by Jim Lane

What in the world has gone right with Gevo?

For years now, Gevo (Nasdaq:GEVO) has remained true to a vision of low-carbon, advanced renewable fuels, when so many others pivoted away to the world of ABF — Anything But Fuels. Some tried chemicals, cannabis, algae, natural gas, nutraceuticals, vegan foods — lately, protein has been all the rage. Gevo was one of the few true believers and paid the price of stock price punishment and near-extinction, for years.

While they weathered a debilitating patent battle with DuPont, until it settled and DuPont imploded. And the collapse of oil prices when the frackers arrived, until many of the frackers imploded. Not to mention the joys of investor impatience as Gevo battled to stabilize their technology at the first commercial deployment in Luverne. The years when no investor believed that carbon prices were here to stay and that low-carbon technology represented a quantum leap in shareholder value creation. The years when the RFS and the LCFS and the Paris climate agreement were unknown to the many and disdained by the few. The years when everything was going electric ‘next year’ and then ‘next year’ and ‘next year’.

Gevo persevered with their technology, and a focus on renewable hydrocarbons, as their stock on a ride through the Valley of Dilution. The company’s many fans stubbornly kept the firm in the upper echelons of the 50 Hottest Companies in the Advanced Bioeconomy. The management kept costs trimmed, laid out a plan for deployment, and waited for the storms to pass. And as was said in Casablanca, “waited and waited and waited.”

The stock dipped to just 49 cents a share last summer, after a series of dilutions, as it assembled a series of impressive offtake agreements, ultimately reaching $1.5B late last summer, and the company raised $50 million in a new share offering. A Praj partnership expanded, and a Koch partnership appeared. The company’s shelf of Whitebox debt was repaid.

And, finally, the stock began to rise as the prospects that Gevo would finally deploy at the scale necessary for thriving, not just surviving, seemed at hand. Gevo announced its Net Zero Project.

Just as the world took notice that all these Net Zero promises coming from companies of late could not be satisfied by a mountain of wind and solar, because those technologies have very small carbon footprints but they are not zero. For every wind and solar project, you need to offset with something carbon negative, and that’s something found in biology. Not to mention, renewable fuel projects can be low carbon, too, even when they are not carbon negative, and the investment returns can look pretty darn good when you sell the resulting fuels into low-carbon markets.

And so, Gevo began to rise, and rise and rise and rise. Back to a dollar a share by November. Four dollars a share in December, and $13.24 a share as of January. A market cap soaring to $2B this past week.

I had a conversation earlier this month with a large investment fund, they were looking for value investments in the renewables space — given how high many of the players had gone. He hadn’t heard of GEVO, which I recommended to his attention. I sure hope he bought it, in volume, the price has doubled since that call.

All of this growth has allowed the company to raise $350 million in a share offering this past week — 43.7 million shares at $8 per. Gevo’s back to being a Wall Street darling after The Wilderness Years, as the 1930s were described with respect to Winston Churchill, who sat in the shadows as unjustly and as long.

Is Gevo back? No, Gevo never left. What’s happened? Those things that Gevo long predicted — a future where renewable fuels would do good, and do well — have come to pass. If they are crowing triumphantly for a few days at their reversal of fortune, we’ll not say a word in criticism, for it has been a long stretch of sailing in the Doldrums, but tomorrow it is back to work.

Net Zero Projects

As Gevo outlined recently, it plans to build Net Zero Projects to produce energy-dense liquid hydrocarbons using renewable energy and Gevo’s proprietary technology. Gevo is currently developing its Net-Zero 1 Project at Lake Preston, South Dakota. Gevo management said they expect Net-Zero 1 would have the capability to produce approximately 45 million gallons per year of liquid hydrocarbons (jet fuel and renewable gasoline) that when burned should have a “net-zero” greenhouse gas footprint as measured across the whole of the lifecycle based on Argonne National Laboratory’s GREET model.

In addition, Net-Zero 1 is expected to produce at least 350,000,000 lbs/yr of high protein animal feed. To reduce and eliminate the fossil resources used in the plant, it is expected to have an anaerobic digestion wastewater treatment plant that is capable of generating enough biogas to run the plant and supply a combined heat and power unit, capable of meeting approximately 30% of the plant’s electricity needs. The remaining 70% of electricity to run the plant is expected to come from wind power. Net-Zero 1 may also obtain renewable natural gas using manure from dairy or beef cows.

Here’s the latest Gevo presentation explaining the what, how, who and when of their deployments and partnerships.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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Yay or Nay for EPA? RFS Volumes out for 2020, Biodiesel for 2021 – What’s the reaction from industry?

by Jim Lane

What’s the reaction from industry? Coal for Christmas?

Should Santa bring coal for EPA’s stocking this year? Do the biofuels and agriculture industries think the EPA just put coal in their stocking? Is it thumbs up or thumbs down from biofuel industry advocates on last week’s U.S. Environmental Protection Agency renewable fuel volumes? What about the exempted volumes?

The Ruling – Rotten or Respectable?

First, a bit on the EPA ruling that establishes the required renewable volumes under the Renewable Fuel Standard (RFS) program for 2020, and the biomass-based diesel volume for 2021. Here are the numbers from EPA:

^a All values are ethanol-equivalent on an energy content basis, except for BBD which is biodiesel-equivalent.

The key elements of the EPA action are as follows:

• “Conventional” biofuel volumes, primarily met by corn ethanol, will be maintained at the 15 billion gallon target set by Congress for 2020.
• Cellulosic biofuel volumes for 2020, and thus advanced biofuel volumes, will increase by almost 170 million gallons over the 2019 standard.
• Biomass-based diesel volumes for 2021 will be equivalent to the standard for 2020, still more than double the statutory requirement.
• EPA will closely examine the labeling requirements for E15 fuel and move forward with clarifying regulations as needed.

According to the EPA press release:

Through this rule, EPA has modified the RFS program by projecting small refinery relief to ensure that these final volumes are met, while adjudicating small refinery relief when appropriate. As proposed, we are finalizing a projection methodology based on the 2016-2018 annual average of exempted volumes had EPA strictly followed the Department of Energy (DOE) recommendations of 770 million Renewable Identification Numbers (RINs) in those years, including granting 50 percent relief where DOE recommended 50 percent relief. This is our general approach to adjudicating Small Refinery Exemption (SRE) petitions going forward, beginning with 2019 SRE petitions and including 2020 SRE petitions and beyond, we are committed to following the DOE recommendations. By proposing effectively 15.8 billion gallons for 2020 we will ensure meeting our target of 15 billion gallons.

“Through President Trump’s leadership, this Administration continues to promote domestic ethanol and biodiesel production, supporting our Nation’s farmers and providing greater energy security,” said EPA Administrator Andrew Wheeler. “President Trump committed to our nation’s farmers that biofuel requirements would be expanded in 2020. At the EPA we are delivering on that promise and ensuring a net of 15 billion gallons of conventional biofuel are blended into the nation’s fuel supply.”

EPA has modified the way RFS obligations are determined to better ensure that these volumes are met, while still allowing for relief for small refineries consistent with the direction provided by Congress under the statute. By proposing effectively 15. 8 billion gallons we will net out at 15 billion.

More information can be found on the EPA website here.

Reactions from the Industry

Ok, so now that we know the numbers, what’s the reaction? Sure, there are increases in the volumes but is it enough?

Overall consensus is no, not even close. But it’s not just the volume numbers that have folks up in arms – it’s the small refinery exemptions. The EPA is counting only half of the exempted volumes actually granted over the past three years.

Just a taste of what they are saying:

The EPA is playing games…

They blew it…

They’ve missed the mark…

Disappointed, frustrated, and quite frankly angry…

This is not what we agreed to in that meeting on Sept. 12 or Oct. 4…

Trust has been lost…

EPA has decimated demand for more than 4 billion gallons of renewable fuel…

We’ve gone from promises of a giant package to the reality of a lump of coal…

Stifles investment in green energy breakthroughs…

Leads to more uncertainty for renewable fuels…

We will keep holding EPA’s feet to the fire…

I don’t think the White House truly understands the depth of discontent in farm country…

Here’s more on what key players in the biofuels industry had to say:

Growth Energy asks EPA to take further action

“While the final rule provides an uptick in federal biofuel targets and signals an intent to account for demand lost to oil refinery exemptions, Growth Energy stressed that the agency must enforce those volumes by accounting for exemptions accurately and that EPA Administrator Wheeler must take additional steps to uphold the administration’s October 4th commitments to rural America.”

“President Trump pledged to deliver certainty and stability for America’s farmers and biofuel producers by restoring integrity to the RFS,” said Growth Energy CEO Emily Skor. “While we’re encouraged that EPA is finally taking steps to follow the law and account for biofuel demand lost to secretive oil refinery exemptions, this rule leaves important work unfinished.

“Integrity is restored to the RFS only if the agency accurately accounts for exemptions it will grant. The rule uses an accounting formula based on Department of Energy recommendations, which EPA has a poor track record of following. All eyes will now be on EPA’s next round of refinery exemptions and future targets, which will signal whether Administrator Wheeler is truly committed to ending demand destruction.

“Additionally, Administrator Wheeler must act swiftly to break down remaining market barriers to E15 as promised in the October 4th EPA announcement. When the RFS is working as intended and government has eliminated market access barriers, drivers across the nation will able to take full advantage of the administration’s move to unleash sales of E15 year-round.”

