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Could Renewable Diesel’s Boom Be Cut Short by Feedstock Access and Availability?

Submitted by on April 11, 2016 – 9:59 amNo Comment

by Jim Lane (Biofuels Digest) … Renewable diesel demand is booming, booming, booming. We’ve tipped it repeatedly in The Digest, not least with our March Madness webinar last week on “Renewable Diesel’s Boom”. Any doubts may well have been swept aside at the end of last week, when Darling Ingredients announced an expansion of the Diamond Green Diesel facility in Norco, LA. DGD is the Company’s joint venture with Valero Energy Corporation. The expansion will grow the facility’s annual production capacity from 160 million gallons of renewable diesel to 275 million gallons.

The incremental cost per gallon of renewable diesel production for the expansion is estimated to be approximately one-half of the green field construction cost due to significant logistics and processing facilities already in place. This expansion plan is expected to be funded by DGD cash flow and is subject to final engineering and cost analysis.

Renewable diesel is a true hydrocarbon just like diesel and meets ASTM International’s standard for Diesel Fuel Oils (D-975). It has a different molecular structure from biodiesel, which is a methyl-ester. Because of this structural difference, renewable diesel is a superior product with a higher cetane index than typical ultra-low sulfur diesel (ULSD), and unlike biodiesel, an energy density value equivalent to ULSD.

Renewable diesel can be distributed using the established petroleum pipeline system, while biodiesel requires truck or rail transport. Additionally, renewable diesel has no cold-flow issues and won’t thicken and clog engines in cold weather as may happen with biodiesel.

Now, let’s rain on the parade

We’re running out of feedstock to feed the growth. Fast. Despite deep potential reserves outlined last week in “Make Haste with Waste”, the grease side of the equation is proving hard to tap, according to Peter Behrle, President of Lantern Environmental.

Behrle took issue with a stat quoted in last week’s Digest

Waste fats
24 million tons
19 MT recoverable
4.3B gallons – fuels

Behrle comments, “I think your numbers above include all parts of rendered livestock, including both the solids and the oil produced by renderers. Only the oil is currently relevant. The solids are used for pet food and livestock feed. The actual amount of yellow grease and animal fats produced in the US averaged 1.25 billion gallons from 2009-2014 (per Render Magazine). The amount of yellow grease and animal fats produced annually is not growing. It is a relatively mature business. Of the amount produced, per the EIA, about 355 million gallons (28.4%) were used for US biodiesel production in 2015, leaving only about 900 million gallons of this material available for additional biofuel production.

Of Diamond Gren’s expansion?

“The good news is that Diamond Green has been successful enough to expand and will be producing a great deal more renewable diesel as early as 2018. The bad news is that Darling, a 50% owner of Diamond Green and the world’s largest renderer, will be using more of the oils they produce internally and they will not be available to other producers. Diamond Green alone will be using 275 million (22%) of the 1.25 billion gallons of available waste grease produced in the US.”

He adds, “REG has a significantly growing nameplate capacity. They key is how much of their capacity can they actually keep in production.

New supplies of feedstocks must be developed, such as trap oil, DAF oil, camelina, jatropha, etc. in order for the biofuel industry to grow appreciably. Not many noticed that Mexican and Brazilian jatropha oil were conditionally approved as RIN-producing pathways by EPA for biofuel in 2015 … . However, none of the new feedstock possibilities are currently close to making enough of a volume difference to move the feedstock needle. The failure of algae oil thus far is a major disappointment for a feedstock that many thought would pan out.  READ MORE

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