Big Changes in Renewable Diesel & SAF Feedstock Partnerships

By Will Thurmond, Emerging Markets Online

Special to The Digest

A new study titled Renewable Diesel and Sustainable Aviation 2030, Vol 2  (September, 2021) has discovered some surprising answers and useful insights to key questions regarding feedstock availability, scale up, partnerships and from 2020 to 2030 where many states and nations have targets.

For example, in the year 2018 when Emerging Markets Online released our first white paper on Renewable Diesel, there were only 15 of these plants in the world that were operating or in planning.

Now, in 2021, three years later, there are more than 70 players in operation or planning. 29 of them are in the United States, six are in Canada, 14 are in Asia, 18 in Europe, and two are in Latin America.

Key Question:  Will There Be Enough Feedstock for Renewable Diesel and SAF?
Answer: There is a common misconception that there are not enough feedstocks for these plants.

In fact most of the new plants have new partnerships with growers of sustainable feed stocks that are non-food-based and are low carbon, circular, sustainable, feedstocks such as Camelina, PennyCress, Algae, Tree Oils, Agricultural Waste, Municipal Waste, Carinata, Tobacco Oil, Castor Oil, Pongamia, and a significant amount of growth around the world. An emerging highlight is in Canada, for canola to be used as sub zero truck and jet fuel.

The study also focuses on Sustainable Aviation Fuels (SAF) in detail, providing case studies of producers and the low-carbon feedstocks, technology pathways, partnerships, investors, and off-takers.

Smaller Plants With Specialty, Lower-Carbon Feedstock Partnerships

One key trend of SAF & renewable diesel retrofits of large global petroleum refineries is now being accompanied by the emergence of smaller scale, localized, circular renewable diesel and sustainable aviation refineries.

The Renewable Diesel & SAF 2030 study provides a growing number of case studies of companies that have dedicated joint venture partnerships for (upstream) feedstocks and (downstream) offtake agreements. One of the study’s key findings illustrates a common misunderstanding that there are not enough feedstocks for these refineries. Emerging Markets Online has discovered this is neither true for commodity traded feedstocks such as soybean oil (Marathon-ADM venture), canola oil (Covenant Energy in Saskatchewan), nor next-generation feedstocks. In fact most of the new refineries have new partnerships with growers of sustainable feed stocks that are non-food-based and are low carbon, circular, sustainable, feedstocks.

Growth in Local, Advantaged, Specialty, Low Carbon, Circular Feedstocks

This growing trend of smaller, localized plants favors specialized, low-carbon, circular feedstocks in geographically advantaged areas that can benefit the specialty-scale RD/SAF integrated refinery. Feed stocks such as forestry tree oil (St1, UPM, Neste), crude tall oil (Fintoil, Finland), raw tall oil (Preem, Sweden), pongamia (Omega Green Paraguay), castor oil (Eni Italy), specialty camelina (Global Clean Energy-Exxon California), specialty carinata (multiple airlines), purpose grown penny cress (REG), cover cress (NBB R&D initiatives), municipal solid waste (Fulcrum), Distiller’s Corn Oil (DCO with Darling and Valero JV Diamond Green Diesel, East Kansas Agri-Energy, and several others), forestry products (Louisiana Green Fuels), Cielo Energy in Canada (sawdust, plastics, tires, MSW, construction debris), circular feedstocks (palm waste and UCO at Neste, Singapore refinery), and smaller, non-commodity traded, feed stocks and specialty markets with higher values.

Renewable Diesel & SAF: Different Scales, Different Carbon Requirements, Different Timelines

One of the major conclusions of the Renewable Diesel and Sustainable Aviation Fuels 2030 Study is renewable diesel and plants in the United States average approximately 263 million gallons per year.

