Renewable Diesel Projected to Turbo Charge Biofuel Growth

September 29, 2022

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by Kenneth Scott Zuckerberg (CoBank) • By producing fuel using sources with lower carbon intensity compared to traditional petroleum based products, the U.S. biofuels sector is well-positioned to play a major role in reducing greenhouse gas emissions.

The recently enacted Inflation Reduction Act is expected to boost biofuels by providing tax credits and funding to develop next-generation biofuels, including renewable diesel and sustainable aviation fuel.
While electric vehicle adoption may eventually reduce demand for ethanol – which currently dominates U.S. biofuel production – prices of lithium batteries are surging due to supply shortages. Higher battery prices will likely slow demand for EVs and extend the time frame for mass EV adoption, cushioning the rate at which EVs disintermediate ethanol fuel.
Driven in part by major oil companies’ embrace of renewable diesel, numerous stakeholders have announced plans for new soybean crush and refinery projects over the past two years. If these projects come to fruition, RD capacity would grow more than six-fold to 6.5 billion gallons per year by 2030.
The expected growth in soybean oil-based renewable diesel will require considerably more soybean bushels for domestic crush. To satisfy this demand, the U.S. would need to (theoretically) stop exporting whole soybeans while planting 17.9 million additional acres of soybeans (21% larger than the current crop) to satisfy the incremental biofuel demand.
Besides importing soybeans, the alternatives to shifting massive farm acreage would include growing other types of oilseeds (such as canola and sunflower) at a larger scale, importing other vegetable oils, and/or using other feedstock such as beef tallow to produce renewable diesel fuel. Read the Report READ MORE; includes VIDEO

Renewable Diesel Projected to Turbo Charge U.S. Biofuel Growth: As efforts to reduce greenhouse gas emissions accelerate, U.S. biofuels sector is positioned for expansion (CoBank/Globe Newswire)

Renewable Diesel Aims to Turbo Charge U.S. Biofuel Growth (USAgNet/Wisconsin Ag Connection)

Renewable fuels face supply challenge -- Turning to crop-based fuels is becoming more popular, but it raises interesting questions, like: Are there enough soybeans? (Farm Progress)

Excerpt from CoBank/Globe Newswire: By producing fuel using sources with lower carbon intensity than traditional petroleum-based products, the U.S. biofuels sector is well-positioned to play a major role in reducing greenhouse gas emissions. According to a new report from CoBank’s Knowledge Exchange, the recent surge of investments in U.S. renewable diesel production capacity is likely to ignite a period of growth and transition for the biofuels industry.

“The outlook for biofuels is favorable as the U.S. and other leading developed countries embrace renewable liquid transportation fuels as a solution to reduce greenhouse gas emissions,” said Kenneth Scott Zuckerberg, lead grain and farm supply economist for CoBank. “Renewable diesel offers the most intriguing opportunity in the biofuels space, given the extraordinary growth potential.”

As major oil companies have begun embracing renewable diesel, U.S. production is expected to increase exponentially. Several industry stakeholders have announced plans for new soybean crush and refinery facilities over the last two years. Soybean oil is the feedstock most commonly used for producing renewable diesel. Combined, the proposed crush and refinery projects would increase U.S. renewable diesel production capacity six-fold by 2030 to 6.5 billion gallons annually.

However, the expected growth in soybean oil-based renewable diesel requires considerably more soybean bushels for domestic crush. CoBank estimates that U.S. soybean acreage would need to increase by 17.9 million acres to fill the supply gap created by the additional crush and refinery projects that have been announced. Additionally, the U.S. would need to stop exporting whole soybeans.

Alternatives to a massive shift of acres from corn to soybeans would include growing other oilseeds like canola and sunflower on a larger scale, importing other vegetable oils, or using other feedstocks such as beef tallow to produce renewable diesel fuel.

Biofuel production has grown nearly 8% every year over the past 15 years, driven by tax credits and targeted government programs, including the federal Renewable Fuel Standard (RFS) Program and California’s Low Carbon Fuel Standard (LCFS). The Inflation Reduction Act of 2022 will increase usage of renewable energy in general, and biofuels in particular.

Biodiesel and renewable diesel are 50%-55% less carbon-intensive than traditional petroleum diesel. Although renewable diesel and biodiesel have similarly low carbon scores, renewable diesel offers the additional benefit of being used as a “drop-in” fuel. That means it does not require additional blending with petroleum diesel, which is required before biodiesel can be used by commercial engines. As a drop-in fuel, renewable diesel does not require any modifications to older engines, a key attribute for increased adoption.

Read the report, Renewable Diesel Projected to Turbo Charge Biofuel Growth.

About CoBank

CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 76,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore. READ MORE