The U.S. is poised for a massive buildout in renewable diesel production capacity — a boom spurred by increasingly supportive government policies and a big push by ESG-minded refiners wanting to reduce the carbon footprint of their operations. It also hasn’t hurt that while renewable diesel is produced from used cooking oil, tallow, and other renewable feedstocks, it meets or exceeds the fuel specifications of traditional ultra-low sulfur diesel and thus is considered a “drop-in” replacement for ULSD — there’s no “blend wall” that limits its use. In the encore edition of today’s RBN blog, we discuss highlights from our recent Drill Down report, which looks at why renewable diesel is a hot topic, what we can learn from California’s Low Carbon Fuel Standards program, and how much new renewable diesel capacity is in the works.
In observance of today’s holiday, we’ve given our writers a break and are revisiting a recently published blog on our Drill Down Report on Renewable Diesel. If you didn’t read it then, this is your opportunity to see what you missed! Happy Holidays!
Last year, when COVID caused demand for transportation fuels to wilt, refiners saw utilization rates tank and several refiners shuttered operations, either temporarily or permanently. And as the refiners gauged their next steps given uncertain future demand, announcements for renewable diesel conversions really picked up steam (see Where Are You Going). Just about every refiner is thinking about renewable diesel these days, and it was a key topic in our recent School of Energy, and for good reason — there are the large financial incentives provided by California’s Low Carbon Fuel Standard (LCFS) and the U.S. Biodiesel Tax Credit, which can make renewable diesel production highly profitable. The U.S. does not have a federal LCFS policy in place. However, at the national level we do have the Renewable Fuel Standard (RFS), which mandates a Renewable Volume Obligation (RVO; see Money for Nothing for more info on RVOs) that must be met every year. [The Environmental Protection Agency (EPA) said November 18 that it would extend deadlines for refiners to comply with RFS obligations from 2019 and 2020. Its proposed biofuel volumes for program years 2020, 2021 and 2022, were announced December 7.] Driven by these factors, there’s a lot of renewable diesel production capacity under construction or on the drawing board: From greenfield projects to expansions of existing renewable diesel refineries to conversions of old-school refineries to make renewable diesel and coprocessing within existing facilities.
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