National Biodiesel Board disappointed with lack of growth in 2020 RFS volumes

The NBB said that the EPA rule blocks growth for the biodiesel industry and Kurt Kovarik, NBB’s VP of Federal Affairs, said, “EPA’s final rule for the 2020 RFS volumes is simply out of step with Congressional intent and President Trump’s promises. This week, Congress and the president are extending the biodiesel tax incentive through 2022 and sending an unmistakable signal that they support continued growth of biodiesel and renewable diesel. At the same time, EPA Administrator Wheeler is doing everything he can to block that growth.”

Kovarik continued, “Despite his statement to the press, Administrator Wheeler’s method for estimating future small refinery exemptions does not provide assurance to the biodiesel and renewable diesel market. The best estimate of future exemptions is an average of the 38 billion gallons exempted over the past three years. Even if EPA had included that estimate, though, there is nothing in today’s rule to ensure that the agency will get these exemptions under control.”

BIO says EPA’s rules are leading to more uncertainty, stifles investment in green energy

“Unfortunately, this final rule from EPA does not alleviate concerns we had when the draft rule was published earlier this year,” said Stephanie Batchelor, VP of BIO’s Industrial and Environmental Section. “The lack of growth for advanced and cellulosic biofuels, and the failure to fully reallocate the gallons lost from the drastic expansion of small refinery exemptions, will continue to stifle investment in green energy breakthroughs. This final rule will have a long-lasting negative impact on the country’s renewable fuels industry as we’ve already seen plants close because of the agency’s manipulation of the policy to date.”

Iowa Biodiesel Board says biodiesel flatlined in final rule and future small refinery exemptions underestimated

Grant Kimberley, executive director of the Iowa Biodiesel Board, said, “The EPA rule does not provide positive signals to a market longing for assurance. EPA’s actions have already decimated demand for more than 4 billion gallons of renewable fuel, including biodiesel and renewable diesel. With this final rule, the agency has once again declined to uphold the integrity of a federal law meant to encourage the use of renewable fuels in America, siding with oil company interests at the expense of family farmers. Ten biodiesel producers have closed their doors or drastically cut production due to loss of demand.”

“In addition to our discouragement over lack of growth, the industry does not have confidence in EPA Administrator Andrew Wheeler’s plan for estimating future small refinery exemptions, based on EPA’s past actions. There is no assurance these exemptions will be brought under control or properly accounted for. Meanwhile, we stand ready to meet continued sustainable growth of several hundred million gallons every year.”

Iowa Renewable Fuels Association says EPA rule fails to restore RFS integrity, Trump turns back on previous promises

“President Trump turned his back on certainty for farmers and failed to keep the September 12 deal,” stated Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw. “Instead of certainty, we are essentially being told to trust the EPA to uphold the RFS in the future even though for the past three years the EPA has routinely undermined the program. Every farmer and biofuel supporter I have talked to is deeply disappointed, frustrated, and quite frankly angry. I don’t think the White House truly understands the depth of discontent in farm country.”

In order to remove EPA discretion from the process, biofuels supporters united behind a plan to account for SREs using a three-year rolling average of actual refinery exemptions granted. President Trump agreed to this plan in a September 12 Oval Office meeting with Midwestern elected officials, including Iowa’s Governor and Senators. Today, however, President Trump sided with EPA’s alternative plan which relies on using a three-year rolling average of U.S. Department of Energy (DOE) recommendations for SREs, which EPA has routinely ignored and is under no legal obligation to follow.

“IRFA today called upon the EPA to immediately post DOE recommendations – past, present and future – on their SRE website dashboard,” stated Shaw. “Market participants must have faith in the process and must know whether or not EPA is following the DOE recommendations. Further, to prevent any entity from gaming the system, this information should be made public to all market participants at the same time. In just a few months, EPA will begin adjudicating the 2019 compliance year SREs. It will be their first opportunity to demonstrate good faith and we’ll be watching very, very closely.”

Click here to see IRFA’s full letter to the EPA.

American Coalition for Ethanol calls RFS rule a failure to uphold President’s biofuel deal

American Coalition for Ethanol (ACE) CEO Brian Jennings said, “Over the course of the past few months, we’ve gone from promises of a ‘giant package’ to the reality of a lump of coal. To say we are disappointed is an understatement. While it was well understood this rulemaking would not make farmers and the ethanol industry ‘whole’ for the damage EPA has done by abusing the small refinery exemption provision of the RFS, we were led to believe the rule would represent a step in the right direction, an opportunity to account in a meaningful way for refinery waivers.

“We are forced yet again to continue defending the RFS and fighting EPA’s mismanagement of the program in the third branch of government, but this is another painful reminder our industry needs to go on offense with a new plan to increase demand on ethanol’s low carbon and high octane advantages.”

National Corn Growers Association’s President, Kevin Ross, said, “The Administration has chosen to move forward with a final rule that corn farmers believe falls short of adequately addressing the demand destruction caused by EPA’s abuse of RFS refinery waivers. While using the DOE recommendations to account for waivers is an improvement over the status quo, it is now on corn farmers to hold the Administration to their commitment of a minimum of 15 billion gallon volume, as the law requires. We will use future rulemakings and other opportunities to hold the EPA accountable.”

Renewable Fuels Association’s President and CEO, Geoff Cooper, “After EPA’s overwrought abuse of the SRE program in recent years, agency officials had a chance to finally make things right with this final rule—but they blew it. EPA’s rule fails to deliver on President Trump’s commitment to restore integrity to the RFS, and it fails to provide the market certainty desperately needed by ethanol producers, farmers, and consumers looking for lower-cost, cleaner fuel options. While the final rule is an improvement over the original proposal, it still does not guarantee that the law’s 15-billion-gallon conventional biofuel blending requirement will be fully enforced by EPA in 2020.”

POET’s Senior Vice President of External Affairs and Communications, Kyle Gilley, said “Today was a missed opportunity to finally restore clarity to the ethanol and grain markets, but more opportunities lie ahead in 2020. With these 2020 RVO levels now finalized, our near-term focus shifts to implementation of the remainder of the President’s critical biofuels package: ensuring 15 billion gallons means 15 billion blended, deploying an infrastructure package, changing the pump label, and reforming the fuel survey.”

Iowa Senator Chuck Grassley said, “Once again, EPA is playing games and not helping President Trump with farmers. An agreement was reached on September 12 in an Oval Office meeting between several Midwest leaders, President Trump and other members of his Administration. This does not reflect what we agreed to in that meeting.”

“The magic words from the Oval Office meeting were three-year rolling average based on hard data and actual waived gallons. Abiding by this would have solved all the problem’s EPA has created.”

Iowa Senator Joni Ernst said, “Throughout this process, I, along with Senator Grassley and Governor Reynolds have made it crystal clear that Iowa’s farmers and biofuel producers need certainty that EPA will follow the law. After shaking hands in the Oval Office this fall, EPA had an opportunity to restore the broken trust of farmers and to follow through on the president’s commitment, but it appears they’ve missed the mark…again. We were guaranteed a deal in September, and we were assured of that same deal in October, yet EPA rolled out, and has now finalized, a different proposal. It’s no wonder trust has been lost.

“We will keep holding EPA’s feet to the fire to ensure they truly uphold the RFS, the law, as intended and fully implement the other critical aspects of this rule.”

U.S. Rep. Collin Peterson (D-MN), Chairman of the House Agriculture Committee, said, “At a time when our agriculture economy is struggling, the EPA has ripped 4 billion gallons of ethanol out of the market and impacted corn prices and rural communities. We also have yet to see the other things that were promised to the biofuels industry and corn farmers to get more ethanol into the market via infrastructure incentives and policies related to higher ethanol blends.”

RNG Coalition welcomes EPA’s biofuel targets

On the other hand, the Coalition for Renewable Natural Gas (RNG Coalition) said they welcomed the EPA cellulosic biofuel targets for 2020, but they are certainly not in the majority among the biofuel and agriculture industries.

“The RFS has helped spur the remarkable growth of America’s RNG industry. We welcome today’s final rule providing for a 41% percent increase in the program’s cellulosic biofuel target, and we appreciate the Administration’s willingness to promote the expanded production and use of cellulosic biofuels,” stated Escudero.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Debra Fiakas, CFA

The aviation industry contributes about $2.7 trillion to the world’s gross domestic product.  It may seem like a big number, but that is only 3.6% of the world’s wealth.  Aviation may be a minor player in terms of creating wealth, it is a big culprit in climate change.  Flying around the world accounts for as much as 9% of humankind’s climate change impact.  Indeed, compared to other modes of transportation, flight has the greatest climate impact.

The negative impact of carbon emitted by aircraft is made even worse by the fact that the emissions point is mostly at cruising altitudes high in the atmosphere.  High-altitude emissions are considered to be more harmful because the chemical reactions there create a greater net warming effect.  The Intergovernmental Panel on Climate Change (IPCC) estimates that the climate impact of aircraft is as much as four times greater than the effect of the carbon emissions alone.

Several companies have attempted more environmentally friendly jet fuel.  Honeywell (HON:  NYSE) acquired Universal Oil Products (UOP) in 2005, and subsequently announcing in 2008, UOPs ‘ecorefining’ process for converting vegetable oils into diesel and jet fuel replacements.  Since then Honeywell-UOP has announced several high profile customers for its jet fuel, including the U.S. Navy’s Green Hornet, United Airlines, Quantas Airlines and among others.  Still Honeywell concedes its jet fuel will reduce greenhouse gas emissions by only 65% to 85% based on their own internal analysis.

Neste Oyj (NESTE:  HE) has developed its own version of sustainable aviation fuel it calls MY Renewable Jet Fuel.  Like Honeywell-UOP’s product, Neste’s jet fuel is compatible with existing jet engine technology and is considered a fuel that can be ‘dropped in’ to existing distribution and handling infrastructure.  Neste uses a variety of feedstock for its bio-jet fuel, including used cooking oil, waste fish fat, animal fats and corn oil.  The end result is a cleaner burning fuel that emits as much as 80% less greenhouse gas emissions than jet fuel made with petroleum.

