EIA sees renewable diesel overtaking biodiesel

In Washington, the Energy Information Administration’s Annual Energy Outlook 2022 (AEO2022) Reference case, which reflects current laws and regulations, projects that renewable diesel supply (domestic production and net imports) will exceed biodiesel supply in the near term. It projects that renewable diesel supply will increase to 130,000 barrels per day (b/d) in 2022 and 145,000 b/d in 2050, reflecting a significant increase in renewable diesel production capacity in the near term. 

Targets and incentives that contribute to renewable diesel’s growth include the Renewable Fuel Standard, California’s Low-Carbon Fuel Standard, and the U.S. biomass-based diesel blender credit, which currently applies through 2022 and allows qualified taxpayers to claim a credit of $1.00/gallon when the required amount of biodiesel or renewable diesel is blended with petroleum diesel for sale or use in a trade or business. In response to the improved economics of renewable diesel due to these policy actions, domestic production capacity has increased, both in the form of new stand-alone facilities and converted petroleum refineries. 

EIA assumes that policies, rather than market demand, drive the adoption of biomass-based diesel fuels in the AEO2022 Reference case. Renewable diesel and biodiesel compete for the same feedstocks, so some of the projected growth in renewable diesel production displaces biodiesel production. It projects these two fuels will remain a relatively small part of the larger diesel market, accounting for less than 8% of the U.S. diesel production in 2050.