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Top 5: Feedstock Shortage for Biomass-Based Diesel?

03.18.20 | Blog | By:

Hello friends! Here’s my monthly take on five most interesting developments in fuels and vehicles trends. What I try to do each month is select stories, studies and other interesting items that you may not have seen elsewhere but that really represents an important issue or trend that I think you would want to know about. Or, I try to poke behind the hype to provide a deeper understanding of what’s happening. Items I selected this month include:

  • ICCT Biomass-Based Diesel Analysis: A new analysis from ICCT finds the amount of BBD that could be produced from domestically available fats, oils, and greases will be 1.84 billion gallons in 2020, increasing to 1.97 billion gallons in 2032, a 13% increase compared with 2018.
  • Clean Hydrogen Alliance: As part of its recently announced industrial strategy, the EU Commission is putting its weight behind a new hydrogen alliance that will launch this year.
  • Midwest LCFS: Biofuels, EV and other industries have joined to create a Midwest Clean Fuels Standard plan that may show up in state legislatures as early as next year.
  • More Hydrogen Breakthroughs: Japanese scientists have found a way to efficiently produce (by up to 25 times) hydrogen fuel by using rust and a light source.
  • E20 in Europe: A recently completed study has shown that it is possible for new vehicles and those going back to 2011.

1. ICCT: Potential Biomass-Based Diesel Production in the United States by 2032 — One of the biggest issues I’ve been working on in my consulting practice over the last year is related to the scale up of renewable diesel (RD also known as hydrogenated vegetable oil or HVO). Who is investing? Where are the facilities going to be and what are their capacities? What low carbon intense (CI) feedstocks are available and what is their likely supply and demand situation over the next 10+ years? So I thought clients and blog readers alike would be interested in this new analysis from the International Council on Clean Transportation on the feedstock issue that it hopes U.S. EPA will consider in setting future biomass-based diesel (BBD) targets under the Renewable Fuels Standard (RFS).

ICCT found in this analysis that the total potential BBD production from the seven most common feedstocks for biomass-based diesel production in the U.S. is projected to increase by about 16 million gallons, or 1% a year from 2018 to 2032. The amount of BBD that could be produced from domestically available fats, oils, and greases will be 1.84 billion gallons in 2020, increasing to 1.97 billion gallons in 2032, a 13% increase compared with 2018. That’s far below planned capacity for RD right now, which I peg at about 5-6 billion gallons at least. I consider that a conservative estimate.

The projected volume in 2032 of 1.97 billion gallons of BBD that could be produced from domestically available feedstocks is even smaller than the 2020 and 2021 BBD obligation of 2.43 billion gallons specified by the EPA. The gap between BBD availability and the RFS-driven volumes might be even higher as additional BBD could be needed to meet the advanced biofuel obligation, reflecting pressure from the ethanol blend wall. Continued increases in BBD and advanced biofuel volume obligations are likely to add pressure to domestic BBD feedstock markets, leading to price increases and feedstock switching.

Potential BBD production from the estimated feedstock availability of FOGs

(million gallons biodiesel equivalent)

Source: ICCT, February 2020

The ICCT notes that overall impact of higher obligations could thus result in significant GHG emissions from the production of low-cost substitute feedstocks. Furthermore, obligated parties in the U.S. would need to increase imports of BBD feedstocks, or BBD, or both to meet higher obligations. Thus, setting BBD volumes low would enable RFS to meet its stated intention of reducing GHG emissions and improving national energy security.

Feedstock Inputs to Biodiesel Production in the U.S.