Even small-fry Gevo, Inc. (GEVO:  Nasdaq) is getting into the sustainable jet fuel business.  In August 2019, Gevo announced an agreement to supply France’s Air TOTAL International SA with a jet fuel based on Gevo’s proprietary renewable isobutanol.  Gevo fractionates grain and ferments the residual carbohydrate portion to produce bio-isobutanol that is then processed further into jet fuel.  Given Air TOTAL’s position as a leading aviation fuel distributor, Gevo may be very well positioned beyond its historic share of the renewable fuel market.

Gevo has not yet achieved profitability so even its brilliant distribution relationship with Air TOTAL might not be enough to get risk adverse investors to take a position.  The more mature Neste is trading at 24.2 times trailing earnings, which may seem a bit pricey until the stock’s 2.5% current dividend yield is taken into consideration.  At 21.2 times its trailing earnings Honeywell’s stock is a bit cheaper.  Its 2.0% current dividend yield is not hard to swallow either.

For those investors who cannot decide on the basis of valuation alone, a sustainability rating might help.  Sustainanalytics puts Honeywell in the 59^th percentile in terms of environmental sustainability.  The rating was determined against a peer group of 29 companies.  But the same rating scheme puts Neste in the 79^th percentile among its peer group of 37 companies.  Given its renewable fuel and chemicals focus, Gevo would probably like to be considered among the most environmentally friendly companies.  However, Sustainanalytics gives it no rating at all.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 11/19/19 as “Flying High on Organics.”  

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Challenges and Opportunities in Biofuels

By Steve Hartig, Former VP of Technology Development at ICM

The North American biofuels market can be split into three main segments all of which have major dynamics.  What I would like to do is give a high-level overview of what I see as some of both the challenges and opportunities across these.

• Ethanol which is a produced from corn and sorghum in about 200 plants mainly across the Midwest and blended at about 10% with gas.  Majors such as POET, Green Plains, Flint Hills, Valero, ADM and Cargill do a bit more than half of the 16 billion gallons production with the rest done mainly by farmer co-op plants.  An average plant size is about 80 mln gpy.  About 10% of gasoline is ethanol.   Cellulosic ethanol is the newer area which has had many challenges but companies such as POET DSM are producing some volumes from crop residues and Lanzatech from gas streams.
• Biomass based diesel produced mainly from vegetable oils and waste fat in a large number of plants, typically rather small, across the US with the market leader being REG.  Total volume sold in the US, per the EPA was 2.3 bin gallons, in 2018 or about 4-5% of the total diesel supply.  Actual capacity is much larger at 4.1 bln gallons.
• Bio jet fuel which is still embryonic but an interesting are with about 25 bln gallons of potential.  What is exciting is that this area is likely to grow in volume over time and alternative approaches such as electrification are difficult for aircraft given the weight of batteries so this is a long term and growing market for biofuels

Challenges for the corn ethanol and biodiesel producers are very much around profitability and the regulatory environment while the embryonic cellulosic and jet fuel areas still has many technical challenges to prove viability.

Corn Ethanol

There is a huge challenge today due to oversupply versus demand driving prices down.  There is much arguing as to the cause of this but it seems to be a combination of low or no growth in gasoline demand, significantly added ethanol capacity, a slow uptake of higher-level ethanol blends and the EPA Small Refinery Exemptions.  This is aggravated by the dynamics in corn pricing this year due to weather.

Unless E15 volume increases significantly, things are only going to get worse as essentially all forecasts show gasoline volume decreasing over the coming five to ten years driven by increased fuel economy in the short run and vehicle electrification in the long term.

Forecasting what will happen is difficult as ethanol is very different than most commodity chemicals due to the relatively small plant size, driven by corn supply economics, and the large number of companies active in it.  In most commodity chemicals markets, a handful of companies control the market and new entrants are difficult due to the lack of economies of scale.  However, continued consolidation and the closing of smaller, less efficient and poorly located plants will continue.

The starting point for surviving any downturn and long term sustainable profit will be having a plant with a low cost position driven by a combination of scale, plant technology, location, operational excellence and strong maintenance.  The difference between leaders and laggards here can be over $.10 per gallon, which is huge.

However, the likely winners will be those that also embrace some form of specialization next to the commodity markets for ethanol, distillers grains and corn oil.

A number of options exist and this is also an exciting area of focus for many companies.

Main areas include:

• Moving towards higher value animal feed by fractionating the distillers grains into more focused animal feeds.   Options for this exist from many suppliers including ICM and Fluid Quip Process Technologies.  Both companies take an approach of splitting the DDGS into two streams, one a high protein feed product targeted at poultry, swine and aquaculture and the remainder being either a DDGS at the low end of the protein specification or a wet fiber and syrup product targeted at cattle.   The value comes from the fact that the higher protein product more competes with soy rather than corn and  can capture a higher price.  Both companies have multiple installations in place and claim paybacks in the 2-4 year range.  Considerations for installing these technologies would include plant scale and geographic location with proximity to cattle allowing the use of wet feed an advantage.

• Towards the future, options will include using stillage as a fermentation broth such as both White Dog Labs and KnipBio are developing.  Both companies are focused on using the relatively inexpensive stillage to produce single cell proteins aimed at aquaculture.  These products can potentially compete with fish meal which a$1500/ton and is also limited in growth potential. White Dog Labs has announced an initial installation in Nebraska while KnipBio has announced a cooperation with ICM towards commercializing their technology.

• Focusing on California and the increasing low carbon fuel markets.  Today, with the value of a carbon credit close to $200, a plant with a CI of 75 can get a premium of over $.25 per gallon.  There are only a few plants in the 60’s but many in the mid 70’s.  Typical approaches include alternative power sources such as land fill gas or anaerobic digestion to biomethane combined with cogeneration of electricity and steam.  Other options include solar or biomass boilers.  A newer approach is the use of membrane technology to reduce the energy used in the molecular sieves or alternatively modifications to the evaporators.  The keys when considering this approach would include a good starting point with plant efficiency and the cost of west coast shipment.

• Using the ethanol plant as a platform to produce other products.  Edeniq has a number of plants producing cellulosic ethanol from corn fiber while both ICM and D3Max have their first, larger scale, plants under construction.   Cellulosic ethanol from corn fiber is much lower cost to produce than cellulosic ethanol from crop residues or energy crops.  Edeniq has no capex and claims a cellulosic ethanol amount of 3-4% while both D3Max and ICM indicate levels more in the range of 7-8% but have significant capital.   However, the payback can be short given a combination of a D3 RIN and potential LCFS credit.  Another alternative in the future may be butanol with Gevo (NASD:GEVO) and Butamax both having demonstration facilities up and running.

I believe these options will be a game changer for the industry but companies must make the right choice based on starting position, plant location, scale and technology, risk tolerance, operational capabilities and capital availability.  A key item for many of these is that they will typically create a more complex plant and business environment which can require a higher level of staffing, capability and management expertise.

I think the future can be bright for ethanol but I foresee a future that likely has fewer, larger and more sophisticated plants than are in place today.

Biomass based diesel

Biomass based diesel (BBD) has very different dynamics with about 100 plants in the US, some of which are very small, less than 10 mln gallons per year.  Many of the plants are driven by location by feedstocks, either soy or corn oil or waste fats and greases.  Demand for BBD is very much driven by the RFS as it typically costs more than petroleum-based diesel but can fulfill either the D4 BBD RIN or the Advanced D5 RIN.  This is particularly the case with the biodiesel tax credit lapsing in 2017 and, at least so far, not being renewed.

The big change going on now is the shift towards renewable diesel, presently about 15% of total BBD, which is more costly to produce but is essentially a drop in for diesel and can have lower carbon numbers, depending on feedstocks.  Due to the lower CI it is being heavily targeted at California for sale under the Low Carbon Fuel Standard.  In addition, it can capture a greater RIN value.

The plants scheduled to come on line over the next few years is mind boggling given today’s position.  Expansions planned or proposed by Diamond Green (a joint venture between Darling Ingredients (DAR:  NYSE) and its joint venture partner Valero Energy (VLO:  NYSE)), NEXT Renewables, RYZE, Philips 66 (NYSE:PSX)/Renewable Energy Group (NASD:REGI) and others could add up to 2 bln gallons of new Renewable Diesel volume focused on West Coast markets and almost doubling the total volume of BBD volume.  This is in addition to global expansions in biodiesel by companies such as Neste and companies coprocessing it in oil refineries.

Selected US Renewable Diesel Projects

Note:  Project information from company websites and public announcements

This will have significant impacts on the market:

• The total diesel fuel market is not expected to grow much, per the EIA, so this fuel will need to displace petroleum-based diesel which may negatively impact pricing.   There also is more capacity than there are RINs available which will have a downward impact on that.  On the plus side, is the LCFS which is spreading beyond California and will bring a carbon credit.  REG indicated in their 10k that the 2018 value was between $.40-.80 per gallon.

• Regulation unclarity will continue between the RFS volume obligations, tax credits, trade policy, and the Small Refinery Exemptions which appear to have more impact on BBD than ethanol.  Right now, several smaller BBD producers are not operating due to lack of profitability.

