A Fuel Value over $7.00 per Gallon, and Everyone’s Chasing It: The Birth of USA Bioenergy and the Surge in Renewable Diesel

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November 21, 2018

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by Jim Lane (Biofuels Digest) In California, we are now seeing project flow projecting a sustainable $7.63 price for renewable diesel in the California market, where the Low Carbon Fuel Standard stacks on top of the RIN values from the federal Renewable Fuel Standard.

That’s market value, not subsidy. Though some die-hards might still insist that renewable fuels should only be sold based on energy value, not on market value, as in for example the markets which Californians freely established for themselves with the Low Carbon Fuel Standard, and in which any fuel producer can avoid carbon taxes and no one is guaranteed a subsidy. Yes, Californians have different standards for fuels than other states. But then again, some people drink bottled water at $6 a gallon and some drink tap water for pennies. Up to you — that’s how markets work.

The limitation that everyone is talking about is feedstock. At some stage, there’s not going to be a drop of tallow or other waste oils anywhere near the state of California; the economics are certainly there to begin to compete for veggie feedstocks such as soybean oils, but most of the newer projects have been wary of utilizing anything at scale that looks like it will be in long-term competition with food markets — problems with price swings and the optics of food-vs-fuel are usually cited.

For that reason, one of the top execs at one of the major players (that is, the “north of 300 million gallons per year” club predicted that the industry will begin to tilt towards wood-based feedstocks, especially residues. In some cases for finished fuels, in others as a source for a biocrude that can be refined by the bigger players.

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For diesel, the big trucking firms are always on the radar and of course the major oil refiners with their large obligations under RFS to blend renewable fuels. In some ways, truck stops have the upper hand, if they can handle the supply volumes, because they are not themselves obligated parties under the US Renewable Fuel Standard, meaning they can buy the fuel, and detach and sell the RINs in the open market. For that reason, fuel retailing firms are the untapped resource that can push renewable fuels to new heights. READ MORE

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