US refiners and biofuel companies likely to miss renewable diesel production

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US refiners and biofuel companies likely to miss renewable diesel production

REUTERS Mike Blake File Photo

According to a study released Tuesday from Cerulogy, the US refiners and biofuels companies are likely to reach less than half of the renewable diesel production projected by the U.S. government for 2025 due to policy and feedstock constraints.

A growing market backed by government incentives, a number of petroleum refiners across North America are planning to convert facilities to process waste and vegetable oils into renewable fuels.

The Energy Information Administration estimates renewable diesel production capacity in the United States could increase fivefold by 2024 from 1 billion gallons per day to more than 5 billion gallons per year.

Cerulogy believes that the projects are more likely to yield around 2 billion gallons of total renewable diesel production capacity in 2025, meaning that at least 2 billion gallons of already announced capacity additions are likely to be delayed, canceled or downsized.

Achieving the EIA predictions would be exceedingly difficult, and would require heavy reliance on feedstock imports and a very significant reduction in production of biodiesel - a biofuel that is made from similar feedstocks but blended with petroleum-based diesel - according to Chris Malins, who wrote the report backed by the International Council on Clean Transportation.

Achieving the EIA forecasts would require an increase of 17 million metric tons of additional demand for fats, oils, and greases for renewable diesel, mainly by diverting waste oils and fats from traditional biodiesel production, increasing U.S. soy oil production and increasing U.S. vegetable oil imports, the report said.

By 2022, the Renewable Fuel Standard will generate 1.3 billion gallons of renewable diesel.

While the U.S. EPA believes that the fuel reduces greenhouse gas emissions compared to petroleum diesel, several parties are concerned that the increased demand for the oils needed to create it will cause indirect land use change and cause food prices to go up.

Malins said that the annual production of 2 billion gallons of renewable diesel by the year 2025 is a high-end estimate for what can be achieved without market distortions.

Policies meant to promote renewable diesel are not strong enough. The U.S. Renewable Fuel Standard and state policies such as California's Low Carbon Fuel Standard are intended to achieve growth in renewable diesel.

The U.S. Environmental Protection Agency has highlighted the risk of a worsening of the market if the supply of biomass-based diesel is increased, according to Malins.