Measuring the Uncertainty of Renewable Diesel Projects

December 21, 2020

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by Dave Collings (1898 & Co./Burns & McDonnell) Renewable diesel — also known as green diesel, hydrotreated vegetable oil, or hydrotreated esters and fatty acids — has now gained widespread attention throughout the world. This growing interest is turning into action as existing renewable fuels companies build grassroots facilities and purchase idle refineries. Oil companies are also busy coprocessing, building new facilities, repurposing refineries, and converting diesel hydrotreaters and hydrocrackers to renewable diesel units.

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U.S. oil companies have long been challenged by the cost of renewable identification numbers (RINs). Today’s pandemic increases the pressure on the industry to explore the sustainable business options of renewable investments.

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The formula appears simple for the average oil company: Take advantage of the LCFS market, offset renewable identification number (RIN) obligations and benefit from the Blender's Tax Credit.

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Renewable diesel comes with an enormous number of economic variables, including feedstock availability, RIN pricing, capital expenditure escalation, product pricing and future legislation. As renewable diesel production accelerates, producers must look beyond the five-to-10-year horizon and consider myriad factors, such as:

Carbon intensity of the renewable diesel facility and feedstock
Procurement of the desired feedstocks
Emerging feedstocks
Risks associated with renewable diesel production
Current and future markets for renewable diesel
Variability of feedstock and product price
Outlook for the Blender’s Tax Credit, California LCFS and RINs

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Organizations developing, constructing and commissioning new renewable diesel plants must consider various market conditions to avoid poorly made investments. READ MORE