Biodiesel 2015: The top 14 trends for the new year

January 20, 2015 |

rp_Biodiesel-sm.jpgNew technologies, new markets, new research and most of the same policy challenges, as we look at the 14 top trends for 2015.

This morning, the National Biodiesel Conference & Expo opens in Ft. Worth, just hours before President Obama delivers what is expected to be a realistic-legislation-free State of the Union Address in Washington. In Texas, you can expect more practical talk and actions on behalf of America’s favorite advanced biofuel, biodiesel — and, to an increasing extent, the world of drop-in renewable diesel as well.

As the conference gets underway, here’s a look at 14 trends for ’15.

1. Falling oil prices – what’s the impact?

The headlines in recent months have revolved almost exclusively around falling commodity prices — and to be sure they have been felt in biodiesel too. As we reported earlier this month, Asian biodiesel and ethanol market prices hit lows at $820.92/mt — the lowest seen since 2009 when the price averaged $721.31/mt. From a peak of $912.50/mt on February 21, prices have broadly tracked the fortunes of crude palm oil prices, which have also seen steadfast declines through the year.

2. Policy uncertainty

But the challenges have been not only about prices, but about the hit that production is taking from policy uncertainty, particularly in the US. We reported last week that the US biodiesel market shrunk in 2014 due to policy uncertainty that destabilized the industry and caused many biodiesel plants to shut down or reduce production.

According to EPA data released Jan. 15, total U.S. biodiesel consumption fell to 1.75 billion gallons for the year, down slightly from nearly 1.8 billion gallons in 2013. The downturn came as the Obama administration failed to finalize biodiesel volumes under the renewable fuel standard (RFS) and Congress allowed the biodiesel tax incentive to lapse at the beginning of 2014.

3. Tax Credits

The good news is that the biodiesel tax credit did pass in the US in a tax extenders package which extended the $1 per gallon biodiesel tax credit retroactively throughout 2014, on a 76-16 vote. Senate Finance Committee chairman Ron Wyden voted against the bill in the end, stating that “this tax bill doesn’t have the shelf life of a carton of eggs. The only new effects of this legislation apply to the next two weeks.” Yep, they all expired on December 31, 2014 — and if you’ve concluded that this gives almost no planning certainty to the US business that would result in a material increase in manufacturing or job creation, just a retroactive windfall, you’re not alone.

4. Broader global distribution

At the same time, distribution opportunities ere expanding, and globally. We reported only last week that in China, a year-long trial of 104 buses running on a biodiesel blend in Shanghai has been deemed a success and will be rolled out further to 1,000 buses this year. The 104 buses ran a total of 2.3 million kilometers. Using biodiesel in buses provides an alternative market for used cooking oil rather than the oil going back into the human food market.

5. A winner on emissions

The reasons? For one, biodiesel keeps showing up a winner on emissions, as we saw last week when we highlighted a report showing animal fat biodiesel reducing GHG emissions by 85%. The exceptional figure has been confirmed by the findings of a recent study by the Institute for Energy and Environmental Research (IFEU) in Heidelberg. It specifically looked at how the greenhouse gas emissions resulting from the processing of animal by-products should be allocated.

6. Higher blends

Increased blending opportunities also appeared last month when ASTM voted to approve performance specifications for blends of 6 to 20 percent biodiesel with traditional heating oil. The move is a significant leap forward in the industry effort to boost the percentage of cleaner burning biodiesel that homeowners and building managers use in oilheat equipment common to the Northeast and Mid-Atlantic.

Recently, the emissions performance was in view as Boston turned to a new dynamic type of public transport called Bridj, offering passengers in Boston trips between home and work for just $3 on biodiesel-fueled shuttles. The system works via a phone app that tracks demand for pick ups and drop offs, sending users their pick up location walking distance from the place of departure.

7. New processing technologies

It wasn’t the only innovation in sight this year. All year, we’ve been tracking the rise of new technologies to handle high free fatty acid (FFA) feedstocks such as brown grease. Only last month, Novozymes announced the launch of Novozymes Eversa, the first commercially available enzymatic solution to make biodiesel from waste oils. The enzymatic process converts used cooking oil or other lower grade oils into biodiesel. Biodiesel producers can thereby reduce their raw material costs. The resulting biodiesel is sold to the same trade specification as biodiesel created through traditional chemical processing.

Because of technologies like Eversa, companies like Viesel Skunk Works are preparing to commercialize an enzymatic biodiesel production process that it developed with Tactical Fabrication of Dublin, Georgia, and Novozymes. The technology allows for better use of brown grease and other low-grade feedstocks by eliminating the sulfur that is typically found as part of the production process.

