Used Cooking Oil Industry: The Impact of Environmental Sustainability on Its Growth

Highlights:

• Introduction
• Reasons behind the increasing preference for UCO recycling
• Use of UCO for biodiesel production

Used cooking oil, as the name suggests, refers to the fats and oils that have been used for cooking or frying different food products. Naturally, used cooking oil is produced in households, commercial enterprises such as restaurants and hotels, and end-use sectors such as food processing industries. In the last few decades, the pace of urbanization and industrialization has increased considerably. This has significantly changed the dietary habits of people living in metropolitan cities and industrial towns. The busy lifestyles of people in urban areas have surged the demand for fried foods and processed products, thus increasing the use of cooking oil in domestic and commercial sectors.

The gradual shift toward used cooking oil recycling impacting the industry positively

The used cooking oil (UCO) industry is expected to gather a sum of $11.8 billion by 2034. The landscape held a revenue share of $6.4 billion in 2023 and is expected to rise at a CAGR of 5.8% during 2024-2034. Since the last few decades, the awareness regarding environmental sustainability has increased significantly. Furthermore, international agreements such as the Paris Climate Accords have compelled countries to declare their net zero emission targets. As a result, several governments across the globe have enacted legislation and regulations that seek to decarbonize their economy. Naturally, the focus on used cooking oil recycling has increased with several companies investing in advanced technologies and innovations in the industry.

The rising adoption of UCO recycling technologies has led to a substantial decrease in the volume of waste generated by restaurants, food processing companies, and households. As per a survey, there are more than 600,000 hotels and fast-food chains in the US alone. The amount of UCO being thrown away by these commercial enterprises every single day has several negative environmental implications for aquatic ecosystems in the region. At low temperatures, UCO solidifies into chunks, thus clogging drainage pipes and ducts. In populated urban areas such as metropolitan cities, this choking of sewage systems creates huge problems in waste management architecture. In this context, specialized businesses have emerged as UCO aggregators, collecting waste materials from restaurants and hotels for recycling.

The rise of UCO aggregator businesses has proved to be a win-win situation for both recycling companies and restaurants. From the perspective of recycling companies, these aggregators act as intermediaries that connect all hotels in a locality, thereby creating a network of all the stakeholders. On the other hand, fast-food chains and eateries earn extra revenue by selling used cooking oil to these aggregators, thus diversifying their income sources.

Used cooking oil for biodiesel production

Over the years, the growing environmental consciousness has led to a shift away from conventional fossil fuels. In contemporary times, there is an increasing demand for biofuels from various end-use industries such as transportation, manufacturing, mining, etc. This has created numerous growth opportunities for the used cooking oil industry as UCO has proven to be a viable and cheap raw material for biodiesel production. Governments across the globe have launched schemes and programs to promote the use of biofuels produced from UCO and other similar fats. For example, several agencies such as the US EPA, Department of Energy, and Department of Agriculture have rolled out plans to connect hotels, aggregators, recycling plants, biodiesel refineries, and petrol pump stations to ensure a smooth transition to these eco-friendly fuels.

In August 2019, three premier state-owned petroleum companies in India, viz., Bharat Petroleum, Indian Oil, and Hindustan Petroleum unveiled a program to procure used cooking oil from private entities operating in 100 cities. Subsequently, in May 2021, Shri Dharmendra Pradhan, the then Minister of Petroleum & Natural Gas and Steel, flagged off the first supply of UCO-based biodiesel from Tikrikalan Terminal owned by Indian Oil in Delhi. The EOI scheme for procurement of biodiesel manufactured from UCO aims to create an overarching framework to collect and convert these fatty acids into biofuels.

Heavy investments by leading private players helping the industry flourish

In the past few years, private companies have played a major role in expanding the scope of the used cooking oil industry. While certain businesses have invested heavily in this landscape, other enterprises have focused on establishing strategic alliances with their peers to strengthen their foothold in the sector. In November 2022, for example, Neste, an engineering services company, announced the acquisition of UCO aggregators and collectors from Crimson Renewable Energy Holdings, LLC., a biofuels manufacturer. As per Matti Lehmus, President and CEO of Neste, the acquisition is in line with the company’s commitment to invest in green energy technologies.

Similarly, in March 2023, Olleco Bunge, a full life-cycle oil collection business, issued a press release stating that it had acquired two major UCO collectors in Spain, viz., Discoil, S.L., and Rafrinor, S.L. The strategic merger of these two enterprises is expected to help Olleco Bunge expand its operations in Europe in the coming period.

In summary, the used cooking oil industry is expected to gather significant revenue in the coming period due to the gradual transition toward biofuels and other such eco-friendly products. The growing awareness regarding sustainability and advancements in urban waste management techniques is anticipated to augment the growth rate of the sector in near future.

Contact our experts for the growth drivers and investment opportunities in the industry!

Related Post