Conversely, sustainable aviation fuel plants, average 25 million gallons/yr in size, and are approximately 10% of the average size of United States renewal diesel plants. This is a significant finding and goes to show that the sustainable aviation fuel industry is very serious about acquiring low carbon, sustainable, feedstocks that produce fuels with higher than 80% GHG reduction.

Compared to soy-based renewable diesel, sustainable aviation fuels are generally from non-food waste sources that produce biofuels with 80% or higher or GHG reduction. In contrast, SAF fuels are unlike renewable diesel regulations that are presently accepting soy bean oil canola oil in palm oil, each at 50% or lower carbon intensity, and lower GHG reduction.

Starting about 10 years ago, some of the first US renewable diesel refineries and suppliers (Diamond Green Diesel, REG, Neste), locked up huge contracts with circular, low-carbon animal fat suppliers in joint ventures, Used Cooking Oil suppliers, and REG’s Geismar refinery that originally started with Tyson chicken in a previous life. Today, REG’s biorefineries are now accepting up to 14 (yes, 14) different feedstocks according to CEO Cynthia Johnson’s Q&A in a July, 2021 DigestConnect webinar.

Feedstock Partnerships Rapidly Growing
Fast forward to 2021. Feedstock partnerships abound between emerging renewable diesel refiners and established agricultural suppliers. For example, nowadays, we see Chevron-Bungee locking up $600 million deals to bring soybean oil to a petroleum refinery to feed into an FCC unit (something new-ish), Also, Marathon and ADM are partnering up to lock in soybean oil supplies to feed two extra-large refineries, and Exxon’s Imperial Oil in Canada is partnering with a major canola oil supplier in anticipation of Canada’s forthcoming Renewable Fuel Standard.

Another key trend we note in the Renewable Diesel & SAF 2030 study is:  The De Facto standard for new 2021 entrants from US Big Oil (integrated) companies is to go with big soy and canola providers. Carbon intensities are higher, but so is the scale. There are benefits to scale. At 250 gallons or more, a soybean-renewable diesel refinery will still be very profitable as these refinery scales go up to 600 million gallon/yr such as at Marathon’s Martinez refinery in San Francisco, or at Next Renewable’s 800 million gallon/yr Oregon refinery, or at Gron-Fidelis-Koch’s 900 million gallon/yr hybrid hydrogen/renewable diesel net-zero-carbon envisioned refinery in Louisiana.

Sustainable Aviation Fuels: Feed Stocks, not Food Stocks, Specialty, Circular Waste Stocks
For Sustainable Aviation Fuels companies, no food, please. This is because the SARA equation is omnipresent from field to fuel tank in the aviation industry and it matters significantly. The key problem is, Sustainable Aviation Fuels agencies and groups are in serious  need of an AA meeting (two letters derived from the SARA acronym) to determine how their fuel will become 1. A) Affordable and 2.) Available.

For this dilemma, there is good news! Help on the way. Laws in California, DC and other places are making this easier in the second half of 2021. What about   #3) Sustainable? Check. And #4) Reliable? Check the supply chain on the feedstocks. In 2021, there are currently is a large number of lobbying efforts in Washington, DC to “level the playing field” between Sustainable Aviation Fuels and Renewable Diesel fuels (less expensive to produce). We expect this regulatory trend to pick up as the state of Washington gets closer to ratifying its CFS, and as Canadian elections progress and bring in Canada’s plan for a Clean Fuel Standard expected in 2022.

This explains why sustainable aviation fuel plants average only 25 million gallons per year because they benefit from low GHG feedstocks such as smaller scale, waste-based, circular crops.  In contrast, most renewable diesel plants are typically retrofits of former big petrol refineries and require significant volumes of commercially traded, available feedstocks (soy, canola, palm, UCO, some animal fats) to maintain a feasible profit margin. In other words, those feedstocks that are available, reliable, and (sometimes) affordable. This works out on the U.S. and Canadian West Coasts in British Columbia with CFS rules.

