Advanced BioFuels USA

(Hellenic Shipping News)  Some US refiners are considering adding sustainable aviation fuel to their renewable diesel production plans, spurred by higher demand from airlines seeking lower carbon footprints and the likelihood of increased policy support, some analysts said.

“Jet and diesel are going to typically be priced very similarly, so to entice RD producers to produce some volume of SAF, the government will need make the subsidies for SAF production higher than those for RD,” said Robert Auers, senior analyst at energy consultant Turner, Mason & Company.

The Biden Administration proposed Sept. 9 a $1.50-$2.00/gal federal tax credit for SAF, followed by release of an excerpt from the Build Back Better Act by the House Ways and Means committee on Sept. 10 proposing a $1.25/gal SAF tax credit.

Some refiners have expressed hesitation about adding SAF, concerned about lower margins and returns due to higher costs for additional equipment, lower value renewable credits, and lower prices for SAF.

But more incentives could make it easier to justify increased costs.

“In order to invest additional money to add SAF production capability, RD producers will have to feel confident that SAF will have more subsidies than RD over the long term,” Auers added.

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As more new renewable fuels projects are announced, feedstock supply tightens and RD and SAF producers seek to lock in supply.

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While lower carbon intensity feedstocks like beef tallow and used cooking oil are more valuable, soybean oil is most in demand due to availability, despite a drop off in production.

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RINs are credits bought by refiners and other transportation fuel suppliers under the Environmental Protection Agency’s Renewable Fuel Standard to meet renewable volume obligations, or RVO, that aren’t met by through blending renewables into gasoline and diesel.

SAF currently generates 1.6 D4 biomass diesel RINs, compared with RD’s 1.7 D4 RINs, giving RD the advantage.

So far in Q3 2021, RD holds a 16.55 cent/RIN premium over SAF, up from the 14.02 cent/RIN premium in Q2, Platts price assessment data shows.

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Auers said the SAF decision is based on evaluating the economics to produce SAF versus 100% RD, adding that most RD projects are being built with the ability to eventually produce some SAF easily, although some extra investment will still be needed.

“Most of the facilities, even with new investment, would not be able to produce 100% renewable jet easily, but could likely get to a about a 50/50 mix of SAF/RD with a fairly low amount of investment,” Auers added, noting once the investment made refiners would be able to make “operational changes to vary this ratio as economics dictate.

Chevron is co-processing 2,000 b/d of biofeedstock at its El Segundo, California, refinery, producing its first batch of SAF last week, according to Mark Nelson, head of downstream speaking on Chevron’s Sept. 14 Energy Transition Spotlight webcast.   READ MORE