Biomass-based diesel poised for growth

By Dave Elsenbast | May 24, 2016

The biomass-based diesel industry showed its resiliency in 2015, another challenging year, and now that some regulatory uncertainty has been resolved, it is looking ahead to a brighter future. 

The industry nearly reached record production levels last year and, according to U.S. EPA data, U.S. consumers used a record 2.1 billion gallons of biodiesel in 2015, reducing America’s carbon emissions by at least 18.2 million metric tons. Biomass-based diesel continues to add value to many industries including agriculture, fuel marketing, ethanol and transportation. It is proven that advanced biofuel is poised for continued growth. The fuel supports our nation’s energy security and diversity, food security and environmental stewardship. 

EPA released its final rule and volumes for 2014-’17 for biomass-based diesel Nov. 30, 2015, putting the renewable fuel standard (RFS) back on its legislated schedule as shown in the accompanying table. With this forward regulatory certainty, biomass-based diesel’s role in RFS compliance will continue to increase. In addition, the $1-per-gallon federal biodiesel excise tax credit that expired Dec. 31, 2014, was retroactively extended for 2015 and 2016. 

Many other positive factors have kept the advanced biofuel industry moving forward. Market opportunity is broad for biomass-based diesel and there is ample domestic production infrastructure in place. Biodiesel imports rose from 510 million gallons in 2014 to an estimated 670 million gallons in 2015, nearly 30 percent of the total U.S. market. 

Falling oil prices, however, pressure biofuel market prices and that impacts the advanced biofuel industry. With oil prices the lowest since 2003, the energy market is weak and there is ample supply.  

State and local policies supportive of biomass-based diesel continue to be generally positive, albeit with some uncertainty. New York City has a B2 requirement for all heating oil sold and higher usage requirements are under consideration. Minnesota requires all diesel gallons be blended at B5 year round and at B10 in the summer months. California’s low carbon fuel standard (LCFS) requires producers of petroleum-based fuels to reduce the carbon intensity of their products. Biofuels from feedstocks such as inedible corn oil, animal fats and used cooking oil are favorable choices for LCFS customers because of their lower carbon intensity values.

Corn Oil Fit 
Biomass-based diesel continues to be a significant and reliable source of demand for inedible corn oil as shown in the bar chart. In 2015, biomass-based diesel consumed 944 million pounds of inedible corn oil, nearly 40 percent of all inedible corn oil produced in 2015. The cold weather characteristics of corn oil-derived biodiesel, combined with the advantageous carbon intensity score into the LCFS market, make inedible corn oil and biodiesel a great fit. 

Uncertainty and market volatility are no strangers to the renewable fuels industry. This has taught us that the biomass-based diesel industry needs feedstock diversification. Renewable Energy Group Inc., an advanced biofuels producer and marketer, has been a leader in that diversification strategy. Today, REG relies on its multifeedstock, multiproduct and multitechnology approach to ensure feedstock flexibility and product quality across all of its biorefineries. The company has invested in facility upgrades that allow multiple feedstocks with both high- and low-free fatty acid content. 

Biomass-based diesel is among the most tested fuels in the marketplace. The American Society for Testing Materials and the biodiesel industry have been strategic partners in research and investments in quality standards for biodiesel. This dedication to quality has proven that biodiesel is here to stay. It is a widely accepted and ready-to-use fuel in many applications, including on-road and off-road transportation and heating oil markets. 

So what’s next in 2016? History has proven over and over again that this resilient industry will continue growing into new and existing markets, utilizing multiple feedstocks and producing quality products. Biomass-based diesel will continue to support jobs, economic development and innovation. 

The U.S. Energy Information Administration forecasts drivers will consume 17.1 percent more diesel fuel by 2023 and 26 percent more by 2040. Diesel car and SUV registrations in the U.S. increased 24.3 percent from 2010 through 2012, compared with a 2.75 percent rise for gasoline car and SUV registrations. With 44 new clean diesel car, truck and SUV models launched in the 2014 model year, automotive industry experts predict that consumers will have more than 58 diesel vehicle models to choose from in North America by 2017, according to a National Biodiesel Board 2016 market report.  
Biomass-based diesel’s future growth looks even more promising with progress being made toward addressing climate change, demonstrated by the recent 2015 United Nations Climate Change Conference in Paris. The industry can help improve petroleum diesel’s greenhouse gas emissions profile as countries and local governing entities continue to expand policy responses to this issue.

Consumer acceptance, growing domestic production and continued advocacy across the ethanol and biodiesel industries will remain important for future growth of the renewable fuels industries. The biomass-based diesel industry has been tested, proven and is here to stay. 

Author: Dave Elsenbast
Vice President, Supply Chain, 
Renewable Energy Group 
[email protected] 

*Editor’s Note: This article first appeared in the May 2016 issue of Ethanol Producer Magazine. After the article was written and published, EPA released its proposed 2018 renewable volume obligations (RVO) for biomass-based diesel at 2.1 billion gallons.  


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