Forecasts: Interviews with Association and Industry Leaders to Gain Valuable Perspectives
How will this play out for SAF’s criteria demanding: circular, waste-based, lower carbon feedstocks? Time will tell. The biggest factor is government incentives, tax credits, regulations, mandates. These are the big accelerators that launched Brazil’s biofuels industry in the 1970s, with carrots (incentives) and sticks (mandates) together, as was explained to me by a  UNICA representative in 2011. He was there, is still there, and has seen the markets go through lots of volatility and regulatory changes.  His astute, experienced, and well informed expert advise is also sustainable: if you don’t have two things: 1. Mandates or 2. Incentives, the markets will slow down, until the cyle of regulations/presidents returns, and regains speed again. The markets are circular, like the feedstocks many seek to source.

UNICA’s 50 year observations have proven to be correct, especially in California that is living in the golden age of regulatory goals and market-based incentives (along with US federal RFS and RINs markets) to bring California’s bio-based diesel penetration rate from 8% in 2014 up to 27% now in 2021. All done with the carrots approach (for biofuels companies).  Compare that with the U.S. RFS2, Renewable Fuel Standard, using the sticks approach, where bio-based diesel has remained between 1.6 billion gallons and 1.9 billion gallons for 5 years in a row, and the national diesel penetration rate is only 2.8%).

Think about that. California has achieved a 27% bio-based diesel (including renewable diesel) penetration rate in diesel markets in 11 years.  The U.S. Renewable Fuel standard has only achieved a 2.8% penetration rate in the diesel market in 15 years. Carrots (tax incentives, credits, etc) are better drivers than Sticks (taxes, volumetric national mandates.

Data Sourced Directly from Association Leaders, and Dozens of Renewable & SAF Producers
Emerging Markets Online’s Renewable Diesel and Sustainable Aviation Fuels 2030 study outlines and synthesizes data and analyses from interviews with association representatives including UNICA, Advanced Biofuels USA, Advanced Biofuels Association, NBB the National Biodiesel Board, Canada Advanced Biofuels Association, European Biodiesel Board, Brazil’s Biodiesel Association UbraBio, UNICA in Brazil, UFOP the Union for the Promotion of Oil and Protein Plants in Germany, WARFA – WA Renewable Fuels Association, CARBIO – Argentine Biofuels Chamber, Argus, Biobased Diesel Today, Biodiesel Magazine, Jacobsen, APEC-EWG the Asia-Pacific Economic Cooperation Energy Working Group,  ETIP the European Technology Innovation Platform, and the incomparable Biofuels Digest’s annual Advanced Biofuels Leadership Conference and DIgest Connect series. These leaders have brought great perspectives and views to the research.  Most of all, the majority of our content comes directly from dozens of first-person interviews/case studies with more than 50 Renewable Diesel & SAF Producers, feedstock suppliers, technology providers, and offtakers from truck fleets to airlines to some of the bigger Oil and Gas companies where Emerging Markets Online remains active in biofuels for 16+ years in Houston, TX.

About The Author
Will Thurmond is the CEO of Emerging Markets Online and has been consulting utilities, oil and gas companies, and biofuels organizations for 25+ yrs. He has published several studies on biofuels (Biodiesel 2020, in 2008), (Algae 2020, in 2012), (Drop-In Fuels 2020, in 2014), (Renewable Diesel 2030, in 2018), (Renewable DIesel & Sustainable Aviation Fuels 2030, in 2021). Mr Thurmond formerly served as the Chairman of Greater Houston’s Biofuels Task Force, as an entrepreneur/mentor in residence at start-up incubator Houston Technology Center, and as Chairman of R&D at Americas Biofuels Council. Mr Thurmond is the lead consultant for Emerging Markets Online’s consulting, market research, competitive intelligence, and forecasting activities for feedstocks, markets, and technologies. You can reach him via Emerging Markets Online www.emerging-markets.com, email [email protected], or tel 713 429 4905 (Houston).