Biointermediates and U: A Potential Step Change in Advanced Biofuel Economics

by Antoine C. Schellinger (Biofuels Digest/ International Alliance Group) ... The EPA has performed lifecycle analysis on certain pathways and published them in the CFR as approved pathways. They are labeled with sequential alphabetical characters and currently range from A to T. These proposed rules contemplate a new pathway U.

Entities who produce petroleum based fuels are assessed a renewable volume obligation (RVO). The lifecycle of a RIN begins when it is generated alongside a gallon of renewable fuel, detached and moved to an obligated party, and then retired by the obligated party against their RVO.

The simplest manner this can happen is where the obligated party, a petroleum fuel producer, produces the renewable fuel as well. The current rules generally prohibit the petroleum fuels producer from using the same processing equipment to produce renewable fuels. The proposed rules relax this restriction. Under the self-production case, there is virtually no transaction cost from generation to retirement. However, the majority of RINs travel from a producer to an obligated party via either direct contractual relationships or through a market-maker. Many entities have stepped into the middle-men roles leading to accusations of RIN hoarding and price manipulation.

Biointermediates

The EPA has proposed to allow for the transfer of biointermediates from one registered facility to another. Currently this is not allowed due to restrictions contained within the facility registration requirements. Facility registration requires that the entire pathway be completed on a single site. For a biomass-fed facility, this effectively limits the size of a processing facility due to the economics of feedstock aggregation.

Industrial Sugars
There are a wealth of hydrolysis technologies available today. A hydrolysis technology generally converts cellulosic biomass into industrial sugars. There are a number of variants of the technology, but they all aim to accomplish this basic task. Intuitively, the liquid sugar product is far more energy dense than the biomass it was created from.

If the proposed rules are adopted, a more economical supply chain can be developed; one where many distributed hydrolysis plants are installed, each with a reasonable radius of biomass collection. Then multiple batches of liquid sugars would be trucked to a more centralized fermentation center. This allows for the fermentation center to be larger, now that it is less constrained by biomass aggregation issues, and to have greater efficiency through economy of scale.

Bio-Crudes
Bio-Crude, as used here, is a crude-like substance that can be fractionated and processed into traditional transportation fuels using established upgrading technologies employed in a typical refinery.

For bio-crude to be RFS2 complaint, it must be made from an eligible feedstock as laid out in the various pathways: agricultural oils (ag-oils), algae, waste greases, crop residue, tree residue, short-rotation trees (if that portion of the NPRM is adopted), switchgrass, separated food waste. For a complete feedstock listing, consult the regulations.

Similar to sugars, the final upgrading of bio-crude into finished transportation fuels can be limited in size by the facility registration requirements and the economic collection radius of waste greases, tree or crop residues. In this case, the raw materials can be converted into an energy-dense liquid bio-crude that is economic to transport to a central processing facility. Depending on the intricacies of specific technologies, some bio-crudes are even eligible for pipeline transport.

All of which leads to the question, if my bio-crude is similar enough to petro-crude, then why wouldn’t I simply process it in an existing refinery? That leads us to the proposed Pathway U.

However, a refiner is currently prohibited from producing cellulosic diesel, jet fuel, or heating oil and generating a corresponding RIN. This is due the statutory definition of these products prohibiting them from being co-processed with petroleum.

Under the greenhouse gas (GHG) reduction targets of the program, there should be no resistance to flowing bio-based fuels through an existing refinery. The same reduction in GHG is achieved whether the materials are processed in a stand-alone bio-only facility or whether they were processed in a comingled fashion. One might argue that greater GHG reductions are achieved in the latter due to efficiency gains stemming from economy of scale. The proposed rules recognize this incongruity and seeks to remedy it through the creation of Pathway U.

Co-Processing of Ag-Oils & Algae-Oils Remains Prohibited: The persistence of pathways F & H

If soybean oil is hydrotreated at a stand-alone facility, it generates a D4 RIN. If the same material is hydrotreated within a refinery, it generates a D5 RIN despite possibly having a greater GHG reduction. With the breakdown of the co-processing barrier proposed in new pathway U, it is vexing why the artificial barrier remains for selected feedstocks.

... EPA should continue to interpret rules that encourage and mimic an integrated post-RFS2 supply chain. In that vein, we ponder the following questions.

Questions that Remain

1. What is the rationale of adding short-rotation trees to pathway L, while excluding them from pathway U? Short-rotation trees have shown great promise to be an economic and reliable source of biomass feedstock for renewable fuels. Using them to feed a processing facility that involves co-processing or not, the only difference between the pathways, does not seem to affect their advantageous status as a GHG-reducing feedstock.

2. There remains a slight penalty for co-processing biofuels with their petroleum equivalents, albeit a much reduced penalty. Under revised pathway L, a D7 RIN is generated. Under new pathway U, a D3 RIN is generated. The only difference between a D7 and D3 RIN is their flexibility in use. A D7 RIN, for which there is no corresponding obligated volume, can be converted to either a D3 RIN or a D4 RIN. In general, D3 and D4 RIN’s have similar commercial value. However, why is the flexibility withheld from an entity that chooses co-processing?

3. Why did the co-processing of ag-oils get excluded from the co-processing routes? If all agree that the GHG reduction benefits are achieved through the co-processing of cellulosic biomass, as proposed in pathway U, then isn’t the co-processing of ag-oils the same? The modification of existing pathway F to remove the co-processing exclusion appears to be an appropriate move. READ MORE