8. High FFA feedstocks

We think high FFA feedstocks are poised for a breakout, as we suggested last month when we wrote: “One of the most alluring targets in advanced biofuels — although cruelly mis-named — is in the world of free fatty acids. Most of the oils currently used for biodiesel are sourced from soybeans, palm or rapeseed, and precisely because they contain less than 0.5% free fatty acid (FFA) content. Traditional biodiesel process designs have difficulty handling oils containing more than 0.5% FFA, meaning that, for many, waste oils with high FFAs have not been a viable feedstock option. That’s changing and we looked at the who and how and why, here.

9. Winning in Low Carbon-oriented markets

The effect has not translated everywhere to increased production, due to the ongoing policy uncertainty we’ve noticed, but in big markets focused on Low Carbon Fuel Standards like California, the impact has been big.  From California, we reported in November that “Biofuels fared remarkably well in the [California Energy Commission report] and were cited for their value in providing immediate GHG reductions.  Biodiesel and renewable diesel were described as “making tremendous gains.”  Overall, the CEC found that, “Market transformation is underway.”

10. Mandates lower than hoped?

The news couldn’t come at a better time, because as we reported in November, Platts says traders are expecting 2014 biodiesel mandate under 1.5 billion gallons

In Washington,  or even as low as 1.28 billion gallons. Biodiesel production reached 1.22 billion gallons as of September and the National Biodiesel Board has sought a mandate of 1.8 billion gallons. If the mandate remains the same as 2013 at 1.28 billion gallons, some extra production could go towards the advanced biofuels mandate but it’s not yet clear if there will be enough volume in that category to absorb more biodiesel.

11. Policy parity drive

One thing that will help — besides policy certainty? That’s policy parity.  That’s why the Biobased and Renewable Products Advocacy Group submitted petitions to the U.S. Environmental Protection Agency requesting that biodiesel fuel manufacturers be granted the same Chemical Data Reporting  exemptions that petroleum-based diesel manufacturers already receive. BRAG made its petitions through two mechanisms allowed under Toxic Substances Control Act rules.

12. America’s Favorite Advanced Biofuel

No matter how tough the climate in Washington DC,  the public remains a strong fan of low carbon fuels and biodiesel in particular. As we reported in October, an NBB poll showed 75% of US voters support tax incentives for biodiesel. 76% said they support a national renewable fuel standard.

13. Trade Parity

But when it comes to parity, there’s trade parity as well. One of the reasons that the National Biodiesel Board filed comments in October with the European Commission challenging unfair trade duties that have blocked U.S. biodiesel from being exported to Europe since 2009. NBB urged the commission to allow duties on U.S. biodiesel to expire this year as scheduled, citing overwhelming evidence that global trade for biodiesel has changed dramatically since the duties were imposed and that continuing the duties is protectionist and unnecessary.

14. Globalization

It’s a reminder that biodiesel is a global story, which Digest readers would have noted all year with headlines like these:

Petrobras opens first-ever biodiesel plant in Rio Grande do Norte, Brazil

Argentina’s biodiesel industry may get boost from government…or not

UCO biodiesel may find market in Taiwan for heating oil

Mexican researchers show UCO biodiesel reduce public transport emissions 90%

Ukraine looking to boost excise taxes on fuels including biodiesel

India looking to expand ethanol bus trial to biodiesel and biogas as well

Select Chinese biodiesel wins court case against Sinopec over fuel monopoly

Key takeaways? It’s a continuing story of opening new markets and making the old ones economically more advantaged. Success in developing advanced technology is likely one reason why, in Washington state, we reported last week on proposals to take over operations at the biodiesel plant at the Odessa Public Development Authority are being accepted until Jan. 30. The former tenants, TransMessis Columbia Plateau, stopped production last fall and the agency has been looking for a new operator ever since. The agency borrowed $4.2 million from the Energy Freedom program to build the facility and $3.5 million is still outstanding.

The Bottom Line

The story is still about expansion, but growth remains ties to advanced in feedstock and policy parity and stability. With politicians squabbling over everything from income distribution to immigration, don’t expect a year of vision and grand compromise on Capitol Hill. There’s it’s politics as usual, which means brutal battles over the natire and role of government that continues to dampen opportunity for alternative fuels.

But they have become an accepted part of the national energy mix — and a popular one, certainly the most popular in all of biofuels. Capacity building will depend to some extent on feedstocks and those new technologies that open up FFA opportunities perhaps have the strongest chance of being the “transformative trend” that drove the market, when many years from now we look at the turbulent journey toward cleaner fuels.

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