• How about feedstocks?  Right now BBD uses a combination of soy oil, corn oil and waste fats and greases.  BBD today uses about a third of the US soy oil supply so this will clearly impact pricing and availability certainly in the shorter run.  What will aggravate this is that all the feed streams are byproducts of other processes so cannot be increased on their own along with all the dynamics hitting soy on the trade side.  The EPA in their draft 2020 RVO estimates that from 2019 to 2020 feedstock availability would be enough to produce about 144 men gallons of advanced biodiesel and renewable diesel.

I think this business will continue to have challenges in the future and it is also likely not all the plants proposed will be built but the trend towards renewable diesel will continue.

Bio-jet Fuel

Bio jet fuels have a completely different environment that ethanol and biodiesel both as they are presently not mandated by the government and also as they are in an earlier stage of technical development.

There are three broad technology areas that cover much of the effort.  Most technologies would produce a fuel that could be blended at some level with standard jet fuel.

1. Renewable diesel/oil to jet—This process is an additive process to biobased diesel taking the diesel and cracking it, isomerizing it and then purifying the end product.
2. Alcohol to jet—Basically taking an alcohol, either ethanol or butanol, and then dehydrating it to remove the extra oxygen and then catalytically or chemically converting this to jet fuel.  The advantage of this is the ethanol routes are well developed so only the final process step is new.  Potentially this could consume some of the excess ethanol in the market but that would likely be with a penalty to CI compared to routes such as LanzaTechs using cellulosic feed streams.  Players here include Gevo, LanzaTech and Byogy.
3. Gas to liquids—the typical routes here are gasifying a biomass or MSW stream into syngas and then using technology such as Fischer Tropsch to convert it to jet fuel.  Pyrolysis is another alternative.  This is earlier stage technology but has the potential for very low carbon due to feedstocks and will have wide feedstock availability.  Players here include Red Rock Biofuels and Fulcrum.

Selected US Jet Fuel Projects

The diesel fuel route is clearly the one with the fewest technical hurdles but will run into the same feedstock issues that biodiesel has if it moves to any significant volumes.  Alcohol to jet would be the next most straightforward while it seems like the gas the liquids route has the best carbon footprint and also feedstock potential.  However, it is unclear what the cost will be and what technical hurdles they will hit.

The next five years will see major learning taking place as commercial plants for many of these technologies are underway.

What makes bio jet particularly interesting and challenging is that it really is a global market so any regulations put in place by a single country could be very challenging to implement and enforce.  Conversely, given the global trade environment it seems unlikely that a global pact will appear anytime soon.

Without a mandate, it appears the airlines are broadly experimenting with biofuels but not making any major commitments.  My cynical view would be that they are doing everything they can to show progress while putting minimal money on the table.  Given the impact of fuel prices on airline profitability and the fact today that most or all biojet fuels will be more expensive than fossil-based fuels I would guess progress will move slowly.

Looking at the RFS, the pathways exist to capture a D4 RIN for biodiesel type approaches, a D5 RIN for Renewable diesel approaches and a D7 when using cellulosic feedstocks.  It does not appear that there is an existing pathway for a corn-based ethanol to jet fuel.

The question is what the RFS will do if biojet fuel grows significantly in volume as they presently define all their mandates based on surface transportation.  If there were suddenly an extra billion gallons of RIN’s available without the obligated parties needing to purchase them this would crash the value of the RINs.  California is working on routes within the LCFS but this presumably would be restricted to California.  Overall, this could provide benefits would not want to bet a business on the availability of RINs.

Long term, I think bio jet fuel will be a large and important market but it will take some form of carbon charge or other mandate.  Until that it will likely stay small.

I think today is an exciting time in biofuels, as always, with lots of dynamics and opportunities for companies to succeed but also fail.

Author Notes

Steve Hartig is an experienced executive with almost 40 years of experience across DuPont, DSM and ICM in leadership roles.  He is presently acting as an advisor/consultant to companies in the biofuels and other segments.

This post first appeared on Biofuels Digest. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Jim Lane

“EPA Reneges on Trump’s Biofuels Deal”, said the Iowa Renewable Fuels Association in reacting to the US Environmental Protection Agency’s new plans for fulfilling federal renewable fuel requirements. EPA released a proposed supplemental rule for the Renewable Fuel Standard today, and the bioeconomy is up in arms, and the outrage is centered in farm country, once a Trump bastion of support.

“IRFA members continue to stand by President Trump’s strong biofuels deal announced on Oct. 4, which was worked out with our elected champions and provided the necessary certainty that 15 billion gallons would mean 15 billion gallons, even after accounting for SREs. Unfortunately, only 11 days after President Trump’s landmark announcement, the EPA proposal reneges on the core principal of the deal.

“Instead of standing by President Trump’s transparent and accountable deal, EPA is proposing to use heretofore secret DOE recommendations that EPA doesn’t have to follow. That means there is no guarantee that RFS exemptions will be accounted for in the RFS.”

Is the EPA’s action an outright about face from the Trump deal announced recently?

As we mentioned at the time of the deal, the operative meme for the Trump Administration’s rural policy is, “sort of”. The deal a couple of weeks ago sorted out the bioeconomy’s problems with small refinery waivers, sort of. The EPA’s actions run counter to the announced Grand Bargain, sort of.

As IRFA explains, “the proposal today essentially asks Iowa farmers and biofuels producers to trust that EPA will do the right thing on SREs in 2021 when they have spent the last two years weaponizing SREs to unfairly undermine the RFS. It is unreasonable and counterproductive to expect Iowans to put their faith in EPA to fix the SRE problem when they were the ones who created the crisis in the first place.

“As this proposal goes against the core of President Trump’s deal that we continue to support, we will work with our elected champions and the President to get the deal he proposed, and we all celebrated, back on track. There must be certainty that 15 billion gallons will mean 15 billion gallons to restore integrity to the RFS.”

The Big Switcheroo: Those pesky DOE recommendations

As IRFA noted, “prior to supporting President Trump’s October 4th deal, biofuels producers and farmers were briefed by the White House and EPA that EPA would account for SREs using a three-year rolling average of actual refinery exemptions granted. Today’s draft rule proposes using a three-year rolling average of U.S. Department of Energy (DOE) recommendations for SREs,

Why all the heated reaction to that proviso?

Bottom line, EPA has ignored DOE recommendations in the past, as we reported here, and is under no legal obligation to follow them. Which undermines the “15 billion means 15 billion” thesis of the October 4th deal.

How did EPA put it?

The EPA painted a far rosier picture.

The agency said in an official statement: “Today’s notice does not change the proposed volumes for 2020 and 2021. Instead, it proposes and seeks comment on adjustments to the way that annual renewable fuel percentages are calculated. Annual renewable fuel percentage standards are used to calculate the number of gallons each obligated party is required to blend into their fuel or to otherwise obtain renewable identification numbers (RINs) to demonstrate compliance.

Specifically, the agency is seeking comment on projecting the volume of gasoline and diesel that will be exempt in 2020 due to small refinery exemptions based on a three-year average of the relief recommended by the Department of Energy (DOE), including where DOE had recommended partial exemptions. The agency intends to grant partial exemptions in appropriate circumstances when adjudicating 2020 exemption petitions. The agency proposes to use this value to adjust the way we calculate renewable fuel percentages.”

Biodiesel “skeptical” over “never-before-discussed” proviso that “lack transparency” and “can’t be trusted”.

In biodiesel country, the National Biodiesel Board said it is skeptical the Environmental Protection Agency’s proposed supplemental rule will ensure that 2020 and future biomass-based diesel volume obligations are fully met. The supplemental notice contains a never-before-discussed proposal to estimate small refinery exemptions for 2020, with no assurance that the estimate will come close to actual future exemptions. The biodiesel industry does not believe the proposal meets President Donald Trump’s October 4 promise to American farmers and biodiesel producers.

Kurt Kovarik, NBB Vice President of Federal Affairs, added, “The notice that EPA issued today is significantly different from the agreement that biofuel industry champions negotiated with President Trump just two weeks ago, which was to estimate future exempted RFS volumes based on the average of actual volumes exempted over the past three years. EPA is proposing a brand-new method for making the estimate – one that was never previously proposed or discussed and significantly undercounts past exemptions. Once again, EPA is sending a signal to the biofuel industry that the volumes it sets in annual rules can’t be trusted.”

Advanced biofuels: “the Administration took back two thirds of what it promised just a week ago”

Over at the Advanced Biofuels Association, there were fighting words.

“Today, the Administration took back two thirds of what it promised just a week ago, and the irony is rich,” said ABFA president Mike McAdams. “In this rule, EPA has based SRE reallocation on DOE recommendations when the Agency ignored those recommendations in its August 9 decision to grant 31 exemptions for compliance year 2018. Furthermore, EPA has proposed to reallocate only 580-770 million gallons when 1.4 billion were ultimately displaced by those SREs. We doubt the legality of this action, and the Administration’s good faith in proposing this ‘deal.’

“ABFA will argue its case later this month before the D.C. Appellate Court challenging the SREs granted over the last several compliance years. We look forward to the Court’s judgment on the Administration’s efforts to undercut the congressional intent of the RFS program.”

Ethanol: “unconscionable” proposal “betrays President Trump’s promise to rural America”

Growth Energy CEO Emily Skor blasted the EPA proposal in no uncertain terms. “It is unconscionable that EPA’s proposal betrays President Trump’s promise to rural America” she said. “A week ago, Administrator Wheeler personally took to the airwaves and promised Iowa farmers that he would accurately account for lost gallons moving forward based on the ‘last three years of the waivers.’ Administration officials repeatedly said that 15 billion gallons will mean 15 billion gallons and this proposal fails to ensure that farm families and biofuel producers have the certainty they need to reinvest and rebuild after three years of massive demand destruction at the hands of EPA.