Source: ICCT, February 2020

Key findings for each feedstock follow:

  • Soybean Oil: The growth of soybean oil production in the U.S. has outrun its increasing use for food, industrial products, and net exports, leading to an increase of 1.9 billion pounds, or 27%, of soybean oil available for BBD production cumulatively from 2018 to 2032.
  • Canola Oil: Domestic production of canola oil is expected to increase as for food and industrial products. Canola oil availability for BBD will decrease in 2019 and then increase slowly, by 45 million pounds, or 4%, cumulatively in 2032 compared with 2018.
  • Distiller’s Corn Oil: Domestic production of distillers corn oil (DCO) is projected to peak around 2020. Meanwhile, DCO consumption in livestock feed is likely to increase, leaving less of it available for BBD production in the United States. The 2018–2032 decrease will total 0.37 billion pounds, or 20%.
  • Inedible Tallow: Although inedible tallow production is likely to increase, the ICCT expects its non-BBD use in livestock feed, industrial products, and pet food to increase to a greater extent. This is projected to reduce the availability of inedible tallow for BBD production by 0.5 billion pounds from 2018–2032, or 40%.
  • White Grease: Production of white grease is likely to increase, and use of white grease in livestock feed, industrial products, and pet food will also expand. We project that white grease availability for BBD production will rise slightly in 2019, followed by a decline through 2032. We estimate the availability in 2032 to be 18 million pounds, or 3% lower than the availability in 2018.
  • Poultry Fat: Poultry fat production will increase through 2032, but its consumption in livestock and pet food will also rise, reducing its availability for BBD production by 49 million pounds, or 32%, in total from 2018 to 2032.
  • Yellow Grease: The ICCT expects production of yellow grease, or used cooking oil, to increase and its consumption in livestock feed and industrial products to grow as well, but only slightly. They estimate growth in yellow grease availability for BBD production of 0.72 billion pounds, or 51%, collectively from 2018 to 2032. This result suggests that yellow grease has the potential to surpass corn oil and become the second-largest feedstock for BBD production in the U.S. The ICCT notes that the availability of yellow grease for BBD production is likely to have declined in 2019 but now is projected to rise by 48 million pounds a year, reaching 2.1 billion pounds yearly in 2032.

2. Euractiv: EU Announces ‘Clean Hydrogen Alliance’ for Launch in the Summer — As part of its Industrial Strategy for Europe, the EU Commission plans to create a Clean Hydrogen Alliance which will kick off this summer, Euractiv notes in this article. Grounded in the already announced European New Green Deal, the industrial strategy seeks to:

  • Create certainty for industry through a deeper and more digital single market;
  • Uphold a global level playing field;
  • Support industry towards climate neutrality;
  • Build a more circular economy;
  • Embed a spirit of industrial innovation;
  • Ensure skilling and reskilling; and
  • Invest and finance the transition to a net zero economy by 2050.

The Clean Hydrogen Alliance will bring investors together with governmental, institutional and industrial partners. The Alliance will build on existing work to identify technology needs, investment opportunities and regulatory barriers and enablers. It will be modelled on the European Battery Alliance, which brought together more than 200 companies, national governments and research organizations around battery manufacturing. Euractiv notes the Commission’s principal adviser on energy, Tudor Constantinescu, said “hydrogen may be a missing link in the energy transition” because it can help decarbonize process industries and heavy-duty transport: aviation, maritime and long-haul trucking. Meantime, Germany is planning its own hydrogen strategy, and Portugal has announced it will develop a hydrogen target for transport.

3. U.S. News & World Report: Ethanol and Electric Vehicle Advocates Merging on Fuel Plan — Biofuels, EV, auto, agriculture, NGOs and other advocates have been meeting for the last couple of years on the potential for a Midwest Clean Fuels Standard (CFS). This article details those discussions and notes that CFS legislation could be introduced in Midwest states in 2021 legislative sessions. Minnesota has a governor-appointed biofuels council exploring how to expand biofuels use while increasing carbon efficiency. The article notes that the Great Plains Institute, which facilitated the discussions, released a paper recently on the CFS. Principles for the CFS include the following:

