Renewable Diesel Boom Highlights Challenges in Clean-Energy Transition

March 03, 2021

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by Rod Nickel, Stephanie Kelly and Karl Plume (Reuters) ... Refiners can produce renewable diesel from animal fats and plant oils, in addition to used cooking oil. Production capacity is expected to nearly quintuple to about 2.65 billion gallons (63 million barrels) over the next three years, investment bank Goldman Sachs said in an October report.

Rising demand is creating both problems and opportunities across an emerging supply chain for the fuel, one small example of how the larger transition to green fuels is upending the energy economy. A renewable diesel boom could also have a profound impact on the agricultural sector by swelling demand for oilseeds like soybeans and canola that compete with other crops for finite planting area, and by driving up food prices.

But the feedstock supply squeeze is constraining the industry’s ability to comply with those efforts.

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‘SPINNING FAT INTO GOLD’

Demand and prices for feedstocks from soybean oil to grease and animal fat is soaring. Used cooking oil is worth 51 cents per pound, up about half from last year’s price, according to pricing service The Jacobsen.

Tallow, made from cattle or sheep fat, sells for 47 cents per pound in Chicago, up more than 30% from a year ago. That’s boosting the fortunes of renderers such as Texas-based Darling Ingredients Inc and meat packers such as Tyson Foods Inc. Darling shares have about doubled in the last six months.

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Valero’s renewable diesel segment, however, posted a profit, and the company has announced plans to expand output. Marathon is seeking permits to convert a California refinery to produce renewable fuels, while PBF is considering a renewable diesel project at a Louisiana refinery.

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Goldman Sachs estimates that an additional 1 billion gallons of total capacity could be added if not for issues with feedstock availability, permitting and financing.

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A spokesperson for Neste said the company sees more than enough feedstock supply to meet current demand and that development of new feedstocks can ensure supply in the future.

SOYBEAN, CANOLA BOOM

Renewable diesel producers are increasingly counting on soybean and canola oil to run new plants.

The U.S. Agriculture Department (USDA) is forecasting record-high soybean demand from domestic processors and exporters this season, largely because of soaring global demand for livestock and poultry feed.

Crushers who produce oil from the crops are also scouring Western Canada for canola, helping to drive prices in February to a record futures high of C$852.10 per tonne. Soybeans reached $14.45 per bushel in the United States last week, the highest level in more than six years.

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Manitoba canola grower Clayton Harder said it is hard to envision a vast expansion of canola plantings because farmers need to rotate crops to keep soils healthy. Farmers may instead have to raise yields by improving agronomic practices and sowing better seed varieties, he said.

British Columbia refiner Parkland Corp is hedging its bets on feedstock supplies. The company is securing canola oil through long-term contracts, but also exploring how to use forestry waste such as branches and foliage, said Senior Vice President Ryan Krogmeier. READ MORE

Engine experts argue Biden's federal fleet transition should include internal combustion (CCJ)

Used cooking oil, a renewable fuels feedstock, nearly 'tapped out' in U.S. -Valero (Reuters)

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food prices food processing waste tallow animal fat Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel plant oil used cooking oil (UCO) aggregation Renewable Diesel Production supply chain soybean prices soybeans Canola/Rapeseed environmental policy energy policy Transportation Fuels Policy Canada Clean Fuel Standard/Policy (CFS) White House Carbon Intensity (CI)/Carbon Footprint LCFS (Low Carbon Fuel Standard) grease FOG (Fats/Oils/Grease) California repurpose oil refineries BioRefineries/Renewable Fuel Production Louisiana Finland Department of Agriculture (USDA) livestock chickens Manitoba British Columbia forest residue/waste Investing Green Jobs markets/sales market forces Sustainability

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