From Iowa: “Apprehension” over “dramatic departure” proposal that “appears to run contrary to a previously agreed-upon deal with President Trump”

In Iowa, the Iowa Biodiesel Board expressed apprehension over the Trump Administration’s new plans for fulfilling federal renewable fuel requirements, saying it appears to run contrary to a previously agreed-upon deal with President Trump. The group will join other renewable fuel and farm advocates in examining the Environmental Protection Agency’s proposed supplemental rule for the Renewable Fuel Standard, released today.

“We are deeply concerned by EPA’s new proposal to address renewable fuel gallons lost through refinery exemptions to the RFS, said Iowa Biodiesel Board executive director Grant Kimberley. “The solution President Trump previously promised us would have estimated future exempted RFS volumes based on the average of actual volumes exempted over the past three years. That is the remedy we need to steady the renewable fuels market, help plants re-open their doors, and infuse rural economies still in crisis.

“This new plan from EPA appears to be a dramatic departure from the agreement struck with the President, and we expect markets to react accordingly. This is likely to inflict further damage on the already struggling biodiesel industry and farm economy. We will join our Iowa political champions, the National Biodiesel Board and other groups in scrutinizing this new proposal, and in ensuring the final rule fulfills the deal President Trump agreed to earlier this very month.”

The Bottom Line

One of the classic Trumpisms is “you’ll find out”.

11 days ago, we cautioned industry against excessive celebration over the October 4th biofuels deal while we awaited the hard details. Then, we wrote,”This is a plan with an awful lot of ‘EPA will take comments‘ in it, so there are good reasons to wait and see how this deal plays out.”

So, now, we found out. On the other hand, did we? This Administration likes a cliffhanger more than any before it, and we’ll have to wait for next week’s episode to find out what comes of all the frothing and frustration roiling the industry now.

The stakes are Yuge. Tremendous. This story has zero finished.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Jim Lane

In our three-part series this month on utilizing waste resources, we’ll turn to rice straw, which is a major headache for Chinese and Indian emissions. Praj and Gevo are working hard on perfecting a technology to address this.

Specifically, in the past month, Gevo (GEVO) also executed an agreement with Praj to develop jet fuel and isooctane from rice straw and other feedstocks. Gruber noted that “we believe this second-generation technology combination has great potential to address India’s rice straw burning problem and related air pollution, while generating low-carbon hydrocarbons for jet fuel and gasoline. Praj is a leader in technology to convert straw and bagasse into fermentable sugars, their technology marries up nicely with ours—saves development cost and time, while creating new licensing opportunities.”

Gevo’s first quarter results

In Colorado, Gevo reported a $3.8M Q1 loss on $6.4M in revenue, and highlighted that its recent licensing agreement with Praj shows that “Gevo can complete a definitive agreement licensing our biobutanol biocatalyst technology on a commercial basis allowing us to move forward and license our technology for isobutanol from molasses and sugar. We look forward to further developing and completing licensing deals that we expect will generate revenue without us having to deploy capital.”

The other major quarterly highlight was an agreement with the City of Seattle to utilize a blend of Gevo’s renewable isobutanol with conventional gasoline in its pilot program to reduce the Carbon Intensity (CI) levels of fuels used in Seattle’s fleet vehicles. For this program, Gevo has partnered with Hughes Group LLC, a Washington-based, Certified Service-Disabled Veteran Owned Business (SDVOB), to coordinate the blending, logistics, and delivery of the final product to the City. Additionally, Gevo is collaborating with the City to supply a renewable drop-in gasoline on an on-going basis to further reduce the Carbon Intensity of the fleet.

Dr. Gruber added, “In terms of operations, we continue to make progress on our plans to ‘de-carbonize’ our advanced biofuels production facility in Luverne, Minnesota. In April 2019, we began the commissioning of the Shockwave dry fractionation equipment. So far, the commissioning is on track. This technology fractionates the corn into a starch fraction, a germ fraction, and a fiber fraction. The germ will be pressed to extract food-grade oil. The starch fraction will go to fermentation as a feedstock. The fiber and germ protein are expected to be sold for value-added feed products for beef, dairy cows, pigs, and chickens. With this technology, we expect the margins for our feed-related products to improve. Over the coming weeks and months, we expect to begin sales of these new feed and protein products while optimizing the new process.”

Given the small-scale of Gevo’s operations and the parlous state of ethanol prices, the company continues to record product losses and the company’s decision to limit production while product prices are low is going to limit opportunities to reach profitability without adding more value on the protein side and bringing in more high-value advanced biofuels sales or licensing revenues from the likes of Praj and other partners. Action on all three fronts is underway.

The company noted that revenues for the three months ended March 31, 2019 were $6.4 million compared with $8.2 million in the same period in 2018. Hydrocarbon revenues were $0.7 million compared with $0.0 million in the same period in 2018. Cost of goods sold was $9.0 million for the three months ended March 31, 2019, compared with $10.6 million in the same period in 2018, primarily as a result of decreased production of ethanol during the quarter.

Cash status is good. The company at March 31, 2019 had $35.5 million, and the total principal face value of outstanding debt was $13.8 million.

Elsewhere in Rice-based technology

In March, we highlighted as one of our Top 10 Innovations for the week that architect Philippe Madec expects biobased materials like rice husk to change architecture and help reduce greenhouse gas emissions from buildings. Rice husk peaked his interest after construction companies in Camargue, France began using local rice farming waste as insulation.

Once cleaned up, it becomes a high-quality insulating material, allowing houses to keep a homogeneous temperature in both summer and winter, with an energy consumption close to zero. All this while giving a welcome additional source of income for rice farmers. It can be used to build low-cost houses with structural longevity, thanks to its pest-resistance. An Italian group even built a US$1010, 3D-printed house there, using rice husk as well as earth, rice straw and lime, he adds.

In October last year, we reported that In India, Bharat Petroleum Corporation Ltd’s commissioning of its second generation ethanol bio refinery will start building the proposed plant this week in Baulsingha and is expected to be completed by 2020. The refinery will use rice straw as its feedstock. Official sources told Petrol Plaza that they expect that this plant will help to create the biomass availability, which currently is set at about 120 to 160 million metric tons per year to meet the country’s new 20% ethanol blending by 2030 mandate.

And last September, we reported that the state of Haryana has signed a Memorandum of Understanding with Indian Oil Corp. to build a 100,000 liter per day ethanol plant using rice straw as feedstock. The $124 million plant is hoped to provide a market for rice straw for local farmers to reduce the burning that plague’s the region’s air every year. The facility can also use sugarcane bagasse as feedstock during the months when paddy straw is not easily available.

Last June, we reported that Punjab’s Minister of Power and Renewable Energy says he is working to promote the use of rice straw for bio-CNG and ethanol production in the state in an attempt to significantly reduce or eliminate burning of the 20 million tons of straw produced every year. About a quarter of it is used, but the rest is burned. Seven biomass-power plants using rice straw as feedstock are currently under development but the minister estimates as much as 6 tons of bio-CNG could also be produced.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Jim Lane

When the world’s leaders for sustainable aviation fuels have a general meeting the week before the COP24 global climate sessions (this year in Poland), you can bet that the focus will be breaking the “You Can Have Two out of Three Conundrum” of aviation fuels. Which is to say: affordable, available at scale, and sustainable, pick any two of the three.

Fossil fuels are (usually) affordable and always available at scale. Sustainable jet fuels that are available at scale have generally not been affordable to date, and affordable sustainable fuels have been mostly explored at bench scale, so far.

San Francisco’s buying more renewable fuel

Case in point, the exciting and welcome news that Shell, World Energy, SkyNRG, KLM, SAS and Finnair have joined forces to reduce carbon emissions at San Francisco Airport.

Turns out that Shell Aviation and SkyNRG have commenced the supply of sustainable aviation fuel (SAF) to international airlines KLM, SAS and Finnair at San Francisco Airport (SFO). The fuel is produced by World Energy, currently the only at0scale SAF refinery worldwide, at the Paramount refinery in Los Angeles, and is made from used cooking oil, resulting in a fuel that has significantly lower lifecycle carbon emissions than conventional jet fuel. In general, sustainable aviation fuel has a reduction potential of 60-80%, compared to conventional jet fuel.

And, isn’t this the same refinery that provided diesel and jet fuel blends for which the Navy paid $2.07 a gallon in late 2015? (And, though that was a 10 percent biofuels blend, the same refinery won a competitive bid in 2017 for a 30 percent biofuels blend).

So what’s not to like? In the context of aviation demand, running at billions of gallons worldwide and every drop of that airlines would like to switch-over to sustainable aviation fuels — there’s the problem of Peak FOG.

No that’s not something you see in San Francisco around November; it refers to a global shortage of waste Fats, Oils and Greases. Turns out the world runs out of affordable, sustainable liquid alternatives to fossil fuels faster than it runs out of fossils.

Year of the Tree

Which is why the talk of CAAFI was, in a nutshell, all about wood — not virgin timber, mind you, or even the choice parts of the timber supply chain that become 2x4s or round logs. No, there’s no Frame-House vs Fuel in here. It’s the needles, tops, branches that are the waste products of our usual applications for wood. Plus, thinnings as we take dead trees out of forests to limit fire risk.

A breakthrough in woody biomass from federal lands?

Among the more juicy items heard on the floor at CAAFI, one that regards the unfortunately-named 40 CFR 80.1401, Renewable Fuels Standard and Regulation of Fuels and Fuel Additives.

