refining oil. Thinner than vegetable oil, biodiesel can power diesel engines without further conversion. That gives it a big advantage over ethanol, which burns in standard gasoline engines only when it's blended with petroleum.

While no experience is necessary, the investment cost is $1.95 million for a franchise, which mostly goes to facility construction and installation costs. Franchisees are then supplied with waste cooking oil to use as a feedstock, a 5-million-gallon-a-year plant and at least one customer lined up to purchase the fuel.

"Running a successful biodiesel business takes specialized expertise and skills," said Joe Jobe, CEO of the National Biodiesel Board. "Biodiesel production is a chemical refinement process that involves the use of industrial chemicals that must be handled precisely and safely."

The equipment and the facility itself are made and assembled in Germany and delivered to the site where it is assembled by an installation team and operational in about five days.

The plants are designed to be smaller in scale than typical biodiesel plants and serve only local markets, making them less expensive to operate.

Only a two-person team consisting of a general manager and operator or driver is needed to run the plant, according to Xenerga.

"You can never produce enough biodiesel," said Xenerga CEO Jason Sayers. "The problem isn't finding customers; the problem is getting feedstock at a decent price, because without feedstock, you can't produce biodiesel."

To that end, Xenerga has a deal to purchase waste cooking oil from Restaurant Technologies, Inc., which counts McDonald's (Charts), Albertsons (Charts), Applebee's (Charts) and Chili's, which is owned by Brinker (Charts), among its customers.

Once the fuel is refined, it can then be sold for use. The company projects that the first plant will return profits of around $2.5 million a year at full capacity, assuming production of 5 million gallons of biodiesel.

But "like any fuel, biodiesel must meet exacting commercial fuel specifications or it can cause engine failure," Jobe said. "Consistently producing high quality fuel is not a given."

The first plant will open in Orlando, Fla., in December and the company is planning on 40 more in the U.S.

More than 87 biodiesel plants operate nationwide, according to the NBB.

Annual biodiesel production reached 75 million gallons in 2005, three times the 25 million gallons produced in 2004, according to the NBB.

According to a study by Rand Corp., a nonprofit research group, the U.S. could get a quarter of its energy from renewable sources such as biodiesel by 2025.

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