  • Market-Based Approach: Design a market-based approach while remaining fuel and technology neutral, relying on a portfolio of clean fuels including biodiesel, ethanol, renewable natural gas, electricity as a transportation fuel, hydrogen, and other renewable and low-carbon fuels. Design the policy based on the lifecycle assessment (LCA) of fuels using the GREET model.
  • Regional Factors: Consider regional factors in the Midwest, including the impact of renewable electricity development on the electric grid, current production practices at biofuel facilities, adoption of farming practices that impact soil organic carbon and nitrous oxide emissions, and current and aspirational biofuel blending levels.
  • Point of Regulation: A point of regulation should be selected that avoids placing a burden on small fuel retailers and simplifies compliance as much as possible.
  • Regional Coordination: States that move forward with a clean fuels policy should work together to achieve a coordinated approach in the Midwest and beyond.
  • Benefits for clean fuel producers. The focus of a clean fuels policy is on supporting development and use of clean fuels, and clean fuels producers should be the credit-generating entities under the program in most cases.
  • Renewability: States should consider a minimum renewability requirement (e.g., 30 percent renewable) for clean fuels participating in the program.
  • Administrative Efficiency: Because of the importance of operating an administratively lean program and ensuring collaboration with programs in other regions of the country, Midwestern states should consider a surgical approach to approving fuel pathways that starts with pathways approved in other states and then makes changes to specific emissions factors where it is justified.
  • Consistent Approach: Midwestern policies should take a consistent approach across all clean fuel types.
  • Indirect Accounting: Indirect accounting (or book and claim) has unique potential for incentivizing decarbonization of electricity and natural gas in the Midwest due to abundant but distributed wind, solar, and biogas generation.

This could be a game-changer for the struggling biofuels industries, provide a boost for electrification and renewable energy and opportunities for oil companies that are looking for investments to decarbonize. The collaboration here among these industries is important and so is the inclusive vision. It’s what the federal government, through the Congress, should be doing but is not. If the federal government continues to fail to lead, then it is to the states and cities to figure it out. And that’s what they are doing.

Meantime, Oregon’s governor issued an executive order that would, among other things, double the state’s Clean Fuel Standard. Read more about that here.

4. Science Alert: Scientists Find a Way to Make Hydrogen Fuel Production 25x More Efficient — Japanese scientists have found a way to efficiently produce hydrogen fuel by using rust and a light source, this article notes. The set-up uses just a few basic ingredients: light from a mercury-xenon lamp, a solution of water and methanol, and a type of rust (or iron oxide) called α-FeOOH. In a new study, researchers have outlined how this method yields 25 times more hydrogen than existing techniques that use titanium dioxide catalysts. By swapping titanium with rust, the hydrogen gas generated seemed to be blocked from recoupling with oxygen, making the separation of the elements easier and reducing the risk of explosion at the same time.

5. Horizon: Why Raising the Alcohol Content of Europe’s Fuels Could Reduce Carbon Emissions — The European Committee for Standardization (CEN) commissioned research looking at the costs and benefits of introducing E20, according to this article. The project found that all vehicles coming into the market and those since 2011 can handle E20. Under the EU’s Renewable Energy Directive, 10% of the fuel used in transport will need to come from renewable sources such as biofuel by the end of 2020. The 2018 revision of this directive (REDII) set a target of 14% renewable energy use in all transport by 2030. Most member states allow E5 blends, but a few have moved to E10, most recently Denmark, Hungary, Lithuania and Slovakia.

The researchers also estimated that if all 28 EU countries (the UK was still part of the EU at the time of the study) adopted E20, it could reduce GHG emissions by the equivalent of 25.4Mt (megatons) of CO2 – about 8.2% of the current emissions from gasoline in the EU. They estimated that further savings could be made if the fuel’s petrol component had a higher-octane rating of 102 – most fuel on sale today has an octane rating of 95. Yes, you read that right – 102 octane. Kind of interesting considering the stall out of discussions on 95 RON in the U.S.

What I’m Also Reading:

  • Pathways Toward Realizing the Promise of All-Solid-State Batteries: In a review article published in the March 2020 issue of Nature Nanotechnology, nanoengineers at the University of California San Diego offer a research roadmap that includes four challenges that need to be addressed in order to advance a promising class of batteries—all-solid-state batteries—to commercialization.
  • Adding Carbon to the Equation in Online Flight Search: This study explores the potential to promote lower-emissions air travel by providing consumers with information about the carbon emissions of alternative flight choices in the context of online flight search and booking.
  • Destination: Zero Carbon: This paper looks at three strategies for decarbonizing transportation in the U.S., which includes a phase out of fossil fuel vehicles, electrification and active transport (walking, cycling, etc.).

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.

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