The 2,000 page FY2018 Omnibus Spending Bill signed by President Trump on March 23, 2018, in Title IV General Provisions, on page 866, states; “That the Federal policy relating to forest bioenergy- must be consistent across all Federal departments and agencies, shall recognize the full benefits of the use of forest biomass for responsible forest management and recognizes biomass as a renewable energy source. The only limitations is that, the use of forest biomass for energy production does not cause conversion of forests to non forest use”.

CJ Evans (Managing Director, American Diversified Energy Consulting Services) added, “Some background on this language. I first tried to advance legislation in 2007 (through Rep. Adam Putnam’s office) to make the definitions of biomass consistent across all federal laws. There were almost a dozen different definitions.  I hit a buzz saw of opposition from interest groups and abandoned the effort. Mark Riedy also got involved at one point and several groups wrote white papers in 2014 and 2015, without making any progress.

“I was working on other issues during the last 5 months of 2017 (restoration of funding for Title 17 and EERE at DOE and removal of a provision in ag appropriations that would have eliminated USDA staff working on renewable energy programs) but had contact with the offices that could fix the problem with not being able to use diseased trees from national forests and have the wood quality as renewable biomass. So I wrote a short bullet list with some suggested language and gave it to a couple of these offices … and it was included in the Omnibus Spending Bill. Certainly one of easiest legislative victories I’ve ever undertaken.”

The capacity build out

The numbers are getting impressive amongst those who can produce heavy fuels — diesel and jet fuels, specifically.

Consider these. Neste (NEF.F, NESTE.HE, NTOIF, NTOIY), 910 million gallons of existing capacity and a capacity-adding project underway. World Energy, 60 million gallons of existing capacity, with a project underway to expand to 300 million gallons. Diamond Green Diesel (a joint venture between Valero (VLO) and Darling Ingredients (DAR)) with 170 million gallons in place and expanding capacity towards a goal of 300 million gallons. REG (REGI), 70 million gallons in place in Louisiana, and a project underway in partnership with Phillips 66 to build new capacity in Washington state.

And that’s not taking into account companies such as Red Rock Biofuels (first commercial under construction), Fulcrum Bioenergy (first commercial under construction), SG Preston (first commercial under development), Ryze Renewables (first commercial under development), and EnerSysNet (pilot under development), among many more. Not to mention the companies pursuing alcohol-to-jet, including LanzaTech, Gevo and Vertimass.

The feedstocks

Think residues. That’s where the sustainability has, so far, met the economics. There have been three basic thrusts, to date. First, the afore-mentioned foray into waste FOG. There is municipal solid waste, which Fulcrum is using. There is waste wood, which Red Rock has been using. And, there has been waste land — targeting lands that have fallen out of traditional agricultural production because of crop disease or changing economics with traditional crops — Agrisoma and the SPARC consortium in Florida are targeting land that in years gone by would have been home to citrus or cattle in South Florida.

CORSIA fuels, baby

Perhaps the most welcome news of the floor is at last a single word that we can use to replace all the monikers and acronyms for sustainable aviation furls. SPK, SAF, CARB fuel, RJ just to name three of many.

Now we know we can simply call them CORSIA fuels. For the CORSIA Global Carbon Offsetting Scheme that the airlines have established. Which is not a carbon tax or emissions trading, and it applies only to international flights (which represent about 67 percent of commercial airlines fuel use).

Now even the CORSIA group has come up with a three-letter acronym of their own, CEF, CORSIA-eligible fuel. We’ll ignore that. CORSIA is fine.

The leading expert we know is Nancy Young of Airlines 4 America and here are your 10 takeaways:

• single global market-based standard
• time frame 2021-35
• CORSIA is in lieu of other measures imposed
• 2021-26 voluntary phase in for countries, 2027 mandatory other then exempt countries or routes eg LDCs
• 76 countries representing 76% of international in the opt-in phases, in 2027 goes up about 90 percent
• demonstration of compliance every 3 years begins Jan 1 2019
• monitoring is country by country reporting to ICAO
• alt fuel not included in 2019-20, rather in 2021 when offsetting begins
• emissions savings from purchase of CORSIA eligible fuels reduces individual operators obligations
• when we fly country to country, this is the single mechanism

On concerns that airlines will simply buy offsets and ignore fuels. Young predicts: “Watch what happens to the market over 15-20 years as countries move to meet Paris and CORSIA obligations, it will be a tight offset market.”

Mabus: stop buying a way out of a problem and starting buying into a solution

Former Navy Secretary Ray Mabus took the stage and said:

“When I was the nominee for Secretary of the Navy and waiting for my confirmation, what kept jumping out at me in the briefings I received was fuel, how it could be used as a weapon against us. We set a policy goal that no later than 2020 half of fuel would come from non-fossil. When i did that frankly the technology and the economics weren’t there, but we believed that we could save the navy and taxpayers money by doing i, and i saw energy as a national security argument and alternative fuels as a key part of that energy security.

“I got a little push back on that particularly from Congress where one legislator said “you’re the secretary of the navy not energy. I said that the navy has always led in energy transformation, sail to coal, coal to oil, oil to nuclear, and every time we did that there were all these naysayers. They would say, things like ‘why are you giving up all these coaling stations for this unproven oil technology,’ and every time single they were wrong and they are completely wrong about alternative energy.

“We moved aggressively. We tested and certified every type of ship and aircraft. We flew on 100% biofuels. And Fulcrum and Red Rock are here today and doing well, and we made an investment in them. But we got the benefit. 77 mgs in 2015 90/10 blend and in 2017 a 60 million gallons purchase on a 70/30 blend. In each case, 25 cents cheaper to the navy.

“Now, in 2017 I wasn’t there any more pushing for this. Now, it’s the new normal. Now, the navy and so many others — including airlines like United, KLM, Lufthansa and Alaska are moving aggressively, and ports and airports like San Francisco, Singapore, Oslo, Brisbane and Seattle. Alternative energy in all its forms did one major thing for the Navy, it made the navy better at what they do, better warfighters. This is not a group of ardent environmentalist, they run in big ships and have a lot of vehicles. They have become leaders because of the proof that it makes them better at doing the job that the United States needs them to do. Ultimately it was national security, not the 60-90% reduction in greenhouse gas emissions that was important.

“But, the US government put out a national climate assessment the day after Thanksgiving. Every time the assessment comes out , the warnings become more severe, the consequences more dire. The lower states have warmed 1.5 degrees this century, 1.2 degrees in last few decades and will get 3-12 degrees warmer by end of the century. The effects of this are catastrophic. Already we see the effects on places and people, we have the the first internally displaced people from climate change in some of our coastal islands.

“Big companies are now seeing the benefits of direct action. But we have got to get beyond buying carbon offsets. We have to stop buying our way out of a problem and starting buying into a solution. Two immediate ideas. Corporate jet fuels costs usually 3-4X larger than big commercial airlines, Switching to alternatives would send a strong signal that corporations are paying attention. And, favor airlines as business travel partners by screening for alternative fuels. Using that power with business travel to make sure we are moving in the right direction.

“We all have to change how we operate, just as we did at the Navy. In the military if you keep doing the same things you become predictable, and predictable is defeatable. If you don’t change and make the moves you have to make, and think differently about how you procure fuel, your corporation will go away.”

“The RFS debate has been not productive and about locking in first-generation biofuels and failing the industry.”

In his opening remarks, Steve Csonka, executive director of CAAFI said “Aviation is at a crossroads – a vision for expansion but a carbon intensity that the public is turning sharply against. if done right, biofuels can be part of the solution, but not done right it is the opposite.  LanzaTech is clearing industrial emissions, Agrisoma is planting cover crops.. Fulcrum is reducing landfill waste. The RFS debate has been not productive and about locking in first-generation biofuels and failing the industry.”

“The problem is the low cost of offsets”

SG Preston CEO Randy LeTang veered away from feedstocks as the primary challenge. “The problem is not feedstock, but support from the end consumer, when you have high cost fuel vs low cost credits. How can we drive down the cost to provide fuels without he support of airlines offtakers? We see lack of interest and waning interest from offtakers given the optionality of low cost offsets vs high cost fuels.”

#1 opportunity: “clean up this biointermediates rule”

For US policy, CAAFI brought in Advanced Biofuels Association president Mike McAdams, who noted that the 2019 RVO was as expected, and of more interest was the Brady tax bill which offers a 7 years tax credit starting at $1.19 and sunsets after 7 years. He noted that the i#1 opportunity was to “clean up this biointermediates rule”,  that it is essential in scaling advanced biofuels that bio-intermediates be allowable and with a mass balance rather than carbon-14 analysis system. He noted that “consumers are increasingly aware of aviation carbon impact and want to participate in real change; now is the time to drive policies to enable alternative jet fuel commercialization. But he warned that efforts could be undercut by carryover RINs. He commented that 2.8B carryover RINS issued in 2018; up from 2017’s 2.25 billion, and in the D6 RIN pool that had taken the RIN value from 80 cents to 6 cents.

“LCFS is the right tool to address the toughest GHG sector, heavy transport”

For California policy, CAAFI brought in Graham Noyes, who noted that the overall California Low Carbon Fuel Standard drives down the carbon intensity of California fuels by 1.25 percent per year through 2030, with obligated parties having the option to buy credits or blend low carbon fuels. Jet fuels are coming into the standard, though on an opt-in basis at first.

The value of California credits. Noyes noted that a technology with a carbon intensity of 40 could earn $1.19 per gallon and those with a carbon intensity of 10 could earn $1.83 in the trading values today.  He said that the LCFS is the right tool to address the toughest GHG sector, heavy transportation, because it materially overvalues alternatives compared to cap and trade of emissions and offsets.

