by Jordan Godwin (OPIS/SAF Magazine) ... As renewable diesel producers in a suddenly crowded space trudge through lackluster margin conditions in 2024, they’re increasingly eyeing the possibility of switching to SAF. Considering the current size of the SAF market, taking on new volumes from renewable diesel could provide meaningful growth.
In 2023, renewable diesel volumes used to generate renewable identification number (RIN) credits under the Renewable Fuel Standard topped 2.9 billion gallons, a 52% jump from 1.9 billion gallons in 2022, according to data from the U.S. Environmental Protection Agency. Through the first half of 2024, volumes totaled 1.6 billion gallons, well on pace to top 2023’s record. However, margins that regularly topped $2 per gallon in those early years of growth have dwindled to well below $1 per gallon for much of 2024.
In contrast, SAF volumes totaled a little more than 26 million gallons in 2023, a small increase from less than 16 million gallons in 2022, EPA data shows. At the 2024 midpoint, SAF volumes topped 51 million gallons, already nearly doubling 2023’s total volume, but we’re still a far cry from the expectations set forth in recent years.
At least 43 airlines have committed to use about 4.3 billion gallons of SAF in 2030, according to the International Air Transport Association. The Biden Administration in its 2021 SAF Grand Challenge set a goal of boosting domestic SAF production to 3 billion gallons per year by 2030. In July, the U.S. Energy Information Administration increased its forecast for SAF production to reach 51,000 barrels per day (b/d), or 460 million gallons, in 2025, up from 19,000 b/d (30.6 million gallons) in 2023.
So, where’s this anticipated growth coming from? Largely, from existing renewable diesel producers switching to SAF. Phillips 66 said in June that its Rodeo facility in California had reached its target of 50,000 barrels per day of renewable fuel, of which 10,000 barrels per day are SAF. That ratio of renewable diesel to SAF production has to date been the optimal formulation for renewable diesel producers, according to refinery consultant Andy Lipow, president of Lipow Oil Associates.
RD, SAF Ratios
Lipow said the lightest part of renewable diesel in the production process can be distilled off to make SAF at the expense of renewable diesel, but extra equipment is required. He said refineries have several important factors to consider when weighing whether to produce more renewable diesel or more SAF. “When you think about SAF versus renewable diesel, you always go back to the traditional refinery model where you’re looking for the best possible margin,” Lipow said. “Just like when refiners are making decisions around what kind of crude to process and products you want to make, you have to produce the fuels that make the most sense.”
When refineries produce more SAF, Liplow said, they also make more renewable naphtha and renewable liquefied petroleum gas, which is “worth way less” than renewable diesel. Lipow also pointed out that SAF generates only 1.6 RIN credits per gallon, while renewable diesel typically generates 1.7 RIN credits per gallon.
...
Lipow added that SAF producers would be wise to target states that offer SAF incentives, such as Illinois, Washington, Minnesota and Nebraska. READ MORE
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