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Expansion of US renewable diesel output limited by feedstock constrains

22 January 2022

The potential for further expansion of US renewable diesel production capacity is limited by feedstock availability, as well as by insufficient support from existing renewable fuel policies, according to a new report by the clean fuel consultancy Cerulogy prepared for the International Council on Clean Transportation (ICCT).

The United States is in a period of rapid expansion of vegetable oil hydrotreating capacity, which will greatly increase the potential to supply renewable diesel and renewable jet fuel under the US Renewable Fuel Standard (RFS), biomass-based diesel blenders tax credit, California Low Carbon Fuel Standard (LCFS), and other state-level policies. A number of projects are already under construction or have been announced to increase the renewable diesel production capacity. If this capacity expansion could be delivered, US renewable diesel production capacity would increase from just under 1 billion gallon a year to more than 5 billion gallons per year by 2024.

However, limits on feedstock availability and limits on the support available for renewable diesel production mean that actually delivering the full announced capacity expansion will be problematic, according to the report. The market will not support a 5 billion gallons industry as soon as 2024—if ever. This suggests that the next five years will see some projects delayed or canceled, and some running far below nameplate capacity.

Predicted increases in US soy oil production could support about 300 million gallons of renewable diesel production, and increased utilization of waste and residual oils another 150 million gallons. Beyond this, increasing production would mean either dramatic unforeseen expansion of domestic soy and canola area, dramatic increases in canola and palm oil imports, or massive displacement of feedstock from other uses (or a combination of the three). Domestic biodiesel production is likely to be strongly impacted, with waste oils and fats in particular diverted to renewable diesel production for supply to the US West Coast.

Even if only a half or a third of the announced capacity is delivered, there is a high risk that the increased US renewable diesel production will indirectly drive expansion of palm oil in Southeast Asia, where the palm oil industry is endemically associated with deforestation and peat destruction. Consuming millions of metric tons of additional vegetable oil could cause tens of thousands of hectares of deforestation, the report said. With ongoing deforestation in Southeast Asia and other regions, there is a risk that this could cause net carbon emissions rather than savings.

Source: Cerulogy