He noted that Low Carbon Standards were very much in an expansion mode. Washington state in 2019 could be next, there was a coalition of interests in the Midwest looking at a regional LCFS, and a RGGI group for the Northwestern states. Noyes said that the essentials for

2019 were continued vocal leadership from A4A and CAAFI, and sustained support from the agencies.

“We all see a significant shift, that customers are demanding low carbon solutions and by and large the majors don’t make them.”

World Energy COO Bryan Sherbacow commented, “I was pleasantly surprised after 2008 with the Obama Administration coming in to find that the military were the new hippies in embracing sustainability. It seemed clear and obvious this was going to be the successful path forward and that Secretary Mabus was setting out the demand signal. Our timing worked well and we were awarded the first commercial fuel and now on our 3rd Navy contract and its one of our more important pieces of business for us. But the US government eliminated the USDA component and hopefully we can restore that, because we probably won’t be competitive in the fourth solicitation.

Meanwhile, people being displaced and fires are breaking out and it is important what we do. We all see a significant shift, that customers are demanding low carbon solutions and by and large the majors don’t make them.

“At World Energy we are partnering with incumbents in the oil & gas space and we become part of their distribution where they are compelled by policy, We don’t have to replicate the infrastructure – just work through them. Our California asset was back in 2013 a small asphalt refinery and we formed a JV to convert to renewables with initial deliveries in 2016 and first deliveries to UAL and delivering into LAX since then. We started at 3,000 barrels per day and are expanding to 20000 barrels a day. With our process we produce 50 percent jet, but about 10 percent very competitively on a cost basis. So, we’re making 3-4 million gallons, and in the future we would ideally make around 30-40 million gallons.

The problems are that the incentives significantly favor diesel over jet, and that we have to get past fats oils and greases and get to novel feedstocks. The incentives can be fixed, right now if a customer shows up in the California market we can win those contracts every time, unless we have just done a poor job of educating the customer. Now, in January, jet fuel will be included in that LCFS program and that will make a big change.

On technology, the tricky part of that most processes that involve gasification of woody biomass, which is available and affordable, give you a lot of naphtha and not enough diesel, so the economics don’t work nearly as well as they could, because naphtha generally fits into the lower-value gasoline pool.

Get beyond private wood

Red Rock Biofuels CEO Terry Kulesa noted, “the gasoline pool is growing and there’s a need for 30 percent more diesel going forward. We use the same process, different suppliers compared to Fulcrum BioEnergy, we gasify biomass, use FT to get to a biocrude, then hydroprocessing to produce a finished fuel. We’re making 15.1 million gallons per year of heavy transport fuels. The tricky part? In terms of technology, it’s really the gasification. The tricky part of the economics is that we have to buy private wood, we can’t qualify for federal renewable fuel credits when we use wood sourced from federal lands.” Even though we all could use getting some of that waste wood off of federal land.

“Completion? We’ll be completed in December and we expect 6-12 months of ramp up. Plants never run exactly as designed, that’s why we have great operators.”

“We need alternatives to landfilling fossil plastics that cannot be recycled or reused”

Neste’s US head, Neville Fernandes spoke about the growth at the world leader by production volume. “At Neste, we’re at 260000 barrels per day [in petroleum capacity] or 910 million gallons per year in Poorvoo, Rotterdam and Singapore, we have $1.4 billion in operating profit. In a few weeks we’ll make the decision on adding 340 mgy in Singapore which will take out total footprint up to 1.3 billion gallons.

Our pathway involved moving to renewable diesel in 2007, renewable jet in 2015, Ultra low Sulphur marine in 2018 and renewable propane and chemicals are the new initiatives. In the future, we see ourselves building a GreenHub to convert waste plastics to fuels. Last year, 80 percent of our feedstock came from waste and residues. In the short term it is about waste FOG; in the longer term we see microbial oil, algae and plastic liquefaction as important feedstocks. And we need alternatives to landfilling fossil plastics that cannot be recycled or reused.

“100% biofuels now ready for ASTM balloting”

Chuck Red at ARA took the stage to focus on 100% biofuels flights and supplies. “We’re now ready for the ASTM ballot. And we expect to have out first commercial unit at 3600 barrel per day in the Western US, with ARA participating as an equity partner and using a USDA 9003 loan guarantee.

“It’s jet, and ground operations, too”

FedEx’s (FDX) Joel Murdoch noted that the demand is not only for jet fuel but for diesel for ground operations, for many.

“FedEx’s goal is 30 percent alternative fuel use for aviation by 2030.  In petroleum we contract for 1-2 years but we contract for 5-10 years with alternatives, with exit mechanisms, and we have a 5% maximum per location until the security of supply established.”

The challenges? More than just fuel price and composition, Murdoch advises. “There are logistics as well as cost. Truck, rail, pipelines — how will it be transported? There’s the airport fuel consortiums to consider, will the blends be on or off the airport. There’s the use of existing tankage, the addition of new tanks. And more.”

Replacing aromatics

Representing the US Department of Energy was BETO director Jonathan Male, who noted that the 26 billion gallon jet fuel is expected to double in size and would require nearly a billion tons of biomass. He noted that most blends are restricted to date to 50 percent because of the performance of aromatics. “But, are there renewable molecules and help us with particulate matter and give us what aromatics do?” He suggested that R&D should and would examine replacing the aromatics with iso-alkanes and cycloalkanes.

Pursuing economics through process optimization and co-products

Overall, Male’s message was “Bring Down Cost’ and he noted that when it comes to feedstocks, and processing, yield was the goal and “every gram counts”.  To reach the economics needed, he said, you have to have unit operations s that work together in an optimal way — you don’t have a process until you join units together,” and by inference, you don’t have a sustainable, affordable, defensible process until the units work together in an optimal way.

NIFA’s National Program Leader in the Division of Sustainable Bioenergy Bill Goldner chimed in decisively on this point, The co-products are really important to the economics.”

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Jim Lane

In Iowa, white smoke has emerged from the Renewable Energy Group (REGI) conclave: Tesoro EVP and former Sapphire Energy CEO C.J. Warner has been named chief exec of Renewable Energy Group, at a pivotal moment for biodiesel in Washington and around the world and amidst a boom for renewable diesel like the world has never seen.

REG has been making good progress with Wall Street under interim CEO Randy Howard and its share price has been on the rise, and the plants have been humming along nicely churning out hundreds of millions of gallons of biodiesel and the liquid gold also known as CARB diesel (or renewable diesel qualified for the low-carbon markets in California, Oregon and British Columbia). All that, built on an incredible run from single-plant operator to biodiesel behemoth under, first, Jeff Stroburg and then Dan Oh.

Now, the next chapter begins to unfold.

Here’s the REGI challenge

It’s a brilliantly operated company that generated some $220 million in net income last year. Yet, the company has a P/E ratio of around 4.4 compared to the NASDAQ average that hovers around 25. If the company were valued along with its NASDAQ peers, it would have a $5B market cap and could be using its stock to roll up a huge amount of production capacity through M&A. And there’s not an REGI investor who wouldn’t like to see a juicy $130 stock price.

The few cases in history where you get these kind of market disconnects are when the balance sheet is a toxic waste dump, the products are shortly destined for the scrap-heap of history or there’s a huge potential lawsuit liability. None of those apply in this case. So, there’s been major progress, but there’s huge upside. And, so long as the company remains this undervalued, it makes REG a ripe target for acquisition, raiders, privatization efforts, or activist shareholders.

What’s going to happen to REG? Let’s look at the two fundamentals that restless investors are pointing us too: feedstock cost and the dependence on tax credits and RINs to generate value.

The world of REG’s prices and values

Here’s a graphic from Iowa’s Center for Agricultural (CARD) to illustrate biodiesel’s fundamentals.

The red marks the operating margins and the green represents feedstock costs — the one, minuscule, the other daunting. What need to be done to unlock REG’s value? It really comes down to restructuring REG’s income stream. Investors see the company as entirely too dependent on those tax credits and RINs.

There’s come evidence for their fear. Congress only passed the 2017 tax credit in early 2018, did not renew the credit for 2018 at all, as of yet, and the 2015-16 credits came in well into 2015. Only one year, 2016, has REG entered into a new year with a tax credit assured.  The Brady bill dropped into Congress last week with a thud, offering a 7-year tax credit extension but discounting and sunsetting the credit in the mid 2020s.

And, in case you were still feeling swimmingly happy about your REG share price outlook, the Trump Administration’s negotiations with the renewable fuel industry on sweeteners and support have mostly focused on year-round availability for E15 ethanol and not on expanding the market for biodiesel, much. The current EPA mandate for 2019 is way below the industry’s production capacity.  Which means that biodiesel gets hit on the nose by the way EPA runs the RFS program, but the relief efforts generally target ethanol, instead of America’s favorite advanced biofuel. Here’s some color on RIN values (with biomass-based diesel in blue):

That’s hardly grist for shareholder enthusiasm and its tough on REG-s long-term investments planning, too. Can’t be positive for company morale, either.

Solving the problem

Warner, as the incoming CEO, will have several options. One, more of the same, hammer on Washington to extend tax credits and protect RIN values. Two, acquire or build production capacity in renewable diesel to take advantage of the sweet margins for that fuel, taking advantage of REG’s strong position in fats, oils and greases (FOG) acquisition. Three, transform feedstock costs by tapping into wood residues and MSW to make biocrude that can be upgraded to renewable diesel. Four, find a way to privatize the risk that flows from government hemming-and-hawing over tax credits, taking REGI out of the firing line when tax credits do not appear. Five, deliver on the promise of REG Life Sciences with a product line or two that generates the kind of company-altering cash flow that’s been helping the likes of Amyris of late. There may be others in the REG option quiver, but you get the general idea.

The Warner / REGI backstory

Warner arrives on January 14, 2019. She brings more than 35 years of experience in the energy industry, including an extensive background in refining. Most recently she served as Executive Vice President, Operations for Andeavor (ANDX, formerly Tesoro Corporation), an integrated marketing, logistics and refining company. Prior to her most recent role, Ms. Warner served as Executive Vice President, Strategy and Business Development of Andeavor.  Before joining Andeavor, Ms. Warner served as President, Chief Executive Officer, and Chairman of the Board of Sapphire Energy, a biofuels company. Prior to Sapphire Energy, Ms. Warner served as Group Vice President of Global Refining and Group Vice President of Health, Safety, Security, Environmental and Technology for BP (British Petroleum). Ms. Warner serves as a member of the Board of Directors for IDEX Corporation and serves as a member of the National Petroleum Council.

“After completing a thorough and deliberate succession planning process, we are pleased to welcome CJ Warner as our new President and CEO,” said Jeff Stroburg, Chairman of the REG Board of Directors. “Her background and success, coupled with her passion for developing renewable fuels that transform the transportation fuels market to a cleaner and sustainable future, makes her an exceptional choice to lead REG.”

“I am delighted and honored to be joining the REG team as President and CEO,” said Warner. “This growing company is well positioned to meet the rising global demand for cleaner, competitive low carbon fuel solutions.  I look forward to the exciting future ahead and to leading the team with a continued focus on value creation.”

During the leadership transition Randy Howard will remain engaged with the business.  Upon completion of the transition, Randy will continue to serve on the REG Board of Directors, a position he has held since February 2007.

The Bottom Line

Natives are restless, which is to say shareholders. Being an incredibly well-operated company in a fast-growing space is not as attractive to them as it should be, but it’s tough to fire investors. And the company is operating too strongly to hope that anyone can work a miracle from the inside by simply boosting productivity.  There’s not much upside left in performance, but there’s upside in REG Life Sciences, feedstock and restructuring policy risk. None of which is easy to do — but anyone who’s been around CJ as part of the “Beyond Petroleum” generation that advanced at BP under Lord Brown, or her subsequent years bringing Sapphire Energy from a great idea to an at-scale reality, or her work taking Tesoro (or Andeavor, take your pick) into the world if renewable with relationships with Fulcrum, Ensyn (ESNC) and the acquisition of Virent, will be of great cheer. She’s a winner.

And, we might see in her strategic work at Tesoro that renewable diesel might well be the most potent option in front of REG to boost margins, add capacity and dominate the California market where policy risk is lower. The key ultimately is feedstock. The world is reaching Peak FPOG far faster than Peak Oil.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Helena Tavares Kennedy

The seasons are changing in many parts of the world right now, but what really is changing this autumn is how the world is looking at renewable diesel. Phillips 66 and REG’s announcement about a new renewable diesel plant on the U.S. West Coast planned for 2021 comes after a notable increase in refineries that are being converted and changed over to renewable diesel. Change is good, especially in this case.

As Bob Dylan sang, “For the loser now, Will be later to win, For the times they are a-changin’.” And who knew he was singing about the RFS and biofuel economy before it even existed with “There’s a battle outside, And it is ragin’. It’ll soon shake your windows, And rattle your walls, For the times they are a-changin’.”

Maybe Dylan’s song is playing in the corporate offices of Texas-based Phillips 66 (PSX), a former petroleum focused energy company, as they see the value of change by partnering up with one of the largest producers of advanced biofuels – Iowa-based Renewable Energy Group (REGI, a.k.a. REG). While it was over a year in the making, they announced last week that planning is underway for the construction of a large-scale renewable diesel plant that will utilize REG’s proprietary BioSynfining technology for the production of renewable diesel fuel.

Planned feedstocks include a mix of waste fats, oils and greases, including regionally-sourced vegetable oils, animal fats and used cooking oil. If approved, production at the new facility is currently premised to start in 2021.

Location, location, location

The new facility would be constructed adjacent to the Phillips 66 Ferndale Refinery in Washington state. The Ferndale Refinery is a perfect spot with existing infrastructure, including tank storage, a dock, and rail and truck rack access and happens to be a hot spot for this type of project with a Mercurius biorefinery nearby.

“The proposed facility’s strategic location in Washington state would enable us to move renewable fuels more efficiently to support West Coast and international fuel market demand,” said Brian Mandell, senior vice president, Marketing and Commercial, Phillips 66.

“REG is excited to be working with a leading refiner, Phillips 66, on a project that has the potential to significantly expand biofuel production in Washington state and provide low carbon fuel markets with products that are in significant demand on the West Coast,” said Randy Howard, CEO of REG. “We look forward to working with state and local stakeholders to facilitate development of this important project and increase the supply of low carbon fuels in the region.”

Transformations abound

Phillips 66 isn’t the only one converting from petro-based diesel into biodiesel. Several others are keeping up with the changing times and moving towards more sustainable diesel.

In fact, World Energy announced a $350 million investment over the next two years to complete the conversion of its Paramount, California facility into one of the cleanest fuel refineries in the world, as reported by The Digest in October. The project will enable World Energy Paramount to process 306 million gallons annually. The conversion to renewable jet, diesel, gasoline and propane will reduce both refinery and fuel emissions while supporting more than 100 advanced, green economy jobs.

“This project will transform the Paramount facility into California’s most important hub for the production and blending of advanced renewable fuels,” said Bryan Sherbacow, Chief Commercial Officer of World Energy. “This investment will better enable us to deliver much needed low-carbon solutions to our customers. Importantly, with 150 million gallons of annual renewable jet production capacity, World Energy will be able to help the commercial aviation industry combat its greenhouse gas emissions.”

Another conversion is underway by Andeavor (now joined with Marathon as of October 1^st and known as Marathon Petroleum Corporation (MPC)). As reported by The Digest in August, Andeavor is converting the North Dakota Dickinson Refinery to process 12,000 barrels per day of renewable feedstocks, including soybean oil and distillers corn oil, into renewable diesel fuel. The project is expected to be completed in late 2020 and is subject to permitting and regulatory approval.

ENI (ENI.MI) is another petroleum company that switched to renewable diesel. While it still is an oil and gas company, Eni expanded into renewables with its Venice biorefinery in Italy a few years ago which was renovated by UOP to produce renewable diesel. Eni is even supplying the city of Venice and their waterbuses with its E15 Eni Diesel+ which is part produced from UCO collected in the city.

Eni must be doing something right in the renewable diesel space since the Indonesian government is now collaborating with ENI to see if it’s feasible convert Pertamina’s Plaju and Dumai refineries into biodiesel production facilities, as reported in The Digest in October. Both refineries were built in the 1930s with refining capacity of 133,700 bpd and 170,000 bpd respectively. Conversion of refining production capacity into biodiesel production is becoming more common in Europe with both ENI and Total having done it or are currently in the process of doing it, such as Total’s La Mede refinery in France.

Neste (NEF.F, NTOIF) is expected to decide by December as to whether or not it is sticking to an internal deadline of December to make its investment decision about the potential new aviation biofuel production facility in Singapore. As reported in The Digest in October, the company already produces biofuel in Singapore but increased demand for renewables spurred by the most recent IPCC report and Norway’s 0.5% aviation biofuel mandate has given further impetus to the project that the company has already spent “tens of millions” developing.

In November 2017, the Digest reported that Valero (VLO) and Darling Ingredients (DAR) were looking at doubling Diamond Green Diesel production from 275 million gallons to 550 million gallons at the DGD facility in Norco, Louisiana. Why? They are looking into the future through their crystal ball…in anticipation of growing demand for renewable diesel due to the RFS and global low carbon markets. This comes on the tail end of their most recent expansion where they went from 160 million gallons of renewable diesel to 275 million gallons in annual production capacity. Though they had to replace a catalyst that was damaged recently which will lower 3^rd quarter projections, they expect to go back to 275 million gallons rated capacity very soon.

LCA of renewable diesel

Renewable diesel is a low carbon and low sulfur fuel, making it an attractive investment for any company looking to lower their carbon footprint, whether it’s because shareholders are pushing for it, local or state mandates are demanding it, or consumers are requesting it.

If you aren’t convinced about renewable diesel’s environmental benefit, a recent LCA study showed that biodiesel reduces GHG emissions by 72% including ILUC. As reported in the Digest in January, the Argonne National Laboratory, Purdue University, and the U.S. Department of Agriculture (USDA) study represents the most up-to-date and comprehensive lifecycle analysis of biodiesel ever produced. This study represents the first time Argonne National Laboratory has published a lifecycle assessment of biodiesel including indirect land use change (ILUC).

The more the models reflect real world data, biodiesel’s benefits become even clearer. The improved model reduces ILUC emissions by more than 30 percent relative to the score adopted by CARB in 2015. Those are some impressive stats that can tempt any petroleum-based company to switch at least some of their facilities over to biodiesel. Add the fact that it is a drop-in fuel and you’ve got a win-win situation.

What does this all mean?

By our estimates, we are talking about more than 1 billion gallons being converted recently from traditional diesel to drop-in renewable diesel out there, and with California’s mandate as well as others internationally, the demand alone for road transport, not counting jet fuel or marine and shipping fuel is significant. The demand is there and now it looks like the production is starting to catch up to meet that demand. More renewable diesel is still needed, however, so we anticipate seeing more announcements for renewable diesel expansions, new constructions, or conversions from petro-based diesel to biodiesel. After all, the times are a changin’.

Helena Tavares Kennedy is a writer for Biofuels Digest, where this article was first published.  Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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